Glimmer of economic hope needs nurturing, FPB urges

Glimmer of hope? The government needs to nurture the economy, FPB urges

A business lobby group is urging the chancellor to nurture signs of recovery in the 2009 Budget.

Research conducted by the Forum of Private Business (FPB) revealed that one in four members (26 per cent) questioned as part of the FPB’s sixth Economic Downturn Panel actually reported an improvement in the market for their products and services – more than the 23 per cent that reported a deterioration.

According to the FPB this is the first time since the Panel was launched in November 2008 that more business owners have experienced positive, rather than negative market conditions.

However more than half (51 per cent) saw no change in the market. A further eight per cent of respondents said access to finance has improved. This is a stark contrast to the previous month’s survey where no-one reported an improvement in credit.

On the flip side, 19 per cent experienced a deterioration in the availability of credit, and 73 per cent reported no change.

Phil Orford, chief executive of the FPB, said: "There appear to be grounds to be cautiously hopeful, but we are still a long way from genuine and sustained economic recovery. It is important to remember that the optimism reported by business owners in January declined significantly the following month. In order to capitalise on these positive signs, the government must launch a long-term, strategic plan in the forthcoming Budget; one that helps small businesses survive and grow, and become a catalyst to broader economic prosperity."

In other results, no firms saw an improvement in late payments, although 56 per cent said the situation had worsened, and 24 per cent reported increased cash flow difficulties as their ‘key issue’.

Although the provision of credit from banks has improved for some small businesses, the cost of finance is still a significant barrier, the FSB reported. The average interest rate for loans imposed by banks is 6.4 per cent, and for overdrafts 6.8 per cent – both of which are significantly higher than the Bank of England base rate of 0.5 per cent. A further 20 per cent of SMEs reported an increase in banking fees, a 42 per cent increase over the six months since the Panel was first surveyed.

A miniscule five per cent of those questioned believed that support from the government has improved, with the same number reporting an improvement in support from the banks. A total of 25 per cent cited a deterioration in government support, and 41 per cent a decline in bank support.

Tim Rhodes, an FPB member and managing director of freight firm Skypartk Freight in Liverpool, appealed to the government to put small businesses first in the Budget.
"Different sources suggest the markets are improving, but a lot of that is false promise – we’ve never had a lower Bank of England base rate and yet the cost of borrowing remains much steeper," he said. "Look at the housing market – it is improving at the moment but, because nothing has been put together in the long term to stop the slide happening again, it will just go back to what it was before.

“Perhaps the situation is improving slightly for some businesses in certain sectors, but there needs to be an awful lot more done,” he added. “The Budget should look at the economy logically and introduce safeguards specifically designed to support small firms, so that the problems we’ve had don’t happen again."