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Recession and Recovery 1 February 2010

There has been significant comment in the press in recent weeks in respect of the end of the recession. The Office for National Statistics confirmed in late January that the UK technically came out of recession in the final quarter of 2009, growing by 0.1% in the three months to December. Having entered recession in the second quarter of 2008, this represents the longest period of recession since 1955, when quarterly figures were first recorded. Despite this, 2010 and indeed 2011 are still expected to prove a challenging time for many Owner Managed Businesses. The British Chambers of Commerce has warned that while the economy is showing positive signs, progress remains weak. A poll of members of R3, the professional body for Insolvency Practitioners, predicts that company insolvencies in 2010 will exceed last year, rising to 28,000 against 22,800 in 2009. These figures suggest insolvencies will go on rising long after the UK has emerged from recession.

The 0.1% expansion indicated how close the UK came to a continuation of the slump, with some economists fearing a "double-dip", or a return to recession, and expectations are that Scotland could remain in recession for longer particularly as unemployment continues to increase. The recent statistics show that the growth was based largely on an increase in consumer credit in the period running up to Christmas (the first increase since April 2008) which again raises questions over the sustainability of the recovery, and perhaps heralds a "false dawn".

During these difficult times it is important that Owner Managed Businesses focus on cash and ensuring that the overhead base is appropriate for the level of expected turnover. Financial Stakeholders should be fully informed of progress and potential problems. This can be improved by producing quality financial information and appropriate forecasts, and having regular dialogue. Financial Stakeholders do not like surprises.

CR Corporate Solutions has significant experience of working with Owner Managed Businesses and their Financial Stakeholders during these challenging times, and we would be delighted to have an informal discussion to explore areas where we may be able to assist.

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