Marketing Forcast - That Sinking Feeling, January 2012

2011 ended immersed in uncertainty. The Eurozone had lurched from crisis to crisis unresolved throughout the autumn and into winter. The year had begun somewhat optimistically: the austerity measures were anticipated but had hardly begun to bite; and there were signs of life in the private commercial property market, at least in London. Indeed the button was pushed on a number of large office construction schemes in London, including the towers at Leadenhall Building and 20 Fenchurch Street, the “Walkie-Talkie.” But the wind was slowly sucked from the sails as the economy refused to grow and uncertainty returned to haunt the boardrooms.

There remains a huge amount of surplus capacity in the industry, which is why prices have not moved upwards even when workload picked up last year. But with an even poorer outlook for 2012, contractors are reluctantly laying off directly-employed staff. Those contractors fortunate enough to have full order books currently are reluctant to expand given the nearterm prospects.

A Greek default looks ever more likely increasing the possibility of a break-up of the Eurozone with untold consequences. Even without these events, Europe seemed to be heading into recession. Germany’s economy contracted in the fourth quarter of 2011 and France probably flat-lined. What about the U.K.? The latest forecasts suggest that Britain is already in recession. The Ernst & Young Item Club estimates that growth in 2012 will be 0.2 percent with business investment stagnated.