A year ago I began the Paris Smith Insolvency Blog. Freshly arrived at the firm and full of optimism, I wrote my inaugural blog the morning after the President of the European Commission, Jose Manuel Barroso, had delivered his 2011 State of the Union address, when he described the Eurozone crisis as “the greatest challenge” the EU had ever faced. Last night Mr Barroso gave his 2012 speech, noting that the ongoing crisis of confidence which has expanded beyond the Eurozone was “fuelling populism and extremism in Europe” and giving his view that the only real cure now was to move decisively towards a “democratic federation of nation states” who would pool their sovereignty, beginning with the centralized control of banking regulation. Whether the populists are really gaining sway we may see later today with the result of the general election in the Netherlands; whether he is right on the second point given the apparent lack of political will over the past 12 months, history will be the judge. In the meantime, in the real commercial world, no doubt we too are all looking at our forward strategies closely, assessing when it will ever be the right time to make a decisive move to shape our futures.
At the coalface in Southampton, as a firm we see in our rolling 24 month business plan – no doubt similarly to many of our peers in the regions – that it actually shows an encouraging 12 months behind us. Our costs are well under control, our cash is pretty healthy despite a universal drift pressure on debtor days and we are continuously striving to position ourselves to work together with others to stimulate the economy as and when confidence and work levels increase. We have had some notable highlights during this time, including bringing to fruition two major long-running projects in the completion of the Ageas (formerly Rose) Bowl’s refinancing, rebranding and redevelopment and the high profile launch of the Paris Smith Business Club, very recently shortlisted for the Law Society’s 2012 Excellence in Innovation Award,alongside the likes of City giant Clifford Chance. In time, we hope and expect the Club to pay for itself and to become a net revenue stream but in the meantime it seems that even in areas where product and service innovation is difficult to achieve, it is possible to gain market share through great work, brand enhancement and positioning.
Our own experiences, along with other developments including the beginnings of movement on hitherto static property sales held up in insolvent estates, suggest to us that the business community may already be jockeying for position in anticipation of a return to growth. Certainly that was the prevailing mood at last night’s Paris Smith Business Club risk seminar at the County Ground in Taunton, where (amongst others) Shirlaws spoke of a sustained decade of potentially rapid growth commencing in the next 12 to 24 months, and where Virgin Atlantic told us how they had been investing over £100m in their brand and their fleet despite – or perhaps because of – the flat market. For more on this, please see the website and @PSBusinessClub on Twitter. Within the Insolvency and Recovery Group at Paris Smith we have also seen a good deal of progress, as visually demonstrated in our own innovative on-line team organogram , and I am pleased to say that (alongside other legal disciplines for which the firm was not previously recognised) we will be well ranked for Insolvency in Chambers 2013 when it is published next month.
The insolvency industry itself, despite some very significant appointments and deals in the South and sustained activity levels amongst a few of the more national firms, has on the whole remained flat over this period. The reasons for this are well rehearsed but the movement in insolvency-related fees has always tracked behind the general economy and there are signs that when funding starts to recirculate more widely the sector will see a mini-boom as ‘zombie’ company shells are finally put to the sword to make way for more competitive and adaptable next generation entities. Anecdotally, we hear of entrepreneurs recognising that if they do not move ahead of the market their (for many) last best chance to build a nest egg for retirement (into the 2020s) will pass them by, and of their reaching into their pockets again for the cash reserves they have been garnering during (what some analysts are now calling) ‘the depression’. As an aside, it is interesting to note that the Great Depression, to which the current world economy has been compared, in fact lasted in broad terms from 1929 to 1941 and consisted of a staggered double-dip recession in 1929-1933 and 1937-1938 so we should be thankful and optimistic that we are not facing what our parents and grandparents had to contend with then; even the most pessimistic analyst say we will have returned to sustained growth by 2016.
Amongst insolvency practitioner accountants we see senior office holders throwing their arms around their best people and making promotions where appropriate to retain them despite the lack of free budget to do so. Now, it seems therefore, is possibly the time to be investing in our business culture and our people rather than carry on cutting budgets which have already been trimmed and are therefore a sound basis for growth.
So what is the true State of the Union? Well, from my perspective there are grounds for cautious optimism. I am not qualified to make a judgment on the future of Europe or the UK’s position in it, but I can speak to what we see and hear around us in the regional UK economy. In 2010 I foolishly made some economic predictions through to June 2012, including that interest rates would have been held at 0.5% (which of course they have now remained at since 2009), that CPI inflation would be at 3.0% (in June it came back at 2.4%, 2.6% in July), and that the FTSE 100 would be at 5600 (by the end of June it was at 5650 and has since climbed to over 5800). If the analysts are to be believed, economic output growth follows stability in the key rates and growth in the stockmarket. So far, so good. Let’s hope in a year’s time we’re talking about a genuine return to sustained growth!
In the area of insolvency law, which is one of the essential tools to government in ensuring that wealth circulates in the economy, it has been an equally interesting year, about which you can read regularly on our insolvency blog. In particular, there appears to be an appetite in the Courts and legislative alike for bringing some much needed certainty to the area. Whilst further progress needs to be made, and new rules are in the pipeline for next year, 2012 has brought encouraging signs for the rescue culture with the reversal and/or modification of some ill-conceived reforms and with signs of judicial common sense returning in the areas of administration appointments and TUPE. Watch this space for more.
For updates on future blogs on insolvency issues, check back regularly and/or follow @ParisSmithLLP and @InsolLawMan on Twitter or our Lead Insolvency Partner, Mike Pavitt on Linked In . If you would like a monthly e-mail alerting you to new blogposts, please direct mail or e-mail Mike Pavitt (email@example.com)