Central Banks Struggle for Exit as Recovery Weakens

According to many press sources the World’s major central banks are having a very tough time exiting ‘crisis mode’, prolonging aid or reviving stimulus tools as the global recovery loses its momentum.

The Bank of England has recently signalled its policy makers are moving closer to adding more stimulus to the economy, the European Central Bank has extended its liquidity support for Eurozone banks into 2011 and the U.S. Federal Reserve said it’s committed and prepared to ease monetary policy further if needed and as a result has highlighted asset purchases as an option.

The recovery from the worst global downturn of our modern time and on a par with the Great Depression and the fallout from World War II is proving weaker than projected and the turnabout on policy is in direct contrast to the global community before Greece’s debt crisis and civil unrest came to a head in May this year.

Stuart Thomson, international fixed income fund manager at Glasgow-based Ignis Asset Management, which manages about £70 billion, commented in the press that “Economies are slowing, so the central banks will have to do an awful lot more to help them…. It’s a done deal that more quantitative easing is coming…Just as here in the UK, the Global Central banks are weighing the potential inflationary costs of further stimulus and with fuel and energy costs at an all time high, coffee at the highest price for 13 years, crop failures in Russia and the resultant ban on wheat exports bringing a possible food crisis its hard to see any downward effect on prices and a state of deflation any time soon.

With banks, governments and whole economies experiencing such fragility and uncertainty it certain doesn’t translate well for the SME’s of UK, Eurozone and US economies.

Double Dip?

With so little appetite for growth it is difficult to see what effects the further stimulus will have.

The Bank of England spoke out recently and encouraged UK savers to spend their cash reserves to boost the economy and spend our way out. Yet such spending does little in real terms as UK savers are not putting money into creating jobs, or investing in commercial growth or R&D but buying consumer goods. As most of our retail consumer goods are not domestically made nor sold by any UK SME’s, which in turn account for 99% of the UK work force its safe to say that there will be a negligible effect.

Never mind that given the current economic uncertainty and possible double dip recession, to the average UK citizen this translates as more job losses, uncertainty over paying bills and debt recovery letters. In these circumstances when governments and banks are suffering from confidence can we expect our citizens to throw caution to the wind and spend spend spend?

To the average UK SME (small to medium enterprise) this economic uncertainty and possible double dip recession translates as lost sales, cash flow problems, job losses, redundancies and employment tribunals, client businesses going into administration, increased debtor days and increasing bad debt provisions. These are difficult circumstances to persuade business owner/directors to throw caution to the wind and not prepare for the worse and tighten the belt?

If your firm is worried about increasing debtor days and late payment if invoices or a concern is growing of possible bad debts, CCDR (Corporate Credit Debt Recovery Ltd) is a leading UK Commercial Debt Recovery specialist with international reach and a client base of SME’s and Eurozone multinational organisations.

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