Credit Crunch Recession

Will you survive the coming storm? THE CREDIT CRUNCH EXPLAINED What is a credit crunch? In simple terms, a crisis caused by banks being too nervous to lend money to us or each other. Where they will lend, they charge higher rates of interest to cover their risk.
In the real world, that means more expensive mortgages, dearer credit cards, pain for pension savers and other investors as stock markets fluctuate wildly, and in the worst cases repossession and bankruptcy. What sparked the current crisis? Years of lax lending inflated a huge debt bubble as people borrowed cheap money and ploughed it into property. How did it turn into a global crunch? The way the mortgage debt was sold on to investors gave the crisis global significance. The US banking sector package sub-prime home loans into mortgage-backed securities known as CDOs (collateralised debt obligations). These were sold on to hedge funds and investment banks who decided they were a great way to generate high returns (and big bonuses for the oh-so-clever bankers that bought them). When borrowers started to default on their loans, the value of these investments plummeted resulting in huge losses for banks globally. How did this affect the UK? Many UK banks had invested large sums in sub-prime backed investments and have had write off billions of pounds in losses. But it got worse. As fear spread it became impossible to sell these investments leaving a black hole in many banks and building societies' finances. The result: a credit crunch as lending dried up. What has this meant for you and me? Good value mortgages have become more difficult to find as borrowing rates have soared. Lenders have become more choosy about who they lend money to by, for example, demanding bigger deposits. Stock markets have dropped dramatically as strife in the mortgage market has caused confidence to plunge. That's been bad news for millions saving into pensions and ISA’s. Falling UK House prices There's no shortage of supply of new houses - there never was. And there is very little demand for property. Some believe house prices could continue to fall until after 2015. Unemployment The unemployment numbers are beginning to tick up and as we move deeper into recession, they are going to soar. And as the newly unemployed move into default on their mortgages, so their houses will move on to the market.
Recession Technically a recession is two full quarters of negative growth. The effects of negative growth are that people spend less, so businesses are seeing a drop in demand for their products and services. Many economists expect this recession to be long and deep. Lasting at best 2 years, others think it could be 10 years before house prices start to rise again, and the economy begins to recover.
What can I do to make sure my business is one of those that survives? Taxsesnse can help you protect your family and business from the worst effects of what some are calling a perfect economic storm. Essential survival tips for recession novices With many business owners not having worked through a recession before, Taxsense offers advice on how to keep your business working. TaxSense Accountants Recession-buster We will help you develop an effective plan for strategic cost cutting, reducing unnecessary waste, as well as effective ‘shoe string’ budget plans for marketing and getting new business.
The next 18 months will be make or break for many businesses Remember as we write this (Autumn 2008), we are just at the beginning of a recession, the horrific effects are still to come. Complacency will be punished most severely over the coming 18 months.
In order to survive you must have an action plan that is put into action today! If you plan and implement effective strategic efficiencies in your business, along with campaigns to hold on to existing customers, whilst working hard to attract new customers, then your chances of surviving this steep downturn will be increased. Last man-standing Economists believe this recession will be both broad and deep. That means it will be very bad for most kinds of business. Less money will be spent in your particular business sector. However, those that quickly implement effective survival plans stand a better chance of surviving. Over time competitor businesses will fail. This will reduce supplier competition in your sector and be reflected in a higher demand for your goods. Although, overall there will be fewer customers, when supply outstrips demand, even in a recession an opportunity for both business growth and profit exists. To take advantage of this situation you must be ready to act now –start today! HOW TAXSENSE CAN HELP Whilst some generalisation can be made about running a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations. Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which befall new businesses. We would welcome the opportunity to assist you in formulating a strategy suitable for your own requirements. We can also provide key services such as annual accounts, bookkeeping, management accounts, VAT return and payroll preparation. The FREE business advice is subject to terms and conditions. For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm. Top Tips How are you handling the downturn? Business owners are cutting costs, reducing headcount and working harder in a bid to ensure their business survives the downturn, but there are also reasons for optimism. Cashflow crisis As well as the economic slowdown, small firms have to contend with late payment by customers. But it doesn’t have to cost you your business. Essential survival tips for recession novices With many business owners not having worked through a recession before, Taxsense offers advice on how to keep your business working. How to manage a downturn Small businesses have to operate at maximum efficiency even during the good times. So it’s more important now than ever to ensure you’re set up to weather the storm. How to reduce business costs Making small alterations to the way in which you do business can give you the best chance of surviving the slowdown. How to market on a shoestring An economic downturn calls for imaginative thinking about how to market your business without spending a fortune. How to boost sales in a downturn With challenging economic conditions it’s suddenly become much harder to win new business. But going back to basics can help boost performance while competitors struggle. Keeping hold of customers Getting the basics of customer service right will allow small businesses to retain existing customers and attract new ones. How you can be a better boss The most successful bosses use a combination of leadership approaches, with softer team-based techniques likely to lead to better performance. What your staff want from you, how flexible working can help Offering some form of flexible working, and attracting working mothers can increase staff retention rates. Do you plan for staff training? Most businesses see training as something to placate staff rather than a means of deriving real business benefits. Recession-buster An effective accounting package should be a valued part of any small business. Back to basics why did you start your business? You must ensure you have a clear vision of what you want to achieve and the mental strength to accompany it.