- 05 Sep
How Much Worse Will The Economy Get?
When you work within the finance industry you often see the first signs of economic problems. This was true with the recent "credit crunch" related economic issues. Some of the factoring companies that we deal with started mentioning increases in the number of debtors that have failed, 6 to 9 months ago and as is often the case the construction sector seems to have been particularly badly hit due the difficulties in accessing new mortgage funding amongst the banks.
This then has a knock on effect on sales related to contruction, furnishings etc. who start to feel the ripple effect from the construction downturn. The people within those companies then have less money available to spend on a whole host of other products and services and the whole economy deteriorates.
House prices are reportedly continuing to fall and this they further affects the housing market, depressing sales. My guess would be that a lot of businesses have been living off of the "fat" that they have built up during more prosperous times, but that can only last so long.
Within our factoring brokerage we have seen an emergence of new prospects approaching us for factoring as their debtors have slowed down the time taken to pay their invoices causing them cash flow problems.
Personally, I think that the downturn in the UK economy is going to get worse and it is time to "batten down the hatches" by doing everything you can to protect your business' cash flow, and try to wait out the storm over the next 18 months or so.