25 June 2009
InBusiness - eBulletin
Tough talk on revival tactics at Economic Forum
The message at Hart Brown solicitors’ Fifth Annual Economic Forum was that both Government and Business owners needed to be bold and brave to revive the UK economy and improve our personal fortunes.
The Forum proved a timely and useful opportunity for over 300 business delegates to hear about the future for the South East economy, coming, as it did, on the day that Bank of England Chief, Mervyn King, made it clear that any UK government would be forced to make deep public spending cuts to bring our huge deficits down.
The packed auditorium at the Economic Forum, held at the University of Surrey, heard from speakers Vincent Cable MP, Giles Keating (Global Head of Research at Credit Suisse) and Mark Curtis (Managing Director at Vision Engineering) – all of whom provided an invaluable expert insight into business conditions and what can be done to revive them.
Vincent Cable, Liberal Democrat Deputy Leader and Shadow Chancellor of the Exchequer, suggested that we should not be asking ‘when will recovery start?’ but ‘what will we be recovering from?’ if we are to tackle our circumstances successfully. He noted that recovering from this recession will not be like coming back after a dose of flu – more a heart attack – in that the world will be a completely different place in the way we deal with all aspects of finance. He stated that the country is currently being kept going by ‘monetary steroids’ - artificial measures such as low interest rates and taxes - but that the way in which these ‘steroids’ are removed – and when – will be the clinching factor in the rate of recovery.
Vince echoed Mervyn King in stating that the answer lay in the need for the Government to set out a clear programme for getting the deficit under control and sustaining market confidence – and that it was currently being too cautious with its tax and spending plans.
However, the MP finished on a positive note. Unlike in the 1930s, the national Governments have taken some action (whether right or not), and they are co-operating. UK companies are doing reasonably well although there is a mixed picture, and exports are picking up. He also noted that the British labour market is more flexible than a generation before in that they are prepared to take pay cuts, work shorter hours and so forth, all of which have helped.
Giles Keating started very positively, saying that we are on track for the end of recession here in the UK and globally by the end of 2009. He showed that Emerging Markets (Ems) like India and China are leading the recovery, with the US gradually picking up. He also noted signs of revival in Exports with Korea and China coming up first. The underlying trend for UK new export orders is one of improvement.
Giles added that we went into this recession with an extraordinary level of consumer debt in the UK – over 100% of Gross Domestic Product – which can never be repeated and that there was no point in relying on Western consumers to buy us out of it but to look to Ems. He pointed to business diversification being key to recovery, with portfolios that include these markets. He also said that investors worldwide are holding a lot of cash for the grabbing.
Mark Curtis, Managing Director of Vision Engineering, a privately-owned Woking based manufacturer of optical instrumentation (microscopes and camera-based systems), was able to give a view from a South East business (SME).
He said that putting your business into hibernation was not a realistic option for survival and gave some suggestions for tackling the recession. He acknowledged the need to deal with staffing issues head on when having to look at redundancies; to recover cash from satellite companies early on in order to see the business through the tough months; enforce payment terms to debtors, give suppliers incentives for paying - like discounts for prompt payment, check which overheads are actually essential and which can be lost… He explained how his business had employed 0% stockholding (only buying that needed to fulfil actual orders) and had ‘mothballed’ plants that weren’t currently viable.
He also advised on putting resources only into areas of the business which are active and doing well rather than historically successful sectors, and cited, in his case, medical device manufacturing, defence and security-related aerospace, electronics and telecoms, healthcare, forensics, crime anti counterfeiting, and Supra national government (EU, UN, WHO etc).
In creating a ‘recession strategy’ for the business Mark emphasised the need for realism when deciding things like acceptable gross margins; whether you can either restructure or offset assets to pay off debts, and establishing sustainable growth targets.
Mark also called for more Government support for SMEs such as having access to sponsored non-executive directors, more support in cash flow and finance, and a subsidy for retaining staff during a recession.
At the end of the invigorating session, participants were able to put their questions to the speakers, hosted by Professor Neil Rickman, Head of Economics department at UniS.
The Economic Forum was presented by Hart Brown solicitors in conjunction with UniS and the South East England Development Agency (SEEDA).
Hart Brown solicitors will be hosting the Sixth Annual Hart Brown Economic Forum on Wednesday 23 June 2010. It will be held at the same location with David Frost, CEO of the British Chambers of Commerce, as the keynote speaker.
To register your interest for the Sixth Annual Economic Forum in 2010, please email Hart Brown at donna.stevens@hartbrown.co.uk or call 01483 887728.
For further information about Hart Brown solicitors call 01483 887766 or visit www.hartbrown.co.uk