Three steps to heaven!
20 January 2009
Every ounce of common sense I have is telling me not to write what I am about to, but I feel compelled to. And there is barely an ounce of evidence to support my argument, but I am convinced by it...
My argument is that 2009 is going to start motoring along quite nicely for the electronics industry in the very near future.
Not an obvious point of view and not one that people air all that often in public, but there are some good reasons behind it. The first, and this is based on fact, is that there are many electronics companies out there that are feeling somewhat embarrassed on the grounds that ‘the worst recession since the great depression of the 30s’ appears to be doing little to hamper their growth. I have said as much before in this column, but companies in certain markets with good products, and particualrly those that are not dependent on borrowing money to fuel growth, are in many cases doing pretty well.
I heard an interview with the Chairman of British Airways last week who claimed that the recession was not going to last for a year – it would last for two. He is probably right from his company’s perspective. At these times there is no doubt that the housing market and the car market are going to suffer, and there are other obvious areas where people are going to cut back. Air travel is one of these. Whether for personal or business use people will fly less and BA will suffer from that. It will have its own recession that may well last for one or two years. Unfortunately companies like BA (and Woolworth’s and M&S etc) are (or were) sufficiently big to have influence over what everyone else thinks, thus amplifying their recession to cover others.
This is the critical point. Recessions are largely a state of mind. Many commentators have been saying that we will talk ourselves into a recession and that is of course what has happened. Except when people start to lose jobs and houses it does, for them, become a very real recession. In this respect I feel that the BBC and in particular their chosen champion, Robert Peston, have done the country a major dis-service. As someone who has always believed that the BBC news is as close as you are going to get to the real facts, I have been hugely disappointed with the negative, rumour-lead, soundbite-based reporting and believe it has had a huge effect on the national mood; not just from its direct impact but also because the BBC’s largely well-earned position of leadership in the news arena means that it has some responsibility for setting the tone for others. While this tone has created panic in the retail sector, there is no need for it to do so for most electronics companies who are more dependant on what happens over the course of the year and projections for the year after, rather than what is happening on the high street over the next month or two.
So what are the three specific reasons for optimism?
New leader. New Year. And new finance plan.
The first is obvious. Barack Obama’s inauguration could be what the American economy was waiting for. Irrespective of any changes in policies or refinancing of struggling industries and the banking system, both America and the world are hoping that the new administration will bring with it an air of positivity that will have an impact favourably on people’s attitudes towards their jobs, spending (particularly on electronics items!), and investing. As stated above, recession is at least partly down to state of mind. Obama is not going to solve everything the moment he walks into the White House, but it could (and I think it will) be a trigger for a change in mindset.
For the second point I go to the other side of the planet, China. Obviously this has been the most important growth engine for the electronics industry both as a consumer and a producer. At a time when the rest of the world is quiet we could be turning to China for some relief – but it has all gone quiet there as well. But this should not be a surprise. Last year the Chinese government introduced ‘mandatory’ public holidays of which the New Year is the most significant. This holiday results in most factories closing down for one, two or even three weeks. We are going through that stage now with New Year itself not until the 26 January. In the same way that December is not the most dynamic month in British industry, this formalisation of the Chinese holiday effectively wipes out January as a time for Chinese companies to be fully focussed on investing in new projects.
And finally we have the Government’s latest bail-out plan aimed at reviving the availablity of credit and therefore proving the funds and confidence for industry to move forward. From what I have read, and I am sure all the readers of this newsletter have read similar reports, this package seems to be far more appropriate for industry than the previous approaches of giving the banks money with no obligation to pass it on to their customers, and to stimulate spending by reducing VAT. I have said in this column before that the only way people are going to spend (if they are responsible, that is) is to give them job security, and the new package should allow companies to be sufficiently funded so that they can offer their employees a secure future. However, these funds need to become available very quickly, and the lending institutions need to pass them on with equal haste, if they are not to come too late for some.
So beyond the underlying invention and efficiency within the the UK’s electronics industry, these are three further reasons why I believe that positive change is just round the corner.
Do you agree or disagree? Send your comments to Tim Fryer.
Contact Details and Archive...
Most Viewed Articles...