Officiallty the UK came out of recession in the last quarter of 2009 with the economy managing to post a positive growth figure for the first time in two years. However the 0.1% growth fgure was substantially below the average estimate of 0.4% and even below the lowest individual estimate of 0.2% of specialist economists.

Whilst there can be some comfort in at leas the number is in positive territory, it undoubtedly points to a very precarious picture, as we have previously noted in these columns. It seems unlikely that, despite every effort by the government to try and persuade people to continue spending, the British public wants to remain slave to the very debt machine that got us here. Manufacturing made up a large element of the Q4 GDP growth figure, however this was led largely by exporting activity as the weak pound made UK goods look cheap. With the settling of the currency markets, and the question of interest rate moves imminent we can no longer rely on that either. There are alot of commentators again raising the question of cheap mortgage deals ending and the possible impact this will have on any resurgence in the property market.

It is hard to take too much cheer from today’s data release, and we think that it will be necessary to keep a very close watch on all other economic data to ensure that we are in fact on the trend back to continuous growth.

The last year proved what the concerted efforts of a group of central bankers and governments can achieve.  From the edge of financial meltdown the bounce back has been indeed remarkable.  Asset markets around the world put in very impressive rallies including stocks, credit markets, housing.  You name it, 2009 saw it rally.

As we start 2010 we have seen a pause in this rally and a few pertinent questions are now being asked:

• Is this market rally being reflected in the performance of the broader economy?
• How much of this performance is purely down to the combined stimulus measures of low rates and money printing?
• What happens when these measures are stopped and reversed?

There are many articles being written about the possible timing of any rate rises in the US and UK, with the latter clearly expected to have to make the move first, possibly even before the end of the first half of the year.  The possible effects on already fragile confidence could be calamitous.

Strong stock markets have created the illusion that all is well in the world of blue chip companies - it makes us believe that there is demand out there for the products they make, that people are comfortable enough in their employment situation to continue to make purchases, and that the economy is functioning normally.  If you take a closer look at the individual company’s performance and actions, the picture becomes a little less normal.  Despite the huge rally of last year, dividend payments across many companies are actually down on 2008.  Surely strong performing companies would want to thank and reward their shareholders accordingly?  What can be translated from this lack of dividend activity?  That at grassroots level we are still some way away from functioning normally.  How much of this stock market ‘valuation’ can be attributed to the fact that with base rates at zero, that extra money that is being printed by the central banks is being used to shore up troubled balance sheets, what has been created is tantamount to a risk free one way bet on the stock markets.  In effect another bubble that will likely burst.

If we consider that historically low rates are soon to rise, then on top of the exiting from quantitative easing, the asset allocation trade from stocks to fixed income as the traditional ‘risk free’ asset comes into play.  There is no easy fix to this problem faced by central banks, and there are numerous permutations on the exit strategy, however it is a clear concern for 2010.

Honesty has broken out in most of the public sector about the need to cut public spending. The debate is moving on to a question of when and what to cut, rather than if.

For the last two years, senior civil servants have been trying to work out how to deliver more Ministerial commitments with less money (more for less). The obvious answer here is to increase productivity. And techniques such as lean, BPR , systems thinking have become widely popular from local councils to health trusts to most Departments of State.

Now Ministers have been instructed to think about what they can stop doing, or rather, which programmes are ‘lower priority’. The problem is no longer how do deliver more for less, but how to deliver less for less.

Different concepts come into play when the focus moves from increasing productivity to stopping low priority work and taking cost out of the system. To take cost out, managers will be thinking about more radical concepts such as de-layering, rapid outsourcing and straight up downsizing - though they are unlikely to use some of these terms. To select priorities (ie. to work out what to cut), concepts such as portfolio analysis offer a guide - and to get a tighter grip on spend from the bottom up, fine grained techniques such as zero-based budgeting make great sense.

As circumstances change, so to do the appropriate tools of management. Whether it’s an upturn or crisis, smart executive makes sure they are equipped with the knowledge they need to lead any type of change.

In days when global spending is down its important to maximise all revenue streams. One such place where modifications can have dramatic, cost effective, and in some cases overnight success is in e-commerce.

When times are hard and everybody is looking to save money, it is important that if you have an online presence, that you are making enough of it, and if it’s an e-commerce store that all your efforts to combine your various strategies are working together.

When looking at your e-commerce strategy one of the first places to look is how many unique visitors you have coming to your site. This is always something that can be maximised, take a look at your e-marketing campaigns to see what area can be improved. Are you well placed for your target keywords in your search engines of choice? If not, you need to analyse the search engine optimisation of your site. Check with your SEO agency what they are doing with regards to link building, page quality, social media and competitor analysis. If you don’t have an SEO agency or expert in your company perhaps you should consider employing one of these.

Online advertising is a great avenue to look at, but it is essential to be able to monitor its effects, if the traffic it drives does not convert, it is money down the drain – it is essential that any online advertising campaign is tracked to monitor sales conversions. When monitoring your traffic you need to see where people are arriving at your site, you may be surprised, search engines don’t just send visitors to the home page. Check that any popular ‘entrance pages’ have your products available to sell, don’t force the user to hunt down what you offer, because invariably they will not.

Once your visitor has your products in there basket you need to be analysing the ‘purchasing funnel’ you will always have ‘drop off’s’ as they go through the process off adding credit card details, shipping address and postage etc, but these are all avenues that can be maximised. Perhaps the user feels that your site does not appear secure, so they drop off at the credit card section, perhaps they drop off when postage is charged – consider waiving it, or perhaps there are just usability hurdles stopping your visitors converting their interest to your bottom line. Consider multi-variant testing and see how even the smallest changes can have dramatic effects, whilst minimising any risk from making changes.

If everything is looking good, try cross-selling to maximise revenue from sales, if someone is buying a camera, they will probably be pleased to be shown cases designed for that camera size, and maybe to incentivise the sale you could add a multi-buy discount to encourage them to add the extra item now instead of later.

When things are a bit desperate you could even consider opt out strategies for extras, for example if someone is buying a car, have the added alloy wheels option selected automatically making them have to physically remove the item. Be careful with this strategy though, profit may rise but customer satisfaction will probably fall.

Take a moment to review your website, and if there is a weakpoint, try something new, you may be surprised by the results.

The themes in the news really remain focused on the state of the economy with the key GDP statistic released on Friday unexpectedly bad. Company specific news of any major significance remains secondary.

The strength of the FTSE continues to surprise as it still manages to cling on to its best run since 1993 with the index closing the week above 4,500 some 10.9% rise since the start of the latest rally. This reading is all the more strange given that every forecaster expects any recovery to be frail at best, with the BOE being the dissenting voice at the start of the week, however the GDP figures released on Friday showing the drop in output now at 5.6% and the quarterly fall of 0.8% more than double the 0.3% average expected by City analysts.

Part of the reason for the rally in global indeces could be explained by the fact that hedge fund assets under management continue to recover, particularly in the US. There is also some speculation that the glut of money still in China could be finding its way into funds that are used for stock market investing. Can the rally continue? One commentator in the weekend’s papers pointed out that developed markets are looking expensive when compared to historical valuations, and that the levels of emerging market indeces almost defy belief. Another interesting comparison that was made in the same article was that of Japan – the Nikkei 225 halved in 1990, it then rallied for five months, which coincidentally this latest rally has been ongoing. Japanese stocks then proceeded to halve in value over the next 19 years …

There is ongoing mention in the press that bankers are still being paid large bonuses angering the general public on both sides of the Atlantic. This is exaggerated given that they still display an obvious reluctance to lend to small businesses with last month’s figures showing a further fall. The FSA’s chairman’s comments that banks could be forced to set aside more capital against loans is likely to serve to worsen the issue and his comments give some insight as to the thinking within the Basel committee that sets the standards for capital requirements for the world’s banks.

The UK Government borrowing in June came in at record of £13bn vs. £7.5bn a year ago on falling tax revenues. This can only be expected to increase and the spectre of tax rises must also remain a threat if this trend continues.

The worry that Swine flu is likely to affect the retail sector despite the positive data out in the week is still evident as Next calls into question some of its more bullish forecast following a good start to the summer after weather in June. The only possible winners from a worsening of the pandemic remain the drug companies with Glaxo SmithKline say that an order for its Relenza treatment could generate revenue of £600m.

Other news in retail states that Waitrose and Morrisons are the best performing supermarkets in the UK at the expense of rivals’ market share.

On the negative side there are still signs that the British public are reluctant to spend their hard earned money on going out with pubs apparently closing at a rate of 52 a week as British drinkers reign in their past habits.

Back on to the housing market and despite a decent month on month rise in mortgage lending figures it still seems as though there are problems out there as close to 10% of agreed purchases in the UK are not able to complete as the buyer is unable to secure the necessary mortgage financing they require.

The broad tone of business related news over the last week is still not surprisingly focused around the effects of the recession on companies as well as trying to establish whether there are signs that a recovery is imminent.

Job security and consumer sentiment are being looked upon as being the main barometers, as the government’s questionable ethos that the recession will need to be spent its way out of are reflected at street level. Matters seem far from clear with the news that Jaguar is still set to cut further jobs and stories appearing in the broadsheets that workers are taking less sick days for fear of being singled out in any round of redundancy. This is in spite of the warnings that swine flu pandemic still might affect a wide range of business activity. On the counter balance there are reports concerning imminent strikes again by postal workers. Official unemployment figures show an increase of 281k in the quarter to end of May taking the total to 2.38m as expected in this column last week. It is still forecast that this number could approach the 3m mark as the recession continues to bite and making any strong recovery difficult. Worryingly the hardest hit are the young and graduates.

The volatile retail sales figure managed to find a 1.4% monthly gain which prompted Bank of England figures to proclaim that the economy has indeed bottomed out. There were also reports from holiday companies that bookings are on the increase with Pontin’s reporting a 25% rise over the last quarter. This however may be more indicative of the manner in which people choose to spend their money on holidays as airlines have seen a massive drop in premium flight travel and think that this trend could easily take 5 years to recover.

The banking sector retains its share of page space with the government saying it will be reducing holdings of banks within months but will retain majority holdings for several years, whilst the IMF says that UK commercial banking sector remains weak and needs shoring up. In a markedly obvious comment it also points that public borrowing needs to be reduced drastically. The Sunday Times carried an article talking about lending capacity of majority banks still being largely restricted as they try to re-build capital base. Despite pressure being applied from a number of places to kick start the economy by lending more, it is important to remember that banks were close to collapse merely months ago.

Politics and banking are currently never too far from each other and the Conservatives made clearer their plans on how to tackle banking issues by suggesting the breaking up the one-stop shop style of banks into more manageable units to avoid them becoming too big to fail again. In addition they plan to hand the banking supervisory role back to the BOE at the expense of the FSA.

Another popular topic is still house prices – again. The love affair continues with numerous vested interests heralding the bottom with Rightmove claiming a 7% rise in asking prices so far in 2009 following the 20%+ collapse from summer 2007. However the number of caveats that any forecasters care to place on their predictions highlight the real picture – prices could go up due to lack of supply, they may stay flat due to lack of mortgage financing, or indeed prices could well see a double dip with a further 10% fall if the jobless numbers continue to rise. Take your pick.

The stories in the press over the last week and weekend remain balanced for the most part with some positive stories, however there does seem to be an increasing tone of realism/pessimism as there are an ever growing number of mixed signals coming through.

Broadsheet newspapers carry some specifically negative news on certain UK companies. Firstly the struggling global car sector is highlighted with Jaguar expected to make a decision on whether it will be undertaking an extended summer break this year and the spectre of further job cuts. Meanwhile British Airways AGM on Tuesday is expected to have similar tales of woe after a record loss in 2008. Lloyds TSB is expected to write down a further £13bn as despite a raft of stories heralding the bounce back in the UK property market it seems that the major players are still making large provisions for losses. These losses are stemming not only from commercial property portfolios, but are allowing for bad debts associated with both secured lending in the residential market as well as unsecured lending as the fear of increasing job losses mount.

The latter point is covered in a variety of general news and financial sources as despite the IMF predicting the global economy beginning to pick up, this is certainly not being led by the West. UK jobless figures currently at 2.26m are still widely predicted to hit the 3m mark next year.

The financial press commentators remain bi-polar with stories ranging from “the manufacturing sector is well positioned for this recovery” to “we are expecting a quadruple bottom” and “the recovery will be more tortoise than hare”. Nonetheless caution on what were previously deemed to be the green shoots seems to be the current watchword.

There is a phrase recurring amongst senior government officials: ‘don’t waste a good crisis’. The phrase refers to the fact that, in public services as in business, difficult times can provide a useful opportunity to reflect on the fundamentals; to take some difficult decisions that the good times made easy to postpone.

Whether it is politics, finance or management, tumultuous times can offer a welcome opportunity for a return to simplicity. Gordon Brown’s government needs desperately to get back to its simple core purpose - improving the lot of the people, not playing one upmanship on expenses or manoeuvring for the post-Brown era. Some bankers have been stripping away complexity and reminding  themselves of their true and essential role in the economy, and who their customers really are. And managers, in the public and private sectors, need to re-ask themselves the simple questions: why are we in business (what’s the mission)? What do we believe in? Where do we want to be? How will we get there?

Being simple and clear on the fundamentals has made it easier for managers to take difficult decisions in a targeted, organised way. And when simplicity is required, some of the basic and enduring management concepts really come into their own: SWOT analysis helps managers in any-sized firm glean a snapshot, internally and externally, at the true position today. Five Forces Analysis still offers an excellent framework for understanding change in the competitive environment. And Resource Based Strategy encourages managers to look afresh at what their organisation’s core competencies were, and have become.

These management concepts are essential because they provide often simple but powerful structures for identifying options and taking focused decisions. Better this than the blanket measures (eg, cuts across the board) that can damage even the core strengths of the organisation. The crisis has provided a good opportunity to look afresh at the business, and using some of the most simple management concepts can be an excellent place to start.

An increasing number of politicians and policy makers are talking about the worst of this crisis being over, and there being evidence of the beginnings of recovery.

Whilst stock markets have seen an impressive rally from the lows over the past six weeks, alot of influential commentators including the likes to George Soros have been labelling it as a bear market rally.  Encouragingly there has been some stabilisation at the new levels, but It is surely a little early to be talking about a full blown recovery.  It may be fair to say that the alarming pace of decline of global economies has begun to ease, but the trend still remains a downward one.

Today the budget released in the UK revealed what it seems alot of people seem to have put to the back of their minds - all of this money that countries have put in to their ailing financial systems, and to try and stimulate their economies will have to be repaid at some point.  The IMF estimated the total amount of money that the crisis will cost as much as £200bn.  Bizarrely this was later revised down to £130bn allegedly after a heated conversation between the Chancellor and the IMF, but the fact remains that these are not insignificant amounts of money, and it will need to be found somehow.

Borrowing projections have spiralled upwards, whilst growth predictions are still being revised downwards.  The latest figures released today showing the UK issuing £220bn of bonds to finance the budget deficit, which brings debt to GDP close to 78% which is more than some Emerging Market economies.  The government has had to revise down its own GDP forecast from November and now predicts the economy to shrink 3.5% this year (at odds again with the IMF who predict 4.1%) whilst then inexplicably expecting to rebound to 1.25% next year.  The majority of the market economists see this as incredibly optimistic and expect further downward revisions.

This crisis, whilst maybe past its peak, is only just beginning to play out the impact it will have on global economies for the next few years at least.  How markets react to this reality checks remains to be seen, but it is hard to match current valuations with expectations.

After more than 10 years  spearheading the US and UK economies, the unprecedented events of last year  - which saw a whole host of financial behemoths bailed out by their respective governments - are still playing out, and the whole industry is undergoing a huge transformational change.

As the world reels from the aftershocks, the epicentre of the crisis is having to do some very quick, and often painful adjustments to cope with the public scrutiny it now faces. Banks are recognising their corporate social responsibility; a concept that previously seemed not to apply. The immediate need to downsize is not exclusive to the financial sector, but after years of over hiring and seemingly overpaying those who posted huge paper profits, the world at large feels that heads should roll.

It remains to be seen whether 2009 will be another annus horbilis. At least in terms of the results one certainly hopes that the write downs have hit their peak. However, the new corporate culture of drastically lowering of cash bonuses will result in much less risk taking associated with high flying banking executives and traders. This will clearly have an impact on profits for the coming years, and so it is hard to see why the share prices of banks will see a sharp recovery any time soon.

Another element that is widely believed to have contributed to the crisis is the failure by the Regulators (SEC in the US, and FSA in the UK) to effectively monitor the exponential growth and question why this growth was occurring and whether it was in the best interests of an efficient market. The much talked about alphabet soup of derivative instruments that were created by banking geniuses - CDS, CDO, CLN and so on - created risk profiles that seemingly neither the regulators nor the ratings agencies understood sufficiently. It was only when the underlying asset values slipped that everyone suddenly realised that the true unwind values of these assets were so hard to accurately price. Although there could clearly be an argument that the Regulators’ involvement now being a little late in the day, the fact remains that it will now play a much greater role in the day to day running of the financial sector.

The final point that needs to be mentioned here is the involvement of leverage in the system. The ease of access to credit was as prevalent in the professional side of the financial markets as it was to the man on the street. New hedge funds appeared with alarming regularity, and banks were only too keen to allow them to leverage in multiples of their true worth. It has been reported that many of these funds have since disappeared from whence they came, and many more are expected to over the coming year or so as ‘traditional’ lending practices are restored.

It seems the worst could well be over, however let us not speak too soon. The latest plan by Obama has caused a decent relief rally in the stock markets, however it remains to be seen whether the latest plan will actually work.