The State of the Economy

With all the talk of the credit crunch, house repossessions and the economic downturn, it is worth considering what effect this will have on people starting a business.

There seems to be two schools of thought of the subject. The first group believes that just about everything will tighten up; people will stop spending money, those currently in employment will stay there and that the risky journey of starting a business will be delayed until some sense of stability resumes.

This view does have some merit as we have seen company formations in the UK reduced by over 16% in the period between July and August 2008 and September not showing any signs of this downwards trend continuing.

The second school of thought consists of more bullish comments, namely that we have been here before with recessions and collapses and that people know that a rebound will be inevitable.

Even with the decrease in company formation activity, there still are nonetheless businesses starting up and some of these will inevitably be very successful.

If people are made redundant then they will find that unemployment benefit is not what it used to be and the option to live off the state is a pitiful existence. In the absence of being able to secure a reasonably job elsewhere, they might choose to turn their skills and knowledge to starting a business and working for themselves.

As in most situations, the reality is probably a mixture of both synopses with different individuals responding to the current economic problems in difference ways. It is really a question of which group has the largest membership.