The recovery is coming: can we relax yet?

Blue skies are coming.

All this month on economia we’ve been taking stock of where we are five years on from the momentous events that followed the collapse of Lehman Brothers. So much significance has been placed on the events of September 2008, that some commentators are happy now to refer to events purely in terms of them being “post-Lehman”, as if the failure of one institution marked some kind of year zero when the financial world changed forever

While the meltdown in global credit markets certainly followed the collapse of Lehman Brothers, there is plenty of dissention as to whether it was the  trigger for recession it has been portrayed as. Andrew Smithers in his latest book The Road to Recovery (reviewed in the October issue of economia) draws on a wide range of sources to argue strongly against what he calls “the myth of Lehmans”. His argument is that the global economy was in plenty of trouble (and recession had already kicked in) by September 2008. Others still don’t dispute that the collapse of Lehmans was significant but point out that it was significant insofar as the reaction to it from governments around the word led directly to a worsening of the depth of recession.

The argument here is that the painful experience since 2008 was caused by authorities and governments not allowing enough banks to collapse. While the shock would have been much worse in the short term, the recovery would have been sharper and would have taken hold sooner. The banking sector would have emerged with stronger and healthier banks (even if there were fewer of them), and would have been in a better place to help business recover.

National governments might also have been better placed to rebuild economies had they not been propping up failed banks.

But to some extent this is the old story. Five years on from these calamitous events, we are beginning to see the early signs of recovery. There have been various indicators and research reports produced to show that a lasting recovery is taking hold. The biggest question marks now remain over the fragile state of the eurozone and the likely fallout of any further problems in one or more of the troubled member economies, and the trickier issue of whether this recovery (however welcome) is the right sort of recovery.

The chancellor, George Osborne, set his stall out on delivering an export-led recovery that would help rebalance the economy and bring a longer-lasting, sustainable recovery. That the current return to health appears to be built on a new housing bubble and domestic debt remains a concern. It’s the economic equivalent of treating heroin addicts with methadone. It is far better for them (and far better for society) than heroin, and is more controlled, but it can hardly count as a full recovery from dependency. There is a place for this treatment, but let’s not pretend (as a triumphalist chancellor is likely to try and do at his party conference next week) that he has the economy back to anything like a sustainable position.

However, when that real recovery does arrive it will be fuelled by the sort of high-growth businesses that are the drivers of any economy. And on this front there are some interesting insights from a new piece of research from private equity firm ECI Partners. The top line from the report, which is based on a detailed questioning of almost 700 leaders in high-growth firms, is that they are far more confident this year than they have been for the past few years. The vast majority claim to be planning to fund expansion and growth of over 10% in the coming year and most are very confident that they will be easily able to access finance should they need to (this has been a consistent challenge to growth in recent surveys).

While there is a more upbeat tone to the responses from those based in London, and those working in the technology sector, the vast bulk of respondents regardless of sector or location feel that things are moving in the right direction.

Even if the storm clouds had been building since 2007, the storm of recession broke in 2008. Five years on we are beginning to see the first signs of blue skies above. While it is incumbent on everyone to take a hard look at the events of five years ago and make sure we learn the appropriate lessons in areas from audit to corporate governance, from our banking culture to financial regulation, for the time being it is also important to enjoy some good news for once.

This story first appeared on economia.

 

Photograph: Getty Images

Richard Cree is the Editor of Economia.

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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.