What Recession?

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Doom and  gloom are the watchwords on every piece of news we receive nowadays  whether it’s from TV, radio or the newspapers. The reporters are wallowing in it (after all it sells newspapers).

I go to a number of networking events locally and meet many SMEs and, rather than gloom, I meet a lot of determined people who are facing the slow down positively. Yes, companies are slower in paying bills (this is where Cashflow Protector comes into its own). Yes, the banks, that we, Joe Public, bailed out, have reduced their lending and tightened the lending criteria ( it’s a pity they weren’t so discerning in the past) but that will ease soon.

The truth is these SMEs are still busy and even Estate Agents are telling me that the start of the year has been very strong.

We are a nation of entrepreneurs and adversity has always brought out the best in us. Many people facing redundancy will use this time to start the new business they’ve always dreamed of. Companies will use this time to reflect on their business plan, to tighten costs, to look at different areas of business - maybe mergers, to keep going and ultimately they will come out leaner and stronger.

One of the economic myths I wish to expose is that, in this time of crisis when the pound is on the floor, it will help our exporters to sell more abroad and that, in turn, will help our balance of payments and will help grow our manufacturing industry. Sadly that old truism is not viable in the current conditions as the rest of the world is in recession too and they are less likely to be able to buy our goods just because they are cheaper. So although there will be a marginal impact, I’m afraid Mr Brown won’t be able to count on that to save us.

No! Instead it is necessary to keep costs tight and the one hidden cost that few SMEs seem aware of is the foreign exchange cost that many leave to their friendly High Street bank to handle without question. I think few people, after seeing the profligacy of the banks in recent months, would now trust their bank in the same way as before. For both importers and exporters alike margins are tight so, in my opinion, query the rates of exchange you get from your bank, query their payment costs and if they are unsatisfactory look to do better elsewhere. Change banks for a better deal or try one of the independent foreign exchange companies. It is quite  possible to improve the exchange rate margin by up to 3% and that is surely better on your bottom line than a bank’s.

You will realise from the tenor of this article that I have a positive attitude to this downturn. I believe it will provide many opportunities for companies to grow or consolidate in their fields. Of course a number of household name companies have gone to the wall but most of these were struggling in the boom times, none more so than Woolworths  or MFI. The likes of Tesco still seem to be growing and even the banks are showing signs of profit.
So it is not all doom and gloom but opportunity.

Jeff Slade
Is a director of JBE (Associates) Ltd, a company specialising in Foreign Exchange.
www.jbeassociates.co.uk