The Business Hub Podcast Archive
The Business Hub is a weekly radio show broadcast on Star Radio Cambridge each Sunday morning from 9-10 am covering topical business issues to help anyone in business succeed. It is also available online and for download at www.thebusinesshub.info
Insight Associates sponsor a feature on ‘helping businesses to better manage their money’ with Garry Mumford giving an interview each week on all aspects of money management for business.
The Business Hub Show - 13 May 2012
Small Businesses are the Solution
The Business Hub Show - 13 May 2012
It seems that growth is eluding our country at the moment, and also many businesses. Just a couple of weeks ago we were told we were back in recession – in a double dip! The media went wild with stories of doom and gloom, and made an excellent job of making us all feel bad again.
This is all about meaningless statistics. The official definition of a recession is two consecutive quarters of negative growth, however the reality is if we are not growing we are in the doldrums.
The media reaction so appalled me that I wrote a blog about it which highlighted what a nonsense it all was. The reality is that we have not really been out of recession since the end of 2007, where with just one slight exception we have not moved above 1% growth since then, and then it was only just over in one quarter. Without sustainable and sensible growth we are not going to move forward.
And, to add insult to injury with all this double dip hype, did you realise that the figure of 0.2% negative growth in the last quarter is just an estimate – based upon just 40% of the available data! Like I say, it is all a nonsense.
If we are going to avoid just bumping along the bottom for years to come – we have already been doing it for nearly five years! – then something must change. And I believe this change has to come from the small business sector. The Government cannot afford to invest in public infrastructure to stimulate growth, it’s priority is to reduce debt. Whether that is right or not is perhaps another debate. Neither can we have an economy as we had before dependant upon consumer spending fuelled by debt. The answer is in fact with small businesses. The small businesses that employ something like 97% of all UK workers outside of the public sector.
As I said in my blog these small businesses are our future, but they are (in the main) taking a very cautious approach. They are not innovating, taking risks, or moving forward. They need help. Like a frightened animal they need encouraging out, reassured, incentivised and shown a better option. At the moment I do not see where that is coming from?
I am not entirely sure what the right answer is. Perhaps no-one really knows. But it certainly isn’t nonsense schemes like the new National Loan Guarantee Scheme, which does not do what it says on the tin! All this appears to be is a scheme to very slightly reduce interest costs, it does not guarantee anything, it does not encourage lending, and it does not encourage the banks to change their attitude towards the propositions they are seeing. We need something that will change the landscape, not play around with it!
Funding is part of the problem, but far from all of it. The banks have been taking quite a bashing for not lending but I am not entirely sure all of that is fair. As a very senior banker at an event I was at recently said, the problem is that all the businesses that they want to lend to don’t want to borrow and the ones that want to borrow they don’t want to lend to! There is though a serious message here. Those that have to borrow because they are perhaps distressed or have very tight cashflows are not good propositions for any bank, but the ones that would be that are strong and should be looking to grow are just keeping their heads down.
However, it is also true that you do need a pretty strong proposition to get a bank interested. The days of liberal lending are gone and we all have to live in the new reality. There are though alternatives, and an increasing number of them. This week even the short-term high cost pay-day loans company Wonga have entered the business loans market! I thought therefore it would be useful over the next few weeks to investigate some of these alternatives. So that is the plan for the next few shows, and we have arranged for some experts to come in and explore that with us.