Managing Your Cash Flow

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The green shoots of a double dip

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With bank lending down again, mortgage approvals gently sliding backwards and the stock market acting like a nervous meerkat (poking its head out of the hole only to be spooked by a gust of economic data and plunge back down), history tells us that the volatile autumn months ahead will bring us more unwelcome surprises.

As the government grapples with its spending review, we can expect the rat-tat-tat of gunfire from all sides as the Treasury and the trade unions hunker down for what is bound to be a long and bloody battle.

Is it possible to expect that, in the midst of all this uncertainty, businesses can get on with their work and help us grow our way out of the mire any time soon? If we take a good look behind the headline numbers, we can get a glimpse as to why this is going to be a difficult slog.

The British Bankers’ Association said that lending to private non-financial companies, which form the bedrock of UK industry, fell by £2.4bn in July, a bigger drop than that seen in June and larger than that seen on average in each of the previous six months. When quizzed about this, the banking industry now trumpets that there is a “lack of demand” from small businesses.

I’m afraid I just don’t swallow that one. I mean, the banks lied and cheated their way through the financial crisis, and in the end we had to bail them out from a mess largely of their own making. They are now riding high. Supported by the generous offer of free money from our last, jelly-weak regime, while at the same time being encouraged to invest this free money in gilts yielding them four per cent, they have returned to rude health.

But still they won’t lend. So where are businesses finding the cash they need?

Anecdotal evidence suggests that many are turning to credit cards to help with their cash flow, but here there is a nasty twist. While overall credit was flat on the month, repayments on credit cards of £6.2bn outstripped new spending of £5.9bn. However, the effect of interest charges on unpaid balances led to a rise in overall credit card lending of £300m.

So, for doing nothing, for simply standing still, the debt mountain is gradually increasing, making it harder and harder for our businesses to not only compete, but to survive.

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