Mixed Messages for 2011

I haven't blogged for a while, simply because I've been pretty busy the last few months on the run up to Christmas 2010. But, New Year, new determination to inflict my views on the world again!

As an Insolvency Practitioner, I'm not always regarded as the life and soul of the party. However, once a business starts running into financial difficulties, an IP can be a godsend. Just as a reminder of what I'm all about, have a look at my website at www.ipd-uk.com.

2011 will be a difficult year for anyone facing financial difficulties. An article in Accountancy Age on 23 December 2010 sums it up nicely. Bank lending to smaller businesses is likely to increase, but not to any great extent and certainly not to levels previously seen prior to the credit crunch in 2008. UK GDP is expected to grow but only in the region of 1-2% over the year. Estimates of 3-4% I feel are wildly optimistic. That the economy is showing (and is expected to continue to show) at least some growth is very encouraging, but with the increase in fuel duties, increase in VAT to 20% and implementation of the Government spending cuts, 2011 is going to be a very tough year on Joe Public's pockets.

The obvious knock-on of this is that retail is likely to suffer. I'm not going to speculate on which it might be, but I have a gut feeling that 2011 will see at least one, maybe two, more big high street retail names dropping off the perch. I hope it won't happen, but...

Regarding us mere mortals, and by this I mean SME's, insolvencies of smaller businesses are VERY likely to increase. This will be down to several factors:

• HMRC is getting tougher on Time To Pay ("TTP") agreements and are agreeing far less of them. The TTP system has, in my view, been abused by those who either actually could pay their tax normally, or hadn't got a hope of ever paying it and a TTP was an easy touch (in the period running up to the election) to use to simply delay the inevitable. This has resulted in those who could have genuinely benefitted from a TTP being denied the chance;
  
• VAT increase - need I say more;
  
• As the economy improves, it may become more attractive to close a struggling insolvent business. Over the last 3-4 years, much of the bank lending to small businesses has been done on the usual security bases, but largely also included a personal guarantee from a director, backed up by a charge on his house. Twelve months ago, closing a company with a £50,000 overdraft would have meant the director losing his house to the bank to pay it. Now, with an improving economy, that overdraft may have reduced down to £20,000 which is more affordable to settle without losing the house.

Judging by the number of enquiries I received pre-Christmas 2010 for insolvency advice, this looks increasingly to be the case...

Whilst I am always happy with an increase in my work, my silver lining is always someone else's cloud. Those clouds can either be light fluffy ones that are easily dealt with if they're tackled early or black thunderheads if matters are left to drift too long. IP's don't bite - use their skills!!