When I tell people that I am an Insolvency Practitioner, the universal response is almost always “Well you must be busy” – that and the fact that they usually take a couple of steps backwards.
Now, when I tell people that I am an Insolvency Practitioner, most people say “Well, you are going to be even busier, what with the Brexit Effect” – and of course, the couple of steps backwards.
In fact, the Insolvency Profession has not been busy for the last 7 years and, apart from a relatively small upward blip around the time of the 2008 financial crisis, the profession wasn’t particularly busy in the 7 years after the start of the new millennium either. Financial failure rates, for both individual and companies, have been on a long decline for many years now, but people’s perception is very different. And as Tom Peters, the American business guru, quite rightly says, “perception is all there is”.
So what is the new perception?
On the radio very recently, I heard the CEO of a national “high end” retail chain lament the fact that the profits of her group had plunged as a result of the “Brexit Effect”. In fact, look at almost any newspaper or watch or listen to any news bulletin on the TV or radio and lots of things [nearly always bad things] are being attributed to the “Brexit Effect”.
Not so many years ago, the lament of a CEO of a national “high end” retail chain, having to explain poor results to the market, went something like this
“….the weather was too hot, the weather was too cold, the £ was too high, or too low, High Street rents and/or rates are too high and of course there are the out of town developments, and don’t get me started on the overseas discounters and the on-line retailers…etc…etc…”.
Now, how much easier it is to say those two little words “Brexit Effect”. A sort of reverse panacea for all business ills. This particular CEO, in her latest attempt to explain her group’s poor results, could have said this, which would have rung truer:
“Several years ago, well before the British Public were even aware that it was going to get a vote on whether or not the country should stay or leave the EU, my predecessor and the then Board decided that our exclusive brand was so strong that we could move away from being a “high end” retail chain situated in the wealthier parts of the UK and instead embarked upon a store building extravaganza, putting our exclusive brand in nearly every part of the British Isles and they thought that they could do this and still charge the premium rate for the goods that we sold because our brand was so exclusive. No one thought that this strategy would in fact result in our brand being rather less exclusive and accordingly, we could no longer apply our historic sales premium.”
Realistically, why would the CEO of any poorly performing organisation not give a fuller, more honest explanation, when two little words allow them to shift the focus from their company’s unimpressive results to the fact that the UK will, at some time in the future [we think] leave the EU. We are still over 18 months away from formally leaving the EU, but for the past year and no doubt, until we leave and forever thereafter, any economic or business set-back will be blamed squarely on the “Brexit Effect”. And worst still, the negative effect of those two little words could well end up becoming a self-fulfilling prophecy.
In November 2016, my trade body, R3, undertook a survey of its members asking them to provide their views on the likely impact on insolvency numbers as a result of Brexit. There was a large response from members and the resultant press release led with the following:
An overwhelming majority of insolvency and restructuring experts believe the UK’s decision to leave the EU will lead to a rise in corporate insolvencies in the next year, and that the referendum result has already hurt businesses’ finances, according to a survey of its membership by insolvency and restructuring trade body R3.
72% of those surveyed believe the referendum result will cause corporate insolvency numbers to rise by the end of 2017, while 55% say business finances have been hurt since June.
I have applied the bold type. The year is nearly up and what do the corporate insolvency figures show? Well, the latest government figures are for the quarter end June 2017 and its report states the following:
The estimated underlying number of company insolvencies fell to the lowest quarterly level since comparable records began in 2000
It has always been the case that bad news sells, makes people sit up and listen. The more pessimistic the economic prognosis, the more we turn away from the fundamentals of business and parrot les mots du jour.
A final thought.
Many of us remember the recession of the early 1990s [and believe me, the Insolvency Profession was very busy back then and people used to take four steps back when you told them you were an Insolvency Practitioner]. Crashing out of the ERM, interest rates at 18%, daily bulletins from the MSM howling about company closures, job losses, economic Armageddon-The Economist even published a “Recession Index” as an alternative indicator of economic activity [i.e. the number of times that the word Recession was mentioned in articles in Britain’s quality newspapers].
And guess what? This country was in the EU at the time, we were in the Single Market and we were in the ERM [the pre-curser to the Euro which was meant to protect all EU currencies].
In point of fact, the recession was short, albeit sharp and the UK economy recovered relatively quickly.
We survived, we prospered, we didn’t go into the Euro.
We will survive, we will prosper, we may/may not eventually leave the EU.
Of course, if I have really got this wrong, in future, I will be able to answer “Yes, I am incredibly busy, what with the Brexit Effect and all that and ……oh, why are you running away from me?”
