Feeling the crunch? Wait 'til you feel January...
I've been in Northern Ireland all day, speaking to small and medium-sized businesses about the impact of the credit crunch. It's incredibly mixed: there are some sectors that are just not going to be directly exposed - such as, if they are managing right, anybody whose main client is the public sector. Also the defence cluster and the globally-focused materials handling cluster seems to be surviving well.
But today was also the day Seagate hit the news with hundreds of job losses from its assembly plant. And I also heart some horror stories about what's small firms in the services sector, construction and the like, as a result of the credit crunch.
A bank manager described to me, generically and with no names, the way many firms' cashflow situation is worsening; how their access to even short term overdraft extensions is now curtailed and that, basically, there is - as HBOS found out - queue for credit and you don't want to be the last in that queue. The number of firms with unpaid invoices over 60 days is rising fast; so are overdrafts; you are also seeing credit insurance rising in cost.
I stress this is not yet the norm, but what everybody with a story to tell confirms is that it all started in June. This is the worrying thing...
June was the big fall off time in the economy and it has not bounced back. This has ominous overtones for the rest of the UK because this part of the world has a 2 week holiday in June, whereas much of England takes its holidays in late July and August.
People are not shouting about their credit situation in most of British business; they are tending to do it through industry bodies. For example we know that HGV drivers and building contractors are the most typical small traders seeking debt counselling, not because of their industry body but because of the debt counselling industry's intelligence.
Because I've spent two weeks bouncing around the soul-less caverns of lower-Manhattan, I feel out of touch with this story. It's all happening very quickly - and if you correlate the anecdotal experience with the charts you see it's all the result of the big spike in risk indicators in March/April, around the time of the Bear Stearns bailout. The bad news is that, last Friday those same risk indicators (I am using Dresdner's economics team's "ARPI" index) stood at double their peak around Bear Stearns - before falling back slightly on the bailout plan.
We will see next if the stalling of the bailout plan in Congress spikes the global risk and contagion indices even higher. If so, while small businesses are feeling a backwash now, that backwash is from a wave that struck in April; the wave striking now will mean a very bleak January for many in retail, services etc, even if the bailout goes through. If it does not go through in the next few days ... well I hope there is a good budget hotel in the city your jumbo jet has to divert to as it is foreclosed.
I'll be on Newsnight tonight to explain the latest compromise on Capitol Hill. My colleague Peter Marshall is on the scene in the US to watch the stunning spectacle of a presidential election put on hold.