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IAB chairman offers up grim economic forecast

15th Dec 2010
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The International Association of Bookkeepers' (IAB) chairman Clive Johnson this week predicted that the current economic downturn will last for up to two years.

Johnson’s comments are broadly in line with many major economic forecasters as well as reflecting what businesses are experiencing at the ground level.

“We hear from insolvency practitioners that the numbers of business failures are going down, but based on what my clients and their books are telling me, that’s not my experience,” said the IAB chairman and principal of KC & Co in Coventry on Monday. “Cash flows are still down and they’re not getting better.”

AccountingWEB.co.uk’s Economic Outlook poll backs up Johnson’s grim analysis with two-thirds of members polled during late November and early December thinking that economic trading conditions in 2011 will remain fairly stagnant without any appreciable movement.

The poll also uncovers a degree of uncertainty in the year ahead with 21% thinking it will worsen considerably and just 13% predicting a significant improvement in 2011 – mirroring the downbeat forecast from the Office of Budget Responsibility on 9 December.

In spite of the static forecast and increasing nervousness in the financial markets the British Retail Consortium’s (BRC) Christmas Trading Snapshot Survey shows that around two-thirds of the retail business expect sales to be the same or better than last Christmas.

The majority of retailers remain confident about festive sales despite recent austerity measures and the impact of severe weather.

Stephen Robertson, BRC director general, said: "It's reassuring to see a majority of retailers believe Christmas sales will be at least as good as last year even if a third say they will be worse. But, considering inflation is now at 3.2%, growth of anything less than that would be a real-terms fall.”

Moving into the New Year there are further warnings of an inflation spike as firms plan to take advantage of the rise in VAT and sales frenzy that follow Christmas. According to KPMG nearly 60% of retailers and consumer goods manufacturers intend to raise prices over and above the 2.5% VAT rate increase.

Just this week the Bank of England’s confidence on inflation was called into question after figures showed prices overshooting the official inflation target level again in November.

In spite of this, the continuing rise in inflation is not expected to last in the long-term and many City forecasters are predicting that inflation will fall once the rise in VAT drops out of the annual inflation figures in January 2012.

The upcoming 20% VAT rise has also intensified the debate surrounding the Channel Islands VAT avoidance over the Christmas period, with many in the industry calling for the government to clamp down on the loophole in its wider simplification of the UK tax system.

Replies (5)

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Mark Lee 2017
By Mark Lee
17th Dec 2010 14:00

Bookkeepers may be a better barometer than insolvency practition

Bookkeepers act not just for limited companies but also for unincorprated businesses (sole traders and partnerships). Many such businesses will cease operations when times get tough and will not require the involvement of an insolvency practitioner. They are only required when a business is insolvent. they do not get involved if the business owner (of a company or otherwise) gives up trying to make enough profit to make the business activity worthwhile.

Mark

www.BookMarkLee.co.uk

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By Ian_mcdonald
17th Dec 2010 16:40

Inflation

My experience of just the last week ...

npower said 5.1% but increased my tarif ... +16%

Three mobile said they will have to pass-on the VAT increase, but no mention of anything else, so why ... +8.33%

Gym membership, ditto ... +10%

Supermarkets are having a field day, petrol prices volatile, etc., etc.

However, my pension fund is worryingly static and shows no imminent sign of improvement - time for me to jump on the bandwagon and increase my charge rate ?  (exc VAT, of course) (!)

- Ian McDonald IML Interim Management Ltd Finance~Accounting~Systems http://www.i-m-l.org

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By lawmaniz
18th Dec 2010 12:41

Hard Times Ahead - Again!

Here we go again! Another recession. I remember the first of the modern post-war recession that happened in 1968... 'I'm backing Britain' was the slogan. Denis Healey, MP was Chancellor and he said he'd 'make the pips squeak.' (i.e. make the rich pips squeak). The then Prime Minister, Harold Wilson, complained about the gnomes of Zurich.  Since then we've had the oil crisis and recession that started in 1974 and lasted ... forever? Well, there was a temporary break during 1987-89 I suppose. Then came the recession of 1990 +. That last until Gordon Brown's (remember him?) 'boom 'n' bust of 1999-2008. What a party, eh? Heaven for accountants and all other bottom feeders. Now here we are in 2010 and living off the ill-gotten wealth we accumulated during the borrow and spend years. Are we in a recession? No. Are we  in a depression? No. Instead, we are going through a painful period of economic regression. What's that mean then? It means our living standards are going in reverse, including our pay and income. Not only that, inflation is going to be eye-wateringly high. Could it reach 27% as in the mid- 1980s under Tories? Probably. I would wish everyone a Happy New Year but the outlook is that for many it ain't gonna be that. Am I worried? Having lived through and survived the recessions/depressions since the mid-1960s, I'd say no. Just enjoy life as it is - remember, you can always emigrate (Australia is unaffected by the global financial crisis as is much of the Eastern economies.)

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By Supercal
20th Dec 2010 09:10

International Association of Bookkeepers

The International Association of Bookkeepers? ? Really? What does the incororporated brotherhood of nadger grinders have to say? I'll bet the governor of the BOE hangs on every word! Strewth.

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By Gina Dyer
20th Dec 2010 10:34

Heed the bookkeepers

I'd like to refer you to Mark Lee's comment above, which I think explains very well why bookkeepers are a good barometer.

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