Is the recession over for the Tech & Media sector?

This morning I attended a seminar jointly hosted by Taylor Wessing and Cobalt. I saw it as an opportunity to network with entrepreneurs running dynamic growing companies and with the investment community while gaining an insight into the future of the UK market. Here are my notes from the session:

  • George Brown was responsible for the majority of the growth in the last decade, mostly through investment in the public sector. George Osborne intends to provide no public sector growth so it is all down to the private sector.
  • Public sector growth is predicted to be at -1% for the coming 12 months. The private sector is currently growing at 3%. If this is maintained the overall growth for the economy will be approximately 1%
  • Bank balance sheets are too strong so there is no desire to lend to the private sector despite the pressure being applied by Government.
  • While the current inflation rate is approximately 4%, if you discount the increase caused by indirect tax rises (VAT, fuel duty, etc.) the underlying rate is approximately 2.5% which is within the Bank of England’s target range. However, there is significant media pressure to highlight the 4% rate which may cause the BoE to increase interest rates. The danger here is that this will take us into a spiral similar to the one we saw in the 70’s where wages chased prices.
  • There are three possible solutions to the Euro issue
    • German wages rise by 25%;
    • Mediterranean wages fall by 25;
    • Some countries leave the Euro (Possibly France and Germany but likely Ireland, Portugal, Spain and Greece)
  • US jobs are still being lost at the same rate as at the worst of the last downturn.
  • Corporate profits are very strong. This is mostly due to wages being held down.
  • The UK stock market is currently fairly priced (based on the dividend yield).
  • The west is not in a normal economic cycle. It is in a post banking crisis – a period of de-leveraging.
  • M&A activity is set to remain high
  • Investor sentiment should continue to gradually improve.

The speakers were:

  • Paddy MccGwire, Partner Cobalt Corporate Finance
  • Chris Williams, Partner Cobalt Corporate Finance
  • Simon Walker, Taylor Wessing
  • Jeremy Beckwith, CIO Kleinwort Benson
  • Ian Spence, Principal Analyst – IS Research

About Peter Borner

Peter is an entrepreneur and successful business leader. Currently leading a consultancy firm specialising in technical diligence for M&A and advising global firms on IT consolidation and migration to consumption based costing through the use of Cloud Technologies.