FT article: 2 in 5 small businesses consider calling it a day

vivatifosi

Interesting article in today's FT, can be viewed in full here:

http://www.ft.com/cms/s/0/8c318a64-c4a0-11dd-8124-000077b07658.html?nclick_check=1

35% of small businesses considering redundancies, 36% considering cutting staff working hours and 39% considering closing all together.

Pressures on businesses include drops in trade, higher interest costs and late payments.

New company formations were down 34% in November over the equivalent month two years prior.

Pennywise

It doesn't surprise me - unless you are going to make " a lot " of money, being your own boss is not particularly beneficial due to long hours, risk of not being paid, far too much bureacracy, over-regulation, high taxes and business rates etc. I don't really think the recession is the cause of most businesses downsizing and closing down but it may well tip many over the edge who were struggling anyway.

You also have to look at recent history. In the past few years, the vast majority of new business start ups were micro businesses set up basically to give an income to the proprietor rather than expand and take on staff. Just thinking about ebay alone, there must have been tens of thousands of people who registered as self employed, but just to buy and sell stuff on ebay. Also, the working tax credits caused a lot of people to start up "pretend" businesses so that they could say they were working 30 hours per week to get a fair chunk of working tax credits - it amazes me how this was never latched onto by the media as it was a massive "fraud", well known throughout the benefit claimant circles.

Looking at my own accountancy practice, the businesses that have recently stopped trading or who are downsizing are doing so because they never had a future anyway. They aren't profitable businesses that were going places. One in particular has been making losses for at least 10 years and has just gone down to a 3 day week - the recession may well be the straw that breaks the camel's back, but it isn't the root cause. I've had several "one man" firms give up, mostly were "consultancy" type businesses, often set up with early retirement payouts, and they have gone back to employment (funnily enough three of these were teachers who thought the grass was greener but have now gone back into their safety zone). Lots of clients never made a profit but just relied on remortgaging with house price inflation to cover their living expenses and business losses - not a sustainable future at all.

The fact is that like the artificial house price bubble, there was an artificial bubble in the self employed - the govt liked to make out it showed the UK was a haven for entreprenneurs, but unfortunately, these were never real long term wealth producing businesses - they were mostly just people looking after themselves with no real intention of employing people or taking on premises etc. The last ten years created a new phenomena, that of "lifestyle businesses". It's a shame that the country didn't encourage wealth producing "real" businesses instead.

Debt_Robot

Pennywise, what an insightful comment.

I want[ed] to start a business, in the media specifically. I was creating a website that focused on providing information on careers in the creative industries. I had plans to expand it to includ advertising but the recession is biting.

What do you think includes ''real'' business?