Welcome to the 2008 year-end review from Cousins Business Law.
Tough and Turbulent Times in 2008
What a year! 2008 started with a credit crunch affecting the property sector; it’s ending in world economic upheaval, with many banks on the verge of collapse and business confidence at its lowest ebb since the great depression of the 1930s. At the beginning of the year, business people were discussing whether the credit crunch would affect the ‘real economy’; at the end of the year, the talk is of whether we can avoid an economic depression and simply hope for a recession instead!
The first sector to feel the pinch was the property sector, as banks stopped lending and funds dried up. Property transactions hit an all-time low and prices plummeted for those few transactions that did take place. Next hit were all those businesses that rely on credit – and that includes most SMEs - as banks became seemingly averse to lending at all. This came to a crisis point in October as banks fell like dominos and money seemed to stop flowing completely. As central bank interest rates came down (slowly for most of the year and plummeting recently), banks often responded by increasing the rates they charged SMEs and, at the same time, reducing facilities generally. As a result, we have seen more and more businesses fail. As the recession bites more severely, we can expect to see demand in the economy fall further and it is likely that most businesses will be adversely affected.
A recent CBI survey, ‘Economic Crisis: Impact on Real Economy’ revealed that 74% of businesses expect conditions in 2009 to be worse than in 2008 and 40% consider they will be ‘much worse’.
As a firm of solicitors, we have seen a massive rise in enquiries from worried business people seeking advice on directors’ duties and their responsibilities if their company should fail. We have been able to help many safeguard their personal situation, whether their company is on the brink of collapse or even if insolvency does not yet appear on the horizon.
We have also seen a large increase in commercial litigation generally. More and more businesses are taking disputes to court. This appears to be principally for two reasons. Firstly, it is being used as a tactic to delay or reduce payments – put up a defence and you can settle with paying less and later. Secondly, more SMEs are finding it financially better to fight a case that they would previously have let go, as the opportunities for making money from their usual business activities have started to decline.
We have also helped more and more businesses, both as landlords and as tenants, save large amounts of money by renegotiating their leases. A lease is a lengthy and expensive commitment and it is important – both for landlords and tenants – to get it right at the outset and when reviews come up. We have also assisted many tenants renegotiate their leases mid-term, and are pleased that this will help many survive in these difficult times.
Cousins Business Law started trading in April with a mission to provide SMEs and family-owned businesses with the type and standard of expert business advice that would generally only be available from partners of large commercial solicitors’ firms - but without the high prices that they would demand. Our information website was launched, which provides lots of useful articles and tips for people in business and, in July, the Cousins Business Law blog went live.
Working closely with clients, really getting to know them and their businesses, means we can offer timely and appropriate advice - and in a language they understand! In this way, we can be truly pro-active and keep an eye out for opportunities that are of real value to our clients.
Steve Petty joined us to run our commercial property and business sales areas and we are delighted that, through Steve’s dedication to clients, these practice areas have grown, despite the economic conditions.
Our other specialisms, most notably dispute management, directors’ duties, insolvency and professional negligence have all shown large growth this year with many new clients from across the UK (including the business centres of the Midlands and London) and also from Europe, the Americas and Australasia.
Looking to the Future
Cousins Business Law is one of the few solicitors’ firms planning to expand in 2009 and we are actively looking for lawyers to join our team – so, if you know of any good lawyers, ask them to contact me.
Looking ahead, we know that 2009 will be a difficult year for most SMEs: cash flow will be tighter, funding harder to find, disputes more common, there will be fewer opportunities and many more insolvencies. We are committed to help those in our business network, whether they are clients or not. We believe that we need to stick together, not only to help each other survive through the recession but to come out at the other end with better structures, contacts and opportunities in place. This way, we can all hope for a rosy future.
I’d like to take this opportunity to wish you all best wishes for the festive season and hope that we can all prosper in 2009.
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