A year of trial and tribulation

As 2009 draws to a close, we can reflect on a year that has challenged everybody. The acquisition frenzy before the change in capital gains tax in April 2008 seems an age away, and now that tax change appears trivial given what we have experienced since September 2008.

Economist Douglas McWilliams argues in the PB Interview (pp.24-27) that a recession can be a good thing, making sure businesses do not become fat or complacent. Unfortunately, some became so bloated that the taxpayer had to support them: banks such as Northern Rock, RBS and HBOS were so badly managed that they needed to be bailed out by the government. They lost the meaning of risk taking, giving us the worst recession in the UK for a generation.

McWilliams has a point. Almost every business manager this year would have questioned unnecessary expenditure, focused on core businesses and profit generators and invested in areas where they see future growth. Unfortunately, even well run businesses have had trouble securing funding from banks, something they once could have taken for granted (see p.6). Also, many industries - such as airlines - have awful trouble making changes quickly: British Airways has gone from a record profit to a record loss in the space of a year.

Brokers are lucky to have a relatively stable income stream and thus have had the opportunity to revise plans without dramatic losses in income; they should be in better shape for a nascent recovery in 2010 than most.

Making homes flood resilient

Insurers are expected to replace what customers had before their losses, yet in flooded areas, such as now in Cumbria, surely both insurers and customers would benefit from using suitable materials and fittings that are better able to cope with water damage. Clearly, costing is an issue and many negotiations would need to take place to work out how best to achieve this, though everybody would benefit in the long run.