Global Economy Lights are flashing, says PM

“Red warning lights” are again flashing over the state of the global economy, the Prime Minister has warner.

Speaking after the G20 meeting of world leaders, David Cameron said a “dangerous backdrop of instability” threatened Britain’s recovery, and we should stick to our long-term plan”.

In a Guardian article, he warned of the impact from conflicts, low growth and a eurozone “on the brink” of another recession.

He said: “The Eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.

“Emerging markets, which were the driver of growth in the early stages of the recovery, are now slowing down.”

By contrast, the Bank of England has forecast that the UK economy will grow by 3.5% in 2014, remaining resilient in the face of the “subdued world demand”.

But it its latest update last week, it also warned that there were risks from the global economic situation and it revised down its forecasts for UK output next year.

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SO WHERE DO WE GO NOW?

The Greek ‘debt deal’ has now been secured which kicks the problem firmly up the road.

In immediate terms this should have a massive positive effect for the EU and this has avoided a huge disorderly default.

This debt write down of bonds now paves the way for further aid to be advanced to Greece allowing it to meet its obligations under bond redemption later this month.

This still amounts to the biggest sovereign debt default in history. Greece will still be under a huge ongoing debt burden. The best possible outcome is expected to be a debt to GDP ratio of 120 per cent by the end of this decade.

Most economists (and politicians) know that this is unsustainable – the outcome is much more likely to be worse. This is far from the final restructuring of Greece’s massive national debt.

Unfortunately, this default now increases speculation that Portugal could follow the same path.

Yet, Nicholas Sarkozy recently declared that the Greek “Problem is Solved”. Is there a French election looming?...This seems to me to be mighty optimistic! Watch this space….

Rise in number of distressed law firms

New figures show that the number of law firms in distress has risen dramatically.

This could be made worse by the introduction of alternative business structures
(ABSs) under the new Legal Services Act, according to research by Begbies Traynor.

The firm has issued its quarterly ‘red flag alert’ which shows that 163 professional
services businesses were facing ‘critical’ distress in the last quarter of 2011.
This is an increase of 61% compared to the same period in 2010 and Begbies Traynor
says the majority of these were legal firms.

According to the alert, the last quarter of 2011 saw some non-legal businesses
finalise plans to offer legal services ahead of 3 January 2012, when applications
for such practices could officially be received.

However, while the Legal Services Act presents opportunities for non-legal firms,
many law practices have found themselves ‘floundering’ as clients cut back on their
legal fees spending, the alert adds.

Michael Bernstein, a partner at Harris Lipman, said many smaller legal firms were
left wondering what to do next due to the uncertainty raised by the Legal Services
Act.

He warned that this was not a viable strategy and urged firms to make a positive
decision about their future, rather than simply waiting to see what happens.

Read more: www.prlog.org/11812459-rise-in-number-of-distressed-law-firms.htm