The Olympics has definitely created a feel-good factor for the nation. This Olympic bounce should see a short-term improvement in consumer confidence and consumer spending. But, whether this will be sufficient to transform the UK’s long-term economic fortunes, is quite another matter.
Whilst British athletes were setting world records and gaining record amounts of gold medals, the only record the UK economy has managed has been the length of the recession – which is now longer than the Great Depression of the 1930s. (2008 recession v Great Depression)
It was great to have newspapers full of British Olympic medals, but hidden behind all the joy of Britain’s Olympic success was the fifth anniversary of the credit crunch in 2007, and more bad news about the state of the economy.
The Credit crunch is an anniversary no-one really wants to remember – who would have thought five years later, we are still struggling with the aftermath? People talk that the Olympics will leave a legacy for the nation. Let’s hope it’s more powerful than the legacy of the credit crunch.
Those past five years have been unprecedented stagnation, and failed attempts at recover – with GDP still below its 2007 peak. This is the kind of record, Britain definitely doesn’t want.
If buoyed by the Olympic spirit, you’re keen to look on the bright side of life, you could argue at least things aren’t really as bad as the 1930s. For example, unemployment is surprisingly low, given the scale of falling GDP. There are some ‘green shoots’ if you look hard enough.
The Chartered Institute of Personnel and Development (CIPD) suggests that employers are holding on to spare capacity in the hope that Britain can recover quickly from the recession.
The report’s net employment balance, which measures the difference between the proportion of employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the third quarter of 2012, has remained positive at +5 (compared to +6 during the previous three months).
However, the precarious nature of the market is highlighted by the finding that almost a third (31%) of private sector firms have maintained staff levels higher than is required by their level of output during the past year. (Olympic effect may be shortlived, link)
But, as a cynic would say, people have been talking of green shoots for the past 5 years. They have proved persistently very weak and feeble. Finally to say things are better than the Great Depression is hardly much to boast about.