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Relying on The Little Institutions

Reports say that the government and major institutions are relying on small businesses to bring the economy back to a so-called recovery. Such a call is not unprecedented. Some say that economic growth is 2.6% in the retail markets: it should be a typical 8%. The UK economy is running short of 1% overall.

Governments across the world, major institutions and chain retailers are so heavily in debt that none of them really have the power to influence the economy, locally or nationally. Whilst the government is working on approaches to help get the economy moving, councils have yet to change to make their practices fit with the modern economy. The consensus is that they don't need to close libraries.

And with so many people unemployed and chasing the few jobs that there are, and no sooner than some have found work that others are just being laid off, there is little prospect of the consumer sorting out the economy. So many risks and losses typically mean that people get into heavy debt, and can't contribute to the economy, and can’t find ways out. Those that aren't at risk are declining to spend in case something goes wrong, or to avoid paying high VAT prices, or high taxes of any kind. They're doing the intelligent thing.

The only entities in the economy that aren't widely indebted are small businesses. Part of the reason that the banks can't make loans to small businesses is because small businesses are declining to take on debt. The government wants small businesses to take on debt to take people out of unemployment, thus helping the government bring down its own debt.

Banks were bailed out for some £124bn in cash, which translates into some £35k for each SME in the UK. Had the banks not been bailed out, and that money used to open the economy for small businesses to trade flat out, the economy might be in a very different state by now. True, mayhem would be the way to describe financial markets, but it would be nothing less than the phenomenon they bought on themselves, as is largely being agreed in Cyprus.

It’s worth noting the government’s change of focus in the budget towards small businesses. They say that they want the government to work a lot more with SMEs. Our take on this is that the government has demonstrated where its hopes and dreams are: in small businesses. That’s a suggestion that there’s a huge reliance on the SME community.

During WW2, there were many heroic events. Not least the event of small boats grabbing soldiers from the beaches of Normandy. Churchill called them The Little Ships. The government and others are clearly looking to The Little Institutions to move the economy on.

And as Chalestra casts an eye around the business horizon, it’s amazing to see small business so upbeat about the future, even though the economy is not really moving yet, and they’re still finding it difficult. Chalestra works for institutions big and small, and knows all too well which are the happier.

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