What the Credit Suisse News Means For Small Businesses
This morning the news outlets were aflutter with the rescue deal of Credit Suisse so we’ve broken down the news to help you understand any knock on effects to businesses in the UK.
Who are Credit Suisse?
If you’re not familiar with Credit Suisse they are a large Swiss bank and have been established for 167 years. They are among 30 institutions known as systemically important banks globally. This week the Swiss Government has forced a takeover of the bank by it’s rival, UBS after it’s stock fell rapidly. This has caused some worry regarding global banking markets.
Why did this happen?
Credit Suisse has been marred by several scandals over the past few years including admitting to allowing US clients to evade taxes and subsequent fines. In 2020 their Chief Executive resigned after some corporate espionage scandals. They also lost $5.5bn in the collapse of a hedge fund in the USA a year later.
After a lot of bad publicity and leaked links with criminals and corruption, customers started withdrawing billions from the bank which led to it’s forced takeover.
What does this mean for me?
Credit Suisse in the UK mostly service private clients, investment banking and large corporates. Most UK small businesses will not be directly affected by this news at all. However, if you have used them for anything you will have probably had some correspondence that shows if there are any changes to be expected. If you have any personal shares or investment portfolios, it may be worth checking in on them to see how they are doing because the Credit Suisse share prices have been dropping substantially.
Around 5,000 employees of Credit Suisse are based in the UK so if your business does service the City of London you may want to do some more research. UBS are stating that is is too early to tell whether there will be job losses, however.
Indirectly, global banking changes like this can sometimes cause worry in the markets and many of us will remember the 2008 financial crisis all too well. It’s important to note however, that in a statement today the Bank of England have stated that “The UK banking system is well capitalised and funded, and remains safe and sound”.
Will interest rates rise?
One of the main questions banking shifts like this bring up is whether interest rates will continue to rise. Interest rates have risen a fair amount this year which has a knock-on effect to any major borrowing you may have been looking at for your business. The current Bank of England rate is 4% with the next update due to be announced on 23rd March 2023.
If interest rates rise then business credit cards and loans can have higher interest payments. There are other effects too according to Natwest “interest rate rises can force companies’ hands, with inflation driving up the pricing of manufacturing, distribution and business services, which then trickles down the supply chain”.
What should I do to make my business more resilient to fluctuating interest rates?
If you’re worried at all about interest rates the best thing to do is revisit your business plan and your forecasts. As always make sure that you’re keeping a good handle on your numbers, and if you’re a Mazuma client make sure you’re checking your reports and sending us in your paperwork. Check in on any loans or borrowing you have in your business and make sure your rates are workable. If you are thinking of borrowing any further, make sure you’re doing this within your means and accounting for potential interest rate rises.
Be aware also that the minimum wage is rising in April 2023 to help support rising living costs. If you have staff then make sure you’re accounting for the uptick in wage bills that this will bring.
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