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January Blues – A winter of discontent?

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To all our network who might have been wondering why you had not heard from us this year – well the reason is that we decided to wait until we were sufficiently into January that we could avoid the over used phrase wishing you happiness as, quite frankly, we are struggling to see how the majority of people will be happy this year!

According to reports we have read the festive season brought a mixed outcome for different businesses across all sectors with some success stories and a lot of ‘below expectations’ comments, which was to be expected.

As we have said before we are not economists and do not intend to make any predictions on where rates, inflation and energy prices are going this year, but what we will say with confidence is that even if all three go lower, this will still be a very challenging year for most of us.

For anyone lucky enough to still be on an older fixed rate mortgage and energy tariff you may be asking why? Well to you we say – be warned – the news will not be good!

Mortgage rates are somewhere between double and triple where they were which, on top of the increases in energy and food bills, is going to be crippling for many households and our fear is that many will no longer be able to pay the mortgage and so will look to sell and move into rented accommodation. However, Buy to Let mortgage rates have increased by a similar amount which will inevitably cause an increase in rents in many parts of the country and will probably mean a huge number of landlords will rethink their strategy, potentially leading to properties being sold causing a shortage of rented accommodation and a potential glut of properties for sale which could lead to a softening of house prices – something that some will be happy about – but a problem for those with a high loan to value who could potentially be looking at negative equity.

The wholesale cost of gas, electric and fuel have all come down from the record highs but this is not all being reflected in the price to consumers and the much reduced energy support package from 1 April will mean businesses having to pay more for their energy than they have been.

Unfortunately those households that chose to spend on credit during December will be facing a higher bill when this and subsequent months which will cause yet more pain just as we are experiencing more typical winter weather and needing to use the heating more than we have.

Thankfully the big supermarket chains are appearing sympathetic to their customers and offering discounts on everyday food items but this cannot go on for ever and may well cause issues for those businesses further down the line if they try to compete too aggressively with their competitors for a reducing market share.

We are also concerned when all the strike action and inflationary pay demands will end because it does not take an economist to work out that strikes and 10+% wage rise demands are both bad for us all in one way or another.

We truly hope this year moves in a positive direction and we are thankful that we are merely IPs and not politicians who need to grapple with these macro-economic problems!

As we have said many times before – and will continue to say – all we can do is to urge company directors worrying about their finances to seek professional advice.

If you are involved with, or know of any business or individuals that are struggling financially we suggest that you talk to us.