UK Trade Deficit Widened In May

Figures have revealed that last month the UK’s trade deficit widened, and at RTA Business we ask what this means if you are looking to sell your business.

RTA Business, the Business Sales Specialists

When you decide it’s time to profit from your hard work and sell your business, RTA Business are here to help. With our expertise, you can be sure that you will find the right buyer for your company.

Therefore, we know how a potential buyer thinks when they’re considering whether to take your business off your hands, and one of their main considerations is the economy. Is the economy strong enough to make sure that when they take over, the firm they’ve bought will grow and make them a profit?

What Is The Trade Deficit?

That’s why the UK’s trade deficit figures are so important to note here. A trade deficit is basically the amount by which a country’s imports exceeds the values of its exports; in other words, they’re paying more than they’re taking in, leaving less funds to devote to economic growth.

It appears that the UK may be paying more out than it’s taking in right now, as the latest figures from the Office of National Statistics (ONS), have revealed that last month, the UK’s trade deficit grew, in no small part, on the back of aircraft imports.

Why Did The Trade Deficit Widen?

Specifically, the ONS revealed that the UK’s goods trade deficit widened to measure just over £9.2 billion. This is rise from the £8.8 billion figure for April, which was famously revised because of an initial miscalculation of oil imports.

So essentially, last month saw the goods deficit widen by a margin of £400 million, and figures have gone on to show this was largely pushed up by aircraft imports; which are notoriously high value and traded fairly infrequently. However, their impact was in part offset by the country’s services sector, which measured a £6.8 billion surplus.

What Does This Mean for You If You Are Looking to Sell Your Business?

So what does this mean for you if you are looking to sell your business? Obviously, the fact that the deficit widened suggests a weaker economy, which could be bad.

However, the fact that aircraft imports are so infrequent, means that this is unlikely to be indicative of larger economic trends, and that it’s unlikely that these figures will dissuade a potential buyer from thinking now is the right time to take your company off your hand!

If you want to learn more or need to speak to a member of the team, please contact the RTA Business Complaints department today.

Inflation Rise for First Time in Ten Months

News sources are reporting this week that the UK inflation rate has risen for the first time in ten months. What does this mean for the country’s economy and what could it mean for you if you’re thinking of selling your business right now?

The Importance of Inflation Rates

Inflation rates are a pretty important benchmark for the business community. They’re basically the percentage that prices are rising above wages. Generally, if an interest rate rises, it means that the public are paying more for goods and services, which could either be good or bad for business, depending on the circumstances.

For the past ten months, inflation rates have either stayed flat or have fallen due to a number of factors. These include the economic recovery, the interest rate policy put in place by the Bank of England (holding their benchmark interest rate at 0.5%) and wider gains in the global economy.

Inflation Rise by 0.2%

However, it is now being reported that the Office for National Statistics (ONS) has announced that the national inflation rate has risen for the first time in ten months according to the Consumer Prices Index (CPI) – the country’s main measure of inflation, which charts it based on commercial performance. Specifically, the ONS reported that it rose to 1.8% in April, a 0.2% jump from the 0.6% recorded for national inflation in March.

According to the national statistics expert, inflation has risen due to higher transport costs, including air and sea travel. However, they also noted that inflation measured by the Retail Prices Index (RPI), the country’s other tool for measuring inflation, stayed level. They also suggested that rats on the CPI were likely pushed up due to the costs traditionally attached to the Easter Holidays, which were later than usual this year.

Furthermore, the ONS went on to note that travel costs were pushed up by a hike in petrol prices, but that these rises were offset by a fall in food prices, and that despite the rise, inflation still sits below the 2% target set by the Bank of England.

RTA Business Comments

So what does this mean if you’re looking to sell your business? At RTA Business, we recognise that the strength of the recovery means it’s a fantastic time to profit off the sale of your business and the fact that inflation still sits below 2% means that this hasn’t changed.

Are Difficult Times Ahead for Emerging Economies?

This month has seen the reality of the global economy hit as markets across the world are down due to the released of data indicating weak manufacturing growth in America and China. Considering this vault face, RTA Business believes that along with other issues, this may indicate that there could be difficult times ahead for emerging markets.

Emerging markets have generally been seen as growth markets in recent years. The global economic recovery as well as the emergence of China as a financial world power has meant that these countries are seeing rising rates of investment (particularly from China). This has strengthened their economies.

However there are several issues at the moment which could have a deep impact on nations that fall into this bracket. The first is the global dip in prices this month that took place on the back of evidence of slowing economic growth in China and the US.

The beginning of this month saw the Dow Jones fall over 300 points and US stock data fall by 2% on the back of growth falling from 56.5 to 51.3 in US manufacturing, as measured by the Institute for Supply Management (ISM). Chinese stocks also took a hit after figures reported a five month manufacturing low in January.

Another factor to this situation is the withdrawal of the US stimulus. This month the US Federal Reserve announced that it was cutting this monthly bond-buying scheme to $65 billion from $75 billion because of evidence that the US is in economic recovery.

Another factor is the general slowdown of China and other BRIC countries. China has been one of the heaviest investors all over the world, especially in markets such as Mexico, Brazil and Argentina.

However a number of issues have indicated that the Chinese economy is experiencing its own slow down. As well as it’s already mentioned weakening manufacturing growth, general levels of growth are also reported to be down and recent rumblings out of China have revealed that local governments in the country are dealing with billions of dollars’ worth of bad  debt (debt they can’t pay off).

Considering the US and China’s roles in stimulating growth through investment in growing markets, it’s easy to see why said markets may be headed for difficult times. The stimulus withdrawal has already had an effect because it means the US is pumping less money into these markets, meaning their economies are shrinking.

At RTA Business Consultants we’d suggest that you keep track of what’s going on in this sector of the global economy, as these things tend to have a knock on effect that could affect your business. It’s always best to be prepared.

Eurozone Experiences ‘Dramatic Recovery’

The head of the European Central Bank commented at Davos this month that the Eurozone has experienced a ‘dramatic recovery’ economically. What does this mean for business interests throughout the Eurozone?

The comments were made by Mario Draghi, the head of the European Central Bank at Davos, Switzerland. The Swiss town was playing host to the annual World Economic Forum.  This is a meeting of the best and brightest in finance and economics to discuss the state of the global economy. Professionals at Davos included politicians, bankers, investors, economists and even the odd celebrity or two.

The conference itself came to a somewhat cautious conclusion. Experts seem to agree that the world has come out of recession. However there were problems such as the serious fall in the value of the Argentine peso and the rising tensions between economic heavyweights China and Japan that were highlighted as potential roadblocks to further economic growth.

The Eurozone itself was particularly unlucky in the wake of the 2008 economic crash. Economies such as Greece, Italy and Ireland all had to be bailed out by the EU to avoid bankruptcy. Inflation was also a particular problem and economic growth stalled to a standstill in the zone at the height of the crisis.

It was a surprise to many then that Draghi was so positive about the Eurozone. At Davos he has been quoted by the BBC as saying that “risks have decreased across the board both for core Eurozone countries and the periphery”.

Draghi then gave the reasons why he believed the Eurozone has recovered. He primarily cited rising rates of exports to non EU countries as the reason for the economic vault face. However he also noted that domestic activity was picking up with consumers in Eurozone countries increasing how much they spend.

He also notably pointed to inflation to prove that the Eurozone is in full-fledged recovery. Eurozone inflation rates stand currently at 0.8% and Draghi assured the conference that it could reach its 2% target.

For business Acquisition this is particularly good news. British business’ often heavily trade within the Eurozone; falling Eurozone values make this trade less lucrative, aiding in the devaluation of a business on the market. This means basically that buyers pay less to purchase said business. A stronger Eurozone puts business owners in a stronger position when they want to sell.

At RTA Business we believe this highlights a key economic principle; we all benefit when an economy strengthens. Let’s hope 2014 is as positive for the Eurozone as 2013 was.