Deeper & Deeper in Debt

Posted on March 10, 2009 by Ozzy

I have a very personal dislike of debt, or credit, depending on your perspective. Yet it is a very important part of business life, and when you are small business having your credit terms abused by many (often larger) customers you need debt to finance the credit your clients demand. So it comes as no surprise that the stories of banks withdrawing credit facilities sends fear through even the most hardened of entrepreneurs.

As someone who deals a lot in China, and hears a lot of stories about how much cash is sitting in China, I couldn’t help but wonder whether the western strategy of outsourcing work to the far east had a part to play in the lack of cash available this side of the world. My theory was based on the following thought process;

A UK business borrows money to finance their business, which is used to pay for manufacture in the Far East. Eventually the UK runs out of finance so demand for manufacture in the Far East drops driving them into recession (demand for their produce drops), yet they have a lot of cash in reserves. The UK Government in a drive to boost the economy borrows more money to from our already deep deficit getting the country deeper in debt, this debt is used to finance the banks debts, which in turn is used to finance the debt of business, with the theory of buying more (debt). Using debt to finance debt just doesn’t sound right, and I couldn’t help wondering whether a better strategy would be to encourage the eastern countries to buy from the west to help finance the west to start buying from the east again.

We all rely onb each other everywhere in this world in which we live, and the theory seemed to make sense.

So I put the questions to my local MP, Sally Keeble from Labour, and also to the Conservative candidate Mike Ellis. I must say Sally wasn’t keen to get involved in the conversation, cutting me short saying “the Chinese need to focus on their own problems” and the UK Government has a strategy in place to recover our economy. I wasn’t convinced, especially as she cut me short and asked for any other questions.

Michael Ellis took the time to give a more detailed response, albiet he obviously included a sales pitch for his party!

Your assessment of our position vis a vis low cost production from Asia these last few years is accurate. They have been producing lots of goods for us, most of which we, as both individuals and companies, have paid for with credit. This has resulted in large reserves for the Chinese government. So again your description is spot on. It is also true that most people feel the Chinese want to increase demand at home.

However, they are in as much of a bind as we and the Americans are, despite their large cash reserves. Our credit-fueled buying has allowed the Chinese to expand their capacity to meet our needs and this has resulted in more wealthy and middle class Chinese, but nowhere near enough to make up for the sudden drop in consumer demand we are now experiencing here – and that their factories are feeling as a result.

It takes a long time to build a stable consumer class, usually requiring a large middle class, and when combined with a Chinese culture that still understandably values saving I think they have a long way to go to build anything close to the internal demand needed to soak up the production capacity they have right now.

In fact they have kept their cash reserves in the USA and the UK mostly to ensure their currency remains relatively low in value compared to ours so as to keep the cost of their goods low – hoping we will continue to buy. This has provided an additional benefit to us in the West because their demand for government bonds keeps the interest rate low on our government debt, which again you rightly point out we are now creating lots more of…the CBI were just complaining about that today as you may have seen.

If the Chinese took all their cash home, our currency would weaken further than it has already, the cost of our government debt would soar, their currency would strengthen and their exports would get much more expensive to us, driving down demand from us for their goods and creating more unemployment and slower growth for them! We are in a sense all in this together in the most complicated way….

In short – it would be great if the Chinese had the capacity to create more demand internally, and I am sure they will over the coming decades, which one hopes will increase our share of exports. However, their using their cash reserves alone would likely make a small immediate impact and would have some rather scary immediate consequences for everyone.

So I do stand corrected in that where the Chinese Government are storing their cash reserves is actually helping our economy to a degree, and it does show someone in the running for a chair is definitely more willing to spend some time answering a potential voters questions. His response has also helped me understand some aspects of the economic environment that I didn’t realise.
Despite everything said though, I just find it extremely concerning how the government can get our country in so much debt, and before long we could find ourselves in the same situation as Canada on the verge of a whole country becoming Insolvent! (It’s also interesting that they can find billions to bail out the banks for their danm right wreckless management, yet unable to find millions for the NHS). This debt has to be paid for at some point, and the only way this going to work is be increased taxes and interest rates, so let us all sit back and wait for the big hikes in taxes to ultimately pay for the mistakes of the banks, and the money we the tax payers have ploughed into them.
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Support The Young Enterprise Awards

Posted on February 25, 2009 by Ozzy

YOUNG ENTERPRISE COMPANY PROGRAMME
In the Northampton/Daventry Area of Northamptonshire we have 9 schools running 11 companies for one academic year. The students or achievers as we like to call them, who run the companies, are aged between 15 to 18 years old. Each company is selling a varied range of products and this year they have been involved in very successful trade fairs.
Its competition time and these 14 companies will be attending a showcase evening hosted by the Northampton/Daventry Area Board at Grendon Hall, Grendon, Northamptonshire on Monday 30th March 2009. At this event the companies will be competing for prestigious awards in the following categories:-

  • Best Company
  • Runners Up x 2
  • Best Trade Stand
  • Best Sales/Marketing
  • Best Product/Service
  • Best Presentation

We are looking for companies like yours to be involved and to support and present one or more of the awards.
The costs are £500 for the Best Company and £250 for the remainder. In return we guarantee to include your company’s name on the relevant trophy, ask you to present at the event itself and include your company logo on the programme, the power point presentation which will be shown in front of all the attendees at the event and in our press releases.
Of course we understand that in these difficult times businesses are finding it difficult but these achievers are our future business men and women and we need to support them as much as we can, so please give this matter your serious consideration and try and support us if you can.
Young Enterprise is a registered charity and is non profit making organisation. If you would like to see more then visit the website www.young-enterprise.org.uk.

Alternatively please contact:
Robin Neighbour Development Manager Northamptonshire Tel 01832 270407
E mail robin.neighbour@yeem.org
Marion Gould Development Manager Northamptonshire Tel 07794 478931

E mail marion.gould@yeem.org

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Should I adopt Guerilla Marketing?

Posted on February 18, 2009 by Ozzy

Guerilla Marketing is a great term, and if done right a fantastic method of promotion for a business and/or product. The thing is, you need to be a certain type of character to do it properly, and this is something I’m not sure I’m that kind of person to undertake such a task.

I’ve been watching the actions of a fellow Entrepreneur and friend, Duane Jackson owner of Kashflow, with great interest. Someone I would categorise as a great guerilla marketeer, and the results he has achieved I admire.

Perhaps one of his most high profile onslaughts was his attack at the apparent Sage Security Holes in their new online accounting offering, which provided his firm with plenty of media interest from many professional media circles. To quote a term, you can’t buy the sort of publicity this blog entry provided Duane and his business, and he made sure he maximised every opportunity with it. This included sending out Twitter updates, and posts on various online business forums such as UK Business Forums. Making sure everyone he knew not only read the blog post, but were also talking about it. This social publicity is what led to the media interest, and subsequent promotion of his business.

Duane isn’t afraid to rock a few boats and upset a few people to achieve his end goal, which at the end of the day is promoting and growing his business. Even using articles that have no relevance on the face of them with his business at all, yet still generate a lot of conversation about him and his business. The one that actually trigered this blog post was about why are designers bad at business?

I cannot help but admire what Duane achieves with these marketing tactics, and I cannot help but consider the possible benefits of giving them ago myself.

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Remembering Your Customer

Posted on February 16, 2009 by Ozzy

I had an enxperience last week that made me think I need to write about that in my blog, after all it has been a long time since I wrote anything on here! Then, again this morning something happened that re-enforced my thought. These events, I was simply remembered, and it made me feel appreciated and important as a customer.

Everyone will tell you the Customer is King, the Customer is Important, and all these other phrases where business mentors and advisors tell business owners to look after their existing customers but how many really pay attention to this? Honestly? I’ll give you the examples of this and how they made me feel as a customer.

Last week my car was due a service, so I booked it into the Mercedes Benz Garage where I’d purchased it from and they told me how long they needed the car for before asking what dates would be best for me. Sounds simple enough, and at this stage I didn’t think much of it but the consideration continued when I arrived at the showroom. As I walked in the salesman who sold me the car came over, greeted me by name and asked how things were. Now I’m by no means a big customer for them, and it’s been about 6 months since I purchased my wife’s car but he remembered my name and that made me feel special.

Yet it continued, as I was booking my car in at the service desk the guy behind the counter asked me if I would like a drink. Simple, but again important.

To cut the rest of the story short, when I went to collect my car it had been cleaned. I again was offered a drink when I collected the car, and two days after I’d collected my car I received a phone call to check everything went well with the car service and ensuring I was happy with the service. I’m not saying theyr ran around pandering to my every whim, but they were polite and considerate. The whole experience would encourage me to recommend them friends and colleagues, I’d happily be a free salesperson for them, and isn’t this what every business needs?

So what reminded me this morning? Again simply being referred to by my name, as I arrived at the gym this morning still trying to wake up at 6am. I arrived in the reception and my gym has just been acquired by Nuffield Health, and a new gentleman I’ve never seen before greated me at the reception. I gave him my card, he swiped it, and obviously my name must have come up clearly on his computer screen. He then did the most simplest but important of things, he said “Good morning Richard”. He engaged with me by simply using my name.

An old employer of mine ensured the receptionist kept a log of how visitors had their tea or coffee, so the next time they visited she would make their drink exactly as they liked it, and without having to ask them a second time.

Going back to the Mercedes garage for a moment, I need to tell you something else about their customer service, and I’m not really trying to sell them to you :o ). When my wife and I visited the dealership to buy her car we had our two children with us, and two very young children get bored very easily. How did they ensure our children were entertained long enough to ensure they got the sale? They two unboxed a couple of toy cars from their display and gave them to the children to play with on the showroom floor, before the salesman engaged with us he ensured our children were happy. Now I knew right away his reasoning was to ensure he had our undivided attention to get the sale but I didn’t care, he was ensuring my children were happy and that made me happy, and I bought my second car from him in the space of as many months.

I guess my thought for on the last paragraph is, what is important to your customer? For me in that situation it was my children, do you know what is important to your customer and what you would need to do to engage with them?

Beyond everything else though try to remember your customers’ names, it warms them to you ever so easily.

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What Young Enterprise is About

Posted on December 7, 2008 by Ozzy
Students selling their products to the public in Northampton

Students selling their products to the public in Northampton

I have returned home this evening from spending an entire Sunday helping the Development Manager for Young Enterprise look after some 80 students in the Northampton Trade Far for Young Enterprise. This was made up of 11x Young Enterprise companies selling their company products to the public in the Grosvenor Centre in Northampton, a truly nerve wrecking experience for the children but yet such a fantastic learning experience.

Despite coming home from a 10 hour shift that started from carrying in and setting up the stands, through to looking after the wellbeing of the children and coaching them in techniques to approach passing trade, me feet ache, my legs ache, my back is killing me, and I am utterly exhausted. Yet I had a fantastic day and am looking forward to the Milton Keynes trade fair in January. There will be arund 100x trade stands at tha event, and some of the children I spoke to today and fired up and really looking forward to then.

Bagsy-Me - One of the Young Enterprise companies who enjoyed getting out and meeting people.

Bagsy-Me - One of the Young Enterprise companies who enjoyed getting out and meeting people.

From my own experience I have found when volunteering for Young Enterprise the children are extremely receptive to larning new skills in challenging new environments. This not only true for the oler children, such as those who were involved in the trade fair today (ages 15-17), but just as much with the Primary School children I spent the day teaching last week aged 9-10. These projects give them interesting new challenges that they my not usually find in the traditional school curriculum, and they are learning about teamwork, math, presentation and so many other skills without even realising it.

Whilst walking around checking they were all OK (and at one point scaring off a hoody who had his eye on what he thought was the Young Enterprise Development Managers laptop) I would frequently ask the students how the day was going, what sales they had made, and what profitability that gave them. Enouraging their math skills, asking how their marketing was going on, pointers to improve their stands, encouraging them when they got cold shouldered by some shoppers.

It never ceases to amaze me the fantastic ideas Young Enterprise students come up with each year for new products and services.

It never ceases to amaze me the fantastic ideas Young Enterprise students come up with each year for new products and services.

To see the energy these students had in their products, in their company, and for the small number of teachers who turned up their teachers enthusiasm in their students was really inspiring. I have no doubt in my mind that these children have come away from today’s fair much richer for the experience, and wth much more knowledge of how to improve their sales pitches, their pricing, their presentation and communication skills, and perhaps more importantly their confidence. I also met some children who so clearly have a fantastic future in front of them, who I have every confidence will do very well for themselves.

I may be exhausted, I ache from head to toe, I’m going to sleep like a log tonight, but I also feel so alive. I played an important part i helping the primary children last week learn about working together, teamwork, and communication, and why the countries of our world need to all work together. Today I helped many more children learn more about business, about life skills and so much more, and feeler richer in myself for it too.

That is what Young Enterprise is all about, and that is why I believe every Entrepreneur should volunteer for Young Enterprise and show their knowledge and experiences with the Entrepreneurs of tomorrow.

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Business in China

Posted on November 22, 2008 by Ozzy

Those of you who know me will be aware that I have recently come back from my first ever trip to the Far East, having flown into Hong Kong for a few days and then travelling into China to meet with a long term client of mine.

On a personal note his was the longest I had ever been away from my children, and I missed them dearly. I have no idea how so many people can work away from their children for days and weeks freqently, it was bad enough for me just being a week away.

Anyway, onto business. For me the trip was extremely enlightening, for so many reasons. Not only did I become aware first hand that there are actually so many opportunities for so many businesses to expand their operations over into places such as China, but I also learnt how important it is to respect and embrace the culture of the country you are going into. That is the same very reason why my contact in China explained that so many foreign businesses who come into China fail, they simply forget the most important thing of all – China is not the UK, it is a completely difefernt country and you need to understand how people there think, trade and operate very differently. If you can understand that, then you are onto a good start, because people in China love to deal with businesses from the UK.

It was quite concerning that m client, and friend, felt that people in the UK may thnk badly of China purely because it is a communist country. Yes Communisim may have its downfalls, but as far as I am concerned so does democracy and the policitic farce that we have in the UK. Neither is perfect, and if any wants my opinion if we could find a good mutualground between the two then we might have the perfect policitical leadership style between the two. China currently has a very astute leader who’s strategy of building up the China economy and business sector appears to working a lot better than what our western leaders seem to be try, and from his perspective why should he use the funds he has carefully built up to bail out the lash up that hs been caused by the reckless western banks.

That said, back on topic, I attended a very informative seminar on the BRIC economies this week. The subject matter was on the emerging and growing economies in Brazil, Russia, India and China .. and identifying the many commercial opportunities available to the forward thinking businesses of the west. What I learnt was exactly how much cash reserves these countries have over the debt of the apparently deeloped economies, and how much investment their governments are putting into building their infrastructures and building their middle class wealth. This investments means that those who can help with rail infrastructure, and hospital and medicine may want to look into Russia for example. High performance engineering and motorsport businesses may want to look at Brazil, and so much more.

It would also be prudent for me to mention, my particular interest is in China and if any business owners would like to know more about expanding their business and see the opportunities in China do get in touch. My business will help you understand the cultures, different ways of trading, and give you a much  beter chance of success than if you went it alone.

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The Benefits of a Joint Venture

Posted on August 3, 2008 by Ozzy

When I first started up in business my first business was in a 50/50 partnership, but we didn’t really agree what each of our objectives were or what each others roles were going to be in the business. Needless to say, after a couple of years the business relationship broke down. Just like 50% of all business partnerships, hence my previous blog about the importance of have a Shareholder Agreement.

Since then I have always taken the view that I wanted to own 100% of my business interests, never having any more shareholders. I wanted to be in control of my own destiny and my own business. I then started another business with a minority shareholder, and I put a shareholder agreement in place to ensure we both performed as expected. I had a hunch that my partner wouldn’t perform, and as expected he didn’t so he has lost his shares in the business. So for a while I lost faith in working with a business partner again, but then I thought some more (and read Richard Branson’s autobiogrphy) and came to the following conclusion.

I currently run three businesses full time, but I find myself continuously coming up with other ideas for new business ventures. If I tried to run these other new businesses myself I would not be able to, there is only so much that I person can do themselves, so yet again I needed to look at working in partnership with other people to enable these business ventures to see the light of day. This is where I can talk though the thought process I had for one business in particular.

I have had many people ask me whether I was able to supply them with lists of new businesses that have just started, people who wanted to get to these new companies at the ground level to offer them anything from mobile phones to accountancy. Technically one of my businesses has access to that data through our links with Companies House, but I felt it unethical to use that business to offer this service. So I always turned this business opportunities down, until lots of people started asking me for this information. So I started investigating this business model, and whether it would be a profitable business or not. I also checked out some of the competition to see what I would be up against.

Once I started putting the feelers out amoungst my contacts it wasn’t long before I had over £300,000 worth of pre-orders penciled in for a business that wasn’t even started yet, so I needed to find a way to get this business up and running pretty quick. I spoke to some software developers and designed an automated business model, a business that could effectively run itself through automated technology and came up with the entire business model. I then sifted through my contacts to see who I felt would be the best organisation to work with, and picked up the phone to arrange a few meetings. I found an organisation who had similar links to company data that I have, know the data industry very well, and have their own contacts similar to mine. More importantly too, a company where we both know and respect the strengths of each other so that we can work together. It also helped that I brough over £1/4 million on orders to the table ready to go.

Some may argue that perhaps I’m handing another company shares in a business that I needn’t have, I have the money and orders to start this business from a running start but do I really have the time? I’m in a situation now that I consult to this new business venture, I sell the business services to my own network of contacts, and I take my share of the profits. My new business partners have an exciting business opportunity to get involved in, they run the business day-to-day and they get paid for doing that. They also want the business to work, and sell it themselves to their own contacts. They also get their share of the profits too, and speaking to their directors and Chairman they are very excited about working on this business ventre and learning from my expertise in technology and the Internet.

I have two more Joint Ventures I am working on at the moment with other businesses, and I am pleased to have found a vehicle that enables business ideas that I had previously shelved to be realised. Further more, my new business partners are all chosen by me as being firms that have the expertise that my ventures will need, but can also learn a lot from my strengths. Oh yes, and not forgetting the partnership/shareholder agreements too!

So if you are considering working in a JV arrangement, you need to choose your business partner carefully. Both partners need to gain something from the other, it cannot just be a one way street, and these gains can be anything. For example, one of the things I am gaining is freedom of my time so that I do not need to run these businesses myself. That to me has a monetary value just the same as human resources and financial investment. Consider your own strengths honestly as well as your weaknesses, and do the same for the people you are consideirng working whether. There is not point both parties being good at the same things, you will need to balance each other out and then respect the expertise of each other. There is no way my partners in this venture could tell me what is and is not a good website, yet there is also no way I could tell them anything about the industry of business information and company data.

Joint ventures are an excellent business vehicle and can lead to rapid growth of a business that perhaps on your own may not grow as quickly, and if you do need a joint venture setting up of course you know which company formation agent can help you with that :-) . I’m very excited and am looking forward to the official launch of New Start Data Limited :)

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Anti-Competitive Behaviour of the Government

Posted on July 13, 2008 by Ozzy

A few years ago there was an active industry with a good few hundred companies in the UK trading at varying levels of success, from big companies to small one man operations. This industry was just like any other, providing income and jobs to hundreds maybe thousands of people in the UK. This industry was the private numberplate industry.

That was until a Government agency, namely the DVLA, realised that they could make a lot of money from the private numberplate industry and decided to abuse their position and monopolise the market. They undertook extremely agressive marketing activities, from TV to magazine to Internet, and they basically “cleaned up” as the term would go. A Government agency basic abused their position, exploited it to great financial gain, and the end result was many businesses went into liquidation and many more lost their jobs. If this happened in the private business sector it would have gone through the courts with an anti-competitive law suit, but nothing happened, the Government which claims to encourage commerce did completely the opposite and did what in my opinion should be illegal.

Well guess what, it’s happening again!

Companies like one of my business, Quick Formations, are being forced by law to carry out very time consuming comprehensive checks on each and every one of our clients under the Money Laundering Regulations 2007. These checks not only take time, but also cost money too, and we must reflect these costs and time taken in the prices we charge. This isn’t just my business, but it is all businesses in my industry sector (that comply with this legislation that is, but that’s another story). However, what do Companies House do?

Companies House state that they are an “administrative” agency, who’s role is to store data for the public record. Yet, Michael Mouse is able to file forms 10, 12 and 288a with them and Incorporate a Limited company without question. He can use a completely fictitious address, he doesn’t even have to exist, and Companies House will incorporate this Limited company for Mr. Mouse without question. Mr Mouse can then go to one of a number of countries around the world to open a business bank account because a UK company does not have to bank in the UK, and then Mr. Mouse has all the tools he needs to launder all the money he likes out of the UK. By launder, and to quote the Governments own scare mungering about this required legislation, I mean to potentially finance terrorism. Companies House, a government agency, is openly flouting a legal requirements of the company formation industry. The businesses within the company formation agency must charge to cover the administrative burden of complying with this legislation imposed upon them, but Companies House by not complying with this same legislation do not and can abuse their position in the market. The DVLA story seems likely to repeat itself all over again.

However, I have a solution and have raised this to parliament. At first I thought it would come to nothing, but at least Sally Keeble MP is listening and has started to raise concerns and move them forward.

My solution is as follows;
All agents who provide a company formation service apply for an account with Companies House. The requirement of holding an account is that the agent must be registered with HM Revenue & Customs under the MLR2007 regulations, and as such comply with the regulations. Companies House then have no requirement to carry out due diligence on documents filed by that agent.
Any company formations filed by non-account holders will require due diligence, and Companies House will be required to operate under the same legal requirements imposed on all other businesses carrying out the same business activity. They will also have to cover their costs to carry out this activity, leveling the commercial playingfield.

Here is hoping that Sally Keeble can get some results on this.

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Phoenix or corporate restructure?

Posted on July 1, 2008 by Ozzy

This time I’m providing an article that I didn’t write but was in fact written by a friend of mine that I hope will provide helpful to business owners who may find themselves in a difficult situation with a shareholder, or worse still in difficulty with their business overall.

You will probably be aware of the terms “Phoenix” and, more recently, “Pre-pack”.  Invariably, these terms often go together since the introduction of the Enterprise Act on 13 September 2003.  However, should we always cry foul when a new company rises from the apparent ashes of old?

You will probably be aware of the terms “Phoenix” and, more recently, “Pre-pack”. Invariably, these terms often go together since the introduction of the Enterprise Act on 13 September 2003. However, should we always cry foul when a new company rises from the apparent ashes of old?

In a recent case I was confronted with a shareholder dispute where a 30% shareholder was holding the company to ransom in exchange for consideration of his shares at an extortionate rate. His conduct in preventing various actions by the company was like a corporate tourniquet, slowly strangling the company to death. My advice was to place the company into administration (an Administrator is exempt from requiring shareholder approval on prescribed issues under the Companies Act) and seek a purchaser for the business as a going concern.

The outcome was an expression of interest from four parties, with the offer that was best for the creditors as a whole coming from the existing directors. Technically, this could be regarded as a phoenix but the result in this case was the saving of all employee positions and there will be a sizeable return to creditors. The alternative would have meant no funds available and creditors writing off 100% of their debt.

On the other hand, we have the phoenix where creditors ought to be concerned and aware of their rights. In a recent case where creditors asked me to represent them the insolvency practitioner (“IP”) had agreed to sell the business back to the directors for a nominal sum and “put the company to bed” by a voluntary liquidation. The nominal sum conveniently matched the IP’s fees.

Because the creditors I represented were aware of their voting power, I was appointed Joint Liquidator and the original concerns were justified as I am about to sue the directors for a significant sum.

The Association of Business Recovery Professionals is the trade body for IPs and is currently waiting for approval of new guidelines on what must be reported to creditors in a pre-pack scenario. Having read the draft guidelines, I cannot see why the same requirements are not imposed on liquidations where a phoenix has occurred.

When you are a creditor of a company that is being presented with a “Done deal” and the business has been sold (or it is being proposed that a sale be approved) creditors should consider whether the (proposed) transaction is beneficial to creditors as a whole. To assist in this thought process I would suggest the following be taken into consideration:

What marketing activities were undertaken by the company and/or the IP prior to agreeing the proposed sale?
How (and by whom) were the assets valued
What alternative courses of action could (or should) be taken or considered?
Following on from (3) above, what is the likely financial outcome of the alternatives available?
Are there any reasons why the alternative options could not be followed through (e.g. inability to trade for the interim period due to no funding)?
Were steps taken to enquire whether third parties could offer interim funding while the business was advertised for sale?
Had the directors guaranteed any of the liabilities and how were those creditors holding guarantees being handled as a result of the phoenix?
If deferred consideration, what security will the IP have to protect the sale proceeds?
Being able to switch off the emotional mind (very difficult in many cases) and focus on what you are actually being asked to approve generally allows a considered conclusion to be reached. Knowing your rights as a creditor of an insolvent company re-enforce your ability to ask those searching questions and, where appropriate, challenge the proposals put before you.

The field of insolvency is a highly specialised area and very few people truly understand its meanings. Therefore, should you be the unfortunate recipient of an insolvency notice then you would be best served contacting a Licensed Insolvency Practitioner who can explain your rights in a clear and concise manner.

Gary Pettit is a Partner and Licensed Insolvency Practitioner at Begbies Traynor who are the largest independent firm of insolvency and corporate rescue specialists in the UK. Should you wish to contact Gary then his details are:

Begbies Traynor
Calverton House
Tilers Road
Milton Keynes
MK11 3LL

T: 01908 261300
F: 01908 565850
D: 01908 264870
M: 0787 6477312
www.begbies-traynor.com

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Are we heading into a recession, or is it Mind Games?

Posted on May 27, 2008 by Ozzy

My wife made a fantastic observation at the weekend which to a degree can summarise much of what is happening in the media about the Credit Crunch we are experiencing at the moment, and I think this has a lot to account for with the downturn in the economy.

Her Father is widower on a fixed insurance income and pension. He is not employed, so not likely to get made redundant and has no mortgage. What I want to demonstrate is that he is one the least likely to be affected by a downturn in the economy than anyone.

The bad press and media coverage of the Credit Crunch has worried him, so he has started cutting his spending. When he goes shopping he has stopped buying the extra’s he would normally purchase and is only buying essentials, and when he puts petrol in his car he no longer fills up but only puts a tenner or so in at a time. He is cutting his spending in fear of the economy downturn, despite this downturn having very little overall effect on his personal finances.

All that my Father-in-Law is inadvertantly causing is a reduction in consumer spending brought on by csaremungering of the press and media. By reducing his spending, he is reducing the income into the economy, who in turn are reporting reduced consumer spending to the media, who in turn are spreading doom and gloom stories to people like my Father-in-Law who then cut their spending fearing the worse. Do you see what is happening here? Now put that on a national scale, where hundreds of throusands of people around the nation are fearing the worse and cutting their expenditure into the economy, holding onto their pennies for a rainy day. Businesses then have to pull in purse strings and make redundancies to counter act the reduced spending, which then again leads to ever more bad media coverage of the economy.

Before anyone mentions the downturn in the property market, this was bound to happen. The property market could not sustain unrealistic property inflation which was pricing first time buyers out of the market and making it practically impossible for them to get onto the property ladder. For example, I purchased my first home (a 2-Bed Semi) for £43,000 and sold it 8 years later for over £160,000. How on earth can that be sustainable? The property market needed a reality check, and that is what I believe this now is. It is just a terrible shame that people have to suffer redundancies because of it.

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