Contemporary problems and challenges faced by small and medium businesses in London and ways to overcome it
There are a number of problems and challenges facing small and medium sized businesses in London. Getting access to markets, decrease in profitability, problems accessing external finance sources (banks/loan companies), shortage of skilled labor, inability to source appropriate equipment, lack of funds/money, and limited cash funds are some of the problems and challenges. Additional problems the small businesses face include cost of premises, transport, housing, and crime.
The National Chairman of the Federation of Small Businesses (FSB), John Walker, said that small businesses are key to sustaining economic recovery across the UK and urged the Government to ensure that the needs of the small companies are kept in the agenda during the FSB’s Annual Conference in Liverpool in March 2011. First, the extension of the national insurance contributions holiday to include existing businesses and secondly, the introduction of a fuel duty stabilizer to help firms’ cash-flow. (Small Firms are key to strengthening the recovery, says FSB Chairman. FSB News Release PR/2011/24. 18 March, 2011. Viewed 3 May, 2011. <http://www.fsb.org.uk/News.aspx?loc=122&rec=7012>.) Mr. Walker also emphasized the FSB’s key achievements since the Coalition Government came to power. These accomplishments include the commitment to reduce regulation, including the exemption of micro-businesses from time to train legislation; the extension of the Enterprise Finance Guarantee and the re-introduction of the Enterprise Allowance Fund as well as a commitment from the central government to make the procurement process simpler.
“2010 was a tough year and 2011 looks like it’s going to be much of the same as the public sector cuts begin to bite, unemployment remains high and the GDP contracts. The UK’s 4.8 million small businesses are best placed to help the recovery, but they need a helping hand. We need to see the Chancellor use the Budget to create a country fit for entrepreneurs by providing incentives for businesses to take on staff and for self-employment to become a viable choice for the unemployed.”, said Mr. John Walker. (Small Firms are key to strengthening the recovery, says FSB Chairman. FSB News Release PR/2011/24. 18 March, 2011. Viewed 3 May, 2011. <http://www.fsb.org.uk/News.aspx?loc=122&rec=7012>.)
So what is being done thus far? In a recent article on the UK Guardian:
“The fragile state of the British economy was underlined again on Wednesday by a sharp increase in the number of UK firms in financial difficulties and profits warnings from two more companies listed on the London stock market.
Begbies Traynor, the insolvency specialist, reported that 186,554 UK businesses were now experiencing “significant” or “critical” financial problems, a 26% rise over the last three months, and 15% more than a year ago. Companies which rely on discretionary spending are suffering particularly badly, as consumer spending falls.
According to Begbies Traynor, there has been a 68% rise in the number of bars and restaurants in significant or critical distress over the last 12 months. The leisure and culture sector has seen a 60% rise in this level of distress, while the sports and recreation sector showed a 23% rise.” (Wearden, Graeme. “Insolvency firm’s Red Flag list shows rise in distressed UK companies. Guardian.co.uk. 13 April, 2011. Viewed 3 May, 2011. <http://www.guardian.co.uk/business/2011/apr/13/begbies-taylor-red-flag-list?INTCMP=SRCH>.)
Legal actions against debtors show that creditors are attempting to maximize cash collection from their customers. Oil prices and the increase of the UK VAT in January has made cash flow and credit control key priorities for most businesses, with many going through the courts to achieve this.
The FSB has launched a Local Government Manifesto which they hope will urge local authorities to look into the businesses which operate in their localities to ensure prosperity and jobs. Due to the major budget cuts, councils may try to compensate shortfalls in cash-flow by raising the cost of services in an effort to raise revenue quickly. The Manifesto states the following points:
· Respond to financial challenges – Councils must think about the impact that proposals to cut services, revenue-raising through increases to parking charges or taking on new commercial activities would have on small firms
· Help businesses – Local authorities should promote rate relief and targeted discounts for small firms, retain vital business support, ease the regulatory burden and use the planning system to better support local high streets and town centers
· Engage with Business – Businesses are a key part of the community and need to be consulted regularly on the issues that affect them and must be properly represented on LEPs
· Think small, think local – By procuring more products and services locally, the local public sector can help support small businesses and start-ups in their area generating wealth and employment.
(Local authorities can make a big difference if they think small first, says FSB. FSB News Release PR/2011/26. 18 March, 2011. Viewed 3 May, 2011. <http://www.fsb.org.uk/News.aspx?loc=122&rec=7015>.)
These hurdles can be helped by a commitment from the councils to work constructively with the small businesses to improve the economy of each of the local areas.
Credit:ivythesis.typepad.com
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