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Thursday 8.30-9.00pm,
Sunday 9.30-10.00pm (rpt) |
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Programme detailsÌý |
18 DecemberÌý2008 |
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About this programme by Peter Day
In Business is normally a hopelessly optimistic programme. But that seems wrong at the moment. These are tough times for many people, and next year will be worse. Despite our familiarity with the boom and bust cycle of life there’s probably still something nasty to come.
We have now moved quite a long way from the American housing market where the bubble burst first in the middle of 2007. The housing crisis rapidly turned into a credit freeze, as the banks realised they had no idea whose assets were worth what.
Top company leaders (particularly in Britain) denied there was anything wrong in the so-called real business world … it was just a financial system problem.
But then—in September 2008, more than a year after the rottenness of the structure first became apparent—the huge investment bank Lehman Brothers was let go by the American authorities … and with astonishing speed, the credit crunch bore down on the global economy.
Normally in an economic cycle, there’s an only moderate rise in businesses in trouble in the first months of the recession. Companies hang on, hoping for the best, especially in retailing when Christmas is coming and that is normally when the store chain geese get fat.
This time seems to be different: a steep rise in insolvencies almost at the start of the burst, including a scattering of big names.
Since much credit is still pretty frozen even with all the artificial support being pumped into the banking system, there are likely to be some spectacular big name busts as underlying asset values continue to shrink.
And many small and medium-sized businesses will be caught up in this, as big customers disappear without warning.
This week’s In Business considers some aspects of going bust with some experts in the field, people whose restructuring business is booming as everyone else’s shrinks.
During one of the previous busts we’ve covered in the programme, I still remember the advice of a canny former Midland bank executive called Brian Quinn. He wrote a book called resoundingly The Genghis Khan Guide to Business, and as a consultant he would hold the hands of small companies suddenly facing big problems not of their own making.
Brian Quinn insisted that cash was king ... and that quite a lot of businesses made lots of goods and services that were not actually earning them money ... partly out of habit, partly because they had not been costed properly. So his key survival advice was: cut the orders that don’t pay.
He also pointed out to me that the really dangerous time for a company is when it has survived recession by hunkering down, ticking over, laying people off and squirreling away its cash.
Eventually (as they always do), along come those elusive green shoots of spring, and the surviving business relaxes a little. New orders come in, and the temptation is to borrow more working capital to fund the new business.
But this is the most dangerous stage of all: when companies lose all the caution that has got them through the deep dark days of recession.
So beware : there’s worse to come, and when the worse is over, it may not be, quite.
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Contributors:
Blair Nimmo,
Head of Restructuring, KPMG Scotland
Mike Jervis,
Lehman Brothers Administrator, PricewaterhouseCoopers
James Stonebridge,
Insolvency and Restructuring specialist,
Gill Hankey,
Director, Bankruptcy Advisory Service
Paul Hind,
Businessman
Fiona Hamilton,
Managing Director, Beanscene |
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About In Business
We try to make ear-grabbing programmes about the whole world of work, public and private, from vast corporations to modest volunteers.
In Business is all about change. New ways of work and new technologies are challenging most of the assumptions by which organisations have been run for the last 100 years. We try to report on ideas coming over the horizon, just before they start being talked about. We hope it is an exhilarating ride.
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