Who will make a killing this recession?

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Wedensday 06th August 2008
by Rass Fakour-Zaker
Know Your Money Editor

The chatter of recessions and credit crunches is ubiquitous. It's coming from every corner of the media, from the boardroom meetings at work, from the bloke at the bar down your local, even the teenage girl at the bus stop is shouting into her mobile about it. They're all vying for our attention, telling us that an economic downturn could loom, is looming, or was looming and is now upon us like a huge, clichéd dark cloud on the financial horizon. The contradictory explanations, the myriad divergent predictions, the hackneyed myths and the timorous rumours tell us only one thing for certain: people are scared about the recession - some don't even know why.

There are those, however, who are less worried about a recession. Michael O'Leary for example, the chief executive of Ryanair, has been reported to actively welcome a recession predicting it will weaken his competitors. Unlike O'Leary, others may not exactly go out dancing in the rain when, and indeed if, those clouds arrive - but they are likely to weather the storm somewhat better than most, and may even take advantage of the clouds' silver lining.

Alcohol, Tobacco, Pornography and Gambling Industries

Let's get these out of the way first. Historically, the alcohol, tobacco, gambling and pornography industries have been considered reliably recession-proof. Collectively know to investors as 'sin stocks', received wisdom suggests that during an economic downturn demand for these habit-forming vices does not diminish, on the contrary, according to some reports it may even increase .

So despite recent concerns over the health of the US pornography health of the US pornography and gambling industries in the current economic climate, fear not - there remains a good deal of confidence in the enduring selling-power of sinful products.

Pawnbrokers

Pawnbrokers are often the first on the list of recession-proof businesses; and it looks like their financial resilience could be growing. Over the decades, the traditional vulture-like stereotype of pawnbrokers has steadily lost its hold on the public imagination. Some older members of society will always envision a seedy pawnbroker rubbing his clammy hands together with poorly-concealed glee as a wizened old lady tearfully pawns her sacred family heirlooms; however, clichéd hyperbole notwithstanding, younger generations are more at ease with the pawnbroking industry.

The changing attitude towards pawnbrokers is reflected in their increasing numbers - recent reports indicate a 10% year on year rise in the UK - as well as the industry's advance towards legitimacy initiated by a number of nation-wide chains making a move from their traditional back alley habitats onto the high street. Combine this with the tightening up of banks' lending criteria caused by the credit crunch and it looks like the pawnbroker's renaissance is inevitable.

Cinemas

Accepted wisdom suggests that during tough times people will seek escapism, however ephemeral. This certainly seems to hold true in the case of the cinema industry, purveyors of one of modernity's purest and most popular forms of escapism.

Reports from across the globe indicate that cinema attendance often increases during periods of economic instability. Indeed, a recent article in the Hollywood trademag Variety, was confident about the industry's outlook citing the increased box-office revenues during five out of the last seven US recessions. This year's record-breaking summer and a "strong slate" of forthcoming movies seem to support the general optimism in Hollywood.

From a consumer viewpoint it makes financial sense: despite the glut of cash-in sequels, cynical remakes and dumbed-down blockbusters clogging up the silver screen, a night at the cinema remains a relatively low-cost leisure activity and thus a prudent choice for those feeling the pinch of a recession.

Debt Collectors

As far as public affection goes they may languish at the bottom of the list along with traffic wardens, lawyers and telemarketers; but those of a thick-skinned disposition could capitalise on a recession by joining the growing ranks of debt collectors.

The reasons are obvious: in a recession many people struggle to meet their financial needs and as a result payments on loans, mortgages and credit cards are defaulted; and with personal debt currently at record levels in the UK the debt collection industry has flourished and is likely to do so for some time to come.

Environmentalists

It is reasonable to assume that unchecked economic growth is detrimental to the environment since it translates into ever-increasing levels of consumerism, which in turn results in increased consumption of natural resources and higher levels of pollution.

Therefore, some well-respected environmentalists, such as George Monbiot, welcome a forthcoming recession because would force us to re-evaluate our governmental polices, business practices and lifestyle choices and, hopefully, embrace sustainable economic and social reforms. Although there are some logical counter-arguments to this position, for Monbiot, "a recession in the rich nations might be the only hope we have of buying the time we need to prevent runaway climate change".

Whether or not a committed adoption of environmentally-sustainable principles occurs at a political level (which seems highly unlikely in most countries) it is still feasible that sustainable lifestyles will flourish at a grassroots level as people realise their financial benefits. If this is the case then manufacturers and providers of economical and sustainable goods and services may well find the period especially lucrative.

Economists/Money advisors

Economists could find themselves in the role of hero soothsayers come the recession as we ignorant plebs huddle at their feet to demand explanations and predictions gleaned from their arcane world of trends and figures.

Likewise, a recession is likely to be a busy time for money advisors of all types, from websites that allow you to go compare to debt helplines, as many people will be looking to learn a few cost-cutting tips or obtain advice regarding their money worries.

Luxury Goods retailers

At first it may seem counter-intuitive that the market for expensive, luxury goods would not be adversely affected by a recession. However, since the recession mega-rich are generally financially-insulated against a by great big bundles of cash the 'need' for luxury goods during such times will not falter.

We all know that the rich are getting richer and the poor poorer and, what's more, a recession is likely to increase this polarisation with rates increasing for savings accounts. So worry not for those hardy rich folk, we can rest easy, safe in the knowledge that they will weather the storm comfortably on a 70-foot gold-plated, diamond-encrusted, 3-hulled yacht.

Important Notice
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