It's Not All Doo Om and Gloom; Many Firms Continue to Thrive despite the Tough Economic Conditions. Bill Gleeson Reports

Daily Post (Liverpool, England), January 11, 2012 | Go to article overview

It's Not All Doo Om and Gloom; Many Firms Continue to Thrive despite the Tough Economic Conditions. Bill Gleeson Reports


Byline: Bill Gleeson

TO LISTEN to some commentators, you could be forgiven for thinking the eurozone crisis is about to push Britain back into recession. However, a more objective analysis of some of the recent economic data and company results suggests that not everything is going wrong.

Last week, for example, saw stronger-than-expected growth in the allimportant services sector. The service sector is the biggest segment of the UK economy and its performance in December may have saved the economy from contraction in the final quarter of 2011.

The Markit/CIPS Purchasing Managers' Index (PMI), where a reading above 50 indicates growth, showed services rose to 54 in December, up from 52.1 the previous month. City analysts had expected the reading to fall to 51.5.

It comes on top of better-than-expected performances for the manufacturing and construction sectors in December.

The reading across all three sectors rose to 53.2 in December from 51.2 in November in the strongest expansion since July.

Markit chief economist Chris Williamson said: "Services are likely to have expanded by around 0.3% to 0.4% in the final quarter, down from 0.7% in the third quarter but offsetting a renewed downturn in manufacturing and sluggish growth of construction to help the UK avoid a slide back into recession, at least for now."

The overall reading for the services sector was the highest since July and means it has shown growth for every month of 2011, albeit at a slower rate than nor mal.

The latest increase was driven by a solid rise in new business, which was also at its highest level since July.

The number of people employed in the sector edged slightly higher, after two months of modest falls.

Alan Clarke, chief UK economist at Scotiabank, said it would be very hard for the UK economy to avoid contraction in the coming months, but the buoyancy of this week's CIPS surveys reassured "that this will be mild and short-lived".

Construction activity in the UK grew last month, according to another survey that is closely watched by City analysts, but experts warned the wider economy was still likely to have stagnated at the end of last year.

'Services helpUK Civil engineering projects, such as the Crossrail scheme in London, recorded the fastest growth in the month, while housebuilding increased for the second month running. Commercial construction grew but at its slowest pace in a year. avoida slide Howard Archer, chief UK and European economist at IHS Global Insight, said the economy''s overall performance in the final quarter of last year will depend on how well the powerhouse services sector performed. He said: "It is welcome news to see any evidence that part of the economy is growing at the moment. However, signs that construction output expanded in the fourth quarter of 2011 does not hugely dilute concern that GDP could have contracted."

New business received by UK construction companies increased for a third consecutive month in December, CIPS said, reflecting a general rise in tender opportunities and successful bids. But the growth had eased slightly on the month. The data also signalled a rise in employment in the construction sector as new orders increased, although the use of sub-contractors declined.

into Nor is it just national statistics and surveys that offer a glimmer of hope. There are plenty of examples of national and local businesses that remain strong.

One of the best-known local examples of a thriving business is Jaguar Land Rover. The car-maker struggled for years under Ford ownership to improve sales and bring an end to hundreds of millions of pounds of losses. Now, under the ownership of India's Tata Motors, it has gone from strength to strength. The recent launch of the Evoque means that Halewood now employs 2,500 staff who make the baby Range Rover on the same production line that makes the Freelander 2. …

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