Treasury’s scaled back GDP forecasts overshadow Budget’s positive measures for growth
24 March 2011
The Government's reduction in GDP growth projections for both 2011 and 2012, announced in today's Budget, overshadows the measures put in place to help small businesses, and perhaps explains the deep divisions within the business community as to whether the economy is returning to growth, says Graydon UK, the commercial reference agency.
Martin Williams, Head of External Affairs at Graydon UK, commented: "The Budget contains a number of positive initiatives for small businesses, including a reduction in regulation intended to save SMEs £350 million, a moratorium on new domestic regulations for businesses with less than 10 employees and the extension of the business rate relief holiday for another year. This is in addition to the reduction in fuel duty and the cut in corporation tax which will also bring welcome respite for hard pressed SMEs."
"Ultimately though, opinion is split on whether such measures will be enough to resuscitate the economy in the face of rising oil and food prices, a weak property market, falling consumer spend and the continued lack of available finance for small businesses."
Research conducted by Graydon UK and published today reveals that UK risk and credit managers are split over whether the UK economy will plunge back into a recession. According to Graydon's research, 48 per cent of respondents expect the UK economy to have shrunk again during Quarter 1, to lead to a double-dip recession, compared with 52 per cent who believe that the economy has already returned to growth.
Martin Williams said: "Businesses remain very uncertain about which direction the economy is headed. If risk managers do not have a clear sense of what the future holds, as underlined by this research, then confidence levels are unlikely to improve. Businesses need far greater clarity in order to be able to make decisions confidently and this is something that the Government has failed to provide today."
The research also finds that just over half (58 per cent) of businesses saw an increase in sales turnover during January and February in comparison to the previous year.
Martin Williams said: "While this represents a positive indicator for the UK's economy it gives no suggestion of what is around the corner for businesses in terms of sales, particularly as the Government's spending cuts really begin to take effect."
The research reveals also that 54 per cent of credit managers expect the threat posed to business stability by bad debts will worsen this year and 48 per cent expect HMRC's reported tougher line on applicants to the 'Time to Pay' scheme to impact on the late and non payment of invoices. Despite this, just seven per cent of businesses are planning to increase headcount within their credit management departments.
Martin Williams concludes: "Roughly half of businesses are expecting the problem of bad debts to worsen this year, yet the vast majority have no plans to expand their credit management teams, further underlining that economic uncertainty is affecting businesses' ability to plan for the future."
