Last chance saloon
Oct 22 2008
The chorus of approval greeting prime minister Gordon Brown’s emphasis on small businesses in his multi-billion pound rescue of the banks is understandable.
Whether it’s the fix that some commentators are predicting is another matter entirely. You know things are bad when senior entrepreneurs and analysts are celebrating the ability of banks to lend money. Even six months ago, such a situation would have seemed ridiculous.
There are likely to be more economic twists and turns over the coming months and the uncertainty is a nightmare for owner-managers in all industries and sectors. John Hawksworth, head of macroeconomcs at professional services firm PricewaterhouseCoopers expects the banks to take at least two years to return to business as usual.
Interest rate cuts should stir the economy over the next couple of years, but it’s not going to be easy. Hawksworth says: ‘Small businesses will find it tougher to get credit, and when they roll over their banking arrangements, they may find terms have got tighter. We’re expecting a slowdown in consumer spending growth, which has been a major factor in driving the economy, to near zero next year in real terms.’
The old adage "cash is king" is back in fashion. Jamie Constable, CEO of turnaround investor RCapital, comments: ‘Any cash-negative business has a serious concern, but if it’s receiving money for goods 60 days before it pays its supplier, it should be in good shape.’
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