Where will money be made in the next five years?

The four million members of Enterprise Britain continue to battle away developing their businesses in a system which offers them little help and no encouragement. Yet all agree that they are the cornerstone of our economy.

However there is some GOOD NEWS.

Within the next few years there will be a revival of the smaller shares markets with the result that equity capital will become more available. This will allow business owners to underpin their capital positions and secure the finance they need to build successful businesses.

Drury’s Law applied over the last few years as advisors were desperate to find deals to take fees out of ie. bad deals have driven out good deals and there is little new money for business owners. However as we begin the up cycle out of recession a number of factors will lead to a renewed enthusiasm for smaller company shares. The good companies will have survived and the bad advisors will have disappeared – at least for a while. This means there will be real opportunities both for companies and for investors.

Some people will not be making money over the next five years (over and above basic salaries which will be taxed to high heaven):

1. Anybody depending on the public sector. Government debt is so huge there will have to be draconian cutbacks. Maybe we will finally see all those ridiculous consulting fees go out the window.

One exception will be the highly paid officials at the Financial Services Authority (“FSA”). Lord Turner will be spending a fortune putting in a new regulatory system which won’t work and is not needed. After all the regulations were fine – it was the implementation which failed.

2. Bankers (many of whom are now public sector workers). That is because their investment banking colleagues will not be making their silly profits. SIVs (Special Investment Vehicles) are a thing of the past.

3. Credit driven entrepreneurs: their days are over because no banking risk assessment measure will allow their support. In fact it will be interesting how banks will assess risk at all.

4. Hedge funds: the volatility of the rampant bull and bear markets will not be seen again for a while. Not many of us will miss them.

5. Property speculators. Whilst property prices will revive the stricter control over mortgage lending (especially in the commercial sector) will mean the easy money is a thing of the past.

So the opportunities will lie once again with Enterprise Britain, the sector the politicians love to call small and medium enterprises – SMEs. This is the sector which always drives the economy forward and where the hidden gems are. The main questions are whether your business is a hidden gem and whether that will be recognized.

1 comment for “Where will money be made in the next five years?

  1. John Greengrass
    28 March, 2009 at 19:31

    Hi Tony,

    It is imperative that UK government comes froward with a credible and workable plan to get the UK economy out of this very big financial hole. The trouble is that proposing to raise taxes is political suicide. The cop out is printing money. Inflation rockets which shrinks true value of debt and after 10 – 20 years problem solved!
    Going down the QE / printing money route the value of sterling will plummet and the price charged to UK PLC for borrowing money will rocket. That adds up to two things, weaker sterling = supply side inflation i.e. the price of everything we import becoming more expensive, and secondly, the higher interest rates that buyers of UK gilts will demand to compensate for the depreciating value of the pound will translate to higher borrowing rates for the man in the street. Who will suffer most – anyone on a fixed income. Unfortunately, that encompasses the whole of the growing population of retired people.
    Current low interest rates are the calm before a very bad storm.

    Businesses that sell products and services that people want to buy will always do well. We are in the age of the niche operators that can get close to their customers. Big businesses like the banks have generally lost touch with their customers. Their customers have made other arrangements and avoid having to deal with their bank at all costs! Its too painful. Banks deal with customers in a way that is convenient for them. It should be the other way round. Many other big businesses are the same. There is a massive demand for personal, tailored and user freindly services where you can get what you want without jumping through hoops and where you can speak to a human being. And we are in an age where there is no hiding place for providers of bad servce. And where great ideas can flourish.

    I will now climb off my soapbox and sign off.

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