No return to business as usual

Feb 23 2010 by Nic Paton Print This Article

Businesses will only truly start to recover from the recession when they realise that there is going to be no return to pre-recession "normality" and the new, unpleasant, more precarious economic world we are now living in is likely to be with us until at least 2015.

The somewhat bleak prognosis has come from an array of British business organisations, academics and think-tanks brought together by accounting and business services firm BDO.

It is also a sharp wake-up call to the 44 per cent of firms polled by BDO that believe that the economy will return to "business as usual" within the next two years.

The report included forecasts by senior economists from bodies such as the Confederation of British Industry, the Institute of Directors and the Institute for Public Policy Research, in collaboration with the Centre for Future Studies.

Even though Britain has now technically emerged out of recession, albeit just scraping into growth at the last official figures, the tough new, post-recession businesses world was unlikely fundamentally to change in the next five years, the Transitions report predicted.

"Many executives clearly think that there will be a return to business normality in the next two years. However, the world is changing, and there's a need for UK businesses to reinvent themselves if they are to survive," it stressed.

For business leaders what this means is that now is the time to start recognising the need for a permanent transformation in how they think and act in order to adapt to the new environment.

This could include envisaging completely different business models and re-evaluating what we mean by returning to "sustainable" (and possibly much weaker) growth, with all the implications this in turn could bring for concepts such as "shareholder value".

Peter Hemington, partner at BDO, said: "The global economy has become unnaturally skewed through the rise of India and China. Although we hope that this recession may be over, the consequences still remain.

"As a result, the economic environment will remain tough for some time to come. Linked to this, we are going through a period of profound societal and technological change which will mean that some business models will wither away and die, while others will thrive and grow," he added.

When you include the recession, the UK recorded annual growth of only 1.7 per cent during the past decade, the report calculated.

Last year the UK economy shrank by 4.8 per cent, the fastest pace of decline in a single year for 88 years and six times more severe than the global average, it also pointed out.

"We believe the next five years will be precarious for companies with high levels of uncertainty, risk and complexity. Although we will see recovery, the word will have a new meaning. We will not return to how things were," the report concluded.