Small Business: The Main Driver of UK’s Economic Growth
The starting, development and sustaining of small businesses by entrepreneurs
continue to be the backbone of the UK’s domestic economy in 2011 and are going to
be crucial in rebalancing the economic outputs altered by deficit reduction measures.
However, the country’s 4.8 million small businesses need government assistance to
make the most of their superior position in pushing for recovery.[1]
With the imposition of onerous conditions and the move towards more expensive loans,
the first quarter of 2011 saw the decline once again of lending to small businesses in
the UK in spite of the banks’ assurances to boost credit to this sector with powerful
economic potential.[2] The 141.1 billion-pound public sector net borrowing in the 2010/11
financial year was 4.8 billion pounds lower than what was expected in the budget in
March 2011.[3] It is seen as ironic that banks do not want to deal with small businesses,
which are critical to jobs and recovery, while the borrowing terms for individuals and
large businesses are easing.[4]
The Federation of Small Businesses (FSB) in the UK view the economic recovery as
still fragile, with many small businesses still struggling, and is calling for Chancellor
George Osborne to facilitate a Programme for Growth to aid the sector.[5]
Small businesses in the UK employ more people than any other sector and have proven
their worth in contributing to their local communities and in delivering national economic
growth. The FSB calls for the following in 2011:[6]
The inclusion of existing firms with up to four members of staff in the National Insurance
contributions holiday and their being provided with incentives when their employees
increase, which in turn will be sourced through the cancellation of the 1 billion-pound
Regional Growth Fund.
A five percent reduction in the construction sector’s VAT to help promote jobs and the
economy and increase revenue.
A 500 million-pound reduction of the business support budget.
Focus on supporting micro businesses and a functioning web portal.
A banking industry-backed and business-led National Mentoring Service for matching
with small businesses.
The key to economic growth is job creation in the private sector and the government
can work for the passing of Agency Workers Directive, the cancellation of the default
retirement age and the raising of the requirement for small firms to start paying VAT to
90,000 pounds in 2011 to help achieve this.[7]
On a positive note, food and non-store sales in the UK have led an unexpected 0.2
percent increase in retail sales in March 2011 as compared with a month earlier.[8]
However, consumers still feel the restriction of inflation on their incomes and spending
in spite of the modest pick-up in sales.[9]
Smaller shops like small food retailers, garden and toy stores and those selling royal
wedding memorabilia are reportedly doing better than larger stores. People are also
seen to prefer local than out of town shopping due to the high cost of petrol.[10]
Although soft furnishings are considered as partly a luxury, the small Sofin Interiors
shop in London has received a lot of enquiries and estimate requests from potential
clients. The small Poisson Fresh Fish shop remains very competitive against the
supermarkets as they have managed to sustain the healthy eating interests of people
through the spring. On the other hand, the small Star Computers repair shop is not
performing well because it is cheaper for people to buy a new computer than have
a defective one repaired.[11]
[1] Matt Johnson, “Small Businesses are Critical to the Growth of the UK Economy”, Liverpool Daily Post.
co.uk, 30 March 2011, <http://www.liverpooldailypost.co.uk/ldpbusiness/business-features/2011/03/30/matt-johnson-small-businesse> [accessed 26 April 2011]
[2] Jill Treanor and Heather Stewart, “Small Business Lending Falls Again”, guardian.co.uk, 21 April 2011
<http://www.guardian.co.uk/business/2011/apr/21/small-business-lending-falls> [accessed 26 April 2011]
[3] ibid
[4] ibid
[5] “Aid Small Businesses to Deliver Economic Growth”, Express&Echo, 13 April 2011, Source:
this is Exeter.co.uk [Online]
[6] ibid
[7] ibid
[8] “UK Retail Sales Unexpectedly Rebound in March”, News Business BBC mobile, 21 April 2011,
<http://www.bbc.co.uk/news/business-13154886> [accessed 26 April 2011]
[9] ibid
[10] ibid
[11] Ian Pollock, “Retail SalesI: How are Small Shops Doing?”, News Business BBC mobile, 21 April 2011,
<http://www.bbc.co.uk/news/business-13161275> [accessed 26 April 2011]
Credit:ivythesis.typepad.com
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