The economic environment

It became clear in 2008 that the world's financial system was in jeopardy as many of its leading banks were suffering liquidity issues and incurring losses, leading them to be significantly undercapitalised. In early 2009, all indicators pointed towards an increasingly challenging operating environment with the deterioration of the world economy, financial uncertainty and low consumer confidence. Additional challenges became apparent with the continued volatility of currency and fuel prices as well as the outbreak of the H1N1 virus.

More than one year on from the banking crisis we are seeing some indications of economies beginning to bottom out but economic data is still mixed. There appear to be signs that the government's intervention in the banking crisis is starting to take effect and there is improving consumer confidence and an increasing willingness to spend. However, unemployment is predicted to rise to 11% in the UK in the second half of 2010 and although there has been recent improvement in the US, unemployment remains at 9% (Oxford Economic Forecasting September 2009). In Germany and France, unemployment is expected to continue to rise in 2010, remaining high until 2012. During 2009, the US and the major European economies (UK, Germany and France) have seen some quarterly increases in GDP. However, annual GDP growth is not expected to resume until 2010.