Event: Business Forum Scotland – December

Last week Business Forum Scotland had a wee Christmas get together at which we received some pearls of doom wisdom from Marcus Wright (Economist, RBS) and John Waddell (Archangels).  The short story?

It’s going to get worse before it gets better, but deals are getting done and will continue to get done.

Here are my notes on what they had to say, including a comparison between Italy, Haiti and Zimbabwe and mention of an aquarium in Kiev – never let it be said that discussions at Business Forum aren’t wide-ranging!

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The Bad News – Marcus Wright – Economist, RBS

I’m going to try
to be quick passing this on. Like ripping off a sticking plaster…

• UK growth looks set to be slow, there may still be more periods of recession.
  • In the early 90s recession, manufacturing was 20% of GDP and helped recovery, and
    the world economy was strong
  • Now manufacturing is 10% of GDP, and the world economy is weak.
  • At the moment, there are no drivers for recovery.
  • The last RBS forecast for 2012 GDP growth was 1%. The next forecast will be worse.
• UK Unemployment will rise
  • Output is down 5%. So far employment is only down 1%, and this will need to rebalance
  • Central government cuts are largely still to come.
• UK Interest rates will probably hold for the next three years
  • This is necessary to support household deleveraging
  • There will be more quantitative easing next year, supported by fiscal (rather than
    monetary) tightness
• Europe is not yet fixed because the fundamentals have not been addressed
  • My favourite fun fact: “The only countries to experience less economic growth
    than Italy in the last 15 years are Haiti and Zimbabwe”
  • The Euro will survive – it’s gone too far to unravel and fiscal union is the last
    piece of the puzzle to make it work
• The UK is better off than most of Europe
  • Relatively secure AAA rating
  • Better financing costs than even Germany (close to US levels)
• China will see 8% growth next year
  • China will generate demand for commodities that boosts its trading partners
  • It is propping up the global economy
  • The UK is totally irrelevant to China
• It’s going to be worse before it’s better

The Good News – John Waddell – Archangel Informal Investment

• Archangels members have invested about £7m so far this year, which will rise to
  about £10m for the whole year
• This includes four new companies including Airborne Energy, Fios Genomics and Xi
  Engineering
• There are exit opportunities out there – you just have to sniff them out
  • In the last year, Archangels has exit from Crombie Anderson, Data Discoveries, Lab901
    and Mpathy Medical
  • There has been a drought of exists since 2004, but many big companies currently
    have cash on their balance sheets
  • VCs are lowering their sights
  • There is work in progress on further exits
• Money is easier to raise this year than last
  • Archangels have not used the maximum available co-investment on most deals
  • Exits help
• Priorities
  • Team
  • Product
  • Market – which needs as much work as the product to make a company attractive!
• Archangels will probably invest £10m next year
  • Number of business plans coming in is increasing, quality is good
  • Not all are suitable for Archangels, for example, one was for a public aquarium
    in Kiev
• We should be proud of…
  • LINC
  • Scottish Enterprise / Scottish Investment Bank
• Deals get done, and will continue to get done.