New Year, New Money

Initial indications are, thankfully, positive. Local businesses and entertainment outlets have reported a good festive season, with spending up and consumers willing to indulge. Many clubs, bars and restaurant reported very strong trade during the festive season, although some hotels noted that the corporate spend was a little lower than usual – although hardly unexpected given the cash flow problems experienced over the last year.

Similarly, charity collections have increased – another indication that consumers are willing to spend a little money. Local charity collections increased by 50 per cent over the previous year, a significant indicator that spending patterns are changing for the better.

Overseas, the indicators are similarly positive, with British manufacturing showing strong growth in December and property prices starting to climb. Debts are being repaid at an amazing rate, with consumers paying back almost £2 billion of unsecured loan in 2009.

Similarly, UK retailers have seen strong spending over the Christmas period with John Lewis and Next both seeing good sales over the Christmas period and posting positive profit forecasts.

This positive news has propelled the FTSE to its highest point over the last 16 months, and stronger industrial output is being recorded in the US, the EU and China. The Dow Jones Industrial Average has also crept a little higher.

While the above paints a picture of a world well on the road to recovery, there are still pitfalls to negotiate.

Once the good times return – and they will for business is cyclical by nature – it still remains to be seen if we have learned the harsh lessons taught to us by the recent global collapse. Unregulated trading, irresponsible bonuses, wild corporate spending and overstretching bubble markets all heralded the giant crash that reverberated around the world.

Yet no sooner has a shimmer of silver lining appeared on the clouds above, and we already read reports of banking bonuses, property speculation and resistance to new legislation. It would appear that prudence and wisdom are as rare as hen’s teeth in the global market place.

Governments, in the meantime, having put their hands into their deep pockets and bailed out many businesses, are now on the lookout to recoup their expenditure through taxes. As companies begin to recover, it remains to be seen how they will react to new measures and how top executives will cope with proposed hikes in income tax rates.

However, there are also opportunities here. With market fluctuations producing big peaks and troughs, now is the time to take the middle road. Like a budding plant emerging from the ground after a harsh winter, this is the time to gently nurture your business, rather than take big risks. Gradual growth and consolidation is the order of the day, allowing consumer trends to stabilise.

Once your root structure is strong again, and it is quite clear that the sun is shining again, then it is time to reach for the sky and really branch out. That time is coming, and while the forecast is good, it is not quite here yet.