Page last updated at 12:32 GMT, Tuesday, 13 January 2009

Gloomy mood points to dire downturn

Hugh Pym, BBC Economics Editor
By Hugh Pym
Economics editor, BBC News

Frightening, ominous and truly awful - just some of the expressions used by the British Chambers of Commerce to describe the results of the latest survey of members.

Empty shop units in Bristol
The downturn recalls conditions last seen 25 years ago
Usually it's the media who are accused of talking down the economy. But here is a leading business organisation painting a desperately grim picture, coloured with some highly-quotable adjectives.

Might that not in itself be enough to undermine confidence even further and damage the interests of member companies?

I put that point to the BCC director-general David Frost. His response was that he had a duty to "tell it the way it is".

He said the last time he had seen anything like it was in the early 1980s. And his key message seemed to be a warning that the UK economy was facing a downturn worse than in the 80s.

Nearly 6,000 businesses responded in late November and early December. In all key areas - such as confidence, investment and employment - there was a worsening of sentiment.

There is far too much talk about economic doom and hardship

The gloomy mood enveloped both manufacturing and services. The BCC says it was taken aback by the scale and speed of the downturn.

And it argues the UK is facing a very serious recession, which may not be quite as bad as that seen in the early years of the Thatcher government, but not far off it.

Silver lining?

So where's the good news? Well, that's almost impossible to find in the 40 pages of the BCC survey.

David Frost did say that there were still successful companies out there, some with a positive story to tell.

He did raise a hope that the recovery, whenever it came, might be as rapid as the downwards leg.

Quite frankly, the last time I saw anything of this magnitude of decline was when I worked in the West Midlands in the early 1980s
David Frost
British Chamber of Commerce

And the BCC believes that if the Bank of England cuts interest rates close to zero and the government continues to pump money into the economy, recession will not turn into depression.

Now this survey is not a hard economic indicator. It is a poll of the opinions of those businesses which responded, most of which are small or medium-sized firms.

But it has a good track record in detecting the ebbs and flows of the economy. The midsummer survey led to the BCC using the "R" word ahead of other business organisations. It predicted a recession before many other forecasting groups.

Out on the High Streets, the mood is not much better - with the British Retail Consortium (BRC) reporting that total sales amongst its members were 1.4% lower in December than in the same month a year earlier, the worst December result since the survey began 14 years ago.

Both the BRC and the BCC are lobbying groups representing the interests of members. But the facts are plain.

Those members, covering a wide span of the economy, believe that conditions are dire. And that's not an invention of the media.

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