Analysis: Long haul ahead for Britain's struggling economy

Sun Mar 3, 2013 4:48am EST
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By William Schomberg

LONDON (Reuters) - When the financial crisis began to spread five years ago, British coffee machine-maker Fracino raced to get ahead of it.

From the firm's base in Birmingham, it carved out new markets in the Middle East, Asia and even Italy for its cappuccino and espresso machines which it proudly stamps with the British flag.

Last year Fracino generated 25 percent of its turnover abroad, up from just 2 percent before the crisis.

That is the kind of transformation the Conservative-led government promised for the broader UK economy as it took office in 2010, after the near collapse of the country's huge banking sector and the plunge in housing prices.

But in the last few months, things have taken a worrying turn at Fracino. Clients at home and abroad have started to demand its cheaper machines, shunning the more expensive models and slowing the company's revenue growth.

"They are just buying the machines that will do the job," said managing director Adrian Maxwell.

"Until something happens for people to take their foot off the brake and feel a little bit more relaxed about spending again, it's long going to be a long, hard haul."

Nearly three years after Britain's Conservative-led government vowed to restore the country to financial health with a round of deep spending cuts, the economy looks stuck in a rut and could already be in its third recession since 2008.   Continued...

Commuters cross the Millennium Bridge during a rainy morning, towards the financial district the City of London November 27, 2012. REUTERS/Stefan Wermuth