CITY AND SUBURBAN
Prepare to meet your receiver, but please wait your turn in the queue
CHRISTOPHER FILDES
Ihave come across the sad case of the company which can't stop. It is bust, and ought to go into receivership. If it carries on trading while insolvent, the directors risk heavy penalties. Their trouble is that they simply cannot get in to see their prospective receiver. He and his firm are now so busy that companies going under have to wait in a queue. That, and not the inflation figure, is the indicator which the Chancellor should now be watching. Once the oil price started to take off, he was booked for a double-figure inflation rate, and the only question was when it would come through — this week, or this time next month. It has set off the predictable parrot-cries — Chancellor's policy setback, hopes of cheaper money deferred, tighter squeeze now needed to cope with higher inflation . . . . I advise putting green baize cloth over the parrots' cage. The cash squeeze on companies continues to tight- en, and the casualty list lengthens. A banker of long experience watches the sky darken, and says: 'I've never seen it coming on so fast.' The Bank of England's celebrated good offices are back in action, trying to keep creditors in harmony and discouraging the weaker and less patient banks from insisting on their rights at everybody's expense — but all this is harder than it used to be. Nowadays, banks are regulated by a close watch on their capital, under rules which are meant to be the same the world over. It can make them less amenable (especially the overseas banks) to the Bank's nods and winks. Companies squeezed by interest rates find no respite from the exchange rate. Sterling is, for the moment, a beneficiary of the Gulf crisis — there is, after all, something to be said for being self-sufficient in oil — and has been getting firmer. On top of all this, the oil price must squeeze most companies' margins, and operate on them like a tax. It is a vice of the Treasury's to give the economy one kick too many when it is on its way down, but soon enough what will be needed is a hand up. I expect cheaper money this year, and again next year.
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