I’m not sure the timing of our webinar with the Bank of England could have been much better.

We thought it would be good to get the excellent Phil Eckersley to talk our clients after furloughing had come to an end but of course at that point we didn’t know that Lockdown 2 would be underway. And let’s not forget the impact of the US election on the economy and on the government’s ongoing negotiations with the EU.

Wow! Phil is going to have his work cut out to cover the impact of all of these issues.

And then there’s the financial deficit.

There’s barely any small business out there who hasn’t benefited in some way from the array of government help. But somewhere along the line, it’s got to be paid for.

There’s an ongoing joke on “Have I got news for you” where they show a picture of the Prime Minister before Covid (obviously Boris back in March) and a picture of the Prime Minister after Covid (when instead of a slightly slimmed down Boris, they show a picture of Rishi Sunak).

There’s no doubting the Chancellor’s popularity. And most people had never heard of him a year ago.

As a bit of an amateur economist who read loads of economic history when the financial crash of 2008/09 occurred, it seems as if Rishi’s plan is based on the “Roosevelt new deal” of the 1930s. The term “new deal” came to encompass a range of policies designed to lift the United States out of the Great Depression.

It included what were known as the three Rs:

  • Relief (for the unemployed)
  • Recovery (of the economy through government spending)
  • Reform of capitalism (by means of legislation and the creation of new social welfare programmes)

All these changes were an attempt to stimulate consumer demand.

It could be argued that each of the three Rs are mirrored by some of the steps taken by our current Chancellor to deal with and then bring us out of the first lockdown.

Historians and economists argue about how much of the subsequent recovery was as a result of the “new deal” but no-one doubts that it played a significant part in turning the United States into the economic powerhouse it is today.

But a little nagging comparison has kept occurring to me all Summer.

The seed was planted by the return to the Premier League of Leeds United. Bear with me on this….

Leeds had three golden eras. We’ll call them the big one, the little one and the false one. The big one was in the seventies. Billy Bremner, Norman “Bite your legs” Hunter, Jack Charlton. The team only a mother could love.

Or actually because they kept winning things, the team that lots of people who were 7 or 8 in the mid-seventies chose them as their team. Which is why some of my best friends are Leeds fans. But I digress.

There was a little golden era in the early nineties and then ten years later came the false golden era.

It started with a promising group of young players managed by a promising young manager who punched above their weight. Then the chairman Peter Ridsdale started a process that he now refers to as “living the dream”. Big signings, big salaries. All funded on debt.

I remember reading an article about how Leeds had found a new source of money.

They had mortgaged their season ticket sales. The article was quite complimentary about this piece of financial genius.

As an accountant, I was aghast.

“They’ve mortgaged future income…..”.

This is the equivalent in your business of valuing your goodwill and getting someone to lend you money against that goodwill. And then using that money to fund losses.

I’d call that “financial madness”. Or “living the dream” perhaps.

Of course, it all came crashing down. A fire sale of players followed, financial and insolvency problems dogged them for years and the once might Leeds tumbled down the leagues. It took 16 years to return and a lot of heartache to return to the big-time.

It’s easy to be popular when you’re dishing out the dosh. Much harder to find ways to pay the interest and capital repayments on the money you’ve borrowed.

So is Rishi the new Roosevelt or the new Ridsdale? You decide. I’m not sure if Phil Eckersley is a football fan or not but it will be an interesting question to ask him at the webinar next Thursday.

If you haven’t booked your place, I am informed that we only have a handful of places left for this event, which due to Bank of England protocol is not being filmed, so book now to avoid disappointment.

Have a good weekend.

PS – thank you for all the positive feedback about our video “Everybody’s free to understand their management accounts”. If you haven’t watched it yet, see if you can find 5 minutes to do so.

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Malcolm Palmer


Managing Partner

01474 853856

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