Small Business Matters | A Blog for UK Small Businesses

The recession is the small business’ best friend

This week the BBC highlighted that now is the time to start a business, despite the current recession. There are various reasons why this could be the case, as the recession often provides unique opportunities for new businesses or it can be a necessity for those who are made redundant.

Traditionally economic downturns have spurred an entrepreneurial spirit in many. The prospect of owning your own business and managing your own career path is an enticing one for fresh graduates faced with a tough jobs market. Also in the context of rising unemployment, an attractive redundancy package has been the incentive needed for many to start up their own business.

Currently interest rates on savings are exceptionally low, thus making a business start up a more attractive investment for some budding entrepreneurs. While the costs involved with setting up a new business are still significant, it is always cheaper to do so during a recession.

Time for a new wave of young entrepreneurs?

Last week 250,000 young people across the UK anxiously awaited their A level results, but with this year’s grades reaching record highs the competition for university places is tougher than ever. Even those that achieved high grades could miss out on a place. Young people are bearing the brunt of the recession, and the latest Government stats showing that one in six 18-24-year-olds are not in education, employment or training (aka NEETs). This difficult environment could provide the perfect opportunity to foster the next generation of UK entrepreneurs.

The path from school to business owner is actually surprisingly well trodden, with many of our most well-known entrepreneurs choosing the option of starting a business as another valuable way of building their future. Examples include Richard Branson, Steve Jobs, Peter Jones, Ingvar Kamprad (Founder of IKEA), Theo Paphitis, and Lord Alan Sugar. But clearly these few successes are the exceptions not the rule, so it is vital that more help and encouragement is provided to young people that are considering their options at this time.

More VAT rate changes in the pipeline for SMEs?

In an announcement last week The Shadow Chancellor, George Osborne, has declined to rule out increasing the rate of VAT should the Tories be successful in the next general election.  Mr Osborne said that while he had "no specific plan" for VAT rates that he could not guarantee that they would remain the same.

But what would an increase in the rate of VAT mean for SMEs?  For many it will be an increasing burden in already strained economic conditions. 

A choice of banks for small businesses

The Federation of Small Businesses (FSB) has recently stated that recent mergers, recapitalisation and schemes to stimulate lending could create a bank monopoly and end up ‘stifling choices of finance for small firms’. Our recent customer survey has shown that small businesses are forced to become increasingly resourceful in order to secure funding in the current tough economic climate, as traditional lines of credit from banks have all but dried up. The fact that 250,000 small businesses are still struggling to access affordable loans does not come as a surprise, especially as last month it was reported that small businesses were turning to risky personal loans instead.