MAGGIE PAGANO: The tentative signs that suggest we may avoid recession


When we’re living through such great adversity, it is a fool’s game making bold forecasts about the economy.

Yet reading the tea leaves, there are enough tentative signs coming through on the economic front that suggest we may avoid a recession, certainly the deep recession that so many doomsayers have been predicting.

The first sign came with the latest Office for National Statistics data for July’s GDP, which showed the economy grew by 0.2 per cent, after a sharp drop in June, partly due to the extra bank holidays for the Queen’s Jubilee.

Growth: The latest Office for National Statistics data for Jul showed the economy grew by 0.2%, after a sharp drop in June, partly due to the extra bank holidays for the Queen’s Jubilee

By far the biggest contributor to growth was the services sector, which was boosted by England hosting – and winning – the Women’s Euro 2022 tournament.

While next week’s bank holiday for the Queen’s funeral will have an impact on September’s figures, most economists reckon it will be minimal. 

Even so, most predict the public holiday could hit GDP by 0.2 per cent because of the period of mourning, which suggests that over the July to September period we could be close to technical recession territory – two quarters of shrinking output.

Between April and June, the economy shrank by 0.1 per cent. If you take July’s small growth and, by all accounts, a miserable month of August as several surveys point to weak production and muted demand as cost of living outstrips disposable incomes, this quarter could be tight.

On the plus side is the massive emergency package to cap energy prices announced by Liz Truss last week, but overshadowed by Her Majesty’s death. 

By choosing a cap rather than handouts or grants, the package should squeeze down inflation but also give consumers a little more confidence. They may even dip into their lockdown savings.

Truss and Chancellor Kwasi Kwarteng are due to reverse the recent 1.25 percentage-point rise in national insurance in the emergency budget due later this month, which should also help keep up the better spirits. 

It’s important too that the Bank of England doesn’t overshoot and put up interest rates too sharply. 

On a broader front, Ukraine’s recapturing of occupied territory from the Russians in the most astonishing counter-offensive in Kharkiv province is also raising hopes of a potential resolution to the crisis.

European natural gas prices fell to their lowest in a month on hopes that President Putin will no longer be able to leverage prices against the West. Futures contracts are now down nearly 10 per cent.

Whatever the specific reason, there is undoubtedly a brighter feel to sentiment in the financial markets, here and in Europe.

The pound climbed against the dollar and the stock market saw strong gains.

There is another, more emotional, but powerful reason which may be giving investors – particularly overseas ones – more confidence. 

The last few days have reminded them of the extraordinary inner strength of the British constitution, which has seen the most seamless transfer of the monarchy from Queen Elizabeth II to King Charles III without, so far, as much as a hiccup.

That’s worth a dime or two.

Soames outsourced

One FTSE 250 firm whose shares did fall were Serco’s. And for good reason. After eight years of hard slog, resilience and much wit, chief executive Rupert Soames has outsourced himself and is stepping down. 

He took over in 2014 when the outsourcer was close to going bust after a series of scandals. Seen as a pariah, many said it would never win another government contract.

But Soames launched the rescue rights issue, cleaned up the group, cut costs and sold various bits. 

Most importantly, he restored its reputation, got the share price back up to 169p, reduced debt and increased profits. Not a bad turnaround.

Inevitably, Serco was criticised for the troubled Covid Test and Trace scheme – although the Government is more to blame for such a bad design – and for making too much money from running the testing sites. 

Yet the firm has come out of this period stronger, winning several big public contracts in defence and immigration.

Soames may have outsourced himself after doing such a great job but companies in need of a turnaround strategist should now be trying to in-source him pronto.

Aga saga

The dash by Germans to buy electric heaters to keep warm this winter is backfiring.

They have been warned that inefficient electric devices will overload the power grids, leading to cuts. 

Here, homeowners are selling their Agas because of the high cost of running them. It is time experts gave some proper advice, like chopping up more wood.

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