大象传媒

Bull in a china shop

• Robert Peston
• 5 Jan 09, 09:36 AM

Companies burdened with debt and dependent on discretionary spending by consumers are currently as fragile as the finest crystal or bone china. So, sadly, there's no surprise that Waterford Wedgwood - which had net debt around 拢470m last spring - has called in the receiver in Ireland and has gone into administration under insolvency procedures in the UK.

Almost everything that Waterford Wedgwood manufactures is a nice-to-have rather than a must-have. And most of us are thinking twice about shelling out on nice-to-haves.

WW's collapse is a resonant event that speaks of a noxious global squeeze on consumer spending. But although it has more history than most of the FTSE-100 companies combined - Waterford, Royal Doulton and Wedgwood are great names from Britain and Ireland's industrial past - WW is not a huge company.

Global sales are 拢650m. In the UK, it employs 1,900. Of these, around 600 work in manufacturing at Barlaston.

There are 5,800 employees outside the UK. And (lest you've forgotten that we live in a globalised world where production gravitates to low-cost economies) the biggest manufacturing centre is Indonesia, where there are 1,500 staff.

The brands will surely survive under new owners. And my understanding is that there have already been expressions of interest from possible buyers of the brands.

However, what happens to its manufacturing plant - and that of many other companies like it - is what matters. Even if in WW's case there are just a few hundred British manufacturing jobs at stake, the UK can ill afford to see yet more precious exporting capacity relocated to more productive competitor economies.

That said, for biggish British companies this morning, there's some good news on this, the first proper business day of the new year.

What I mean by this is that there's no news of any significance from them - and that's good news.

If trading by retailers over Christmas had been even worse than investors had been led to expect, there would have been emergency announcements by those retailers (under Stock Exchange rules).

So in the coming few days we can expect the likes of Marks & Spencer, Next and Debenhams to say - in their scheduled trading updates - that turnover per square foot of selling space is falling pretty sharply and that profit margins have been squeezed by heavy discounting and promotions. But we knew that.

And we can be fairly confident that they remain on course to meet much reduced expectations for their profits this year (a bit over 拢600m in the case of Marks & Spencer, down from 拢1.1bn last year, or an eye-watering drop of around 45%).

More generally, the question to be asked is whether most of the bad stuff that could happen to companies is already discounted in stock market prices.

Analysts are forecasting that the earnings of European companies will fall fairly sharply this year and that those of US businesses will drop in the first half before recovering. The outlook is more mixed in Asia.

Against that ostensibly gloomy background, stock markets have been rising fairly generally over the past two or three weeks. The FTSE-100 is now more than 20% above its low point of last year. The S&P 500 is 26% off its 2008 bottom. Asian stocks have been rising solidly for the past eight days.

Shome mishtake, shurely?

Not at all.

Stock markets are looking at the prospects for 2010 and 2011. And however rotten 2009 will turn out to be, in the form of companies going kaput and unemployment rising sharply, investors are increasingly confident that armageddon has been avoided.

They look at the way that central banks have slashed interest rates and are - in effect - dropping money from helicopters. They look at Barack Obama's plan to pump something over $700bn into the US economy in the form of tax cuts and public spending. And they conclude that an economic turn for the better must surely come towards the end of 2009.

Here are a couple of almost needless words of caution.

Stock markets aren't always right (we've all learned that painful lesson in the past couple of years, haven't we?).

And, as and when we see the green shoots, they may be fragile, stunted and spotted with a disease called inflation.

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