WELCOME TO 2011
tip of the month – No need for necessary paralysis
2010 was about emerging from survival through the difficulties of 2008 and 2009 and beginning to build again in a somewhat improving economy. The comparison of the ‘adverse’ business statistics between 2010 and 2009 November to November, as recorded by credit experts Risk Disk highlight this improvement:
- CCJs were down 26%;
- Administration orders were down 34%;
- Winding-up petitions were down 21%;
- Liquidations were down 9%;
- Receiverships were down 35%;
- Dissolutions were down 33%.
These numbers firmly suggest the worst impact of the recession on business viability is behind us. At McLean Reid we are seeing clients experience tough times, but very very few failures. The following statistics can also be considered encouraging:
- New incorporations up 11%, sounds positive!
- Count of Trading companies was up 2% with a tiny decline in Non-Trading, that’s ok too.
The Future
Experience tells us that, providing overall demand is broadly unaffected, those business that survive a recession have a new opportunity to grow by filling the gap left by their competitors who failed. However, there are some cautionary notes:
- The impact of the recession was not even across sectors. Some were hit harder than others.
- The economy is not out of the woods yet. Rebalancing government expenditure is only just beginning to bite. For some the squeeze is only just starting. The VAT rise will dampen consumer demand.
Of course, the VAT increase will be inflationary, but commentators will already have fed this into their economic models, so there should be no need to fear an unexpected harmful effect.
What is far more important to us all is that the coalition government’s plans to cut spending actually succeeds in reducing the ever-growing budget deficit. Things will be difficult for most of us, but the potential rewards are a more stable economy and the state eventually representing a smaller proportion of gross domestic product.
This is important to us all whether investing for the medium or long term, because the economy needs to grow strongly in order to provide future economic growth and it is more likely to do so if the private sector represents a larger – and more productive – proportion of the national cake than the state. After all, the private sector makes and sells things, here and abroad; the government simply provides the essential services including, of course, welfare; important, but not productive, economically (and ultimately funded by the private sector).
There Are Two Clouds On The Horizon However!
- House prices are still falling and the future’s uncertain.
- Europe: what will happen to the weaker economies and the Euro currency itself?
So keep marketing, keep talking to customers and suppliers, and keep your eye on the light at the end of the tunnel….
