Reduced Lending and Good Cheer for the Redundant

Posted on Dec 13, 2021. by NTI

Sometimes a headline isn't worth the space it is occupying on your phone screen. Take one this morning that shouts 'Lending To Companies Falling'. If it's a toss-up between reading an article linked to that or one about Boris hosting a quiz night at No 10, our money's on the former. But Tracee looked a little deeper into the numbers (which didn't take as much effort as GCHQ's annual code-breaking teaser; attempted by 6,000 last year, with only three "getting close") and they do not bear close inspection.

It appears that the long hill climb to balance sheet solvency has started, as lending to companies is forecast to have fallen in 2021 in a sign that some businesses are making progress in paying down the debt piles they are sitting on since the start of the pan ... blah, blah, blah. It is that rate of 'fall' which had Tracee reaching for her calculator. Net bank lending to businesses is expected to have gone down by 0.3 per cent to about £478 billion after the stronger than expected economic rebound. Putting that into a degree of perspective; Billy has £1,000 on his Barclaycard, following a weekend of madness with three wonk techie mates two weeks ago. Guiness followed by kebabs followed by chasers and followers. At the rate of repayment reported he will have reduced that debt by £30. If that repayment rate continues it will take him 30.3 years to pay back the balance, assuming Barclaycard have a 0% APR, whereas we know it is 919%. You see, we just don't see that as a headline.

Mind you, in 2020 there was an 8 per cent jump, or a net increase of £35.5 billion in corporate debt, as companies borrowed to stay alive and shift their weight from one set of finger tips to another on that cliff edge. This year’s fall in net lending is expected to be reversed in 2022, however, when the overall stock of loans to companies is forecast to rise by 2.4 per cent. We in the NTI newsroom think that the EY Item Club may be only children, as they are classic attention seekers. There isn't even a story here. Just a touch of Munchausen's.

A bigger and more concerning number this morning (Monday 13 December) is that telling us that one in three owner-managed businesses are planning to make redundancies after the end of the furlough scheme, research suggests. A survey of 442 firms by Moore UK, the accountancy network, found that those businesses planning to make redundancies are considering cutting 45 per cent of their workforces over the next six months. Apparently, companies are waiting a few months to see who and what they need and there is no better time for an employee to receive news they have been canned than a dark afternoon at the beginning of January, having massively overspent on Christmas.

This is why the glad tidings despatched by the Insolvency Service this morning are all the more welcome. They say: "We would like to pay as many customers as possible their redundancy and other payments before the banks close for Christmas. We are asking all Insolvency Practitioners, including their staff and agents, to upload their RP14 and/or RP14(a) documents by 11:59pm, Thursday 16 December."

Such a nice gesture.

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