Just how bad will it get?

29-Oct-2008

It’s now clear that the people who predicted that the UK economy would go bad were right. It will get bad.

But until Lehman Brothers went belly-up it hadn’t permeated into sectors beyond the financial markets. Now it will do.

Nevertheless, as an international player, we are still hoping that those BRIC economies — Brazil Russia, India, and China as well as Poland, the rest of Central Europe, the Middle East, and parts of Africa — will stop it from becoming a severe and prolonged worldwide recession.

Internationally, we had been trading well up until September, despite signs of weakening in Western Europe.

My prediction is that we are going to see the worst of it in Q1/Q2 next year as people start to get laid off, particularly in corporate accounting and corporate lawyers. That’s where the impact will start, though I have already heard of people in such roles who have been laid off.

The effect very much depends on the power of the developing economies, their consumers and their industries to distance themselves from the US, European, and UK economies.

I remain hopeful that the decoupling theory (that developing economies would be immune to what happens in the advanced economies) will hold true, though certainly that doesn’t apply in the financial world.

Capital markets in New York, London and Asia are all inextricably linked, so clearly there’s no decoupling there. But does that mean there is no decoupling of other sectors in the BRIC economies? I am not sure, though I still hope for a certain distancing of those economies from the Eurozone and US.

We are hiring in China, Poland, the Middle East and Africa, and being very selective in other markets.

Whether there will be a prolonged and deep recession, no-one can tell. There are signs that our recruitment businesses in these countries are holding up, though there will undoubtedly be an impact from what happened in the US. The only question now is to what extent.