The British Chamber of Commerce in Denmark invited a UK financial expert to explain the current recession

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Article by Claire Clausen, The Copenhagen Post, used with permission.

The boisterous confidence of prosperity has faded somewhat, not least amongst the many members of the British Chamber of Commerce who gathered last Wednesday to listen to a financial expert from the Barclays Group of banks. Even more appropriately, the distinguished economist, Michael A Dicks, is the Chief Economic Researcher for Barclays Wealth. And it was wealth he was there to explain – the lack of it after the recession and when it is likely to reappear.

With bare branches as an appropriate background, Barclays Wealth’s Chief Economic Researcher, Michael A. Dicks, flanked by Mariano A. Davis, (right), President of the British Chamber of Commerce and Alan Eimert, (left) a founder member of BCCD who facilitated the visit

In a talk, entitled, ‘A tricky balancing act’, Dicks had succeeded in simplifying a huge wealth of statistical evidence to explain, in 50 minutes, what had happened, what is likely to happen in the next year or so, and what the corporate sector could reasonably expect in future.

He had several clear messages – some good news, some not so good. The main thing is that we in the industrialized world have learnt from previous mistakes. The G8 and G20 politicians have acted quickly so that the current economic situation is not a ‘depression’; we are in deep recession but things will improve.

Already there are indications that growth in the last quarter has risen across the world, and the prognosis is positive for a while. The emerging markets of the BRIC (Brazil, Russia, India, China) nations are storming ahead and their growth prognoses are strong. The USA expects growth up to 2% and Europe, which is recovering more slowly, only 1% this year.

The less happy news is that unemployment is likely to continue to increase next year, and the low value of the dollar will begin to impact on consumer spending in the USA particularly. Industry has already completed exit strategies, down-sized risky business, sold off old stocks and laid off staff, so in Dicks’ view there could well be another downturn, until industry catches up with consumer demand.

Dicks spoke of several graph shapes used to illustrate the recession. One is an L-shape where economies drop suddenly and remain a low parallel level. Another is a U-shape with its sudden drop, time at the bottom of the curve before a rapid improvement. Economists agree, he said, that the current situation is a ‘deformed V’ shape where the drop has taken slightly longer to reach the bottom and improvement is sharp but over a longer period.

He also warned against extrapolating the positive short term progress we are seeing today, into the long term. In his view there will be some hiccoughs in the statistical picture in a year or two. Already the legislators have given a degree of fiscal easing but they will have to tighten up again pretty quickly to prevent inflation. He fears that from 2010 to 2015 we will return to the short zigzag course of global trade between the two world wars last century. The pace of recovery and expansion has to be slow and secure so people shouldn’t relax too soon.

‘But how would you advise Mr and Mrs A. N. Other to proceed?’ asked The Copenhagen Post. ‘Most people have a portfolio of investments that I call “lumpy”,’ said Dicks. ‘They have most of their savings in their house, or shares in only one or two companies. Their investments are emotional and local – they invest in names they know from home or in neighbouring countries they understand. Diversification and spread is vital,’

The British expert continued: ‘In my view there are four things: dare to invest in the emerging markets, even if you know little about China or India; set target earnings for shares when they are purchased and when that profit percentage has been reached, sell, sell, sell! They can always be repurchased. Thirdly, emotional ties are not profitable. A spread of shares, property, bonds, currency is by far the best. Finally and perhaps most importantly, develop a good relationship with your professional adviser – in the bank or elsewhere. Today there is, from the bankers’ side, much more focus on psychological investment – understanding what type of person the investor is, and what kind of products would suit him. I work with a committee of people and all our decisions have been made using our collective knowledge and experience,’ concluded Michael Dicks, whose message was more positive than we dared expect but warned of some difficult times for a year or so yet.