Chin up, everyone
As the summer draws to an end, we could be forgiven for feeling a slight winter chill as we read of stark warnings from government ministers, trade union calls for a "day of action" to protest public expenditure cuts and fears of a "double-dip" recession.
For those of us who witnessed the economic and political turmoil of the 1970s and 1980s, images of bulging picket lines, rubbish overflowing onto the streets, mass-unemployment and Denis Healey running cap in hand to the International Monetary Fund (IMF) quickly spring to mind.
Such an analogy seems rather misplaced. It is, of course, true that we are facing serious economic challenges. Cutting the huge fiscal deficit of £160 billion is not going to be an easy task. Then there is the news that inflation, which rose to 3.2 per cent in the year to June, will remain above 2 per cent until Autumn 2011 and that the forecast for economic growth next year has been cut to below 3 per cent.
However, there are some encouraging signs that we are moving in the right direction. Despite the fact that the general election did not give any party an overall majority, the coalition government appears to be relatively stable and has outlined a programme of expenditure cuts which has, so far, received a positive response from both the markets and the general public.
The recent results of Barclays, Lloyds, RBS and Northern Rock suggest that the banks are over the worst of the financial crisis, although getting them to lend more to the private sector is still not proving to be easy.
Whilst there is a serious possibility of industrial action from public sector workers as a result of the proposed government cuts, the strength of the trade unions is far reduced from what it once was. Not only has their room for manoeuvre been impacted by the requirement for strike ballots and other legislation but, according to figures in 2006, the proportion of employees who are union members is only half of what it was in 1979.
It is business confidence that may well hold the key to our short-term economic performance. According to the Travelex Confidence Index, confidence in the economy jumped 12 points in July.
However, this was before we had the revised figures for GDP and inflation. Whilst it is understandable to seize on that disappointing news, we need to recognise that the UK economy is growing again, inflation is still relatively low and we are taking the necessary measures to put our public finances in order.
Therefore we should still feel optimistic.
Jonathan Morris is a partner at the international law firm Berwin Leighton Paisner LLP.