Anthony Carty: Cheer for the New Year
Jan 8 2010 By Anthony Carty
Some good news for the New Year!
The holiday season is a difficult one for news. We’re all much more concerned about the festivities and grabbing some well-needed rest before the start of the New Year comes like an icy shower and wakes us up! News, especially financial news, is the last thing we want to depress ourselves with.
However, I noticed a piece in the New York Times that read: “Lenders expect to make credit more easily available to households and businesses in the first quarter of 2010, a survey by the Bank of England showed. The quarterly credit conditions survey also showed that lenders expect to narrow spreads on corporate and mortgage lending in the coming months. Credit availability was expected to improve further in the first quarter of 2010.”
I don’t know about you, but that sounded like a cheery bit of news.
The last year has been torrid for SMEs in the UK. There is hardly a business owner that has not had to grapple with some fall-out from the global financial meltdown. Much of the news has been dominated by the to-ings and fro-ings in the auto industry with our own West Midlands car manufacturers central to the drama.
They are not alone. Few sectors have been immune. As businesses up and down the country struggled with reduced order books, slow-paying customers and unyielding customer relationship managers at banks, the news became bleaker. Green shoots in May were withered stems by October.
But maybe things have started to turn. The government is, for better or for worse, committed to keeping the economy from sliding into a Japanese-style deflationary slump and is pumping money into the economy. In adopting this policy it is helping support pretty much all asset classes, not least the stock market, and at the same time keeping interest rates much lower than they should be.
With no end to this support in sight it encourages all players in the market to take a little more risk, and this includes the lenders who provide the vital liquidity to SMEs. This is a risky strategy no doubt. It is a classic “pump priming” strategy that may or may not work in the long term. However, the long term is for others to worry about right now. For the majority of SME sector business owners the fact that lenders feel somewhat more confident in the economic environment to start lending is nothing but good news.
* Anthony Carty is a director at Clifton Asset Management