Worst of the recession is over
24 August 2009
| Recent economic indicators suggest that the worst of the recession is over. The large contractions in economic output witnessed in the final three months of 2008 and first three months of 2009 showed how severe the fall-out from the credit crunch was, says David Frost, Director General of the British Chambers of Commerce |
| He continues: "However, some of the factors driving that contraction, such as destocking and the chaos within the banking system, have dampened recently. "That is not to say that risks to the economy do not still exist. There are very real dangers that threaten the wealth creating business community. These dangers include a lack of demand, a sluggish return to growth for the UK’s main trading partners and, crucially, the suitability of Government intervention to support economic activity. "Furthermore, the recession has resulted in a massive expansion of the nation’s debt obligations and, as politicians dance around the subject, it is imperative that a clear exit strategy for improving the UK’s finances is set out. This will require some tough decisions, not least addressing public sector pay and public sector pensions liabilities. "In whatever way that this is dealt with, there needs to be recognition of the implications of spending cuts and tax rises. Increases in business taxes should be avoided at all costs, as this will only smother the enterprise which will drive us out of recession. A perfect example of a misguided approach is the National Insurance Contributions increase planned for 2011. This is effectively a tax on jobs, at precisely the time when everything possible should be done to encourage businesses to take on staff. "The British Chambers of Commerce has 100,000 members, spanning the length and breadth of the country. I have day-to-day contact with these businesses and have observed over the past year how they have adapted to the challenges that the recession has thrown at them. Above all, our members are pragmatic and versatile, and the speed at which they have countered the economic downturn has been impressive and encouraging. "A large majority of the businesses to which I speak has cut all excess out of their operations. This unfortunately means unemployment, and firms that have had to make redundancies have done so reluctantly, as it can mean the loss of skills and experience which will hinder growth when conditions improve. However, this has been countered by some companies, which have used the flexible labour market to introduce short-time working to retain staff. Further observations are that firms are trying to penetrate new markets: Larger companies are entering markets previously regarded as too small for them, or entering related markets to the ones that they already operate in. It is this dynamism that will help businesses as the recession bites. To its credit, the Government has provided some effective support in response to the downturn. The HM Revenue and Customs Business Payment Support Service, allowing firms to spread tax payments, and the Enterprise Finance Guarantee, which offers state guaranteed bank loans, have both been useful tools that have helped businesses with cash flow difficulties. "The Chambers of Commerce network has also been providing invaluable assistance to businesses to help alleviate the pressures placed on them through the economic downturn. Chambers currently provide a number of front-line services on international trade, such as providing origin certification, trade advice and expertise. Also, the Chamber movement is one of the largest sources of work based learning and training in the UK, helping hundreds of thousands of employees to increase their skills each year. "In addition to this, Chambers have created workshops, held seminars and networking events, set-up business clinics, provided confidential help lines, signed up to payment pledges, provided legal advice, and offered resources to help businesses find new suppliers and customers. "It will be small and medium sized enterprises that drive the UK out of recession. The help that they receive, such as that provided by Chambers of Commerce, is targeted efficient and directly aimed at addressing business problems. The Government should keep this in mind when developing its policies targeted at business. This excerpt was taken from the introducer.co.uk website |
