Cheers, beers, and an election
After a shaky 12 months, the South East is looking ahead to 2010 with a sense of optimism.
A year ago I used the analogy of a cold to describe the spread of American economic sickness to the UK, so it seems ironic that some of the debate on regional health has been on swine flu. Much that was mooted to happen during the economic maelstrom of autumn 2008 hasn’t developed to the extent first expected, and with swine flu that is certainly the case.
Looking back 12 months the Trade Union Congress predicted national unemployment of over two million. By the end of 2009 signs indicated it would be close to a peak between 2.3 and 2.5 million. But the South East has fared well from this perspective, despite its reliance on financial services and construction as major areas of employment.
A year ago, with the BBC’s Robert Peston regularly talking about ‘financial meltdown’, it became a guessing game which financial institutions would fail and it looked very gloomy for the region. But a Bank of England bailout for the country’s major lenders has resulted in record bonuses around the City and a relatively low number of jobs losses. Most parts of Lehman Brothers in Canary Wharf were snapped up by rivals and a lot of staff quickly got back into employment.
The trickle down effect has been that the widely predicted crash in the region’s housing market did not really happen. Prices did drop but by the autumn of 2009 had recovered to their levels of a year earlier, driven by a mixture of returning confidence and simple supply and demand.
The regional economy has held up well thanks to the weakness of the pound against the euro. As anyone who lives and works near tourist attractions in South East the region will tell you: “Thank god, for the Italians, Spanish, and even the French tourists.” They have ensured that every where from Windsor to central London, and through to places like Leeds Castle in Kent, have seen a steady flow of year-round visitors, but the currency has also helped exporters.
So what will drive the region in 2010, other than a favourable exchange rate? One will be the impending General Election and the other will the World Cup in South Africa. To put the football into context, the 2006 World Cup resulted in the sales of 10.5 million England flags and £285m worth of alcohol was consumed during the tournament.
Much of the business community is working on the basis that David Cameron will find himself as the country’s new Prime Minister, and is looking for a more ‘business-friendly’ environment, whether it be in the forms of lower business or personal tax, or a less bureaucratic operating environment not bogged down in regulations and red tape. Infrastructure spending towards the 2012 Olympics continues steadily and with more business-focused mayor in Boris Johnson the legacy seems likely to be longer and less expensive.
While economists sit around and discuss the shape of the recovery the region is displaying a remarkable resilience and heads into 2010 with a level of optimism that may not be universally shared in the UK. If the City has a smile on its face, then the rest of the South East will feel a wave of economic happiness too.
Lawrence Gosling
A journalist based in the South East and is editor-in-chief of Investment Week.