This was the heading of a piece in the Times today, a sunny but blustery 8th April 2009 (Heavy showers last night but dry all day :-)

And so to the numbers, not sunny, but apocalyptic! The figures for February are the worst on record, simple as that. The worst ever, that it is historic, makes it no less frightening.

Manufacturing output dropped at an annualised rate of nearly 14 percent! 14! Industrial production dropped by 12.5 percent. That is nuts, absolutely terrifying. And the rate of negative growth is even worse in export driven countries like Japan and Germany, as demand has collapsed in the USA in particular.

At the sharp end, in the SME insolvency market in England, it felt like the world fell off a cliff after Christmas. January and February were brutal months for large and small alike.

But the world somehow keeps turning, and now that spring is here maybe things will pick up, hey it’s Easter, it’s a double bank holiday weekend, the hell with it, let’s go shopping!

In the meantime, the “media” is now playing “spot the recovery” – recession fatigue has set in with the wordy classes and the longing for a bounce is palpable.

But the good jobs are not there like they were, and there are more jobs to be cut as we bump along the bottom for a while. So I expect a bit of a blip in the months to come, maybe, only for it all to fizzle out by the end of the summer.

For those of us in business, the Tax man comes calling at the end of July. There is no escape, he wants his share at the worst possible time, and tea and sympathy is not the order of the day, I can assure you, more like petitions to the High Court for an order for Bankruptcy or Winding-up.

I await the insolvency first quarter statistics for 2009 from the department formerly known as the DTi (dfkatdti) (now rebranded cretinously as BERR) with considerable interest(due out first Friday in May). How many companies were forced into voulntary liquidation as a result of the credit crunch? Has the use of administration surged or not, with the introduction of SIP 16 increasing the regulation on pre-pack administrations? Has there been a surge in bankruptcy orders and IVA proposals? I rather expect so.

As for the industrial output figures, it seems impossible that the numbers could get worse. On that basis, it feels like the bottom. For the moment.

The only thing that is certain is that no-one knows anything, and no-one is in charge.

The Blind Leading The Blind and the Domino Effect

The US, UK, European and Swiss Central Banks issued $280,000,000,000 into the banking sector, by issuing government bonds, with the security being “damaged assets, as in mortgage backed securities” in an unprecedented, concerted attempt to shore up the global financial system. This sort of debt swap has never been done before. In my layman’s eyes it would appear that they are effectively saying to the banks we will take all the hits, you have a Northern Rock style guarantee that we will support you. Talk about moral hazard!

We are living through a financial crisis unprecedented in it’s scale and scope, and the fear is that it is going to get a lot worse. There is real panic in the air. The mistakes of the past have been repeated. The 1929 crash was amplified by highly leveraged investments going bad, we are now going to see many hedge funds, private equity firms and banks fail as their highly leveraged bets go wrong. I prefer the term bet to investment, it is more honest.

You can see why governments are so obsessed with economic growth, as this allows the financial system to function. When growth disappears, the money system starts to implode. Failure begets failure, what we in the insolvency profession know as the domino effect – a large failure like Rover will cause multiple failures in its wake, and so on, the domino effect ripples on for years.

So who will be the casualties, who will be the largest institution allowed to fail? Anyone for Bear Sterns or Citigroup?

In the meantime, the badger has his first budget later today, and I can’t help thinking what an irrelevance he is. He is totally at the mercy of the machine, he had no choice to nationalise Northern Rock, and he must go along with whatever Mervyn King demands.

Figures from the council of mortgage lenders showed that 50,300 mortgages were taken out in January 2008, 34 percent lower than last year. Then the Department of Communities and Local Government (DCLC – who comes up with these stupid department names, they are a nightmare to remember) announces that house prices are up 8% from last February!

Mr King wants a period of austerity, he wants a house price re-adjustment, so do people without a house, and the house builders are bracing themselves for a big downturn. That downturn is now. Hang on to your hats, the housing sector has been driving the UK economy for 13 years, and all the easy credit and household debt has been accumulated on the back of the feel good factor as house prices tripled. The only question is how far, how fast the fall will be, soft landing or slump? The badger would do well to have a few fiscal rabbits up his sleeve to stimulate the housing sector – if only he read my blog? If only anyone would? Hey, if you don’t write it, it’s certain no-one will.

In the meantime, the speculators have moved on from shorting sub-prime securities to of all things oil, wheat and other commodities, now seen as safe havens. Texan crude hit $110 a barrel another record high. The MD of Greggs is kicking off in the press about the price of wheat, blaming this on speculators, not poor harvests, increased demand or biofuels. Wheat hit a record $13.495 a bushel recently. And it’s being driven by financiers making bets to try and recover their losses to the sub-prime meltdown – my head hurts just thinking about it. Why can’t they just bet on the horses like everybody else? Of course event hat is not certain, given todays cancellation at Cheltenham due to the high winds.

Severe storms from the North Atlantic late in winter/early spring again, more evidence of Climate Change, but that discussion is for another day, although I do like the link. Started a new book “The Carbon Wars” by Jeremy Leggett about the history of Climate Change politics, should be good. Still working my way through “The Shock Doctrine” by Naomi Wolf, one of the most enlightening and truly depressing books I have had the privilege to read.

Insolvency is a business like no other. My approach is simple. Help the person who comes to me for assistance.

It is simply a case of first understanding the situation, think about it carefully, than form the best plan for the person asking for help. If there is a job in it for Findlay James brilliant, if not, no problem, it’s good to help, we are not desperate for business, and we know from experience that we may well be paid back with a referral from that person in the future. At the end of the day, we all like to repay a favour.

So don’t expect a hard sell from Findlay James, in fact the opposite applies. We don’t tend to chase up prospective clients after meetings, too be honest we rarely have to. Our clients want the truth, the facts, the real options, and that is what they get.

At the end of the day, when you decide to put your faith in a professional, what you really want is no surprises, no moving the goal posts after the forms have been signed. That is our aim, to make sure you fully understand your choices and what you are getting yourself into.

All Insolvency Practitioners are looking to get in front of potential clients and sign them up for a liquidation, administration or voluntary arrangement. We are no different in that respect. Every Insolvency Practitioner has the same powers and duties and must deal with clients to the same ethical standards. There are big firms small firms, and yes, medium sized firms. As a rule of thumb, small firms deal with smaller clients, large firms deal with larger ones.

We are trying to be different in that we are a small firm, but operating nationally via a network of associate accountancy practices who work closely with Findlay James to deliver insolvency services in their local area. This business model has been operating successfully now for several years. It allows us to be flexible, to enjoy economies of scale at our Head Office in Cheltenham, with a network of experienced qualified accountants supporting our clients locally when needed. By operating on a significantly lower overhead basis than our larger competitors we can make more from less, we are not under pressure due to large fixed overheads, and hence under pressure to sell you a solution that you don’t need. I hope that makes sense to you if you are looking for assistance and uncertain where to turn. Check out our web infomercials, then if you think it would be helpful give us a call.

Liquidation of a company is never an easy decision to take. Deciding when the company is insolvent is often not clear cut. Often there are reasonable grounds for the directors of the insolvent company to continue to trade in the expectation that the company can trade out of the cash flow problems, which have often been caused by an unexpected event such as a bad debt, or a sudden loss of business due to external events, such as for instance the credit crunch.

Sometimes the directors’ mind is made up for them by an unsecured creditor sending in the bailiffs to collect on a county court judgement (ccj) or a secured creditor withdrawing support once they start to get nervous. Banks have pretty good monitoring systems these days, so when a company breaches it’s banking covenants, or starts receiving writs or a ccj, the bank will know about it thanks to the electronic adverse credit monitoring systems we can all enjoy in the digital economy. Where a bank is a secured creditor, that is, it has a debenture granting a fixed and floating charge over the company’s assets, the bank has the ultimate sanction of appointing an Administrator for the purpose of selling the company’s assets in order to repay the secured lending.

Indeed, if the company owes money to an aggressive unsecured creditor who foregoes the debt collection route of applying at county court for a county court judgement, but instead applies for a winding-up petition, then the company is faced with being placed into compulsory liquidation, at which point the Official receiver attached to the county court local to the company’s trading address will be appointed Liquidator. Increasingly many creditors are using the winding up petition as a debt collection tool.

Compulsory Liquidation usually spells the end for the company and the business. However, Voluntary Liquidation can be a route to save the business, and/or a way for the directors/shareholders to exit the insolvent company and pass the winding-up over to an appointed Liquidator. At the point of Liquidation control of the insolvent company passes from the directors to the Liquidator who takes control of the company for the purpose of the winding up.

The directors face an investigation into their conduct by the Liquidator who will report to the BERR unit responsible for director’s misconduct if he finds any evidence of misconduct on the part of the directors. This is the irony of the situation where directors of an insolvent company who seek advice from an insolvency practitioner will often be advised that it is in their best interests personally to proceed to instruct the IP to assist with placing the company into Liquidation. Trading on whilst the company is technically insolvent places the directors at risk of being disqualified for a period of years. The directors often think that it is their duty to creditors to fight on and try and recover the situation and make sure that all unsecured creditors get paid. However, if they fail in the attempt and the liabilities end up greater than they were when previously advised to consider placing the company into Voluntary Liquidation or Administration.

As such, it is worth considering, at the point the company is technically insolvent, being unable to pay its debts as they fall due, and/or the value of the assets are less than its liabilities, that it might be in all stakeholders best interests to continue the business in a new company, without the risk of the directors being pursued by the Liquidator for insolvent trading or being pursued by the BERR disqualification unit under the Company Directors Disqualification Act 1986 for other issues such as trading with crown monies, or failing to keep proper books and records. Such a business transfer can be effected by either voluntary liquidation or by administration.

Administration is now the weapon of choice of the banks, this procedure now having largely replaced Receivership for all but older debentures on secured debt. Directors also can appoint an Administrator if this route is possible and appropriate and a more effective alternative in the situation than creditors voluntary liquidation (CVL). More on that subject on another day.

So if your company has a cash flow problem, and is short of working capital, and you need insolvency advice, the only thing that is certain is that doing nothing is not an option. Look at funding options, but also look at restructuring options. The law is there to help small businesses survive, the sooner directors take action, the better chance they have of controlling the situation for a better outcome.