Wednesday, January 11, 2012

High house prices needed to support SME’s

Blog home Why a shaky housing market could cripple small businesses

Entrepreneurs often secure loans against their homes, but with house prices forecast to stagnate or fall, lenders may not be keen on helping out.The government is pinning a lot of hope on the economy rebalancing. It wants manufacturing, inventions and exports to take the place of high street spending and government outlays. It wants brave new entrepreneurs creating jobs with brave new businesses. The obvious hurdle to all this is the crisis in the eurozone – currently the UK's most important trading area – which is rattling business confidence and hurting exports, as indicated in Wednesday's widening of the trade deficit.But another significant obstacle to the private sector picking up the slack from a shrinking public sector is a shaky housing market.

Posted by jack c @ 08:52 PM (1172 views)
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5 thoughts on “High house prices needed to support SME’s

  • Complete rubbish and she even has the cheek to use the term ‘as long as anyone can remember’ when she’s barely out of uni by the look of things.

    This country used to huge numbers of medium to large sized businesses at the cutting edge of manufacturing and innovation then along came WW2 and its aftermath with chronic materials shortages that resulted in companies being unable to fulfill orders in a timely manner and loosing out to the US and other foreign manufacturers. By the 1960’s these companies were now financially weakened and the boom and bust of domestic orders from newly nationalised domestic industry led to wholesale asset stripping by the likes of Lord Weinstock.

    Recent history has seen the rampage of predatory overseas companies (the worst being state owned French ones) completing the process and it beggars belief that our political lords and masters now think that the future based on the wholesale remortgaging of domestic property.

    The recent decision to blow huge stacks of dosh on an unwanted and unjustifiable link between Brum and Londonistan just about puts the icing on the cake, who cares if you can shave 30 mins off the trip if you live in the right spot when you coulld attend a meeting at the speed of light coutesy of some modest IT. By the time the thing is built and commisioned IT systems will be that advanced that even the shortened journey will be a complete waste of time.

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  • If entrepreneurism is linked to home ownership it bodes ill for the future of UK business that no one under the age of 40 owns their own home. the economy needs young entrepreneurs but the this generation is being strangled by high housing costs in the private rented sector and cant save for a deposit let alone business start-up capital.

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  • mark wadsworth says:

    Yes, I’ve heard this theory before and it is clearly codswallop. If it were true, then our economy would have gone into a downward spiral in 1995 and never recovered.

    As a matter of fact, bank lending to businesses is negligible. I spend all day doing corp tax returns so I have to look at dozens of balance sheets and P&Ls of SMEs every week. Quite simply, the best source of funding for businesses is retained profits, however you look at it. The only items of expenditure where businesses really have to borrow money is to buy, er, land and buildings, so if these were cheaper all round, then SME owners wouldn’t need to borrow so much in the first place.

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  • The problem lies with weak, worldwide final demand and therefore with solvency/creditwothiness of SMEs rather than with with liquidity. And most banks need all the money they can get their hands on just to meet capital requirements and roll over their debts since wholesale funding for banks is hard to come by. And if all this business were available for SMEs to undertake, why aren’t the better funded large companies undertaking it? (Don’t say ‘ah but the SMEs are thrusting, dynamic, innovative and… (cont p94)’.)

    The argument put forward in this Grauniad article is a bankster argument – support asset prices and the health of our balance sheets.

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  • Bullsh*t.

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