Is the talk of recession overblown?
Posted 5 February 2008 at 2:54PM by Ian Betteridge in Investment and finance
Read the papers and you'd think that the economy is going into meltdown. Banks on the rocks, consumer confidence low, slow on the high street (unless you're John Lewis), and credit harder to get - all seem like signs that things aren't going too well.
But there are one or two signs that the economy might not be in as bad shape as it seems. According to statistics from the Insolvency Service, the number of businesses going into liquidation in the last quarter of 2007 actually fell compared to the previous year. What's interesting, though, is how the figures break down: the number of voluntary liquidations actually increased, while the number of compulsory ones fell.
Does this indicate that, perhaps, the underlying conditions of business aren't actually so bad? Of course, you could argue that the last quarter of last year is too early to indicate whether there's an issue for business or not. This year's insolvency figures will be far more telling, especially if there is a wide-spread credit crunch. But perhaps it's not really all doom and gloom after all.
Tags: banking, bt, bt broadbandoffice, economy, finance
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2. At February 5, 2008 6:27 PM, Merlin wrote:
Last quarter figures are no indication of the situation now, except in Retail. Other sectors have a two-week 'Xmas hole' in their billing and thus in their cash flow which will be affecting them right now. So look at mid/end Feb and then you will see meaningful figures. From where I sit there is every indication of a recession approaching, with fuel prices, business rates and costs of meeting legislation all rising faster than official inflation. Many of our customers in the private sector have been sitting on their hands for almost two months now. A lot of firms hang on in there until Xmas if they have seasonal products in the hope of big sales - but quite often this doesn't happen, also big sales are often gained at the expense of profits. Watch this space, make your own mind up and heed not the honeyed tongues of Government spin preachers.
3. At February 5, 2008 7:18 PM, John Allen wrote:
As an accountant in practice I talk to clients on a regular basis and from what I hear 95% appear to be very positive and this includes many in the building trade who say they are getting new orders and have months of work in hand. Those however who say things are a bit slack at the moment include car dealers and pubs It is certainly not doom and gloom in our area.
4. At February 5, 2008 11:19 PM, James Phillips wrote:
I don't think anyone is suggesting that the economy is facing meltdown, but there are definite signs of a slowdown. Britain may be well placed to ride-out serious trouble and really we shouldn't be talking ourselves into a recession.
Having said that, there are indicators that people are becoming more prudent and even Michael O'Leary of Ryanair said today that they are expecting a slowdown. Typically, they also said that they would reduce fares to attract customers. No matter what we might think about them, Ryanair is always innovating. That's my advice to businesses as well - always innovate and double your effort if its becoming harder to attract customers.
So let's keep positive, they're are always new opportunities if you're prepared to look for them.
5. At February 6, 2008 10:24 AM, SIMON wrote:
I am a small business and boy is it hard..
I supply car tyres something everyone needs well not at the moment they dont even the bigger national firms are feeling the pinch.
We normallt do 70% of our business on cards at the moment your lucky if it is 5% cash or nothing seems to be the way at the moment.
6. At February 6, 2008 10:33 AM, Will wrote:
More and more businesses are having to go into voluntary liquidation because of the inceasing strain. Wouldn't you rather go into voluntary liquidation and walk away rather than compulsory liquidation and loose everything.
7. At February 6, 2008 11:23 AM, Ian Betteridge wrote:
All good points, Merlin - although it's worth remembering that we'll need to compare the yearly insolvency figures rather than quarter to quarter to get the right picture.
But what it all adds up to is uncertainty - and that's never good for business.
8. At February 6, 2008 2:14 PM, merlin wrote:
Ah, since my last posting on here I see that the last quarter corporate insovencies are actually up 0.3%, i.e. not a lot, whereas the figures for the year say about 2.6% up on 2006. However, bookshop "The Works" hit the buffers last week, as did Dolcis the shoe chain. Rivals Stead and Simpson were 'saved' by a competitor, so all is not good in retail after all. I think John Allen is too early with his comment as it is only the 6th Feb. Our competitors are all doing brilliantly if you listen to them, but all the wholesalers/importers say those same firms are not buying anything from them. They must have a lot of stock to sell then . . . but it's not shown on their Balance Sheets! I wonder how John's builders are going to get paid? Orders are one thing, but the job's not done 'til the money's in the bank. We are finding it very hard to get payment out of the construction industry - one judgement just won and two more on the go!
9. At February 6, 2008 2:49 PM, Mike Nelson wrote:
Back in the day when I was a lad, there was never so much dull and bad news for the money / stock market and recessions. All people need to do is use good old paper / pen and keep up to date with stock takes and not over spending, that will secure their buisness.
All people seem to do now, small business too, is spend, spend and spend and wonder why they go bust. The telecommunications buisness I work for have been good because of this!
10. At February 6, 2008 2:57 PM, Gareth Davies wrote:
I think a lot of the uncertainty is down to media scaremongering, the more they bang on about it, the more people believe it. It's a bit like the overhead motorway signs that tell you to slow down as there is a queue ahead. It is there when you get there but only because drivers have slowed down in anticipation of a queue!
I run a small steel fabrication business and we have had a quiet couple of months but there is a lot of work coming in over the next few months so it will balance out. Yes, costs are rising and it is hard work but it still beats working for someone else and I'm going to keep going no matter how tough it gets. Life is OK and I don't think there will be the big recession as there was in the 80's. They're my opinions for what they're worth.
11. At February 7, 2008 11:55 AM, ian jenkins wrote:
Sadly I have to say "The Media" appear bent on talking everyone into sitting on their cash. J Humphries and cohorts are typical of Journalist with little or no News to Report constantly banging on about "America" "sub Prime" "House Price decline" etc etc, pity its not their jobs at risk when they talk the rest of us out of work (is that too harsh?) In my view the arbitary month on month insistence on increasing interest rates is the other reason for the slow-down; outside the City Financial Institutions post mortgage payment disposable family income, is on a knife edge and the majority of people are in fact well aware, that you can't spend what you aint got! Get those interest rates down by 1.5% at least and do it now!
12. At February 7, 2008 5:19 PM, Jim Duggan wrote:
The media are talking a rather harsh game towards this. Mainly because banks like Northern Rock have been affected massively by the sub prime market.
Really the government and bank of England should have handled this far better and it should have been resolved by now!
Look at the French bank. £4.5 billion and they quickly reversed the transactions and everything is calm. No lines outside the bank wanting money.
With the price of oil, gas and general energy supplies continuing to go upwards, and even a safe bet in gold, silver and platinum on the rise, interest rates only look like staying the same or going upwards.
The housing market has started its decline, which isn't going to help, but it's about time it started to level out. Was reaching ridiculous levels!!
Recession will not happen, but will be very close if it keeps going the way it is.
Just be grateful that inflation can be kept in line otherwise could be a bleak year.
13. At February 7, 2008 5:39 PM, Preston wrote:
Successful Governing of state is in managing perception, fear and expectations. If you allow the media to build up a perception of doom and gloom but it never comes, the government claims this as a result of sound economic management when really all we have done is ride a period in economic slowdown. Far cry from a major crisis that everyone fears but it does provide Brown with a convenient opportunity to claim how strong a PM he is and beat off competition for No10, yet still subject the nation with high taxation to fund escalating government costs. It's not businesses that need a good lesson in cost mgt, it's the government.
14. At February 8, 2008 9:45 AM, Ian Betteridge wrote:
Ian, you'll be pleased to know that I continue to spend in my usual profligate way - purely for the good of the country, of course!
Seriously, though - and I think we've blogged about this elsewhere - without consumer confidence the economy really will be in trouble.
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1. At February 5, 2008 3:53 PM, J G Dawson wrote: