The State of the Economy
September 27th, 2008 . by adminWith 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.
The Recession Has Started
The economic downturn has started to hurt my business. At first I thought it was the usual quiet June and July periods where everyone was on their summer holidays. But as the end of August approached and then the beginning of September business just did not pick up.
There were days when it was so quiet I could have not been in the office and taken the day off. The prospects look grim for my manufacturing company because even existing customers are ordering less as a result of them not selling as much.
After a few weeks in to September I began to notice the effects of the subdued economy in the high street where some smaller shops were deserted and the glum looking faces of the owners told me that business was slow.
I never thought that the trickle down impact of Wall Street falling over would be so great, although thinking about it, the UK housing market had perhaps weakened the public resolve to fight off any talk of recession.
For those with deep pockets and who were reasonably prudent during the boom years, they will survive; after all we are not talking about an ice age. For the ones who began the last year will high debts and who are now seeing the income from their businesses shrink, these will be the casualties.
In two years time, they will be doing something else to what they are doing now and have the unmistakable scowl of business failure written all over their faces.