With the Diamond Jubilee and a long-awaited Olympic summer nearly upon us, now should be a time for optimism. However, outside the arenas of sporting prowess and royal pageantry, what is this year shaping up to look like?
I wrote at the end of last year that I thought 2012 would see us slowly turn a corner, with governments grasping the nettle of Eurozone travails and finally providing some stability on which market confidence could begin to be rebuilt.
Fast forward a few months, and it is fair to say that the Eurozone is still a work in progress. In recent times, signs have emerged that finance ministers have woken up to the scale of the challenge that faces them and the ECB’s €1 trillion liquidity injection has gone some way towards soothing widespread concerns. However, the election of a socialist President in France – sweeping to office on a platform of anti-austerity, the ongoing maelstrom that is Greek democracy, and the collapse of the Dutch government, have all combined in the past fortnight to rock the markets and inject a fresh air of uncertainty over the Eurozone. A rebounding US economy offers us some positivity of course but, owing to our European neighbours, it might be more a case of ‘wait and see’.
At home, we are not out of woods yet – both Fitch and Moody’s only recently placed the UK’s AAA rating on a negative outlook – but there are signs to give us hope. Recent economic data has pointed towards a double-dip recession but it was the OECD that, in March, released a report which indicated that the UK economy might finally be in the early stages of recovery. Those elusive green shoots eh?
As I tentatively suggested at the tail end of 2011, M&A activity has also shown early signs of returning from the dead. Facebook’s recent acquisition of Instagram may have grabbed headlines but the £50bn-plus mining mega-merger between Glencore and Xstrata announced earlier in the year rumbles on, while the acquisition of UK aerospace group Umeco by a cash rich US competitor in early April illustrates how foreign predators with bulging balance sheets are not afraid to pick up undervalued UK assets.
Banker bashing remains something of a national pastime, and the financial services industry still has some way to go before it fully rehabilitates itself in the public mind; however the “feel good” factor that this summer will bring and a growing positivity in the fate of the global economy should, I hope, combine to help us finally move on from our post-financial crisis hangover. With a bit of luck, like croquet before it, banker bashing may even become one of those Olympic sports we finally realise we can really do without.
Looking ahead, only a protracted period of economic and political stability will give management teams the confidence to rekindle their risk appetites and do deals. Economically therefore we are unlikely to achieve a podium finish this year but let’s really enjoy the 2012 summer for the undoubted positives it has to offer.