Lagging feature of a Recession (Unemployment) makes reappearance
The news today that UK unemployment has reached a 16 year high doesn’t exactly spell good news for an election campaigning Labour government, but the news is not that unexpected to me. We’ve seen before that when an economy moves out of a recession, unemployment rates continue to climb for some time. Future cuts in public sector spending are bound to impact jobs further, but the numbers will vary depending on what kind of government we get after May 6th. The LIB DEM surge in popularity (or are the polls a reflection of how much the electorate wants to confuse and irritate the main parties after MP indiscretions?), is likely to lead to a hung parliament, with perhaps a coalition between Labour and the LibDems running the country. If that happens, the likelihood of immediate large scale public spending cuts will diminish, as both these parties think that type of action would put the fragile economic recovery at risk.
The appetite for risk in the general market is rising again- we can see evidence of this in banking and credit insurance for instance, but there is caution. Many credit risk analysts still worry, for instance, about company insolvencies increasing if the government in the shape of HMRC gets tougher on tax deferral schemes that have helped so many companies during the downturn. Politically, it’s going to be an interesting couple of weeks ahead. What’s the view of accountants?