An economic think tank has predicted something that every business in the UK has predicted: we are about to enter a double-dip recession. A recession is defined by negative economic growth in two successive quarters. In 2020 Q1 and Q2 saw negative growth but the summer’s respite and Eat Out To Help Out saw Q3 see a recovery before the autumnal lock downs saw the economy go into reverse in Q4. So Q1 of this year looks like delivering more fiscal gloom. The Centre of Economics and Business Research (CEBR) said the lockdown is costing the UK £390million every working day – clearly for Rishi Sunak at 11 Downing Street the situation is unsustainable long term.
1975 and all that
Ian Carrotte of ICSM Credit said it would be the first time since 1975 that the nation had suffered a double-dip recession. He said: “Shutting down much of the economy comes at a cost. The tab is being picked up by small businesses, workers who have lost their jobs, sole traders and the self-employed who are not eligible for Government hand-outs. I am old enough to recall previous recessions. They don’t just stop when things pick up – they have a long lasting effect for years afterwards.”
During the first full year of Harold Wilson’s Labour Government in 1975 the nation struggled with high inflation and a recession in an era when Britain’s economy was still dominated by manufacturing and the coal industry. The oil crisis of the 1970s triggered by the 1973 Arab-Israeli war resulted in a hike in fuel prices leading to inflation that condemned the decade to a long fiscal struggle for the Chancellor of the Exchequer. Inflation put pressure on wages leading to strikes and a desperate struggle by the Chancellor to control an economy that threaten to get out of control.
Run on the bank
It was only ended by the newly elected Conservative Government of Margaret Thatcher first plunging the country in a sharp recession in the early 80s before a boom in the economy took place. Sadly the decade ended with more downturns before a period of growth curtailed the economy in 2008 with the Credit Crunch. That very sharp recession was caused by American banks giving unsustainable credit to those who couldn’t afford to repay. When they began to collapse the problems spread with the memorably scene of a run on the bank at the doomed Northern Rock in the UK.
Ian Carrotte said: “Business closures mean that output is likely to continue to shrink by more than 4% in 2021’s first quarter according to the Oxford Economics group. Although I hope the economy picks up once the Covid vaccine programme brings business back to normal with shops, pubs and hotels all open and the travel industry back from the dead. Like many though I’m not too optimistic as we have had a number of false dawns during the economically ruinous pandemic.”
The ICSM Credit boss said members of the credit intelligence group fed in continual information about firms not paying their bills and companies that are on the brink of collapse. In December 2020, there were a total of 1,228 company insolvencies in England and Wales. Some of the worst hit sectors were non-essential retail, hospitality and travel.
ICSM Credit noted there had not been a major rise in insolvencies due to the furlough system propping up ailing companies. Another trend was the rise in CVAs or company voluntary arrangements which helps an insolvent firm gain time from creditors to resolve their financial problems although it often leads to a sale or a pre-pack – the much criticised go-to rescue plan when they do enter administration as often the debts are written off.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel – while at the moment there’s a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach – ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk