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Economic conditions the “new normal” for business

An economic climate of disappointing growth and volatility could be the “new normal” for businesses and charities, PwC suggest.

Andrew Sentance, PwC’s senior economic advisor was speaking at the Charity Finance Group’s Annual conference, and said that for both charities and businesses, the “new normal” economic world will put a premium on good operational and commercial management, as well as sound financial planning and intelligent risk appraisal.

Mr Sentance said: “One thing is pretty clear. We are not going to return to the “old normal” we saw prior to 2007. Recreating a climate of confidence which can underpin a durable and sustained recovery will take time.

“It is likely to remain a challenging fundraising climate, with discretionary spending remaining under pressure. As society adjusts to the “new normal” world, there will be new social developments and trends which appear to require a response from charities.

“Youth unemployment is one obvious example. Retrenchment in the public sector may increase the pressure for voluntary organisations to contribute.

“This can create new opportunities – but also the risk attached to involvement in new areas.

“Charities should be careful to set plans based on realistic revenue targets and guard against over-optimism in terms of income projections.”

The conference heard that most economies around the world have started to recover since the depths of the 2008/0 crisis, although the UK and major western economies were still in the middles of a prolonged period of adjustment.

Mr Sentance continued: “Further shocks from the euro area or other global financial instabilities cannot be ruled out. That means paying attention to the level of reserves and the ability to continue to fund new projects once they are commissioned.

“Not only do we face the legacy of the financial crisis, but western economies face an adjustment to co-existing with the rising powers of Asia.

“Public sector deficits need to be brought down and confidence in policy-makers has been eroded by the experience of the financial crisis.

“Recreating a climate of confidence which can underpin a durable and sustained recovery will take time.

“It therefore seems likely that the “new normal” of disappointing western growth, coupled with volatility in financial and energy/commodity markets will continue for a few years yet – into the mid-2010s.”

This was posted in Bdaily's Members' News section by Tom Keighley .