After much rumour and speculation the inevitable became a reality with confirmation that we are currently in the grip of a recession. For the Federation of Small Businesses (FSB) the news, while most unwelcome, came as no surprise.
In fact, on the same day as the official announcement that the UK had slipped into recession we reported a dramatic rise in calls to our legal advice line on redundancies from concerned small businesses. Calls rocketed by an astonishing 214% in the fourth quarter of last year as small businesses cut back on costs and sought advice on employment issues and redundancies.
While action was taken in a last ditch attempt to stimulate the economy and keep people in employment, for many these were simply a case of ‘too little too late.’
Our recent member survey found that measures such as VAT cuts, bank lending guarantees and pledges on payment practices have had no impact in rejuvenating the ailing economy or employment figures. Our findings revealed that, despite these interventions, two-thirds of those surveyed had seen their trade decrease in the last two months and many were faced with harsh decisions to make such as staff redundancies.
Small businesses in Northern Ireland account for 98% of the business environment and provide employment for over half a million people with 60% of innovations coming from the SME sector. It is these firms and companies that will lift the economy out of its current depressed state and it is vital they are given the recognition they deserve and measures are put in place to ensure they are able to continue to provide employment.
From our member survey it was revealed that less than 3% of those questioned said their banks were making the Enterprise Finance Guarantee Scheme available to them. Meanwhile, over half of those polled said they doubted that the Government scheme would actually compel the banks to start lending again. The Government must use its meetings with the banks to monitor the guarantee scheme and assess why loans are still being refused, while both Government and bank branch managers must do more to promote these funds.
Additionally, a quarter of small businesses are still waiting for longer than 10 days to be paid for public sector work, even though the Executive pledged that it would work with the wider public sector to speed up payment times.
The figures also show that small businesses are increasingly being used as a source of credit in the commercial world with 42% waiting longer to get paid for private sector work. This comes despite the Government-backed Prompt Payment Code, launched last November, which called for fairer payment practices between large and small businesses. The FSB was pleased to see the introduction of the Prompt Payment Code but we now need more action to tackle late payments. We would like to see Companies Registry given sufficient power to penalise late payers in the commercial world while the Government must do more to ensure the public sector does its bit to help the economy.
Of course the FSB fully realises the role small business owners and organisations have to play in helping themselves overcome the economic downturn and the FSB believes that innovative thought and actions will bolster many smaller firms in these difficult times.
For many the recession will bring sweeping changes but the FSB believes that by embracing these changes and adapting with them it will help build a much more resilient economy that will not only rejuvenate the market but increase job prospects as well. With this is mind it is vital we break down the common misconception that innovation has to be technology based — it doesn’t.
Simply put, innovation is about using new techniques or new thinking to unlock increased prosperity, higher productivity and sustained economic growth. It can be as simple as putting new signage on an existing business or setting up a website promoting goods and services to a wider audience via the internet.
The small business sector is a vital source of employment and turnover for the Northern Ireland economy. The FSB believes that through Government support and innovative thought the stumbling blocks continuing to impede this essential sector from surviving and recovering can be greatly minimised.
John Friel, who is from Strabane, is Northern Ireland regional chair of the Federation of Small Businesses.