Big Government or Micro Business - We Are All Paddling Upstream

Written by Alex Barrett on .

It has been quite a difficult week for the British Government and the headlines have not really covered the half of it.

The domination of the media navel gazing in the Leveson Inquiry, what with Jeremy Hunt and both James and Rupert Murdoch providing plenty of opportunity for headlines has served to hide some issues that matter a lot more to business owners.

On Tuesday for example, the GEDI report was published. A bunch of eminent academics released “Entrepreneurial Profile of the UK in the Light of the Global Entrepreneurship and Development Index”.

Like all statistical analyses the report looks at historical data, which in this case dates back to mid 2010 as the latest period of valid data for all the countries monitored.

Unsurprisingly though it reflected that entrepreneurial activity in developed countries was dropping back while in developing countries it was growing.

The report looks at where the UK stands in a number of different areas in comparison to other countries and suggests, that overall, our entrepreneurs and business owners are performing only three quarters as well as our counterparts in the United States.

What was particularly interesting to me was that the numbers of those starting out in business in the United Kingdom are among the highest but the aspirations of those that do are lower than almost all business startups in the OECD (Organisation for Economic Co-operation and Development).

Two of the GEDI measures had me scratching my head for some time. While the United Kingdom ranks well on the non-fear of failure measure our new businesses rank close to the bottom of the risk capital measure.

It took another report, the Trends in Lending report from the Bank of England to shed light on that strange anomaly in the figures. Bank lending to small business continues to fall at a dramatic rate and has done since 2009. The reason why is that the lending spread charged by the High Street banks is increasing faster to remain positive against underlying inflation.

The Banker’s representative association, the BBA, continue their mantra that demand remains low and business is repaying debt where possible and it seems that the Government Loan Guarantee Scheme is not regarded as a serious incentive for lenders or borrowers (though it may yet prove effective).

With all this gloom early in the week, it came as no surprise on Wednesday that national growth had, probably, failed again and we are in recession – the dreaded double-dip.

The Office for National Statistics released their preliminary report and pointed out that for the figures to be revised into growth March would have to prove 40% stronger than February.  Such a revision is possible but so unlikely that neither the Chancellor nor any other commentator said the figures were anything other than disappointing.

What all the above taken together means for the micro business owner is actually quite simple. In order to grow and prosper over the next twelve months our businesses are going to have to perform perhaps four times better than the average UK business.

My own, rather unscientific, calculation assumes flat growth overall this year and that the underlying inflation rate does not come down much from where it stands now. It will make sense to every reader though, with the price of things increasing while deposits in the bank make nothing, we all need to do something.

If you have ever been canoeing on a river you will know that it is a lot easier to go with the flow than against it and to paddle upstream takes it seems disproportionately more effort than the - not inconsiderable - effort required to stay in one spot. Stop paddling altogether though and you start losing ground, even in a slow stream.

While, in Westminster and Holyrood, politicians continue arguing on how to stimulate the economy back into growth, we, the actual business leaders who are going to do it, need to be focused on the task we face and not too distracted by the media circus.

What I recommend will really make a contribution to stimulating the economy as a whole is for micro business owners to think about our clients and suppliers. We need to make our products and services more appealing than those provided by our larger competitors and explain why they will serve our customers needs better to them.

Similarly when outsourcing our own goods and services we need to think more creatively and search for other micro business to build business relationships with for mutual advantage.

At the same time we are all very well aware of the importance of keeping costs to a minimum. In this case a little creative thinking can work well for everybody. Here is a scenario you might like to think about.

You may have seen somebody in a book shop scanning a bar code to check the price of the book online, finding it cheaper and ordering it to be delivered by post.  If you are or know that bargain hunter, ask yourself whether you could get what you want at the same price and still help the micro business that is currently being undermined.

If you are the book dealer, you could sign up as an agent and offer the supplier price with the much reduced margin you may have to accept. Still 5% of something is better than 30% of nothing!

In days like these we all need to keep paddling and encouraging each other as much as we can. As the Prime Minister did not say, the Big Society means we have to help each other as the Government will not be stepping in to help any time soon.

I’d love to hear any comments you may have on this article and, if you found it thought provoking or of interest, please let your friends know about it.

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