Despite the apparent slowdown in the European economies, neither the European Central Bank nor the Bank of England adjusted their interest rates in September. The official interest rates were low in any regard, set at 1.5 per cent and 0.5 per cent respectively. However, neither financial institution seems to be responding to the deterioration in the global economy. The ongoing crisis in the Euro area is of particular concern and if the worst possible scenario occurred the British economy could not escape from the contagion.
At Cooper Matthews we recognise that company performance is often dependent on trends in the wider economy. In our long experience, excess business debt rarely flows from miscalculations made within a company. The norm is for the problems to emerge from the context, making decision making inherently problematic at the level of the distressed firm.
Economic events at different geographical scales can have a major impact on the fortunes of a company. The fact that the Euro area may be sleepwalking towards a recession may have unfortunate consequences for a range of British firms. It is important that the authorities which are dealing with the troubles in mainland Europe begin to act more cohesively than they have in the recent past.
The European Central Bank has traditionally prioritised fighting inflation instead of stimulating economies. If it continues with this stance and the performances of economies worsen, there is more chance that a company cash flow problem will become even more common. It should be remembered that a cash flow difficulty does not necessarily mean that company insolvency is on the cards.