Fiddling whilst Rome burns?20th October 2008
Well apparently it's nearly official - we are in recession! According to a report from Ernst & Young's ITEM Club today, which forecasts the UK economy will not bottom out before the second half of next year and expects only a weak recovery in 2010.
It predicts that UK GDP is likely to drop by 1% next year – the first year of negative growth since 1992 and growth is forecast at only 1% in 2010. They warn that the supply of credit is likely to remain restricted and corporate profitability will suffer, with the consequential impact on investment and employment.
This is serious stuff for the UK's smaller businesses, and the time to act is now!
What is quite staggering is the initial political response. Mr Cameron seems to think reducing Employers National Insurance Contributions by 1% for six months is part of the solution - saving employers with four or less staff a whole £600 - WOW! That will really help I don't think! And not wishing to be politically bias, our incumbent Government believes not introducing further flexible working requirements will help too ....really!!??
What smaller businesses will need is some real help, not this petty fiddling around the edges. They need help to ensure their cash flows are not shot to pieces by draconian actions by the banks, or customers dragging out payments. A good start might be extending the Small Firms Loan Guarantee Scheme to cover existing lending so that businesses can support the funding they need when their own security is weak?
Businesses do not need hand outs, what they need is the reassurance that they can operate profitably in this climate, and the help and support with the funding they need to do that. I don't think £600 will go very far!
While you're running your business in a recession, who's watching your kitty?