Electronic Telegraph, ISSUE 1402, Sunday 28 March 1999

Britain 'to face 2000 hangover', By Bill Jamieson

BRITAIN'S economy will face "the worst hangover in history" after the millennium celebrations, with a minimum of #7.5bn wiped off growth in 2000. [That's pounds--add half to get approximate dollars, around $10.75 billion.]

A detailed analysis of how the millennium event will affect the economy predicts that consumer retrenchment, stock rundowns and computer failures (the "Y2K effect") will depress growth next year by 0.8 per cent of gross domestic product or #7.5bn after a 0.3 per cent boost to growth this year. The forecast is struck after allowing for benign effects - a baby boom, renewed financial sector activity and efficiencies flowing from technology upgrading.

The report, by Janice Clark and Angus McCrone of the Centre for Economics and Business Research, assumes that much feared major computer breakdowns will be rare. But, if this assumption proves wrong, they warn that GDP could plunge by 15 per cent in the first quarter of next year and by 3 per cent for the year. Ms Clark said: "Many Scots are used to a hangover after Hogmanay [New Year's Eve holiday]. But the Year 2000 could cause a much longer-lasting economic headache from reduced spending alone."

The net slowdown will reflect the winding down of Year 2000 construction projects, scaling back of millennium-related investment in IT and de-stocking by consumers after a surge in spending and hoarding in the run-up to the biggest Hogmanay party in history. Millennium party celebrations alone are likely to trigger #200m of extra consumer spending on items such as food, drink and decorations on top of 'normal' New Year's Eve party spending.

The CEBR believes that the economy is not going to experience a simple "V" shaped dip and recovery. Ms Clark said: "Rather we believe that its course in 1999 and 2000 may more closely resemble a 'W' with the second down-leg taking place early next year. Just as the approach of the new century and fear of computer failures in January next year is going to bolster economic activity in the second half of 1999, so the unwinding of these effects is likely to depress it in the early months of 2000. At the dawn of the new millennium, British drinkers may be suffering their worst ever hangover. So, in its own way, will the UK economy."

The report warns banks may be reluctant to extend credit to any firm that cannot prove Y2K compliance and may even call in loans. In the US, there is talk of "leper lists" of non-compliance borrowers. But on the plus side, next year should see a boom in births and marriages.

Cut and pasted by

-- Old Git (anon@spamproblems.com), April 03, 1999

Answers

Old Git....according to my computer guy...independent...he is being asked to provide letters of compliance for companies so that they can apply for working capital loans. The banks are requiring this now. They're not waiting until later.

-- Lobo (atthelair@yahoo.com), April 04, 1999.