Father Christmas?? No, I dont think so either...

Economic growth, the ‘holy grail’ how, or who, will make it happen? Government, the Banks, perhaps it will be Father Christmas? No I don’t think so either. Certainly the Government and Banks have an important part to play and, depending on their actions, they are likely to have an effect, whether it be positive or negative remains to be seen but, at the end of the day, there can be little doubt that it is only businesses and their customers who will turn the economy around.


Depending on your point of view one might argue that we should welcome Government initiatives such as those designed to remove red tape, reduce onerous planning conditions and to enable small businesses that are struggling to obtain finance from an increasingly risk averse banking sector. Though, it will take time for benefits to become apparent every little helps. Red tape impacts disproportionately on small growing businesses and many are deterred from expansion as a result of concerns, real and imagined, with the planning system. I am also very aware of the Banks claims to ‘have plenty of money and are eager to lend’ but in truth I have seen no evidence to suggest that such claims are being translated into action.

Those of us who are a bit longer in the tooth will remember the days when banking was about locally based people who understood local businesses and were prepared to manage risk not, as seems to be the case today, to eradicate it entirely. Time will tell if the Governments initiative makes a difference but, whatever the merits, I suspect that very few people are expecting the ‘complete’ solution.

In the past the answer was easy, throw more public money at it, sadly there isn’t much left. Nonetheless, there appears to be some being made available to parts of the country where unemployment and other issues remain a consistent problem no matter how much money is lavished upon them. This might make some social sense but in reality it is highly questionable as to whether the impact is anything other than short term. Perhaps it is time to take a different approach, how about reducing the amount of money being poured into these areas, where without incentives businesses are reluctant to locate, to create jobs that have all the sustainability of a chocolate teapot. Instead, what about investing it in areas that are able to produce long term benefits that are likely to be economically sustainable for some time to come?

Where should the Government invest our money? Where it will have most effect of course? How about places like Hertfordshire? Places where businesses want to be; places where good long term jobs can be created; places which have the communication and transport links that are essential to success in the global economy. Taking funding, as we have historically done, from areas that are generally successful and pumping it into areas with a track record of failure might deliver short term social benefits but in the long run, from a business perspective, makes no sense at all.

The other essential part of the equation requires encouraging customers to spend money, raising the taxes of those who are able to do so won’t achieve this nor will maintaining some of the other barriers that discourage them from doing so. Half hearted efforts to ignite the housing market for instance will not work if, in this part of the world at least, stamp duty remains at current levels. Why move from one asset that is not accruing in value to another when the cost of doing so is added to by high levels of indirect taxation.

Clearly the Government is not in a position to start flinging cash, nor can it afford to choke off regular income lines, but surely with a little imagination there are actions that could be taken to encourage consumer spending without adding further pressure on the National Debt.

The removal of stamp duty; extending the National Insurance holiday on small businesses taking on new staff to include this part of the country; using some of the enormous amounts of business rates that are collected here and spent elsewhere to accelerate business growth and encourage research and investment in areas that are able to sustain it; might provide fertile ground in the search for solutions. Clearly the decisions of Government are difficult and challenging but to paraphrase what a wise man once said ‘if you keep doing the same things expecting different results you are likely to be very disappointed’. Actually he said that this was a definition of madness but you know what I mean.

ECONOMY, ECONOMY, ECONOMY...

A great deal has been said about the current economic climate, probably too much, there seems to be an ongoing competition amongst experts and the press as to who can come up with the most dire forecast. One says things are bad another says it’s worse. This may serve to burnish certain egos but it does nothing for consumer confidence and certainly doesn’t do anything for the majority of businesses that have been well run. In Hertfordshire we are fortunate to have many companies large and small that have set the standard in terms of innovation; companies that have been developed using sound business practice; companies have been run responsibly. Whilst some will need to tread cautiously they remain viable and will continue to be source of wealth generation and employment.

In any period of challenge those that have the ability to demonstrate clear thinking will come to the fore, thrashing around for one solution after the other is not the answer. The problem is within the financial system not, by and large, within the run of the mill businesses that most of us know and understand. Of course they are affected but it is not a problem of their making left to their own devices with sensible levels of financial support they will continue to succeed.

What is needed is a period of reflection enabling the myriad of initiatives to work, the seemly endless drive to fill column inches or airtime must come to an end. In the same vein the apparent need by some to provide justification has to cease. We all have a good idea what went wrong and where the blame lies. It will be the innovative non-financial businesses that will get us out of the problems that face us we are calling on politicians, regulators and the financial press to clear their heads and ensure that an environment is created that will enable them to so.

It’s a funny old world or is it?

Just when you think you’ve seen it all something else happens. A government with a Prime Minister who made his reputation pursuing Miss Prudence starts throwing money around like a lottery winner, the Governor of the Bank of England declares that nationalising the banks is an option and RBS/Nat West announce that they are going to start doing business again.

Let’s get the last point out of the way straight away. Well done RBS/Nat West, let’s hope that the others follow their example sooner rather than later. Unless and until all banks return to doing sensible business any hope of recovery is nothing more than a pipedream. I don’t mean returning to the target driven recent past where lending at any cost appears to have been the norm but a return to what many of us of a certain age would have regarded as “good business”. Sensible lending where all concerned understood the risks and where clients knew where they stood.

As for the Governors aside that nationalising the banks was “an option” something clearly needs to be done to get the them “out of neutral” but, as things stand at the moment, it would be difficult to say who would be worse, our under fire bankers or our government.

As for the measures announced this week by the Chancellor let me say that I, like everyone else in the country, really, really hope they work. Do I think they will? Well that’s another story. Actually I am far from convinced and certainly question some of the measures announced. Reducing VAT 2.5% might have some marginal impact but given the level of discounting one already sees on the High Street and elsewhere I really can’t see it having much effect.

What concerns me greatly is the thought that as the economy is recovering businesses will be hit again by increases in National Insurance. I know the so called “giveaways” need to be financed but raising NI thresholds is a measure which will ricochet around the system like a stray bullet. Adding costs to employing individuals will add to wage pressures and make businesses even more reluctant to take on new people.

Ultimately, of course, its always business that pays and I acknowledge some good things in the Chancellor’s statement. Reversing the decision to charge empty premises tax for which we have been campaigning for some time, is welcome and the increase in funding for the Small Firms Loan Guarantee Scheme (as long as the banks get behind it) will have some impact.

Overall though the statement brought out my curmudgeonly side (not usually far from the surface anyway) and I am inclined to view it in the same light as most budgets in recent memory. A mixture of “smoke and mirrors” and we’ll all pay for it in due course. If it does the trick though, along with everyone else I will be delighted.

Ross, Brand or the Economy?

It’s been an interesting week; the fall out of the credit crunch rolls on, house prices continue to fall, various wars continue to take their toll around the world and what do the BBC, Gordon Brown and David Cameron choose to lead on? The rude and boorish activities of two overpaid radio presenters.

Oh well at least the Chamber has been doing it’s bit, meeting Members of Parliament, challenging the government on the payment of rates on empty business premises; calling for cuts in interest rates; and particularly looking at support for smaller businesses during the current economic upheaval.

Smaller businesses play a key role in the county employing high numbers of people , introducing innovative new ideas and as a vital link in the supply chain for their larger brethren. To many of the people running smaller businesses the word challenging no where near reflects the current situation.

Anyone who has put their house up as security to support a business will know the stresses on themselves, their families and life in general. People running small businesses can’t just lock up at night, go home and forget all about it.

Last Sunday I read the papers as usual and found myself becoming more and more angry as I read the various accounts of why we had got into the economic pickle in which we find ourselves. Angry because many of these so-called experts were the very people who had caused the problem. I don’t suppose many of them had put their house on the line.

Now the banks who largely caused the problem, those that courted the small companies whose businesses they so avariciously sought only a few months ago, are withdrawing their support. Not surprising I suppose when they don’t even have the confidence to do business with each other.

It is clearly naïve to expect things to return to normal overnight but surely the key ingredient we require now is confidence. Isn’t it about time the experts in the City and the banking community began to do something about it?

Oh, and what about Messrs Brown and Cameron? It’s probably better that they stick to worrying about the BBC.

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