Donald Forsyth: US is still the land of opportunity for technology firms

IN APRIL, Newsweek published an article entitled The Comeback Country - how America pulled itself back from the brink and why it's destined to stay on top.

I went to the US with this message ringing in my ears and expected to see a country that was over the recession; a country that had re-gained its confidence. My experience on the ground was not as positive as the US media would wish us to believe. We know the US has had a president with the moniker "The Comeback Kid", but are they the comeback country?

Whilst the purpose of my trip to the US was to visit clients, extensive travelling to several cites also gave me the opportunity to find out what a wide spectrum of Americans feel about their economy - what it is like beyond the "political speak" and the media interpretation - what is "the word on the streets"? I spoke to everyone. Irrespective of whether it was conversation with chief executives, principals in professional service firms, waiters or taxi drivers (everybody in the real world knows that the latter two groups are the most reliable barometer of economic confidence) - I didn't meet anyone who thought the US recession is over.

Most of our technology clients are based in the greater Boston area, but my visits also took me from Manhattan to rural Massachusetts and from Ohio to Alabama. While I wouldn't claim that those I spoke to would stand up to the rigours of statistical inspection, I did speak to a lot different people in a lot of very different places. The discussions were wide ranging both geographically and socially. Although some US economic indicators are now heading in the right direction, unemployment is still hovering around 10 per cent. The country does not feel confident. The messages I got from speaking with our US clients, contacts and lots of other people I met on our journey were consistent: business and consumer confidence is still low; the US is not out of recession; and, at best, we may be bumping along the bottom.

Whilst retail sales in the US are on the up - an impressive headline rise of 7.4 per cent for the year to May - the rate of increase is due to appalling retail sales in the previous year. The actual level of dollar sales for the year to May was on a par with 2006. According to Vistage International, almost half of the growth in US GDP is due to businesses building stocks in anticipation of sales growth over the next six months. If the sales growth doesn't materialise then stocks will be depleted and the level of growth will fall.

The households that have been crunched aren't spending. The households that haven't been crunched are paying down debt. According to the Wall Street Journal, credit card debt in the US fell by $8.5 billion (5.6bn) in April and at $858bn is now at its lowest level in four years.

As with the UK, their housing market is constipated. People can't move because they can't sell. It is difficult for first-time buyers to get on to the housing ladder.

Again, in common with the UK and the rest of the world - those who are already on the housing ladder and are well able to pay their debts are in a much stronger position.

The US home loan market is different from the UK. It is not unusual in the US to have a 30-year fixed rate loan. I was told of a number of instances of home owners being offered lower rate re-financing deals from their existing lender. This behaviour may suggest a higher level of competition amongst financial institutions than we have in the UK - a squeezed margin is better than no margin at all. Will we soon see this in the UK?

However, I am certainly not writing off the US. It is a land of opportunity. It remains the market that any technology company that really wants to make it has to crack. It has a greater supply of land, labour, capital and enterprise than the UK. The US has a mass market, it has a lower minimum wage than the UK, it has wealth and it admires risk taking to the extent that failure doesn't have the social stigma it attracts in the UK.

The BRIC nations are on the way up but they don't yet have the mature middle class market that the US offers.

The US is a bigger pool and has much bigger sharks. But to any technology companies out there who are thinking about the possibilities that the US may hold - my advice echoes that of The Village People - "Go West".

• Donald Forsyth is commercial partner with Scott-Moncrieff. z