The sensible actions of small and medium-sized businesses are the key to avoiding a recession, it has been claimed.
It is down to ‘ordinary businesses’ to prevent the recession from becoming a self-fulfilling prophecy in the wake of ‘Black Monday’, according to Grant Thornton.
Howard Hackney, partner at the financial advisory firm, told Growing Business it was essential for businesses not to panic after the FTSE suffered its biggest fall since 2001 on Monday.
Hackney said businesses could avoid the worst effects of the recession by ‘holding their nerve’ and reacting sensibly to the US Federal Reserve’s slash in interest rates.
Although he predicted the FTSE would fall as low as 5,000 points, he argued that as long as they were sensible with cash, the effect on most businesses would be minimal.
“For most mid-sized businesses, what goes on in the city and on the stock market is an irrelevance. It’s not real business and shouldn’t have an effect on what’s going on,” he said.
“The great danger is that if confidence is damaged and businesses stop taking on new staff and expanding, the recession will become a self-fulfilling prophecy,” he said.
He added that for businesses, it was essential to remain in control of cashflow.
“Keep your nerve, and don’t over-extend yourself,” he said. “As always, cash is king. Chase up your debtors and make sure you keep money in the bank.”
© Crimson Business Ltd. 2008
