I would expect the market to pick up noticeably now the Paralympics has finished. We are now seeing the government enter the second half of their term in office and consequently I am sure that they will be doing everything they can to stimulate the economy to ensure that by election time, things will be bubbling along. However I believe that the fundamental issue is that unless consumer confidence returns in force, no matter how much money the government puts into the economy, things will remain muted. This is something of a paradox in that on the one hand the banks and the government are telling us that debt is bad and we all need to pull in our belts and yet if the consumer doesn’t start spending again the economy will remain flat. For me, this paradox therefore points to a fundamental rebalancing of the economy where we will see lower levels of spending as a long term trend and I guess we all need to get used to that. Property prices outside London will also therefore remain flat or possibly negative for a number of years until the average house price equals roughly 4 times the average income.
There will also be another significant shift in the coming years as more baby boomers retire and either sell their businesses (if they own one) or buy a business to support their pensions. One trend that is already happening in Australasia is groups of retirees clubbing together to buy a business and to bring in a younger working partner who owns a share of the business and actually runs the business on a day to day basis, while using the knowledge and experience and cash of the retirees as and when required. TI believe that this is a very interesting development in business sales and given the poor returns from traditional pension investments, I suspect that these sorts of buying groups could be making an appearance in the UK in the near future.
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