Sunak vs Truss. My take on the economics

We all have an opinion. Economists and bankers have a pretty poor track record with predictions so what chance do we have but there are some salient policies that have hit the headlines in the leadership contest and for what its worth, I’m less that confident about the proposals from one of the main contenders. And there is something simply do not understand

Rishi’s priority is to control inflation. Few would argue with that but his proposals are hardly populist. The trouble is that we are living in a seemingly “populist” world.

inflation is driven by many factors and we are all aware that commodity prices are a serious problem but there are also severe pressures on many supply chains. Naturally when demand outstrips supply, prices will rise and thus inflation. The key is surely to suppress demand? In truth this will be adversely hit by the troubling energy bills heading our way but cutting taxes and driving up demand when there are stock and labour shortages across the economy simply doesn’t make sense.

There are many inflationary pressures driven by many factors but surely adding to them simply to win votes will backfire? The serious risk here is that we will head into a spiral and whilst its apparently an unlikely result now, I know who I would prefer as PM

RLS scheme extended for two years

It might have been expected that with all the current issues and Sunak clearly occupied with other matters, the RLS scheme might have slipped under the radar

It has been extended for another two years which might come as a bit of a surprise to the lending industry although I was informed a few weeks ago by a leading lender that the extension was in place

It will be interesting to see who’s on board and who isn’t. The vibe from some fintechs was a little negative but who knows? Also will be interesting to see if there are any changes in criteria

Banks tightening up on Hospitality

Not what you may think.

I am referring to lending to the Hospitality sector . The article also details a fall in the level of lending to Retail businesses but whilst there is logic behind the statistics, i’m a little unsure whether the pre and post covid numbers are directly comparable given the influence of Government lending

However it is fair too assume that with the current economic headwinds, lending to businesses that rely on very discretionary spending will be affected

Invoice Financiers. Overpromising and underdelivering?

The first and headline role of an Invoice Finance Broker role is to find the best possible arrangement for clients on the basis of cost and facility. Its often an intriguing puzzle but there is another aspect to our roles which can be very significant. To put it bluntly, it’s keeping the lenders in line.

Many lenders are perfectly straightforward and transparent about what they can and cant deliver but when faced with competition and a client that may not be aware of how this market operates, there is a natural temptation to overpromise delivery or at least skip over the areas which may be contentious

Last week I was recommended to a substantial business (£40 million turnover) that had already met two lenders. Unfortunately time pressure meant that after a few calls, they were going to try their luck with the lenders in question rather than initiate discussions with my suggestions (which were more competitively priced) This was mainly and understandably because both lenders had given assurances over the level of the lend, which was to a requirement which could be described as difficult. They are going to revisit with my assistance after one year. Or perhaps much sooner.

The lenders had both made assurances on debt backed by significant contracts in a sector which is well known for the severity of the clauses. Fair enough but they had done so without examining the (four main) contracts in question

This may not matter but once a survey is carried out and the underwriters get involved, it is easy too imagine a rapid shifting of the goalposts. This will result in a very unhappy client and my impressions is that this is one client I would not wish to mess around

My approach was to simply state that we really had to go through a full process before we could determine the level of the lend that will be available. This will far from being always be the case of course but there were specific difficult issues here. My approach didn’t immediately get my foot in the door but thats not the point. I am here to service the client first and foremost

And that should be the role of any broker. We should be diligently ensuring that the client’s time is not wasted and they are not misled. We should also have a reputation for managing lenders which will in itself result in their indications being realistic

This will be interesting to watch