Government Spending Cuts and the Construction Industry

Just when the construction Industry thought things couldn't get worse...........along came the spending cuts announced recently by the Government.

The main victim for the Government's spending cuts are, Local authorities and planned spending on construction projects particularly, Schools re-building.

This is compounded by so few major construction projects in the UK which in the main are the 2012 Olympics project, Blackfriars and the refurbishment of Birmingham's New Street Station.

The immediate future looks rather gloomy and recent figures released show that construction accounted for the most company failures in the first half of 2010 at 531.

The Have and Have Not's

In the past couple of weeks, Premier League football clubs have been in the business news discussing their current finances either because their latest accounts have been published or because they are the focus of a much maligned takeover bid.

Arsenal Football Club released trading figures at the end of September showing pre-tax profits of some £56 million for 2009. Manchester United's figures released at the end of last week show a phenomal £79.8 million loss although this doesn't seem to phase their owners in the slightest as they have paid approximately £40m in interest payments alone and £67m in finance charges, which were one-off occurrences.

The likes of Arsenal and Manchester United though did manage to achieve £650m turnover between them and regardless of debt financing, these figures are a million miles away from that of clubs in the lower divisions who struggle from day to day to survive. Premier League clubs are guaranteed at least £39m per season from TV revenues and whereas pre "Bosman" higher league clubs would feed money down the chain via transfers, this rarely happens as players take advantage of running down their contract periods and simply leave on a 'free' and the lower league club getting no transfer fee and at best getting nominal compensation from the multi-rich clubs.

The last couple of years has seen several clubs enter administration and this trend looks likely to continue, particularly in the Championship, League 1 and 2 clubs who survive on moderate TV money and small crowds.

UK Fraud Spirals Out of Control!

Recent figures indicate the cost of fraud in the UK to be £30bn a year, an increase of £10bn in the last 3 years. The rise in fraudulent activity is expected to continue with no signs of slowdown in the near future. A key problem in this area is the lack of people being caught and dealt with properly by the courts, put simply the deterrents aren't strong enough to prevent the criminally minded attempting and, in increasing numbers, benefiting from their ill-gotten gains.

It was anticipated that the Fraud Act 2006 (designed to make it easier to gain convictions against fraudsters) effective from January 2007 would have an impact on the level of fraud and lead to an increase in successful prosecutions. Figures released by the government this year show that the number of successful fraud convictions has declined from 14,300 in 2007 to 13,200 in 2008. This is hugely disappointing at a time when the growth rate in crime itself is spiralling out of control.

The concern amongst credit managers I speak to is the lack of direct action by the authorities in combating commercial fraud. I believe the government and police must do more to protect legitimate business trade, however past experience has shown that those tasked with dealing with the problem have all too often been under staffed and under resourced. With the proposed reductions in future public sector spending, I fear this trend is set to continue.

The message I would give to business owners is clear; it's down to you to protect your own organistaions! The deterrents currently in place simply aren't strong enough to prevent fraudsters from attacking your business.

Link: http://news.bbc.co.uk/1/hi/business/8473167.stm