For the penguin, life is very simple. In order to survive the four worst months of an antarctic winter, they need 8 good months beforehand in which to build up their strength.
But how many good years will companies need to survive the next economic downturn when it comes? Let’s call this the Penguin Test.
When one looks at the recessions/downturns over the last 40 years, they tend to come around every 6 or seven years. The time between the Internet bubble downturn in 2001/2002 and the credit crisis/ Lehman Bros collapse in 2008/2009 was no exception to the rule…… but the trouble was that the global GDP growth differential between where it was at the start of the downturn and where it fell to at the bottom was bigger than previously seen- a full 5.8 percentage points. What will happen if the next downturn comes around quicker than 6 years? Will companies have the time to build up strength to withstand the economic pressures? Or will they be more vulnerable to a downturn? If the latter turns out to be true, the fall in GDP around the world may be even greater than we’ve just experienced.
I think businesses should start to act like the penguin; accept the inevitable fact that hard times do come around on a regular basis, prepare for them, and keep looking for early signs that the economic weather may be getting colder!
Steve Absolom and Will Wright from KPMG Restructuring have been appointed joint administrators to City Motor Holdings and associated companies
Partners from Johnston Carmichael have been appointed as joint administrators to Axon Well Interventions Products UK
Begbies Traynor have been appointed administrators of William Anelay Ltd, York, one of Britain’s longest-established construction and heritage restoration companies
Smith & Williamson has been appointed administrators of charity 4Children