Economy woes follow 1980s fashion

By Simon Atkinson
Business reporter, BBC News

Top of the Pops, FA Cup football and Eastenders were all popular in 1988

The Teenage Mutant Ninja Turtles swung onto our television screens, Salman Rushdie published Satanic Verses and farmers' favourite - the Barbour jacket - became inexplicably trendy for city dwellers.

And then there were those Liverpool players, showing remarkable lyrical dexterity for a bunch of footballers, rapping how they had "won the league, bigger stars than Dallas, they got more silver than Buckingham Palace".

Welcome to 1988 - the year where the UK charts were topped for five weeks by The Only Way Is Up - at a time when the UK economy was beginning to have other ideas.

Economic growth had peaked and was beginning to slow, while inflation was rising - both precursors of the recession of the early 1990s.

Heady days that seem an age away. Or do they?

On Wednesday, the Bank of England governor hinted that the UK may be heading back towards those troubled times, saying the Britain faced its "most difficult economic challenge for two decades".

What the governor was trying to spell out - especially to younger people who can only really remember the good times - is that things are changing, as they inevitably had to Richard Hunter, Hargreaves Lansdown stockbrokers

Inflation is set to rise, Mervyn King said, while growth and house prices were likely to fall.

'Dire times'

The "two decades" comment was a good headline, but a bit misleading, says Richard Hunter of Hargreaves Lansdown stockbrokers.

"What you have to remember is that the past ten years have been extremely successful economically.

"But what the governor was trying to spell out - especially to younger people who can only really remember the good times - is that things are changing, as they inevitably had to."

The late 80s saw "some pretty dire times", recalls Mr Hunter, who would not be drawn on whether he ever owned a Barbour jacket.

Energy bills are taking a bigger slice of income than 20 years ago, firms say.

"In 1986 you had the Big Bang, and then in 1987 there was the hurricane and the crash where the market fell off a cliff. So by 1988, the economy had got into a bit of trouble.

"And between the late 1980s and early 1990s, there was a lot of negative equity and it took a long time for the market to recover its poise and confidence.

"There were quite a few rounds of redundancies, especially in the City. Computers were still fairly new, so it was easier to make yourself more efficient by losing people and focusing on processes."

For small businesses, many of the problems are worse than they were two decades ago, says Mike Cherry of Just Wood - a Staffordshire-based firm which makes items for gift shops and visitor attractions.

"Inflation was the biggest worry 20 years ago, but it's a greater concern now, especially because we've never seen energy prices rise so fast," he says.

There is definitely a denial of how bad things are Roy Walton Bromwall Ltd

"And back then, we did not have the same fluctuations in currency rates that we do now, which have seen a drop of almost 20% in the pound's value against the euro."

The firm would "weather the storm", Mr Cherry predicted, but it had to be increasingly cost-conscious and would try to be "sensible" when it came to wage increases.

And high levels of taxation, as well as inflation, meant that the situation was to become worse than that seen 20 years ago, said Roy Walton of Bromwall Ltd, a commercial insurance broker that has been trading for 35 years.

"There is definitely a denial of how bad things are," he said.

"The building industry has been hit very hard, which is usually the first sign of a recession on the way.

"Because we are in commercial insurance, we are not too badly off, but some businesses are going to really suffer.

"If it wasn't for high taxation, they'd probably be able to get through it, but it seems that the government has been out to get all it can from business."