The political posturing of recent weeks that’s seen the two main parties fighting over which is best placed to assist small businesses symbolises a belated but crucial shift in thinking about the economy.
Where before all the talk has been about banks, opening up the lines of credit and kick starting the markets, both the government and the opposition have finally woken up to the significance of small and mid-market firms.
It must have been frustrating for the lobby groups, who have been noisily reminding the government of the importance of supporting small business through the crunch for months on end, but it’s natural that now the £440bn bail-out has been pushed through, the ‘real economy’ is the focus.
There’s nothing left to give to the banks, so the obvious next step is to ensure they are actually lending to the UK’s 4.5 million small businesses, which represent half of our total workforce.
One of the biggest concerns that I’ve been hearing recently comes from owners of companies that are commercially sound, worried that their cash-flow will be hit by banks cutting overdraft allowances or charging more for debt facilities.
The government has revived its ‘Small Business Forum’, which, in theory, should hold the banks to account if they don’t open up the lines of credit. What, if anything, can be done if overdrafts are simply too expensive is unclear.
And it’s not just the banks putting the squeeze on either. Entrepreneurs are also complaining that blue-chip customers are hanging on to their cash for longer, refusing to pay bills on time as they procrastinate in order to keep cash on their own balance sheets.
Where big business is being tough, you’ll need to be too, negotiating short payment periods and doing your best to get your larger customers to stick to the terms. Not that it will be easy; it’s tricky to threaten a legal challenge and impose interest charges on late payments when the big boys have numerous tricks up their collective sleeve to ensure they can delay payment with little prospect of comeback.
All of that makes for rather depressing reading. While I’m loath to disagree with a Dragon, the squeeze that small firms will feel in the coming months is inevitable, so I just can’t see how Peter Jones’ suggestion that we’ll endure, at worst, only a “shallow recession” can possibly hold water.