How safe is your cash with a bank?

 Having money in your bank is safe?   Well maybe not!

Since Carr vs Carr in 1811, when you deposit your money with a bank they create a debtor account and you become an unsecured creditor of the bank.
However, UK financial institutions with a banking licence are covered by the Financial Services Compensation Scheme (FSCS), which is designed to protect your deposit if the bank were to become insolvent.
The limit is £85,000 per person. So for a joint account cover of £170,000 is available.
If you have more than these amounts in a bank or building society account do make sure you spread it around amongst other banking licence institutions to protect yourself.
However, one thing to be aware of is that this limit is per banking institution - not per individual bank, so Lloyds and Cheltenham and Gloucester come under the same licence.
As an example, recently the Co-op bank has been in the news since Moody’s downgraded it’s credit rating to “junk bond” status.
Within the same banking institution as the Co-op bank is Britannia Building Society. Therefore, if you held an account in your own name only with both institutions with £50,000 in each of them you would in fact not be properly covered if the bank were to fail.
In total your deposits amount to £100,000 but since both institutions are under the same banking licence, in a worst case scenario only £85,000 of this amount would be covered.
So make sure that you spread your money around banks with separate licences.
I spoke to a prospective client who had €300,000 in one bank in Portugal.
He thought he was cautious and wanted to leave that money in a deposit account rather than putting it into investments. I advised to him was to move it asap and spread it around at least 4 separate banking institutions – This risk is lower even if he is getting a lower interest rate than with his current bank.
The aim must be to preserve capital even if you lose a small amount on the interest rate.
If you have any queries on where your money is currently held and you are concerned about what to do, please do call me on 01483 453755.

Euro suffers after eurozone recession continues into 2013

The euro fell across the board on Wednesday morning after the release of economic growth figures showing that the eurozone economy had remained in recession for a record sixth consecutive quarter.

Andy Scott, premier account manager at foreign currency exchange brokers HiFX, said: “As a collective, the economy of the 17 member countries contracted by 0.2% in the first three months of 2013, following a fall of 0.6% at the end of last year. The euro fell to a six-week low against the dollar, below 1.29, and fell by around 0.75% against the pound.

“Most of the individual country figures were worse than expected with France, the euro area’s second-largest economy, back in recession for a second time in the past four years. Italy’s recession continued for a seventh consecutive quarter, contracting by a further 0.5%. Germany narrowly escaped recession with growth of just 0.1%, which was less than expected, with the figures for the end of last year also being revised lower to show a contraction of 0.7%.

“It’s unlikely that these figures will have surprised anyone who pays even just the slightest attention to the news. The eurozone has some deep and entrenched issues that have come to light over the past few years. Several economies in southern Europe had been growing predominantly thanks to increasing government borrowing and spending. Now that Germany has a hold of the purse strings and global investors have demanded much higher rates of interest to lend money to these countries, the craters are there for everyone to see. The calls to ease the austerity measures that continue to damage confidence and hamper growth prospects will no doubt continue to increase but, publicly at least, Germany remains opposed to dramatically changing deficit reduction targets. There will also likely be additional pressure from politicians on the ECB to do more to try to stimulate the economy, but with interest rates at record lows of 0.5%, they may be limited in increasing demand. Monetary stimulus alone cannot undo the impact of economies that were largely dependent on state borrowing that is no longer available.

“The euro area looks like it could be in for a very tough couple of years with rising unemployment a problem that shows no signs of abating.”

Growth Predictions for UK Economy

The UK economy will continue to grow throughout this year, with GDP growth expected to pick up in 2014, according to the CBI’s latest economic forecast. But while recent economic data has been more promising, clear challenges remain both at home and abroad.

The CBI is forecasting GDP growth of 1% in 2013, unchanged from its previous forecast after official first quarter figures came in line with its expectations. Quarter-on-quarter growth is expected to gather pace gradually. The CBI is forecasting growth of 0.3% in the second quarter, 0.4% in the third and 0.4% in the final quarter of 2013.

In 2014, the CBI is expecting growth of 2%, with quarter-on-quarter growth to range between 0.5% and 0.6%.

John Cridland, CBI director general, said: “The UK economy is moving from flat to growth. Although recent data suggests rising business confidence, the economic climate remains tough, hampering demand here and overseas. Meanwhile, consumers remain under pressure as inflation continues to outstrip wage growth.

“Now the government needs to pick up the baton and deliver on promises to get finance to firms, cut red tape and help drive up exports.”

The CBI is forecasting that unemployment will see a small rise in 2013, to 2.58 million, before receding slightly to 2.51 million in 2014.

Inflation is expected to peak in the second quarter of 2013 (3.1%) before starting to fall steadily for the rest of the year, though remaining above target throughout 2014 (2.5%).

Uncertainty in the eurozone and the muted international outlook is limiting business investment intentions. Business investment growth of just 3.3% is forecast this year, but this is expected to pick up significantly in 2014 as global conditions improve (6.3%).

Eurozone growth continues to have a negative influence on UK export prospects, with an indifferent performance anticipated in 2013 (0.4%). An upturn in fortunes is expected throughout the next year, with 5% growth.

Household spending is expected to remain subdued with wage growth weak and unemployment expected to rise slightly. However, improving confidence, lower inflation and improving credit conditions should support a gradual improvement in household consumption, with growth rising from 1.3% this year to 1.8% in 2014.

Stephen Gifford, CBI director of economics, added: “Our latest survey data suggests that the momentum shown in the first quarter will continue into the next. We continue to expect UK economic growth to strengthen and become more broad-based over this year and next.

“Global uncertainty has receded somewhat, setting the stage for a gradual improvement in trading conditions.  However, while household incomes are expected to remain under pressure, improving credit conditions and confidence should maintain the momentum in the consumer recovery.”

Metro Bank & LGBA Selling Your Business Seminar

Selling Your Business Where: Metro Bank Fulham Broadway, London SW6 1BW (in the Fulham Broadway station complex) When: Wednesday 5th June 2013 from 6:00 p.m. to 8:00 p.m. Please email richard.wickes@lgba.co.uk by Friday 24th May 2013 to confirm your attendance Whether you plan to sell your business now or in 20 years you should attend our informative seminar on Exit Planning at 6:00p.m. on Wednesday 5th June.  It will tell you how to assess the value of your business now, and what to do to increase that value. It is an opportunity to learn about the way to prepare your business in order to obtain the maximum value when you wish to sell it. Ideally you should start planning your exit about three years before you wish to complete it.  The strategy to increase the appeal to a potential buyer is significantly different from that used for business growth.  Everyone present will be able to comment on anything they have heard, and to question the panel and the other delegates. ·         Hear from experts the best ways to maximise the value of your business ·         Make your own contribution to the discussions ·         Hear more about Metro Bank – the first High Street Bank to open in over 100 years ·         Enjoy some light refreshment whilst networking with other like minded local companies Presenters: Peter Kroeger (www.peterkroeger.com/index.php/selling-a-business/ ) specialises in preparing businesses for sale, and in the sale and purchase of businesses. Stephen Cowburn (www.thehrc.co.uk/our-advisors/stephen-cowburn ) will talk about the staffing aspects of sale. Peter Kelly (www.pegasusfunding.co.uk) will talk about the funding aspects of buying and selling a business. The event is organised by the London Group Business Advisors (www.lgba.co.uk), a network of people who have grown their own successful businesses, and have advised and mentored other companies.  Together they cover almost all disciplines (marketing, finance, HR, IPR etc).

Four Year Low for Insolvencies

Figures from the Insolvency Service show that company liquidations in England and Wales in Q3 2013 were down 5.3% on the previous quarter, and down 15.8% on the same quarter in 2012. Personal insolvencies also dropped in the first quarter of 2013 to 25,006, 12.9% less than the same period 12 months ago.

Bev Budsworth, managing director of The Debt Advisor, said: “It’s great to see levels of corporate and personal insolvency continuing to fall. This is a welcome bit of good news for all of us, but we mustn’t get complacent and must realise that there are still tens of thousands of people with serious levels of debt, facing wage freezes, redundancy, benefit caps and rising prices in an economy that is showing little or no growth.

“However, although liquidations and corporate insolvencies in general are down, they do tend to mask the true extent of the problem. In 2012, around 20,000 companies were wound up and for every one of these, at least a further 80,000 to 100,000 ran out of funds and were struck off with creditors, having no chance of making a recovery.

“If you look at the figures from the Centre for Retail Research, 2013 looks like it could be even worse with over half the number of companies failing in the first four months of this year as did throughout the whole of 2012.

“Up to the end of April this year has already seen off 28 retailers and effectively closed nearly 1,900 stores which has affected over 18,500 employees. Many of these companies could possibly have survived with more support from banks, who have removed overdraft facilities with little or no notice, or with more time to help them do deals with their creditors.”

Bev’s comments come at a precarious time for the economy, with marginal growth of only 0.3% and the cold weather in March being blamed for a dip of 0.7% in retail sales when compared to the previous month.

Bev continued: “Looking at the figures for County Court Judgements, we see a slightly rosier picture. The value of corporate CCJs in the first quarter of this year was 68.7 million, nearly 21% less than the figure seen in the corresponding quarter of 2012. Likewise, the actual number of corporate CCJs has reduced by around 10%, from 18,722 in the first quarter of 2012 to 16,847 in the first quarter of this year.

“It does point to the fact that although there are glimmers of improvement for the economy, we are certainly not out of the woods yet.” 

Small pick up for SMEs, but lending to businesses remains weak, says BCC

Commenting on the latest Bank of England figures on business lending, John Longworth, director general of the British Chambers of Commerce, said: “Although it is encouraging that lending to small businesses rose slightly in March, UK firms are clearly operating in a challenging credit environment. The new look Funding for Lending Scheme must work to rectify this and ensure that the money reaches fast-growing and relatively new firms, who continue to struggle to secure the credit they need.

“This is part of a wider problem around business finance. There has been a lot of talk about the business bank but it must be delivered with the sort of urgency and scale required for it to be a true player, and not a pretender, in the lending market. While not competing with commercial banks, the business bank should work towards plugging the gap in access to higher-risk finance that so many firms are unable to cross.”