Keep connected to the real economy

More than two million unemployed in the UK and the first year of global recession since the second world war. These are just two of the long list of grim statistics to hit the headlines in recent weeks.

Yet, despite all the bad news, we have seen some key figures talking about the end, or the beginning of the end, of the bad news. Ben Bernanke, head of the Federal Reserve, has gone so far as to say he believes the US has averted another Great Depression and that the recession is likely to end this year. The IMF, which has been wrong before, as its critics will point out, is saying that the UK will have the longest recession of all the developed countries, and will remain in negative growth to the tune of 0.2 per cent in 2010. Bad, but not the Doomsday scenario that some have been predicting.

Investment legend Anthony Bolton says the stockmarket is at or near the bottom, although pretender to his crown Neil Woodford at Invesco is saying it will be several years before all the bad news is flushed out of the system.

Those who have been stashing the candles, dried foods and condensed milk will take comfort from these words, even if they are unconvinced that we really are out of the woods. And financial services professionals are likely to see their mood rebound pretty quickly if such an outcome, which is of course by no means certain, does come to pass.

But for employers, dealing with two more years of recession will be a tough challenge, and demand for the crucial advisory work that has been done in the last six months of the meltdown will remain paramount. The industry is being presented with credit crunch issues on a daily basis, but the good news is that many of these problems are solvable.

Some, however, remain very challenging and will continue to do so. Defined contribution pensions, for example, have seen their chickens well and truly come home to roost. As Paul Farrow demonstrates in this issue, the current use of equities in pensions is in the dock and new solutions are yet to be tried and tested.

In the fields of healthcare and group risk, the challenges are of a different order. Employers remain concerned over premiums, and advisers are finding solutions that can deal with this issue.

The real economy will not bounce back in the same way that the stock market may, and advisers would do well to remember that the problems their client face do not go up and down with equity prices.