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Gary Weston, Chairman of Group 19, introduced the speaker Roger Martin-Fagg. One of the most popular Vistage speakers, Roger’s talk was named How Does the Economy Work and What Causes a Recession?

They are two big and complex questions which Roger deftly explained with wit and verve. Injecting both humour and clarity into Gross Domestic Product forecasts is not the easiest of tasks but Roger’s engaging delivery ensured that even the most complicated of economic theories was easily digestible.

Perhaps the most pressing question for most of the people in attendance was ‘What stage of the recession are we in?’ Roger’s sobering prediction is that the current recession is unlikely to end before 2012 and that we then face several years in which small improvements in the economy will be countered by mini dips. The underlying trend is that the economy will grow but at a slow rate.

Roger’s message might not have been the most optimistic but its stark assessment should help Vistage members shape their strategy for the next few years.

As well as potential new members, those in attendance included Vistage members such as Sandra Birrell of McKinnon and Clarke; George Finlayson of Portakabin Scotland and Andy Lothian CEO of The Insights Group. They were joined by alumni such as Jim Lambert of J. Wilson Power Tools and Graham Wallace of the Filmhouse.

Steve Gilroy, CEO of Vistage International (UK), attended the event along with Chairmen Gary Weston and Alastair Muir.

Watch the video for a taste of the day and visit vistage.co.uk to find out more about our upcoming Vistage Open Days for 2010.

Watch our video of Roger speaking at our regional meetings last year

If you want to watch more of Roger please click here

The report also said that December was the fifth successive month in which hiring of permanent employees grew and that temporary staff placements also rose during the period, to a 30-month high. So have we really turned the corner, and is UK PLC now into hiring mode again? I don’t think so.

I’m as happy as anyone at the good news, but I think it’s important to keep these developments in proportion. The reality is that I don’t expect overall unemployment levels to improve markedly in the short-term and, unfortunately, I think we have some further pain to endure in the coming months.

Trends in unemployment tend to lag behind underlying changes in the economy. We’re now hearing news of ‘green shoots’ and the ‘start of the recovery’, prompted by surveys such as that from Deloitte this week which showed confidence among finance directors at its highest for more than two years. However, there are still plenty of businesses out there that may not survive the year or still have tough decisions to make. And, of course, when government spending comes to a crashing halt, as it surely will in the next two years, the ripple effect will add to unemployment levels, especially among public sector workers.

Although, as the Report on Jobs indicates, companies which made deep cuts in their workforces early in the recession may now need to re-staff, I suspect most will do so very carefully – using self-employed, contract and temporary labour where they can.

The number of workers in these categories will therefore grow this year, as they make major contributions in all sectors of industry – this is a trend that I believe will continue.

The days of ‘one job for life’ have now truly gone and many roles can be flexible in their nature. If they’re planned well, new flexible employment arrangements can therefore suit both workers and employers.

One group to benefit from this trend could be the many retired people the recession is prompting to re-join the labour market, as many of them are specifically seeking part-time and flexible roles. Their availability could also be a boon for employers, especially in sectors such as manufacturing, as there are many highly-skilled operators among these aspiring returnees.

At the risk of going off at a slight tangent, it’s also worth pointing out that big changes are taking place in the means of hiring workers. In general, employers are finding that technology, the internet, social networks and personal recommendations or referrals are very effective and much cheaper than traditional methods of recruiting. Specialist recruitment agencies will still have a place in the future, particularly for employers seeking scarce skills or filling niches, but I do foresee a significant move away from traditional print advertising for recruitment in the months ahead.

So what does the next 12-24 months have in store for the UK job market? Do you see employment growing or contracting? And what is your view on new employment formats, and recruitment methods? Has the world really changed, or is it just another cycle of more of the same old things?

Let me have your thoughts, and any specific examples that you have to detract from or backup my points above.

The new HQ, ‘Terra Nova’, plays a critical part in the company’s expansion plans.  In a difficult global climate, this international organisation has given a firm pledge to retain its foundations and expand its future workforce in Scotland.

The First Minister Alex Salmond welcomes the firm’s decision to retain its base in Scotland.‪ He said: “Our Economic Recovery Plan makes clear the key role that education and skills must play in getting us through the downturn, for example through ScotAction we’re enabling individuals and businesses to acquire the skills needed to enter, remain and progress in employment.‪

“The opening of Insights’ global headquarters in Dundee underlines the high value of Scotland’s people, their skills and experience, to our economic fortunes at home and abroad.‪

“This exciting development is a major boost for Scotland and the Tayside economy as the company expands its reach across the world.”‪

The creation of a new global headquarters in Dundee represents a significant milestone for  Vistage member Andy Lothian,Insights’s CEO  who was born and bred in the city.  He says “We have a long term commitment to maintaining a global base in Scotland.  We are building a platform for global expansion from which we can continue to change personal and professional lives across the world through innovative learning and development techniques, and we are looking forward to creating more high-value jobs across the company.”

Businesses operating under the Insights’ brand enjoyed a turnover in excess of £20 million during the last financial year.  Its two learning systems, Discovery and Navigator, have become recognised as amongst the most impactful learning and development solutions available in the world today, each designed to improve performance and create sustainable lasting change.

For Insights’ founding Director, Andi Lothian, father of CEO Andy, the building signifies how far the company has progressed since its formation.  He comments: “It houses, inspires and consolidates the passion, spirit and excitement which have fuelled Insights’ phenomenal growth since its launch 11 years ago.”

Mr Posen’s main area for concern is the possibility of the Government reducing significantly its current level of support for economic activity before the financial system is fixed. He believes the result would be a shortage of credit for small and medium-sized non-financial enterprises – the types of business which benefit most from Vistage services – and this mismatch between supply and demand could trigger the double-dip.     

In warning of a further slide downwards, Mr Posen is aligning himself with Vistage UK’s top speaker and leading economist Roger Martin-Fagg, who predicted some time ago that the recession would be W-shaped, with a further period of decline following a temporary upswing towards the end of this year, which would be largely due to businesses re-stocking.  

We issue Roger’s bulletins on a regular basis to help members navigate their businesses through the currently turbulent waters. It appears that his prediction about the shape of the economic curve is now being echoed by a key person within the institution heading the UK fleet.

Very unfair, of course. The fact that we, at Vistage UK, believe in economic forecasting is easy to see – just look at the regular predictions we issue, prepared by Roger Martin-Fagg, one of the best practitioners around.

I was reminded of that old insult, however, when I read reports this week that the Ernst & Young Item Club believes the UK economy is already out of recession. That view is expected to receive backing later this week when the Office for National Statistics announces economic output was either flat or headed upwards in the third quarter of the year.

Before you rush out to celebrate, however, be warned that not even the comparative optimists of the Item Club are suggesting choruses of Happy Days Are Here Again are appropriate yet. They expect the economy will “bump along the bottom” for the next 18 months or so, growing by a mere one per cent next year, compared to the almost unprecedented 4.5 per cent collapse in output during 2009. They also say interest rates will remain very low for many years, as the economy struggles to regain full power, following the recent problems. 

The Item Club’s view does contrast pretty starkly with that of Roger, however, who predicts GDP growth will actually be W-shaped, with a slight recovery this autumn being due to restocking and proving strictly temporary, as households and companies continue reducing their debt in the months ahead. He says that by 2012, the UK economy will be no bigger than in 2005.

If that hasn’t made you depressed enough, Roger also believes that: unemployment, particularly among the under-25s, will keep rising; credit will continue being hard to obtain and expensive, with the era of cheap money not returning until 2017; the high level of business failures will be maintained; and there’ll be no resurgence of commercial or residential property prices. I could go on, but there may be sharp objects around…I think you get the drift.      

There’s therefore clearly a divergence of view between the Item Club and experts like Roger, over the shape of the curve in the foreseeable future. So it would be fascinating to hear how things look from your viewpoint: do you agree with one of them or hold a completely different view? Why not drop us a line and let us know?

Economic Update

Vistage UK speaker Roger Martin-Fagg has released his October 2009 economic update for the UK, available to Vistage UK members

In the report Martin-Fagg says there’s no quick, or even slow-paced recovery on the horizon. He projects a “W-shaped” recovery. In this scenario the UK will have a second leg of decline, not quite as severe as the first leg. That second leg will come as the government money tap (i.e. quantitative easing) is turned off.