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We’ve all read the endless stream of headlines, news stories, and informed articles being plastered across the Media every day – but are things REALLY as bad as they say.
Or are they typically hyping it up, over exaggerating problems so as to sell more papers etc??? Is it all Robert Preston’s fault – aided and abetted by the BBC???
OK businesses are going bust (into Administration) almost daily it seems. In consequence people are losing their jobs; house prices have ‘slumped’; and doom and gloom spread over the land. Obviously the end of the world is nigh …. or is it?
The fact is that if a business is run badly, sooner or later it will come a cropper. When times are “good” and sales seem buoyant underlying problems can often be masked or at least not be apparent to those that ought to see them. Poor cash flow; lack of ‘real’ profit; over-optimistic investment bringing poor returns; over-stocking; poor (if any) control over costs, wages, and overheads; the list is endless.
Only when a so-called ‘boom economy’ slows down do these issues return to bite the inexperienced, unskilled or unwary in the ass.
Take Zavvi for example, which has today announced that it is going into Administration. It was formed as a management buy out from Virgin Megastores only a year ago. It employs some 3,400 staff at 114 very expensive High Street locations selling CD’s and DVD’s to the ‘younger market’. If you think about the effects of the internet on CD purchases for a moment it is pretty obvious that a business, the sale of whose main products are declining, and whose profit margins are virtually non-existent, isn’t going to have much of a chance of survival – even in the medium term.
Virgin must have thought it was their birthday when they sold off their retail arm – particularly as a child of 3 could have forsseen the impending demise of retail CD and DVD sales. At a stroke they removed an enormous rental liability and got rid of stocks that were devaluing daily.
So what is your experience of this so-called slump??? Are you going to be affected in a major way, or will you simply tighten your belt a bit and get over it???
I’m self-employed. I earned less than £100 last month. When things were good I was earning £2000+ per month and could have earned a lot more except I valued my spare time more than the extra cash.
Things are bad, but people are just seeing a snapshot and don’t realise how bad things might get soon. Some people are trying to say there are bargains out there in the property market because prices have fallen. But your bargain soon stops looking like a bargain if it continues to fall in value. A good saying of the moment is: “There are no bargains in a falling market”.
Businesses I know of (including myself) have seen trade drop to virtually zero. I was at Focus Do-it-All yesterday 23 Dec – 2 cars in the car park and hardly any customers.
Supermarkets are busy but nowhere else is.I think there is a wave of big bankruptcies coming in Jan / Feb. It can’t be long before one or two of the big housebuilding companies go under, I reckon.
Volvo trucks had 41,000 orders for heavy trucks throughout Europe during one quarter last year. The figure for the same quarter this year was 150.
My view is it’s going to be a lot worse than most people think. Depression rather than recession.
Well-run businesses are going under too. Suddenly their markets have evaporated. I mean, a car manufacturer can, over time, switch their product range. But, for example, Jaguar and Land Rover can’t sudenly switch to making small economical hatchbacks as they don’t have time or money to develop them. They could, I suppose, take a short cut and use re-badged Tata cars from their parent company. These would probably kill the Jaguar and Land Rover brand images, but perhaps those brand images themslves are redundant now.
I’ve been skint for the past 5 years so i havn’t noticed the latest drama it just seems like everyone has caught up with me lol No one will learn though. Everyone on Tv that were in the highstreets spending i bet it was all on their cards, none of it was cash and these same people will be crying in january :roll:
Another symptom: I was looking at car registrations and it struck me how few ’58’ ones I saw, compared to last year, 2006 or even ’08’. I know there’s been a big fall in new car sales, but even so there are surprisingly few 58-reg cars. Is that because a lot of them are fleet cars, no longer needed and sitting in auction yards waiting to be sold?
I suspect Bas that it’s because the sales of new cars have slumped over the last few months. (“58” is the second half of 2008). My guess is that even if manufacturers offer enormous discounts on their new cars, the difficulty in obtaining credit will screw up their sales.
Dealer margins are only around 17.5% anyway so there isn’t much room for discounting. I think that the new registrations in 2009 (09 and 59) will be even lower.
However ….. isn’t it interesting how al the pundits bleat now and yet – and yet – isn’t this exactly and precisely what the “anti-global warming” brigade want? Less petrol used; fewer cars on the road; fewer flights being taken by people; surely they should be praising us all for saving the planet???
Working in the finance industry I can see spending and lending patterns daily have changed dramatically – yes a lot is due to the doom and gloom in the media and the governments inability to react quickly to the economic crisis in the USA earlier this year.
The banks that have been ” part nationalised ” had to no choice when share prices fell to almost nothing – the city traders made their fortunes in September with over 200 being added to the millionaires list betting that share prices would fall – I feel for the banks – believe me the government had them in an impossible sitaution – they wouldnt intervene when the interbank lending dried up ( imagine you had an overdraft and was asked to repay it within 2 hours …….that is the equivalent ) they had to accept the money offered to them or be fully nationalised and be sold for peanuts a few months down the line to the highest bidder…
Lending is still available but only to those that can afford to repay it – low credit commitments, stable employment ( not reliant on overtime to keep up the bills ) and a good track record. This puts many out of the picture as overdrafts are not renewed….
The worse is to come – the figures have forecast that up to 30 retail companies will fold in January alone…….and there are more banks on the ” careful watch ” list from the Bank of England……and don’t get me started on pensions as that is a bombshell to come…..
Welcome to 2009 !!!
The boss of Suzuki Motors has said that the slump will really hit the Japanese motor industry around the middle of 2009. Partly this is a knock-on effect from the situation in USA where car sales have slumped, hitting all manufacturers, in particular US-owned ones – GM, Ford and Chrysler.
He went on to say that people have lost interest in cars, particularly in Japan, where fewer people are learning to drive and it’s no longer un-cool to be a non-driver. I could see that coming here too.
I would say things are as bad as they say, however, i am of the opinion that the media helpd to talk us into resecion. Constant things are bad and we are going to fall into resecion etc etc . The power of the media and all that. If it was on the news that there COULD be a shortage of bread due to a blight found in flour, you can bet your last pound if you went to asda an hour later there would be no bread on the shelfs due to panic buying. The companys now folding, i beleive as PB already suggested, wernt realy viable anyway. As for the banks, they have now had millions of tax payers money and still refuse to lend to each other let alone the general public, so now is the time to nationalise them. The car industry has been over priced for decades,and should not see 1 penny of tax payers money, its been collapseing time after time in this country since the 70s. As for the people who have made money and lots of it out of this…what do you expect in a free market where there are no real penaltys or jail terms. The anti globalisation crowd have been proved right on 1 point, linking economys together is bad for the world, the world linked its self to america and we are all in it now. My own personel thoughts are that what has been done will not be enough and we are still only a few months away from a world wide depresion greater than the last one. And i fear, that yet again, it will take a global war to drag the world economicaly back from the brink. One thing you can be sure of, is those with money will make money out of all this.
LL’s point – “Lending is still available but only to those that can afford to repay it – low credit commitments, stable employment ( not reliant on overtime to keep up the bills ) and a good track record. This puts many out of the picture as overdrafts are not renewed….
“ actually hits the nail smack bang on the head.The entire point of making a loan to somebody (or to an organisation) is that it gets repaid plus interest due.
Whingeing on that the banks won’t lend money is to miss the point that indeed they won’t lend money ….. but only to those about whom they have a reasonable commercial suspicion won’t be able to repay it. You don’t give trade credit to a customer if they take your goods and then don’t pay or can’t pay you for them 30 days later.
The lending ‘mess’ that has occurred is primarily because loans were made against flimsy security (that recently has vanished) to people who either never could repay, or lacked the will to repay.
I cringe when I constantly hear how awful it is that Woolworths, MFI and others have gone into Administration. They were badly managed unprofitable companies – accidents simply waiting to happen.
Yes there will be people that make money in the current (and forthcoming) recession / downturn / world crisis / – but then clever talented people always will make money.
When due to the economic “crisis” you can no longer afford to get a weeks shopping in Lidl then moan until then you got it good :P
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