There are several reasons for this, mainly the speed and generosity with which now former Chancellor Rishi Sunak supported the economy when Covid began sweeping these shores.
His generosity included £ 80 billion in government-backed Covid-19 emergency loans; 12 million jobs backed by a permit at a cost of £ 70 billion; the £ 700 million “food to help” plan; in addition to millions of grants for small businesses and numerous tax cuts.
The Treasury broke the tax regulations in an effort to prevent a repeat of the Great Depression of the 1930s.
This drove a frantic boom in savings and helped drive consumer spending, boosting demand at a time when households would normally struggle to tighten the cords of the portfolio.
Businesses have been even more isolated for a prolonged era of super cheap money. But after more than a decade of very low interest rates and lax printing of central bank money, the good times are coming to a halt and the carpet is being removed from under UK plc.
Nowhere is this more evident than in the private capital crisis of recent days. First, the planned sale of Unconditional Boots on the main street was withdrawn, with US owner Walgreens blaming a “unexpected and dramatic change” in the financial markets.
This was quickly followed by the collapse of a £ 15bn bid by KKR and Macquarie for the UK’s largest electricity distributor, UK Power Networks. His suitors said the talks had broken down because the company’s Hong Kong parent company had demanded a higher price as a result of the inflation spiral.
There will definitely be more. A city figure I spoke to recently spoke of a “cold wind blowing” on the square mile, with mergers and acquisitions and stock quotes that have been left out on the left, right and in the middle.
There will be fears about the expected floating £ 50bn of GSK’s consumer health branch, as well as any of the big deals financed with costly high interest debt as the boom ended, mainly acquisitions of private capital of Asda and Morrisons.
Investment bankers should not be too alarmed. As always, as the cycle turns, the acquisition boom is quickly replaced by urgent cash collection exercises, forced asset sales, and help restructure stretched balance sheets. But it is accounting firms, transformation experts, and insolvency specialists who will rub their hands happily.
Corporate costs are also skyrocketing, leaving executives with difficult decisions to make about whether they live on tight margins or pass them on to customers, a dilemma that has manifested itself in the Battle of the Beans as two titans in the world. corporate, Heinz and Tesco, fight over who should swallow most of the price hikes.
With data from retail forecaster Springboard predicting a prolonged period of pain, there is already speculation about who will follow AO World in the emergency room.
HSBC, perhaps prematurely given that it publishes its annual results on Thursday, has become very bearish with power chain Currys, halving its stock price target by halving earnings expectations for 2023 by a quarter.
AO World will not like the comparisons, as investors have backed its cash call, but there are parallels with the financial crisis and Woolworths ’fate. When credit insurers ruled out coverage, it quickly broke down, causing a decade of unrest.
This time, a fast-talking fridge mogul from Greater Manchester may be the first to feel the cold winds of the recession.