You are here: News > Credit Crunch Replaced by Recession
Watching the press recently you will probably have noted the old term “Credit Crunch” being used less and less as the real term of “recession” is used increasingly. Yet not everyone are being affected. Indeed some of the previous gloom in the housing market has been tempered by the recent report from Halifax that house prices rose by 1.9% in January 2009. Estate Agents appear to confirm that the housing market is more buoyant and Home Information Pack Providers also report increased activity. This is no doubt helped by the interest rate cuts being put into place by the Bank of England who brought base rates down to a record low or 1% on the 5th February. Most lenders have offered reductions to their borrowers. Although a single months house price figures may not be fully representative it is clear that there is a demand for property and with lending at such a low rate it is easier to enter the market if you have capital. Indeed with low investment rates those with funds will probably find property a better investment!
However, the liquidity of the Banks remains an issue for small business where borrowing has always been an issue. The lack of funds from Banks means that when Debtors have cash flow problems they tend to hold on to their cash and not pay their creditors. This builds up from larger businesses with more ability to negotiate lending and is passed down to small businesses and one man bands to whom borrowing is more limited and often personally secured. Hence the increased in small company liquidations and sole traders ceasing trading, even when their order books are good. They just do not have enough money coming in or available to borrow to pay their debts to the larger recovery active suppliers, or even provide a basic living.
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