The signature of trouble?

Jul 3 2008 by Peter Jackson, The Journal

NEW mortgages being approved for house purchases have hit a new low in the UK, down 64% on a year ago.

Confidence among UK consumers has also almost hit a new low, being, at -34, only just above the -35 recorded in March 1990, during our last recession.

I don’t intend to go into whether this pessimism is justified, or whether we are in for a repeat of the early 1990s, but the consensus seems to be that we are facing a pretty torrid time.

What strikes me is the number of people in business who are now willing to contemplate hard times ahead, even recession, but without any clear idea of what that means.

I suspect that is because, like policemen, they are getting younger. In short, they have not lived through it.

I started work in the early 1980s when sclerotic British industry was being buffeted by the cold, hard winds of change. The senior partner at my firm of accountants Coopers & Lybrand warned us that these tough times demanded that we did not worry over much about a company’s profit and loss account or its trading history, but that rather we took long hard looks at the balance sheet, and at whether current liabilities were likely to be met out of current assets over the coming months.

As the recession really began to bite, I remember senior management in one Cambridge-based manufacturing company forming a cash flow committee, which met every morning to discuss which cheques for which suppliers they could afford to put in the post.

At these times credit controllers were key personnel and a good one commanded a decent salary, but credit control also occupied senior management much of the time. I recall one chief executive, at the head of a large company, who personally went round to debtors to knock on the door and demand payment for overdue invoices.

And, of course, there was the old chestnut of posting the cheque, but forgetting to sign it.

I don’t want to worry you, but one business lady of my acquaintance in the leisure industry, tells me that over the past couple of months, her organisation has suddenly started to receive an unusually large amount of unsigned cheques.