Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

Successful business leaders have all the information they need to make good decisions…Do You?

Tuesday, May 22, 2012

The Euro according to Blackadder

Baldrick: "What I want to know, Sir is, before there was a Euro there were lots of different types of money that different people used. And now there's only one type of money that the foreign people use. And what I want to know is, how did we get from one state of affairs to the other state of affairs"

Blackadder: "Baldrick. Do you mean, how did the Euro start?"

Baldrick: "Yes Sir"

Blackadder: "Well, you see Baldrick, back in the 1980s there were many different countries all running their own finances and using different types of money. On one side you had the major economies of France, Belgium,Holland and Germany, and on the other, the weaker nations of Spain, Greece, Ireland, Italy and Portugal. They got together and decided that it would be much easier for everyone if they could all use the same money, have one Central Bank, and belong to one large club where everyone would be happy. This meant that there could never be a situation whereby financial meltdown would lead to social unrest, wars and crises".

Baldrick: "But this is sort of a crisis, isn't it Sir?".

Blackadder: "That's right Baldrick. You see, there was only one slight flaw with the plan".

Baldrick: "What was that then, Sir?"

Blackadder: "It was bollocks".

With grateful thanks to Nigel Cook and apologies to Richard Curtis and Ben Elton I suspect!

Thursday, May 17, 2012

Is there a safe haven?

One of the very interesting and diverse aspects of our work here at Insight Associates is the huge variation in the fortunes of our clients. At any one time we can be working with businesses which are distressed where we are helping nurse them to health again (often including intensive cash management), and the others doing very well and generating cash.

This has perhaps been even more noticeable in recent years.

It is the second of these areas interestingly that is presenting a challenge at the moment. We have clients who are holding reasonable amounts of cash, generated through profitable trading. They are naturally risk adverse, so want somewhere to hold these funds and also get a reasonable return.

The big four clearing banks have in the main forgotten what it means to pay interest on deposits, with many offering such low rates it is hardly worth their while doing it. There are exceptions but mainly for long term bonds etc.

So, if you want to get any return worth talking about (and we should be looking at the very least keeping up with inflation) then you need to move the funds to other banks and institutions. Most of these are overseas or have significant overseas interests or ownership. Then are you looking at risk?

I have just this week had an interesting exchange with a senior manager with the UK arm of a certain red Spanish bank (an excellent manager incidentally, so this is no reflection on him). This bank are offering very strong rates for short-term deposits, and have been for some time. On the face of it attractive. But what of their exposure to the rather shaky Spanish economy?  They show very compelling statistics and facts about their rating and how the UK is ring-fenced, which yes shows that they would not fall if their parent in Spain fell or had difficulties.

However, I say, banking is based entirely on confidence. No-one can argue that the confidence in the UK bank would not be badly shaken, at best, if things happen in Spain, and regardless of the facts that may well lead to a run on the UK bank. No bank however strong can survive that can it?

So are there any safe havens left?  The financial world is a very uncertain place at the moment.

Insight Associates, Insight House, Riverside Business Park, Stoney Common Road, Stansted Mountfitchet, Essex, CM24 8PL, UK
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