15-02-2008
BPE Credit Crunch – Fact or Fiction?
BPE Solicitors hosted a dinner on Wednesday 13 February to discuss the reality of the credit crunch.
The dinner was attended by leading players in the regional business community including representatives from the accountancy profession, banking community, financial advisors and other leading business figures.
John Workman chairing the evening remarked "that since the new year the press has been full of comment about the economic prospects and the term was now used very commonly and the overwhelming impression was that the UK economy was in for a period of turbulence and that growth and financial prospects for 2008 were looking poor".
The evening started with a consensus that the credit crunch was a reality-but the real issue was what we define as a credit crunch and whether it was as serious as recent press comment indicated.
There was a concern that the coverage was somewhat divorced from the reality on the ground that the real economy was not performing too badly and those attending had not seen any serious negative impact thus far.
There remains a high level of confidence and business people are still keen on expanding their businesses.
Whilst there had been an upturn in insolvencies, Andrew Taylor head of BPE's insolvency team, reassured people that there was still an appetite for lending to "good" businesses with plenty of positive activity.
Those attending were keen to stress that deals were still being done, indeed in some cases ahead of the same position last year and there had been no reduction in the bank's appetite to lend.
However, it was recognised that the cost of borrowing was going up and the banks were seeking to improve their margins, in some cases more security was being sought and there was a greater emphasis on risk.
This however needed to be seen as a repositioning and a return to normality after the high level of lending and competition which had been experienced in the past few years. The banks indicated that they had cash and were continuing to lend to customers with a decent business proposition. There had been no instruction to bankers on the ground whereby they had been instructed not to lend or to keep out of specific sectors.
Where there would be a contraction would be in domestic housing lending with falling values and tighter credit control.
Everyone felt that the greater risk was the media driven lack of confidence becoming a self- fulfilling prophecy: if consumers felt that there was to be a downturn and this was linked to a reduction in credit facilities they would reduce their own spending be it on housing or other consumer spending.
This lack of confidence would be the key driver and in itself result in a downturn. Some attendees felt that although 2008 might not see a credit crunch, 2009 would be a different matter.
There was a feeling that the press was not being as responsible as it could be and the reality on the ground needed to be stressed a little more.
In conclusion the consensus was reassuring that those members of the business community at the coalface were more confident than might have been expected form current reports although they were concerned about prospects for 2008. However, they were not anticipating at this time a major recession of the type experienced in the early 1990's.
The dinner was attended by leading players in the regional business community including representatives from the accountancy profession, banking community, financial advisors and other leading business figures.
John Workman chairing the evening remarked "that since the new year the press has been full of comment about the economic prospects and the term was now used very commonly and the overwhelming impression was that the UK economy was in for a period of turbulence and that growth and financial prospects for 2008 were looking poor".
The evening started with a consensus that the credit crunch was a reality-but the real issue was what we define as a credit crunch and whether it was as serious as recent press comment indicated.
There was a concern that the coverage was somewhat divorced from the reality on the ground that the real economy was not performing too badly and those attending had not seen any serious negative impact thus far.
There remains a high level of confidence and business people are still keen on expanding their businesses.
Whilst there had been an upturn in insolvencies, Andrew Taylor head of BPE's insolvency team, reassured people that there was still an appetite for lending to "good" businesses with plenty of positive activity.
Those attending were keen to stress that deals were still being done, indeed in some cases ahead of the same position last year and there had been no reduction in the bank's appetite to lend.
However, it was recognised that the cost of borrowing was going up and the banks were seeking to improve their margins, in some cases more security was being sought and there was a greater emphasis on risk.
This however needed to be seen as a repositioning and a return to normality after the high level of lending and competition which had been experienced in the past few years. The banks indicated that they had cash and were continuing to lend to customers with a decent business proposition. There had been no instruction to bankers on the ground whereby they had been instructed not to lend or to keep out of specific sectors.
Where there would be a contraction would be in domestic housing lending with falling values and tighter credit control.
Everyone felt that the greater risk was the media driven lack of confidence becoming a self- fulfilling prophecy: if consumers felt that there was to be a downturn and this was linked to a reduction in credit facilities they would reduce their own spending be it on housing or other consumer spending.
This lack of confidence would be the key driver and in itself result in a downturn. Some attendees felt that although 2008 might not see a credit crunch, 2009 would be a different matter.
There was a feeling that the press was not being as responsible as it could be and the reality on the ground needed to be stressed a little more.
In conclusion the consensus was reassuring that those members of the business community at the coalface were more confident than might have been expected form current reports although they were concerned about prospects for 2008. However, they were not anticipating at this time a major recession of the type experienced in the early 1990's.
