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Budget to Nurture Business Recovery
Date Added: Mon April 20 2009

Following some signs of 'green shoots', the FPB is urging the Government to put in place a strategy to nurture economic recovery by boosting business and consumer confidence.

In all, one in four members (26%) surveyed as part of the FPB's sixth Economic Downturn Panel, which is published on 17 April, reported an improvement in the market for their products and services – more than the 23% which reported a deterioration. 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. More than half of respondents (51%) saw no change in the market.

In addition, 8% of businesses surveyed in April said access to finance has improved. In the previous month's survey, not one respondent reported an improvement in credit. However, in April, 19% experienced a deterioration in the availability of credit and 73% cited no change.

"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," said Phil Orford, Chief Executive of the FPB. "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."

Significantly, not a single business owner reported an improvement in risk management carried out by financial services organisations (21% said it had deteriorated, although this was less than the previous month). In addition, no one saw an improvement in late payments, which 56% said have worsened, with 24% reporting increased cash flow difficulties as their ‘key issue'.

Although the provision of credit from banks has improved marginally for some small businesses, the cost of finance remains a significant barrier. The average interest rate for loans imposed by banks is 6.4% and for overdrafts 6.8%, both of which are well above the Bank of England base rate of 0.5%. In addition, 20% of the small businesses surveyed reported an increase in banking fees – a hike of 42% in overall fees over the six months since the Panel was first surveyed. Just 5% of respondents believe that support from the Government has improved, with the same number reporting an improvement in support from the banks. In all, 25% cited a deterioration in government support and 41% a decline in bank support.