The UK appears to be showing the signs of a possible second recessionary phase with a retail malaise and consumer confidence shaky at best. Consistently high fuel price rises, increases in utility costs around the corner and food inflation forcing households to review their weekly spend. Interest rates’ remaining static has become the “norm” over the last year or so but this will not continue. Is the “double dip” going to become a reality?

 The prognosis on growth has been reduced by both the Government and the IMF and with companies regularly going into administration, and continued cut-backs by businesses, it would appear that the Japanese stagflation model may be mirrored in the UK over the next few years.

It is not all doom and gloom with a number of businesses becoming more focused and streamlined with even some growth opportunities being exploited. Many businesses who have survived through the prolonged downturn are now looking ahead to the future.

Utilising an independent business resource is one way of stimulating a business to review, plan and invest for an economic upturn and to maximise potential opportunities. MW Interim Finance provides independent professional finance support to assist is implementing achieve your strategic and operational objectives.  Visit www.mwinterimfinance.co.uk for further details.

Interest rates remain at 0.5% in the UK, but for how much longer as record monthly leaps in food and transport costs raised the consumer prices index (CPI) to 3.7% in December 2010, (up from 3.3% in November), according to the Office for National Statistics. Continued high level rises in food and fuel prices could send the inflation rate to 5% by the autumn, economists warned.

There is some suggestion that interest rates will have to rise to mitigate inflationary pressures however, pushing up interest rates may be a welcome relief for net savers but it is likely to have a greater adverse impact on those with mortgages and other borrowings.

The housing market is already falling back from the small gains during the last twelve months and, with an increasing level of job losses in 2011 possible, (currently at just under 2.5 million or 7.9%), any consumer confidence could be wiped out and the UK could slip into another economic downturn or consistent low growth period for the foreseeable future.

Yes, VAT in the UK has risen to 20%, for consumers buying “large ticket” items and stealthily increasing the cost of living across the board, by over £400 per typical family suggested by some commentators. This figure is based on average spend on general purchases, fuel, utilities and adult clothing. In response, retailers are saying that high discounts and sales are in fact saving costs to consumers, as they try to catch up on sales lost prior to Christmas due to the inclement weather. The discounts of course will not continue much into 2011 and consumers will suffer from continued increased costs of goods and services. A substantial impact will be on the weekly costs of refueling vehicles and the Winter utility costs of gas and electricity which contain supply driven increases well above inflation plus a VAT impact. Have a Happy New Year……

Yes, 2010 was not the roaring positive start to a new decade for many businesses and consumers as the UK slipped into, and technically out of, recession. Business and consumer confidence was low as the election loomed, with apprehension about the coalition government’s budget and CSR, (Comprehensive Spending Review). Interest rates remained low for the year; SME businesses stated banks were not lending with the banks saying they had the funds but few credible opportunities were presented by companies; house prices remained in the doldrums and, for first time buyers, getting on the housing ladder continued to be an issue. Standard rate VAT increases in January 2011 and retail sales are struggling at the end of 2010 with adverse weather adding to the general retrenchment by consumers. It appears that most businesses and many consumers seem to have curled up and let things pass them by this year. Is this the demeanor of a pussycat or a sleeping tiger waiting for an opportunity to pounce?

As 2011 is the year of the Rabbit,  let us hope that the government, businesses and consumers activate themselves into stimulating the economy and not run around frantically finding the nearest burrow to hide in for the year…………

Remember, procrastination means never having to make a decision, but a positive attitude will inspire, stimulate and maximise the benefits from any opportunity. For businesses wishing to review operational performance, produce or update business plans or forecasts and implement strategic change, MW Interim Finance provides independent professional finance support to achieve your objectives.  Visit www.mwinterimfinance.co.uk for further details.

Unemployment in the UK increased by 35,000 in the three months to October to 2.5 million, the Office for National Statistics (ONS) has said. It is the first time that the jobless measure has risen for six months however 33,000 of the increase was in the public sector, raising the overall unemployment rate up to 7.9%. It has been assumed that the private sector will mitigate many, if not all, of all current and future losses now resulting from the full impact of public sector cuts………..but with UK retailers suffering, VAT rising in January and businesses holding on to cash rather than investing there is a fragility to the economic recovery.

Millions of families are struggling to pay their bills — and the number is likely to increase in the new year, according to analysis from the Bank of England. The report published this week shows that two fifths of households have difficulty from time to time or constantly in meeting their monthly bills, compared with a third last year, and more than half regard their overdrafts or credit cards as a burden.

More than three years after the start of the credit crunch, the Bank of England warns today that a lack of available credit “continues to be one of the main factors holding back the economic recovery” and repeat warnings about the size and concentration of Britain’s banking sector.

The Bank of England is forcing high street lenders to repay £185 bn of emergency loans in an attempt to avert a new market meltdown next year. Bank officials have recently held meetings with four major banking groups and the biggest building societies demanding that the loans, which were handed out at the peak of the financial crisis, be paid back sooner than planned. Analysts warn that the tough line could stop banks lending to small businesses and slow down Britain’s economic recovery.

The messages therefore for a UK economic recovery are not looking good for 2011.

As we reach the end of 2010 there are many businesses still under pressure to maintain sales, margins, profitability, service their debt and create / maintain positive cash flow.  Some businesses have managed to recover their cash position but are indecisive about investing for the future. Whether driven by perceived risk, fear of failure or apathy decision makers in SME’s and some larger organisations are not addressing issues, some critical, in re-evaluating their operational or strategic focus. This is the first time in over a year when all the factors likely to impact businesses in the future, more so in the private sector, are “known”. The austerity measures are in place, taxation rates understood, interest rates stable, lenders willing to support good business cases and even retirement and pension related issues have more clarity.

2011 should be a year of increasing confidence and utilising an independent business resource is one way of stimulating a business to review, plan and invest for an economic upturn and to maximise potential opportunities. MW Interim Finance provides independent professional finance support to assist is implementing achieve your strategic and operational objectives.  Visit www.mwinterimfinance.co.uk for further details.

The Organisation for Economic Co-operation and Development, (OECD), warned that the UK austerity measures pose “headwinds” to growth, and has significantly cut its forecast for the UK in 2011, to only 1.7%, down from 2.5%. They also stated that the housing market is at risk of a double-dip downturn that poses significant risks to recovery, on the back of comments that net mortgage lending for 2010 would be the lowest since 1980, amid stagnant property demand.

This weeks bail out for the Irish economy is possibly the first in a number required to protect the Eurozone from further sovereign debt defaults, with Spain, Portugal, Turkey and Greece remaining in serious economic strife.

In the UK a total of 1.6m jobs will be lost across the economy as a result of the Government’s deficit reduction programme, according to the Chartered Institute of Personal and Development (CIPD). It estimates spending cuts will account for 725,000 of those losses, the hike in VAT to 20% a further 250,000, and knock-on redundancies in the private sector of 625,000. When these are added to the current unemployment figures the total will likely be higher than in the recession of the 1990’s.

 Remember remember the 5^th November………………………..but do not forget that the UK standard rate of VAT is rising to 20% on 4^th January 2011.

Is your business prepared for;- the impact on internal accounting and IT system changes, pricing of goods and services, costs of purchases and related cash flows, updating budgets and business plans, margin and profitability expectations. Businesses should plan now and make the necessary changes and review their forecasts well in advance of the run up to Christmas holiday period to avoid cash flow surprises in the first quarter of 2011.

It has been just over a week since the UK comprehensive spending review, (CSR)), which was keenly awaited but with no surprises on the whole, except there were copious figures quoted and a time frame of 2014 / 15 to turn the country around. The upshot was work longer, pay more taxes, and suffer reductions in benefits and public services.

There was however a “double whammy” for men in respect of pensions with an earlier rise in the retirement age and the potential for a move by annuity providers to remove the differential in providing higher annuity rates to males who have the same sized “pension pot”, as females on the basis that men are likely to die sooner. This is a result of a European Court of Justice opinion that “insurance companies may not charge men and women different rates for products”. Once this opinion is ratified in EU law it could have significant implications for life insurance premiums, transfer values and member options.

The private sector over the last eighteen months has suffered the full impact of the economic downturn, recession and low growth “recovery”, but things are getting worse with the cuts announced in the CSR and a view that the private sector will have to absorb the fallout in people and cuts in services in the public sector. In addition, public sector workers will have to increase their contributions and possibly move from a final salary to average salary scheme………..but this is a half measure. The private sector has already, over a number of years, moved away from final salary to money purchase schemes and increased contributions have followed for employees. Why can’t the public sector make the change? More importantly, there should be legislation that does not allow any government to utilise public pension funds in other areas of public sector spending, thus protecting public sector workers.

Martin Walby, managing director, commented, “the rebranding and launch of MW Interim Finance in the Spring of 2010 has been enhanced by targeted advertising for the SME sector, who have suffered most from the economic downturn and pressures from lenders.

MW Interim Finance is well placed to provide interim financial and business partnering support to businesses, either on a project or on going part-time basis working with directors and owners to achieve their operational and strategic objectives”.