Noel Healy: Liverpool's success means a recession must be on the way

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The Independent Online

Are we in recession, going into recession or poised to enjoy further, sustained economic growth? The official statistics and the United States' economic and business news point one way. But out on the streets, it is harder to tell.

Let's start with some words of wisdom. "The end had come, but it was not yet in sight" (JK Galbraith, The Great Crash, 1929). "Past investment performance is not necessarily a guide to future investment performance" (investment advertisement rubric, 2001).

I hold both of these to be true when I read the current economic and business commentaries. "Woe, woe and thrice woe" is the cry at bad news such as job losses and profit warnings, while good news, like strong consumer spending or higher German business confidence, is regarded as a spasm from a comatose body.

But it doesn't feel as if there is a recession. The usual London indicators (restaurants, taxis, traffic congestion) do not seem, when seasonally adjusted for the effects of annual holidays and hoof'n' mouth, to tell of a major downturn. Other reliable indicators, my barber and my local publican in Chelsea, do not speak of gloom and doom. And the impression was magnified by recent events in Wales like the Brecon Jazz Festival, the FA Charity Shield and The Open golf, all with attendant Hogarthian scenes.

Glyndebourne was as busy as ever and Cornwall (aka Clapham-on-sea), boosted by the fabulous Eden Project, received extra stimulus from the Prime Minister's entourage.

Returning to business, where the smaller end of the market seems reasonably active, M&A and capital-raising services remain in demand. Service-based, outsourcing and other rights-based businesses seem to be the lively ones. No doubt this reflects the overall shift to the non-manufacturing economy.

Aspects of a slowdown show themselves in the new issue market being "difficult". This may reflect greater rigour on the part of investors, or temporary diminution of the supply of suitable companies. Anyway, the lack of institutional interest in smaller companies, and neglect of them once they're on the public market, stimulates a search for other funding options.

But the development and start-up capital markets are also "difficult". Private equity funds seem introspective and have started selling to each other. Funds still have to be invested. How about some sector consolidation here? Consolidation means fees for advisers.

The financial sector is a curious mix. Lay-offs by the ton at the pan-galactic investment banks, as they "refocus for the current business environment", give us smaller guys the chance to recruit able individuals. But then some of those banks will try to develop smaller company business, so competition heats up.

The private client/personal financial/wealth management sector is consolidating. Regulation and squeezed commissions – capped fees on stakeholder pensions, for example – are a catalyst. The housing market still underpins confidence and low interest rates are, for many, a disincentive to save.

I wish we could measure the informal economy properly. It is hard to know in which direction we are going but I feel we are likely to keep tottering along. The confidence factor when people return from holiday will be important. If the stock market is a long leading indicator and it peaked at the end of 1999, the worst may yet be to come. But this time may be different, with low and falling inflation, a more flexible economy, Prudence in Downing Street and generations unaccustomed to these luxuries. The risks lie in the potential inflationary consequences of rising public spending and the possible scale of the devaluation required if the pound is to be abolished.

If my personal economic indicator is anything to go by, we should be OK for a while. This relates economic performance to the performance of Manchester United. The prospects are, therefore, good (the 1960s and 1990s).

On the other hand, Liverpool are coming strong and they represent the 1970s and 1980s. If they have another run, I fear the economy will be like me this weekend as I walk the quicksands of Morecambe Bay – very close to disaster.

Noel Healy is a founding director of E&H Capital Partners. Any opinions expressed are wholly his own.

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