Recession stimulates change

Published:  24 June, 2013

Key note speaker, Rt Hon Michael Portillo, addressed the BMF audience by giving a fascinating insight into his political career and gave his perspective on the economy - referring to a recent article he found in the Daily Telegraph discussing mortgages and how they are 14% up on last month, and two percent up on May last year, signalling a "more positive outlook for the economy".

He touched on the various different government schemes available but was cautious of the cost of house prices in the UK and said that they were "far too high". He told delegates: "Politicians have been reluctant to work at bringing house prices down. Why? Because they never want to repeat the negative equity nightmare I had to endure back in the 1990's."

Mr Portillo added: "Unless we get house prices into a better kind of relationship - inline with people's average pay - we are going to see home ownership decline, which I think is bad news for you (the audience) as those who are the big spenders when it comes to home improvements are homeowners and not landlords. I don't see a government policy out there at the moment which does anything to tackle this problem."

He then went on to reflect on the issue of unemployment in the UK and said that it isn't "a symptom of a declining economy, but a symptom of an economy that hasn't yet adjusted, where things have changed and people have not adapted to it".

The third issue Mr Portillo discussed was the fact that he thought that a recession was necessary from time to time. Why? "Because recession is the moment where changes that have been postponed have to occur. It's like a forest fire - they naturally occur to get rid of the dead wood and refresh the forest."

He added: "It's easy for companies to make a living in the boom periods - it's only in these periods of recession that companies who are focused on the future get to survive and the ones that are stuck in the past don't."

Even though the British economy isn't growing, it's still a vast economy, said Mr Portillo. "Our economy is the same as it was in 2004 and back then we thought the UK was fairly rich," he said. "We are a rich country and we do have rich consumers, so we do have enormous opportunities in a recession."

He added: "But let's be honest, you (the audience) are people who are fit and who are looking to the future to innovate and who are going to be the survivors and thrivers."

Mr Portillo then went on to say that be believed it was difficult to plan what avenues a business will take. He said: "Life always gives you surprises that take you in unexpected directions. It's worth thinking: how can you get more direct contact with your customers? You have to remove the obstacles and make yourself accessible in your business," he concluded.

To read more from the BMF All-Industry Conference, look out for the full report in the July/August issue of BMN.

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