IT SEEMS there is no end to the urge to merge. The latest couple are the drugs companies, Zeneca and Astra. They join a long and distinguished list of recent marriages that covers banking, insurance, utilities and the oil industry.

It seems that, while big may be beautiful, it is not adequate these days. Huge is where it is at.

All this, of course, is good for the stockmarket. Spotting the next take- over target has always been a favoured occupation for stockbrokers.

But any prudent manager will tell you that you should never buy a share on take-over talk alone. Remember that take-over bids do not necessarily guarantee the investor will profit. Still, it is not doing the stockmarket any harm, and with talk of a recession next year, every little piece of speculative activity helps.

Most, but not all, mergers are to do with greater efficiency and cost cutting. Witness the way in which the Deutsche Bank bid for Bankers Trust resulted in an immediate statement concerning job losses. And the bid has not even gone through yet.

What is surprising is that, despite the manufacturing slowdown and a steady drizzle of P45s in financial services, the labour market is holding up. Indeed some service industries are reporting a skills shortage. No wonder wage rises continue to outstrip inflation.

This is one reason why Professor Tim Congdon, of Lombard Street Research, does not believe there will be a recession in the UK next year. It has to be said that there is a divergence of opinion. Last week Tim and fellow director Brian Reading slugged it out in front of an audience of City professionals in the charming setting of Skinners Hall.

Brian's concern is that the problems in the Far East are too deep-seated to be shrugged off and that deflation will engulf the developed world.

Certainly some statistics make alarming reading - domestic demand in Korea is expected to shrink by 25 per cent this year. But Tim believes the US economy will continue to power ahead, even if 1998 has been a strange year. Normally the economic health of America, which accounts for around one third of the world's economy, is crucial to the wellbeing of the rest of us. Yet the continued strength of the US economy has not helped the beleaguered nations of the Pacific rim, while other emerging countries are having a tough time.

However, the good professor discounts the prophecies of recession in the UK on the basis that we don't need one and the Chancellor has all the freedom he needs to prevent one. Inflation does not look likely to give the Monetary Policy Committee much cause for concern, while, unlike some parts of the world, we rejoice in a strong and profitable banking sector willing and able to lend to keep the wheels of commerce turning.

What with that and the steady flow of takeovers and mergers, the outlook does not look half bad. I cannot help but feel that I've missed something.

Brian Tora is chairman of the Greig Middleton investment strategy committee