Geoff Newton: Bearing with the banks
It's raining again... so the old Supertramp song goes, and the thought of an Indian summer is fading fast. Beer gardens remain empty and licensees' woes seem to be getting worse as the UK's rudderless economy appears to be heading for an inevitable recession.
Those of you who are old enough will remember the last recession of the early 1990s. You really would have thought, wouldn't you, that we had learnt our lessons from the past?
But this time it's somewhat different, driven by factors that were not prevalent nearly 20 years ago.
At the heart of the matter lie the banks. Quite how huge sub-prime write-offs in the US and the UK affect the domestic banks' appetite to fund pub businesses is beyond me, and as an ex-corporate banker I should know.
It's not as if, all of a sudden, the UK pub sector is littered with underperforming, incompetent operators who do not justify ongoing financial support.
The majority of operators run good, strong, durable businesses and generally it is factors beyond their control that have caused sales to fall and costs to rise, putting the inevitable squeeze on profits.
Good businesses don't go bad overnight and those that survive the next 18 months will emerge stronger. Of course some will fall by the wayside - indeed we are already seeing this - but, some will argue, surely they were poorly run businesses that would have failed anyway? Weren't they?
This may be true in part, but cast your mind back two years when money was cheap, plentiful and easy to get, with banks falling over themselves to lend. Almost over-night the market changed. Some lenders pulled out of the sector, others severely reduced the amounts they were prepared to lend, and all of them put up their margins and fees.
Some remain committed to the sector and I hope they succeed in attracting some of the quality business that is out there.
The next 15 months are going to be interesting, to say the least. Banks have to lend - it's what they do and a fundamental aspect of their business. But don't expect the floodgates to open for a long time to come.
Instead, concentrate on the fundamentals of your business, proper planning, good financial systems and controls, positive cashflow and strong management.
It's not rocket science, and in some ways it is a step back to the old days of banking when "the canons of lending" - which when I were a lad used to be CCCPARTS, standing for: Character, Capital, Capability, Purpose, Amount, Repayment, Terms, Security - were ingrained in the minds of all up and coming corporate bankers.
As we head into the final quarter of what can only be described as an 'annus horribilis', one hopes that we will soon start to see interest rates falling, inflation stabilising and house prices starting to recover.
Don't expect this to happen quickly. 2009 promises to be hugely challenging for the sector, but if those banks start lending again...
Geoff Newton is managing director of GN Solutions Ltd
