Recession just waiting to happen

By Richard Bond
Business correspondent, BBC Look East

Warnings grow that the economy is heading into recession

As warnings grow that the economy is heading into recession, BBC Look East business correspondent Richard Bond examines whether the signs were there all along.

As we now know all too well, the downturn is affecting the East of England, but should we have seen it coming?

Maybe we should. Maybe, in the unglamorous surroundings of the Novotel in Ipswich, I did.

The date was 27 June 2005 and I was attending a press conference where plans for yet another big development in the town were being launched.

It was called St Peter's Port, down near the river. A £75m scheme - the usual mix of hotels, apartments, shops and restaurants.

Too good

There I was, sitting in the Novotel, listening to the architects and developers waxing lyrical about the latest in a series of lavish redevelopments of the town centre.

They were full of optimism and, after a while, it all started to sound just a little too good to be true.

When they had finished the presentation, questions were invited from the floor. "What happens if there's a recession?" I asked.

There was a pregnant pause. This was not a question anyone on the panel was expecting. They looked blank.

Sitting in front of me was Chris Mole, the Labour MP for Ipswich. He suddenly turned towards me.

"We don't have recessions any more," he said, rather curtly. The press conference moved on.

Well, three and a bit years on it looks like we do have a recession, and as for St Peter's Port, it has been delayed.

Housing glut

The plan no longer includes apartments - Ipswich has a glut of them - and the completion date has slipped to 2011.

In recent years, the belief has caught on that our economy is immune from difficulties - that economic growth can be expected to continue year after year, without interruption.

It was this belief that Mr Mole was expressing that day and I am sure he believed it absolutely.

But a market economy is not like that. However much we might like there to be no more boom and bust, the reality is that boom is usually followed by bust.

In 18 years as a business reporter in the East I have only known one other recession - that of 1990-1993. It was a stinker.

Businesses in prosperous Huntingdon have begun to feel the effects of our shinking economy

Since then we have had 15 years of growth and since 2000 I have been expecting a recession.

All the signs seemed to be there - an overheated housing market, a credit boom, companies desperately short of staff, but the recession never seemed to arrive.

So when Mr Mole put me in my place that day in 2005, I started to wonder whether he might be right.

Maybe Ipswich could absorb ever more apartments and shops. Maybe, in the wider region, we could go on building ever more housing estates, ever more business parks, ever more shopping centres.

But it was not to be. In the end what ran out was not the optimism, it was the credit.

The banks do not want to lend, not now and probably not for a while, and we in the East must rethink all our old assumptions about rampant growth.

I wonder, for example, about that government target that this region must build half a million new homes by 2021. Sounds rather optimistic to me. I wonder if it was launched in a Novotel.