Published: Friday, 25th January, 2008 12:30
TV business' mixed fortunes
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Sue Staunton.
It HAS been a year of mixed fortunes for businesses in the Thames Valley. If you were in the right sector you could have experienced significant growth – particularly, for example, if you were offering a key technology platform to the market.
However, for others the year was one of increasing problems – particularly if they were reliant upon consumer-led demand or were affected by the natural disasters that impacted across the region.
For all businesses the much-vaunted credit crunch, coming in the wake of the difficulties at Northern Rock, appears to have led to further uncertainty for individuals and businesses.
So what does the future hold for our region in 2008?
With a high density of population in the area, the fortunes of many businesses – particularly those in the retail sector – are dictated by consumer confidence. There have been predictions of increased levels of personal insolvency going into 2008. This is largely based on the fact that many fixed mortgages are coming to an end and that the most vulnerable borrowers may find it difficult to obtain comparable discounted mortgage deals – particularly those who have loans on high-income multiples.
However, it is worth bearing in mind that in November the Government’s Insolvency Service reported that the number of personal insolvencies fell in the third quarter of the year.
If the forecast of increased personal bankruptcy does prove correct, the knock on for the retail sector could be considerable, with an increase in corporate insolvencies and with several High Street names not necessarily being immune – a number have already issued statements indicating that the post-Christmas sales have not been good.
Reports on the housing market nationally continue to be relatively stable – despite the credit crunch – with a predicted holding of values of 2-3% increase year on year. With the continued population growth in our region this should mean that, providing there are not significant levels of personal insolvency, values will broadly hold up in 2008.
In the wider corporate world we are now seeing the impact of the Chancellor of the Exchequer’s announcement about the changes in the capital gains tax regime with an expected flat rate of 18% on gains – an effective increase of eight per cent for company owners who have held their shares for over two years.
This has meant James Cowper seeing an increase in the instructions we have received from owners wishing to sell their companies prior to the tax changes in April.
It’s fair to say that the majority of the instructions are coming from those who would have sold in the next couple of years anyway but it is probable that this acceleration of sales may change the corporate landscape during 2008 – with a number of new owners and an increase in corporate borrowings to make acquisitions.
On borrowings, it appears that while there are still funds available, lenders are beginning to be a little more circumspect about where they are lending. We should expect greater rigour in the due diligence process for 2008 before funders agree to advance funds and, post-lend, there will be more detailed monitoring of results and meeting of covenants by borrowers.
From a business perspective, the fortunes of the Thames Valley are tied to the broader international economy, with many companies based here either being UK branches or subsidiaries of overseas parents or doing business in other countries by way of export.
For those involved in the US there have been significant impacts due to the strength of the pound against the dollar.
The movement on the exchange rate during 2007 has led a number of companies to take hits on their profits. The reduction in the UK base rate may improve exchange rates but it is early days yet and may need a further reduction of half a per cent before the impact is felt.
The region has always had a strong level of inward investment and there is little sign at the moment this is abating with investment in the UK from the Middle East and the former Eastern bloc beginning to feature.
Their continuance will be dependent upon the continued perception of the UK as having a stable economy and attractive tax regime.
There are, no doubt, a number of uncertainties for businesses going into 2008, but those with strong management who monitor the pulse of the broader economic landscape in which they operate should be able to take advantage of opportunities as they arise.
Their ability to do so, however, will depend upon how independent they are from third-party influences, and in particular the domestic consumer.
For further information contact Sue Staunton on 01865 200500 or sstaunton@jamescowper.co.uk
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