Archive for August, 2010

Insolvencies falling?

For once I have posted some good news…

But why has the rate of insolvencies in the UK slowed? Usually it is the tail end of recession where business failures peak.

Any suggestions?

Would be nice to have a few responses. I am open minded about this, but perhaps the continuing support from the HMRC (am i correct?) and banks keeping an eye on their PR allied to low rates are just keeping a few heads above water. The risk remains very high of course and certain sectors are really struggling (Travel being a prime example).

A lot of very intelligent and experienced people read this blog, so lets hear from you…

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Networking for accountants…


Not bad article

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India. Doing business?

David Cameron’s visit/trade mission to India last week naturally drew attention to this huge and yet very complex market. India has of course become synonymous with the export of  cheap services with perhaps too few exports going the other way (Cameron did highlight that the UK’s total exports to ireland were greater than those to China, India, Russia and Brazil combined) but what is doing business like for those companies that are involed in the Indian Market? And what are the risks?

Ruth Sutherland addressed this in the Observer last week.

The bureaucracy is legendary: a report earlier this year by the Political and Economic Risk Consultancy found India had the worst levels of excessive red tape of 12 Asian economies, making it difficult to set up businesses and to enforce contracts. The World Bank ranked India 133rd out of 183 countries in an “ease of doing business survey” for this year: the UK comes in fifth place. This will be hard to change because of the entrenched power of the Indian civil service, and because local business moguls have no interest in seeing the status quo overturned.

Oh dear…..

And this naturally leads to the question of credit risk. The lack of ability to enforce contracts is naturally the first issue (if it is worse than China….) but als (not mentioned) is the extraordinary length of Indian court cases. Indeed some cases go on for decades and in one instance 170 years.

Not ideal if you have a cashflow issue..

And then there is the issue of assessing risk. Recently I was responisble for the credit lines to two rather significant Indian businesses. Satyam and Jet Airways, both of which were very much in the news. Jet Airways story was a little more conventional in so far it was an airline that overexpanded and had to quickly retrench, but Satyam were a provider of “outsourced services” who had quite frankly been overstating their books under the less than watchful eye of Price Waterhouse Coopers for a number of years. In fact they were bust and when the scandal broke, there was a stampede of customers to the door.

So what happened next? Well, the Indian Goverment became involved because Satyam were deemed “too important to fail”

Really? Well they were hardly a utility provider or, dare I say, a bank. Its hard to see why a straightforward outsourcing provider couldnt haveve been broken up or superceeded by less corrupt models

But it does tell us that whilst credit risk is difficult to assess in India, the fallback “rescue” possibility is interesting and perhaps can be seen as a degree of security when dealing with larger companies. Perhaps…

Interesting area and welcome any comments from those with experience in thsi market

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