How are firms coping with the credit crunch?

Last updated 13:24, Friday, 07 November 2008

IN the wake of the Bank of England's one-and-a-half percentage point cut in interest rates to three per cent, finanacial analysts are warning that this signals we are heading for a long recession. The cut, the biggest since 1981, comes as the International Monetary Fund predicts that developed economies will contract for the whole of the coming year for the first time since the Second World War. Despite these dire predictions, some South cumbrian businesses are still holding their heads up high. DAVID PICKTHALL, SAM WALKER and JOHN SIMPSON report

BRIAN Moxham, who runs the collectors shop Pepperland Collect, in Barrow, has, like many businesses, been hit by the credit crunch.

But on the sunny side he is also benefiting from it as more people are selling their nostalgic knick knacks and offering them at realistic prices.

Mr Moxham gave up his automotive engineering job three years ago to make his hobby his business.

He is soon to reopen his shop in Scott Street after moving from Buccleuch Street where his three- year lease ended in October.

He said: “The credit crunch is a problem and I am downsizing because people are not spending the same.

“But because of the credit crunch I also have a lot more people coming in and wanting to sell.

“If you can get stuff in at the right price you can sell it at a reasonable price. People are more prepared to let things go at a reasonable price. I think some people are beginning to find things are a little bit tight.”

Pepperland Collect is due to re- open in its new premises next week and Mr Moxham is determined to get through to the other side of the recession.

A business thriving in the credit crunch is The Range, which has just invested £1.5m converting the former B&Q in Abbey Road into one of its popular discount stores for home and garden products.

Trevor Rebello, marketing director at the group’s Plymouth head-quarters said Barrow’s The Range had been packed for its first two weeks.

He said: “Barrow has been probably one of our top trading stores for the last two weeks. It has really kicked off with a bang.

“If everyone was spending it would be better for us than some people spending. But the credit crunch is not nearly as bad for us being a value retailer. We don’t feel the impact like a John Lewis store would.

“People who can’t spend as they used to and who used to shop at a high end retailers are now thinking ‘we’ve still got to buy stuff, we’ve got to furnish our home or do our garden’.

“What has changed is where they shop. People are going to value shops and shopping smarter. We stress our concept is every day low prices. You can walk into a Range store and find what you are looking for and not have to worry whether it is cheaper down the road.”

A Millom shop owner has said the economic downturn has not dramatically affected business.

Arthur Ferguson, who own’s Ferguson’s on Wellington Street, and Kiddies’ Corner, says business in his haberdashery store is ticking over despite the current financial climate and explained that stores like his can even benefit from it.

He said: “The big wholesalers are all feeling it. You can do deals with them at this time and get a better price. We sell lots of little things, we had a good week last week during half term and with the winter weather coming in I hope we will have people coming in to buy duvets and blankets and thermal underwear.”

One area of the economy that is unarguably in decline is the housing market.

Yesterday it was revealed by Halifax that house prices dived by a record 15 per cent during the past year, wiping nearly £30,000 off the average home’s value.

The latest fall left the average home costing £168,176, down from around £197,698 in October last year. However, an Ulverston finance expert has told homeowners they should not be scared by credit crunch horror stories. Steve Woodburn, of Woodburn Mortgages and Insurance, insists homeowners can safely get through these hard times if they just plan ahead.

Mr Woodburn, boss at the Lower Brook Street broker, said: “With rising fuel, food and drink and utility costs, the future looks bleak. However help is at hand and is closer than you think.

“It’s awful to see people losing their homes, but it is really important to address the matter before it comes up. Mortgage payments can be reduced significantly just to get people through these hard times.

“When arranging a mortgage or re-mortgage it is important to ensure adequate protection is in place. It’s just a case of ensuring that protection needs are identified and tailored to meet individual circumstances.

“Various insurances are available, ranging from mortgage payment protection, to income protection, to life assurance or critical illness insurance.”

Mr Woodburn also reassured those worried about losing their bank savings.

He added: “Some people are worried about having savings in banks. If these people have a mortgage, a safer place to store their savings could be with an offset mortgage.

“For example, if a borrower has an offset interest-only mortgage for £100,000 and £25,000 in a savings account with the lender, he can opt to waive payment of interest on his savings.

“That enables interest to be charged on a net loan of £75,000. This calculation is repeated on a daily basis.”