Recession finally ends but what now for 2010?

Official first estimate figures released by the ONS today confirmed what many had predicted, the UK finally pulled out of recession at the end of 2009.

Whilst on the face of it, we can breathe a sigh of relief that the worst post war recession is finally over, the weakness of the GDP figures (0.1%) casts serious doubts over the strength of the recovery.

Most economists had predicted Q4 GDP to come in around 0.4%. The reality is that the UK very narrowly escaped a record 7th quarter of recession.

It has to be borne in mind that this is a first estimate for GDP and that all first estimates have been revised since 2007 so it may very well be that in coming months we will see Q4 GDP revises upwards to nearer 0.3% . That being said the figure has shocked many economists and yet again calls into question the accuracy of many of the economic surveys that have been predicting far stronger recovery.

So what now for 2010? With so much in air at the moment it is going to be very difficult to call. A general election is due within 5 months and whilst the Conservatives still lead in the polls, a clear cut victory is far from secured. A hung parliament remains a more than remote possibility and is probably one of the worst current threats to economic recovery. Tax rises and spending cuts are just over the hill and the removal of monetary stimulus is only a matter of time. Add to that the thorny issue of inflation and the way ahead for 2010 is far too difficult to predict.

So far as the housing and remortgage markets are concerned, much is going to depend on public reaction to the media headlines on our technical exit from recession.

Property is always a confidence game. Following the 1990s property market recovery was subdued for many years because the public lacked the confidence in the market. This time around we have not yet seen the vast wave of repossessions and negative equity issues and therefore the public may feel more confident about the future of the property market

The remortgage market will be dictated by the publics attitude to the imminence and likelihood of interest rate rises. We still consider that BoE rate rises will occur during 2010 but the anaemic GDP figures may have an effect of the public perception of the timing of rate hikes and therefore we may see a continuation of the subdued remortgage market in the first half of 2010.

We welcome comments from others as to their views on the property/remortgage markets as a result of the GDP figures.

Weathered the recession: have you planned for growth?

Come along and join me for this great networking opportunity where I will be the guest speaker. Meet with like minded people, make contacts and discuss business opportunties over a full English breakfast.

Those who follow my blog or LinkedIn will know that I am a Director and the Head of Company Commercial and Corporate Recovery at Breeze & Wyles Solicitors LLP. The firm's Corporate Recovery team was launched in mid 2009 to meet the changing demands of a number of high profile clients. The team has handled a number of corporate recovery instructions within this period and associated work such as claims against directors and book debt recovery.

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Recession: A Recipe for Survival?

It is unclear from the number of sources commenting on the economy what 2009 holds for business. The Government’s official position is that growth will decline in 2009 by 1%. However, some commentators are predicting a decline of more than 3% and a return to growth only well into 2010. In these uncertain times how do businesses with a profitable core operation ensure survival? Cost cutting exercises are being carried out by many to ensure survival. Staff costs are being reduced but this costs money as redundancy payments must funded. Cheaper supply options are considered. From where will this money come? During the boom, the majority of businesses needed to concentrate on customer and contract acquisition and then delivery to those customers. With banks lending in support of growth book debt recovery was down the list of priorities. Now that there is a stiffening of the credit conditions funding for restructuring is difficult, if not impossible, to obtain and then at penalty rates.

The requirement on the banks that have taken the Tax-payer funded bailout is that they must significantly increase the amount of capital/cash on their balance sheets. As a result the appetite for the banks to lend to businesses is severely curtailed. Decision makers in business are now considering how to restructure the operations to maintain a strong cash-flow position. One certainty is that turnover will continue to reduce for all but a few market sectors. It is certain that in the short- to medium-term trading your way out of the situation, on the same basis is not an option. In the forefront of the decision makers mind is the hope that some competitors will fail. Even though the market will contract further, if a significant number of competitors fail then the share of the market available to the business will be sufficient to guarantee its existence through to the end of the downturn.

A considerable amount of the ‘survival’ money is tied up in debt of which a significant amount may be long-term. As Debt Recovery lawyers we have noticed that the age of debt upon which we are asked to advise is increasing. A small number of businesses have realised that the impact on cash-flow of a robust and rigorous debt recovery process is now a business imperative. By stealing a march on your ‘cash competitors’ you will be taking steps to ensure the business survives. More importantly in your banking relationships greater emphasis is now being placed on your ability to review and analyse the profile of your debtor book. Banks are taking a much greater interest this information for the purposes of assessing the viability of your business.

Strategies and Techniques for Recovery

1. Credit Control
There is now an industry delivering various techniques for debt recovery or collection without the need in the vast majority of cases for the use of courts. The court procedure adds a cost element to the process of recovery which need not be incurred. Using techniques such as telephone contact, letters and personal attendance recent debts are likely to the recovered in full. At the very least an assessment of the debt profile can be undertaken. Credit control is not a simple recovery procedure in the sense that this is all it seeks to achieve. If only it was that simple. In the current economic climate cash-flow of all of our customers is limited. If Debtors are prudent then they will make payment of their debts strictly in priority to their business needs. An assessment of their liability forecasts will mean that the amount they owe you is down the list of priority. The credit control process enables you to move your debt up that list.Furthermore, it enables you to assess whether the debtor is of sufficient financial standing to maintain an ongoing relationship.

2. Statutory Demand
Where there is no likelihood of a dispute about the amount outstanding and that sum is more £750. It may be worthwhile serving on the debtor a Statutory Demand. This process is the preliminary step to bankruptcy or liquidation of the debtor. It focuses the mind of the debtor on the payment of your debt above all others due to the potentially catastrophic impact of not dealing with the Demand.Once the time period for the debtors to apply to have the Demand set aside or make payment has expired you have a number of choices as to how to proceed. Formal insolvency proceedings are an option but this means that all creditors will then have equal rights in accordance with the class of debt that they have as against any funds available to pay the creditors. This may mean that you will only recover a small portion of the amount owed to you by the debtor.

Caution should be exercised when using this process. It is critical that a proper and detailed assessment of the circumstances surrounding the debt is carried out before a Demand is served. The Court frown upon creditors using this process where there is or is likely to be a genuine and serious dispute about the claim. Criticism and costs penalties will arise where there is a genuine dispute as to the claim.

If this article and the points it raises are of interest to you please feel free to contact Brendan O'Brien on 01279 715333 for a confidential and no-commitment chat.