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Bishop Fleming’s Sam Talby gives his views on the economy

Sep. 25 2011 Columnists, Latest News 5 comments

SAM TALBY 1 199x300 Bishop Flemings Sam Talby gives his views on the economyA ‘double-dip’ recession seems inevitable given the plunge in consumer confidence across both Europe and the United States.

Unfortunately, keeping interest rates low has not encouraged savers to spend money. The lack of consumer spending here in the UK is made more daunting because of the weakness of the Eurozone, which makes an export-led recovery more of an aspiration than a reality.

Globally, the International Monetary Fund (IMF) has called for further easing of monetary policy, which in plain English means that more money is to be pumped in to stimulate economies. Some commentators suggest that if this does not happen soon, given the state of France, Italy, Spain, Portugal and Greece, we will face recession again.

Here in the UK, the government  is committed to continuing its programme of cuts to reduce the deficit and the opposition Labour Party maintain that a slower cuts programme, with more public spending would be better economic medicine.

When the recession first struck, it was seen by some as a way of cleansing an economy which had gone out of kilter and become unbalanced. Businesses which were underperforming and causing harm were removed from the system, creating opportunity for stronger, more efficient businesses to take their place.

Unfortunately, due to a combination of government intervention, banking policy and HMRC ‘Pay as you Go’ schemes, those businesses in breach of banking covenants and schemes are operating like zombies.

So what is the solution? There is two theories which would both have consequences.The first is to liquidate underperforming businesses now, and this includes underperforming banks. If this happens strong businesses should fill the void and cause regeneration. The downside to this approach is the pain of unemployment and the social problems that occur because of this.

The second explanation is to implement Keynesian economics, the economic theory proposed by John Maynard Keynes, which says it is better to pay a man to dig a hole and pay another to fill it in rather than having somebody doing nothing, as this will stimulate the economy. But this would result in a greater national debt burden.

As a Restructuring and Insolvency Practitioner, I want to see a growing sustainable economy with an availability of credit to both good businesses and ailing businesses which, with help, can become healthy again.

At present, I see a real danger of a double-dip recession but no clear strategy of how to stimulate lasting growth which business and society desperately depends on.

Sam Talby is a Partner and Licensed Insolvency Practitioner at Bishop Fleming Business Recovery and Insolvency. Sam has over eighteen years of mainstream insolvency and business turnaround experience gained from both small and large accountancy  firms and has dealt with a variety of cases ranging in both complexity and size. Sam is also a Chartered Certified Accountant and a Member of the Association of Business Recovery Professionals.

www.bishopfleminginsolvency.co.uk

Tel: 0117 9100 250

Email: stalby@bishopfleming.co.uk

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  • John Adams

    I think we are in danger of talking ourselves into a double dip recession. Surely everyone needs to stop turning to the goverment – who’s fiscal policies have helped put us in this siutation – and start getting out their and make business happen. Recovery will be driven on the back of business success, this creates wealth and jobs, but we can’t rely on others. Company bosses need to take the lead, and drive growth by doing business better. Wait around for the government, or others, at your peril.

  • arthur croker

    The governments of Europe are stepping in this time to ensure there will be no double- dip recession. Doom and gloom merchants and media do their best to talk us into a recession.

    The stock market is recovering now people have stopped cashing in on the gains. Anyone who lived in the 70′s will recall we have seen it all before. Imagine if we had 29% inflation and 15% mortgage interest again, then you would have something to fret about.

    Mortgage rates are the lowest in many years, inflation is very low, Bank interest is low. Unemployment never reached the predicted 3 millon. THe jump was due mainly to the laying off of 1000′s of civil servants. We knew that was happening to cut the government cost.

    Be positive in business and spend your capital to boost the economy.

  • Tony

    There is another point to consider. Why should good, healthy, successful companies have to cope with poor-performing competitors who are propped up by the goverment or HMRC giving extended payment terms. Maybe we need a tough stance, clear out the dead wood and make room for growing successful companies to make their mark. Surely by propping up these dead-beats we are just postponing the inevitable? Meanwhile, good businesses are having to compete with these bad companies who are being bankrolled by HMRC or government.

  • Bill Thomas

    Its easy to point fingers, but a big part of the problem is still the banks. While profit is important in a business, cashflow is crucial. A business can survive treading water and breaking even, without making profit, but it cant survive without cashflow. And as the banks tighten their grip, restrict lending, and reduce overdraft limits the pressure on business is immense.

    Many companies could trade out of the current difficulties if they had cashflow aid, but they will go to the wall because banks will no longer support them.

  • Anonymous

    I am currently out of the office on Christmas leave.

    Our office will be closed between Wednesday 21st September 2011 to Tuesday 3rd December January 2012.
    I will reply to your email upon my return in the new year.

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