SUB-PRIME MADNESS LEADING US INTO RECESSION – BUT DOES IT HAVE TO BE THIS WAY?

When the world’s largest and one of the most ‘respected’ banks says it has lost at least $18bn through its involvement in the sub-prime US mortgage fiasco then shockwaves can be expected.

That’s exactly what has happened with Citigroup in the US as it revealed its exposure to greed and stupidity - and plunging stock markets around the world are a symptom of the illness. Yes when the US sneezes everybody else gets a cold - or maybe in this case a dose of influenza.

Plenty of doom and gloom about - but while stock markets yoyo up and down largely on ‘sentiment’ are we as a nation in danger of talking ourselves into a recession before it happens - thereby causing one. Vicious circles come to mind.

Surely it is the responsibility of business, banks and government to help avoid the recession by talking the economy up and taking effective measures - such as reducing interest rates and minimising price rises for energy and food and other essentials to prevent a knee-jerk reaction.

Here in the UK we are on the brink - things could go one way or the other. The US is much farther down the recessionary path than on this side of the Atlantic. What’s needed now is for organisations - and their customers - to avoid panicking and put up the ‘business as usual’ signs as much as possible.

And the organisations who concentrate on excellent customer service as well as offering value for money will be in the best position to ride out the rough times ahead and be in the best place for the upturn - probably around mid 2009.

So we’ve got the biggest house price falls since the 1990’s, business confidence the lowest for six years, business failure the highest for six years, sub-prime fuelled dearer mortgages (despite a fall in interest rates), spiralling energy prices, rocketing food prices. I could go on.

But without wishing to come over all ‘Life of Brian’ there is plenty to be optimistic about. Our economy has been one of the strongest in the world for a decade now and many of the long term indicators are still positive. So let’s not talk ourselves into a repeat of the last recession. Time to tighten the belts and remain calm.