Whilst reading a blog today about the atrocious UK Government borrowing figures for January, one of the comments reflected the truth that things are NOT getting better, that the banks are making businesses put money in rather than lending to allow them to trade properly. This wouldn't be so bad if anyone could actually get paid. It seeps into the soul when you spend the whole time chasing people for what in America would be nickels and dimes.
The problem of course is your customers have exactly the same problem. One of my tenants, a very hard-working office cleaner business, would love to take on more work. He's been offered it at rates that are good. But he cannot finance the 6 -8weeks he would be out the money before he gets paid. If he's lucky. So his business is stagnating, and his existing customers stretch their payment another few days, and he needs another £1000 from his bank to pay wages ( for jobs that will bring him £3000). And so the merry-go-round continues, with the velocity of money slowly but surely seizing up.
But a salutary tale.
My local post office, quite a big one, and only a post office with no shop, was sold by the PO about 2 years ago to an Irish property companyYes you read that correctly - insane I know, but hey, this is Brown's Britain. I believe they bought about 50 offices across the country. And here's another one I did earlier...
That was fine, apart from the fact that this property company ( not daft) used the PO cash flow to finance its developments.
Now have a guess. Commercial property has fallen some 35/40% over the last wee while and hey presto! no equity in any of the developer's sites. In fact, negative equity, and negative cash flow.
The banks, not being stupid when screwing the general public, takeover the developments. I can't remember if I've mentioned this before, but once a bank pulls the plug, any money that comes in is used to pay down the debt - though the interest keeps ticking away at the side- and they are allowed to write the entire amount off against their profits, which means ultimately the Poor Bloody Infantry in the shape of the UK taxpayer picks up the tab, in lower earnings and hence lower tax take.
So what happened to my local post office?
Well, there was a bit of a hoo-ha, but the PO took it back ( along with the others) and everyone kept their jobs which was great.
Except they hadn't been paid for November or part of December. And guess what, the liquidators of the Irish property company say it's the PO to pay and the PO says its the liquidators...
But hey,the staff can sue both of them for their wages and get paid.