Businesses hold the key to the next stage of the cycle

These are turbluent times for the economy - but the macroeconomic numbers of output, investment, jobs and pay are simply the aggegate of many thousands of decisions taken by individual businesses across the length nd breadth of the economy. How the UK economy emerges in the current downturn will depend crucially on the strategies adopted by the busines sector. It is a huge challenge - to make money and protect margins in a time when cost pressures are enormous, when demand might be slipping away and productivity growth is slowing down as capacity utilisation drops.

“Companies take four sets of decisions that are vital to macro-economic performance: about wages and prices; the level of investment spending (on plant and machinery and R&D); levels of stocks (inventories), and employment levels.”

Roger Bootle has a superb article on the state of health of the UK corporate sector - available here

Profits look healthy for this stage of the cycle - but are under pressure

The falling exchange rate could prove decisive if the economy is to avoid recession

Some businesses may be reluctant to shed large numbers of people especially if they want to avoid re-hire costs when the economy enters an upturn

There are hoeps that a resilient and flexible corporate sector could be the all-important “shock absorber” for the UK economy this time around ... a shame that the same cannot be said for the public sector.