Categories
Banks, Lenders & Investors General Rescue, Restructuring & Recovery Turnaround

Economic recovery outside London?

 

From my office in Mayfair it would seem that economic recovery is gathering pace, but when I visit clients outside the M25 it is a very different picture.

A year-end editorial in the Observer highlighted the imbalance between London and the rest of the country, calling for efforts to redress the balance of wealth distribution across the regions.

In my last blog about the winners and losers over Christmas I cited examples to show the patchy nature of recovery.

However some research highlights the issue on imbalance:

The Trussell Trust, organiser of the food bank network, reports a 400% increase in demand for emergency food parcels in 2011-12 (most recent figures). More alarming is that the recipients are “ordinary families, who in the past would never have had to fall back on such support”.

These include recipients among the “squeezed middle” who according to the Resolution Foundation make up a third of the country’s working age households – people on an income of between £20,000 and £35,000, 60% of them owner-occupiers. These households spend 48% of their household income on essentials (food, clothing, transport, energy supplies) and 25% of their income on mortgage payments. 

This is no surprise given that energy prices have risen by 24% since August 2009, not including the most recently announced increases averaging around 7%, and that house prices have risen by 7.5% in the last year, according to the Halifax, while wage increases have at best only risen by around 2%, if at all.

The Foundation predicts that: “Based on current projections, the typical low to middle income household is expected to be no better off by 2017-18 than it was in 1997-98”.

Not all of those in the squeezed middle can get on the train in order to exploit the opportunities available in London – especially not when the cost of a season ticket is around £3,236 from Southend, £6,760 from Grantham, £5,440 from Rugby and £7,480 from Norwich.

All of this underlines the lunacy of relying for recovery on a growth in consumer spending and property sales – and why many SMEs outside London are somewhat sceptical that there is economic recovery at all.

Categories
Cash Flow & Forecasting General Insolvency Rescue, Restructuring & Recovery Turnaround

Will we see more retail failures in the New Year?

 

With a quarter day looming in December many retailers will be hoping for healthy sales in the run-up to Christmas in order to pay their rent.

We are led to believe that an economic recovery is consolidating and that 2014 will continue the upward trajectory, but on the High Street the picture is not so clear.

There is already some evidence that the pre-Christmas rush has been delayed with consumers waiting for last-minute reductions. Figures from the accountant BDO showed that High street sales fell in the first week of December by 4.1% in non-food sales to December 8, while online shopping rose by 25%.

Fashion stores seem to have suffered worst with sales in the first week of December down by 5.9% and H & M already launching a winter sale offering reductions of up to 60%.

Whether High Street shopping picks up in the next few days remains to be seen, but there is a likelihood that with wages lagging behind the cost of living and significant energy cost increases the much vaunted consumer-led recovery may not be as lively as hoped.

Complicating the picture is the growth of the “buy local” movement, which may encourage more shoppers to patronise their small, local independent stores for both food and non-food items, especially unusual gifts.

Looks like it might be an interesting start to the New Year.