May '14

This Recovery is No Joke

A recruitment consultant, a banker and a restructuring professional went into a bar…….. It was 08.00 one morning at a networking event in a “True Blue” market town.

“How is your world?” asked the recruitment consultant of the restructuring professional.

“Well, it’s been busier; it’s very quiet really, in fact it has been for about 5 or 6 years.  We hardly ever get a company that’s gone bust now. We do occasionally get called in to offer advice on how a business can restructure itself and its debt to stop it going under, but there’s nothing really wrong with the company.”

They turned to the banker, “How’s banking?”

“Quiet really” said the new manager from Challenger Bank. “We are mostly refinancing debt and overdrafts from the big 4, and we only take the better ones – most customers are stockpiling cash still, I’ve not been asked to lend to help expansion for some time now.”

Enquiring eyes turned to the executive recruitment consultant hoping for better news.

“My slice of the market is quiet still; companies are only doing ‘must do’ projects; so compliance, legal and regulatory – very little ‘business enhancement’ or ‘transformation’. At senior levels, when an opportunity comes along, people are reluctant to move; in spite of the so called cost of living crisis people are backing the devil they know.”

So how does this conversation, which really did take place, account for 1m new businesses, a fall in unemployment, the creation of 1m new jobs and a fledgling recovery?

Here’s how:-

In 2007, as the recession began to bite, the typical “corporate triangle” saw it coming and retrenched. Companies chopped off their wings and a large number of middle and senior executives took early retirement or a package which resulted in an equally large influx of CVs to the recruitment consultant.  But instead of looking for a new permanent role, they mostly wanted to adopt a ‘lifestyle’ business as a consultant or interim manager.

So they opened a Personal Service Company and called themselves Interim Managers or Consultants which explains how we have 1m new companies and 1m new jobs – roughly 1 job in each company. In the last recession these people would have been on the unemployment register and, arguably, they are not economically active whilst they live off their corporate payouts (whilst they build their business).

So what of the recovery?  Well, about 20 months ago some companies looked for opportunistic ways of making money at no cost and the Zero Hour Contract was born.  It enabled companies to start reaching out to customers again and gave a “no cost” way of rebuilding a new, but slimmer, “corporate triangle” whilst taking more people off the unemployment radar with the appearance of new jobs.

The combination of the new economically inactive lifestyle business people and zero hour contracts conspire to lower productivity calculations, increase corporate start-ups, increase jobs and give the illusion of progress.  It also explains the general malaise that still exists, because nothing has really happened yet.

The good news is that about six months ago the banks started some “like to do” projects – based on history repeating itself, that means the recovery is now only about 12 months away – just in time for an election!

Now isn’t that funny?

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