Credit crunch

Whilst politicians are looking after the ‘big boys’, I thought I would post this message that was sent to me' earlier this week.

It shows what is happening in the real world of small business away from the soundbites of a so-called 'economic summit. Although the author said that it could be used freely, I have changed the name of the company.

“I trust that you are well and apologise for taking up your time. I am not looking for any help but, as I am not a member of any other organisation (Chamber of Trade etc.), I just thought that I should tell somebody about the effect that the 'credit crunch' is having on my business - ABC Independent Financial Advisers. Sitting alongside the IFA business I also have ABC Commercial Finance and ABC Vehicle Solutions.

In 2007 we were probably South Wales' largest IFA firm (both by turnover and numbers of financial advisers) - with locations in Cardiff, Swansea and Tenby. We also have offices in Wrexham, Hereford, Bristol and Southampton. Our turnover was £4.2 million and our net profit £491,000. As with most businesses financial advice is seasonal, with quiet periods around Christmas and the summer holidays. However, this economic downturn has virtually stopped our sector from working. If we are struggling, so are all of our competitors. In September 2007 our turnover was £763,000 (gross profit £171,000), whereas, this September it was £172,000 (gross profit £38,000).

I have already made eleven redundancies (half of my management team went last week) and cut my costs to the bone but, with salaries, rents and leases, it still costs £75,000 per month to keep the business running.

The banks have either withdrawn from the market or tightened their lending criteria so much than most individuals/businesses cannot obtain facilities (commercial finance, asset finance, residential mortgages or buy-to-let mortgages). The turmoil in the stock markets has affected investor confidence, so that potential investors are keeping their assets in cash (Northern Rock, Bradford & Bingley and the Irish banks). Inflationary pressures (increases in the price of road fuel, gas electricity, food, etc.) and the fear of redundancies are making individuals reluctant to commit to protection and retirement products.

The businesses are owned by my wife and myself. The media is full of national governments assisting the large banks (who, arguably, caused the problems) but nobody appears to care what it is doing to the small businessman involved in the financial sector. I am sure that we will get through this (one way or the other) but, if we do not, there will be another 60+ individuals looking for employment”.

Despite the grand statements from the economic summit today (seemingly swallowed hook line and sinker by BBC journos), I fail to see how any of the measures proposed will help this company or thousands of others across Wales

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