Thursday, 21 June 2012


Spain’s banking problems lie with the regional banks (the cajas) that lent all the money to property developers to fuel the boom times.

In theory, the cajas sound good – they are small, local and focus entirely on retail and commercial banking, lending to local businesses.

Almost all of these banks were controlled or influenced by one of Spain’s local governments. The politicians in power would have voting rights in its local cajas and would also sit on the board of the bank and nobody in Madrid bothered too much about it whilst all was well.

There were about fifty cajas – now reduced to ten. It is now becoming clear that the local developers were in cahoots with the local politicians. Public sector construction works would be won by ‘favoured’ contractors who would receive loans from the bank.

Investigators are trying to get to the bottom of the value of all of the loans – but don’t hold your breath – this is likely to take years. And this is the problem at the root of the banking crisis – nobody seems to know the extent of the losses on the bank books. The practice in Spain has been for the banks to largely provide their own valuations!

We’ve seen recently George Osborne unveil the final details of the reforms to the UK banks proposed by the Independent Commission on Banking. Essentially, the retail arms of the banks are to be separated from investment banking. But, won’t these new ring-fenced banks look a bit like the cajas of Spain?

The UK banks that have failed, Northern Rock, Bradford & Bingley and HBOS were all pure retail banks.

The real security lies in making the banks stronger – holding more capital and liquid reserves which they now do.

Tim Corfield June 2012

Monday, 18 June 2012


The UK’s hopes of rapidly escaping the recession were dealt a series of blows last week.

Producer output prices rose by larger than expected at 0.7% on the previous month according to Office for National Statistics (ONS) data.

A contraction is the construction industry was also stated to be considerably worse – 4.8% compared with the previous 3 months, rather than the 3% initially reported.

The ONS said this revision is likely to increase the originally reported contraction of the economy for the first three months from 0.2% to 0.3%.

An economist at the RBS said “As a number of large scale construction projects, such as work on the Olympics have come to an end and public sector cuts have begun to take their toll.”

The level of activity going forward could remain low.

There is also an index from Nationwide which show that consumer confidence has declined in April as people became more worried about their jobs.

Tim Corfield - May 2012


In a hard hitting recent interview with the Guardian, Christine Lagarde, head of the IMF insists its payback time for Greece and makes it clear that the IMF has no intention of softening the terms of the country’s austerity package.

She says Greek parents have to take responsibility for their children being affected by spending cuts. “Parents have to pay their tax” she says.

Greece, which has seen its economy shrink by a fifth since the recession began, has been told to cut wages, pensions and public spending in return for financial help from the IMF, the European Union and The European Central Bank.

“I think more of the little kids from a school in a little village in Niger who get teaching two hours a day, sharing one chair for three of them, and who are very keen to get an education. I have them in my mind all the time. Because I think they need even more help than the people in Athens”.

“As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time”.

Legarde says she thinks equally about Greeks deprived of public services and Greek Citizens not paying their tax.

In recent days the caretaker Greek Government has met to discuss sharp fall in tax revenues – down by one third in a year. Under the terms of the country’s bail out, Athens has agreed to improve Greece’s poor performance for tax collection in order to reduce its budget deficit.

These comments come at a time when most recent polling in Greece is pointing in favour of the anti-austerity parties.

Tim Corfield comments ‘all the problems of Greece were known before the Euro adventure started. Politicians have a lot to answer for here – and what about Spain?.’

Wednesday, 13 June 2012


Figures from DEMSA (Member of Euro Debt Financial Services) have carried out an annual survey showing the reason why people get into debt problems. The top reasons are as follows;

  • Loss of income (i.e. one breadwinner losing their job or having a pay cut or reduction in hours) - 23%
  • Spiralling debts – where one credit card or loan is used to pay off another - 23%
  • Poor financial management - 15%
  • Divorce or separation - 10%
A spokesman for DEMSA said “There is no doubt that many consumers need help managing their finances and taking control of their debts”.

Tim Corfield comments “These statistics reflect what we find in practise. The important thing for any person who feels they are struggling with debt is take professional advice. We suggest they call a local Insolvency Practitioner and have a no obligation discussion, preferably face to face as soon as possible to see what their options are “.

Tuesday, 12 June 2012


John Carew, the former Aston Villa player has recently been on the wrong end of a bankruptcy order in the High Court following a petition from HM Revenue and Customs.

Last year, Carew reportedly had a tattoo misspelled on his neck. It was meant to say, in French - “My Life, My Rules”. Unfortunately, for Mr Carew there was a misplaced accent and what was actually tattooed was written as “My Life, My Menstruation”!

Friday, 1 June 2012

Business Failure Rates Expected to Rise 10% Over the Next 2 Years

Business failures are set to rise by up to 10% over the next 2 years according to a study by BDO LLP recently.

Some 23,600 businesses collapsed in 2011. This is expected to hit over 25,000 in 2012 and nearly 26,000 in 2013 according to a BDO survey.

The pessimistic forecast is based on lower levels of consumer consumption arising from weaker earnings growth and rising unemployment.

Construction and property, business services and retail and wholesale are the three sectors to suffer the most during 2012.

Technology, media and telecoms and manufacturing are ear marketed as the sectors likely to grow.

A spokesman for BDO said, “Businesses that develop innovative products, distribution channels and a strong customer proposition will gain significant competitive advantage – irrespective of sector. Those who do not respond to the new normal are at a greater risk of falling into difficulty”.

The report also predicts that after 2013 failure rates will start to decline.

Tim Corfield May 2012