Make life bearable for small businesses

A word from Mark Owen, chairman of the Gloucester branch of the Federation of Small Businesses, and MD of Moose Marketing and PR.

There is no doubt that the current economic downturn has started to have a devastating effect on small businesses across the board and at long last the government is beginning to recognise this.

But it remains to be seen whether they will do enough in time to prevent permanent crippling damage to this most important sector of the economy. Traditionally small firms are caught between greedy banks, a grasping government and a wall of red tape. Most small firms just donít have the cash reserves to withstand a significant withdrawal of credit from the banks or sudden increase in interest rates for existing loans.

Almost half of the FSB members have seen an increase in the cost of finance over the last year. The government must put pressure on the banks to make more money available to small businesses at decent rates to help sustain them and get them through the next year.Ē When you also take into account that many large firms like supermarkets have a policy of not paying their suppliers for up to 105 days, itís hardly surprising that so many small firms could go to the wall.

When you consider that 99% of business in the UK fall into the SME sector, any serious damage in this area will reverberate through the entire economy. It is essential for the welfare of the whole country that the banks continue to maintain the same lending policies to small businesses as before to prevent them going under. The government needs to take a long hard look at its levels of taxation on small businesses and use its new found influence in the banking industry to reduce bank charges and ensure that small businesses get a fair deal. Corporation tax has just been hiked to 21% and plans are afoot to raise this to 22%. There have been calls to reduce this to 19% but I would go further and bring it down to 15%.

The government could also help by being more flexible and forgiving over payment deadlines for VAT and other tax payments and think constructively about putting more government contracts to smaller businesses