World Economic Forum Under Way; U.K. in Economic Limbo
RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Good evening, from Davos, in Switzerland, where tonight jobs, growth and recession, are on our agenda. Britain has emerged at last from the longest slump on record. And now the U.K. finds itself in an economic limbo, between expansion and contraction. Tonight, on this program, as you would expect, we're going to discuss whether it can find any way out. Also, the recovery and the world at work. Employment agency Manpower is telling us what it means when it comes to job prospects. And we have a detailed discussion on the question of trust with the top man from KPMG. On our program we discuss the business world needs to do things right. We know that much, but it is for the right reasons. So, firstly, Britain made its economic bulletin, came as a massive disappointment to just everyone. There was growth, the first growth for more than a year and half. It was growth in name only. It was the only positive news. The economy expanded on 0.1of a percent in the final three months of the year. Yes, it couldn't really get much less than that. Anemic compared to what economists had been expecting; 6 percent of Britain's economic activity was wiped out during a year and a half of economic decay. Last year alone, GDP shrank by a whopping 4.8 percent. The worst year since the U.K. measured GDP. You could liken it to a guest who arrives late at a party, only to find everyone else has moved on; in other words, Britain the last major economy to come out of recession. And still, the Finance Minister Alistair Darling said he was optimistic, but cautious.</s>ALISTAIR DARLING, FINANCE MINISTER, UNITED KINGDOM: I think today's figures give us the confidence that we are on the right path, provided we stick to the course that we set. And as the CBI said today, maintain our support for businesses and families, at the moment, but then we've got to make sure that we get through into a period of sustainable growth. Now, I'm confident we can do that, but I remain cautious, because there is lot of uncertainty around, still, right across the world.</s>QUEST: Alistair Darling is a member of the government that has to face the voters at some point in the next five months. The rumors are the U.K. election will around May the sixth. Even so, when you've got this sort of news you need some expert analysis. David Buik, an experienced market watcher and friend of this program, told me how the latest numbers went down in the London's financial district of the city.</s>DAVID BUIK, BGC PARTNERS: Richard, I wish you had been here at 9:30 a.m., this morning. I've been in the city 47 years. I have never heard in a dealing room howls of anguish and frustration as I heard today. They just couldn't believe how fragile the U.K. economy still remains.</s>QUEST: What is underneath those numbers? What is preventing the U.K. from returning to growth like Germany, France and other EU countries?</s>BUIK: First, and foremost, unlike our European friends we don't have a balanced economy here. We focused our attention on the service sector in the last 12 years. And it paid handsome dividend for 10 of those, about 80 billion pounds. But unfortunately when you do that you neglect manufacturing output and industrial production and you pay a very heavy price for it, which is exactly what's happened. Within those figures of the fourth quarter, we did of course see a 10 percent increase in exports, but that is from a ludicrously low level. Also, manufacturing output and industrial production, Richard, has also improved, again, from a ludicrously low level. What surprised us was the service sector only rallied by 0.1 percent, we were expecting 0.6 percent.</s>QUEST: If we look forward into Q1 of 2010, we've got in the U.K. a rise in VAT rates, we have a tax rises coming along later in the year. Is it possible and are people saying that the U.K. could have slipped back into recession within the first quarter?</s>BUIK: It is possible because to use the English vernacular, we're skinned. We spent our money at Christmas. We're obviously very, very vigilant for the fact that we could loose our jobs. And people also extremely concerned about the fact that the government refuses to take a really positive tact towards the terrible public sector shortfall and also the borrowing requirement. And we also think that if constancy of easing (ph) were to be exited sometime in the second half of 2010, we'd be in trouble.</s>QUEST: So, with an election coming up in May, David, in your dealing room, and the people you are talking to, is there a feeling of stagnation and kill? I don't mean economic stagnation. I mean paralysis, if you like, of policy until after the election, which is believed to be at the beginning of May.</s>BUIK: It is a dangerous possibility. The fact remains that, you know, I don't think that the Bank of England will be allowed by any government, Tory or Conservative, to withdraw constancy of easing. I think the economy is much too -is in much too brittle a shape to be able to allow to do that. And that will help. And also any signs of inflation, while I hope we won't be able to span it for the next six months, will have to remain in the in tray. Because what we need is a continuing massage to get what economy we have back working. There are some very good bits. It is just much too small.</s>QUEST: David Buik always makes common sense on these issues. Recovery is clearly underway but it is slow and for those out of work it really feels like things are not getting better at all. It is not just a U.K., as a percentage, Britain's unemployment problem isn't the world's worst, in the world, by any means. Joblessness in the U.S. hit double digits late last year, holding at 10 percent in December. That is more than 15 million people out of work. In the U.K. the jobless rates was 7.8 percent in November. Germany's labor market remains strong with 7.6 percent unemployment. That is amongst the lowest within the European Union. Spain, amongst the worst with 19.4 percent unemployment, the second highest in the European Union. So, David Arkless now joins me to talk about it, with the employment services company Manpower. Nice to have you here.</s>DAVID, ARKLESS, MANPOWER: Richard.</s>QUEST: You've just come from?</s>ARKLESS: Riyadh.</s>QUEST: Riyadh. You are one of these people that is sand to snow.</s>ARKLESS: Exactly.</s>QUEST: You'll be getting a bit chesty before you're finished.</s>ARKLESS: Just like you.</s>QUEST: Now, you are the president of government affairs at Manpower. Let's talk about this serious issue that we have got. The jobless numbers are grim, and they are grim, but are we seeing them getting better?</s>ARKLESS: All I can tell you is when you and I talked about this on your program a couple of weeks ago, and we said it was amber; which means a bit of caution, especially with the U.K. The U.K. hiring intentions are showing positive from employers, but they're holding off hiring. So that means they need to hire people but they are not quite making the decision to do so. So the U.K. is going to be, as you put it, a bit anemic for while.</s>QUEST: But then if you take the U.S., for example, where we are seeing the numbers coming down, just a tad, but that is not -that is a bit of statistical anomaly, isn't it? That is people falling out of it. And yet there are some countries that are cutting unemployment rates?</s>ARKLESS: Well, like which ones? Germany for instance, we are going to have a problem in Germany coming up soon. So that is something that you should watch out for, because the cash for clunkers have stopped and the subsidies for part-time jobs is slowing down. So, Germany, that 7 percent number you mentioned, might start to come up again. The U.S. is absolutely, though, starting to show some signs of things coming back.</s>QUEST: Is that because -and this is an interesting discussion on the question of is the U.S. just a more vibrant economy when it comes to creating jobs? It has less regulation, which is a good - it is, and an evil.</s>ARKLESS: They lay off much quicker than any other country in the world. And then they start to hire much quicker. But this time, they are taking their time in re-hiring. So the stimulus package, in itself, in the U.S. did not create jobs. But we are just starting to see a little bit more of corporate interest in rehiring now.</s>QUEST: Davos-what are you doing? What do you think the purpose of this year's Davos is? The one question-and I'm sure friends and colleagues of yours say, David, why do you go?</s>ARKLESS: Davos is the great convening location. It is as simple as that. I can see who I want, when I want, wherever I want here.</s>QUEST: Do you learn anything?</s>ARKLESS: I learn loads here. Especially from you.</s>QUEST: Oh-ho.</s>ARKLESS: The issue here is you can connect on the big issues, which we are talking about this year at Davos, which is reinvention, reengineering, and getting it right for the future. And by the way, we're not just starting to talk about this at Davos. We have been looking at global agenda issues, with the World Economic Forum, for two years. And right now, at this forum, we are going bring some of those to fruition on jobs, on employment, on job creation.</s>QUEST: The whole jobless question seems to be the iceberg, if you like. Everyone knows it is there, but everybody wonders when it gets better?</s>ARKLESS: It will get better but slowly. I'm looking into-as we discussed before, the third and fourth quarter this year, I think we are going to start to see some resilience in the recovery for jobs.</s>QUEST: David, many thanks, indeed. Keep warm. David Arkless joining me from Manpower. And we will always be happy to have you with us on the program. Some positive numbers that you need to know. European stock markets closed higher for the session. The gains were fairly modest. We must not be ungrateful. They were the first plus numbers that we had in five days. A little more optimism in the air on economic matters. Look at the numbers. Germany's DAX up over half a percent, the FTSE did a third of a percent. And the CAC Currant, up half as well. Solid earnings from Novartis, here in Switzerland, helped the pharmaceutical stocks. And that was enough to offset losses in the banking sector. Now, you are up to date with what is happening in Davos, where indeed, we actually got some snow. We'll find out the weather later in the program. Turning to more serious matters at the moment, Max Foster is at the CNN news desk.</s>QUEST: We thank you for that, Max Foster, in the warmth of CNN in London. The first question everyone always asks me when they see our studios: You must be a bit chilly. We'll talk about that a bit later in the program. Also after the break, the era of slash and burn, at least for one famous name has come to an end. Ford jumps ahead of the curve as jobs cuts the world into equal thirds.</s>ALAN MULALLY, CEO, FORD MOTOR COMPANY: When we look out into the future, Richard, we see about one third of the market being in the Americas, about one third of the market for all of the cars going forward will be Europe and Russia, and about one third of the market will be the Asia-Pacific region.