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Almost half of UK firms could run out of money within six months


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Surprised its as high as 6 months, especially after 3 months of winddown then lockdown. Presumably this is only because govt is paying for everything? 

Last month there was a similar survey which said 3 months for smes  https://amp.theguardian.com/world/2020/apr/02/coronavirus-six-in-10-british-firms-have-no-more-than-three-months-of-cash-left

On the business relief thread there was a post that stated some classes of business(more likely to be resteraunts/bars etc) typically have 27 days cash in hand. 

 

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2 hours ago, richmondtw said:

The Guardian? 

 

Restaurants and bars yes.  How many of the employees there were ever going to buy a house? 

Same as in most industries.... hardly any compared to before.

In the economy having excess cash is tax inefficient as to create that cash and retain it would require not running a near loss which you can do with lovely predictable cheap debt.

The better, more profitable, more predictable your company is the more attractive it is for the bank to get that levered up.

I remember Marconi back in the pre IT bubble days 1 billion in cash..... out with the old in with the new lever up and acquire..... then screwed.

These days it would have been take profits, lever up, buy own stock, inflate price, take massive bonus, now same business just with loads of debt falling shares and screwed.

I cannot think of any businesses these days aside from privately owned ones (where the owner has a mistrust of debt) where in a meeting of investors / accountants more cheapo debt would not be sought.  

A local building company around here just  went under 1.7 million debts and only 10,000 of assets after wages.

How amazing they can even get to that level.  Thats an outlier but just wait for the period after lockdown lifts.

https://www.edp24.co.uk/business/builders-bespoke-norfolk-1-7m-liquidation-1-6650219 

Edited by Fromage Frais
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16 hours ago, Saving For a Space Ship said:
Almost half of UK firms could run out of money within six months

I can sort of believe this - ignoring my mortgage I'm probably only spending half as much as usual, so if that's what everyone's doing then I guess half of all UK firms will go bust.

However, as soon as the virus recedes there will be demand for most of those things again.  So Butlins (say) might go bust as no-one can go on holiday - but couldn't someone just buy all their holiday camps for £1 at the firesale and open them again next year?

Unlike banks in 2007/8 which are structurally a problem to let go bust and re-form (because the entire economy grinds to a halt without banking) the sorts of firms that will go bust can be just let go bust, and replacements will spring up will they not?

I mean I'm oversimplifying it - because these things take time in practice - but half of UK firms going bust doesn't actually mean half of UK activity stops forever?

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23 hours ago, Fromage Frais said:

Same as in most industries.... hardly any compared to before.

In the economy having excess cash is tax inefficient as to create that cash and retain it would require not running a near loss which you can do with lovely predictable cheap debt.

The better, more profitable, more predictable your company is the more attractive it is for the bank to get that levered up.

I remember Marconi back in the pre IT bubble days 1 billion in cash..... out with the old in with the new lever up and acquire..... then screwed.

These days it would have been take profits, lever up, buy own stock, inflate price, take massive bonus, now same business just with loads of debt falling shares and screwed.

I cannot think of any businesses these days aside from privately owned ones (where the owner has a mistrust of debt) where in a meeting of investors / accountants more cheapo debt would not be sought.  

A local building company around here just  went under 1.7 million debts and only 10,000 of assets after wages.

How amazing they can even get to that level.  Thats an outlier but just wait for the period after lockdown lifts.

https://www.edp24.co.uk/business/builders-bespoke-norfolk-1-7m-liquidation-1-6650219 

On the subject, construction industry want £11 bn bailout 

£11bn investment in construction can kick start UK economy, says experts

https://www.pbctoday.co.uk/news/planning-construction-news/covid-19-economy-recovery/76193/

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1 minute ago, Saving For a Space Ship said:

On the subject, construction industry want £11 bn bailout 

£11bn investment in construction can kick start UK economy, says experts

https://www.pbctoday.co.uk/news/planning-construction-news/covid-19-economy-recovery/76193/

if you are going to piss money up the wall may as well do it with something tangible at the end of it.

Better than underpinning paper profits at least
 

 

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