Stephen Alambritis: Suddenly, it's getting worse again for small firms

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The first three months of any year are the bleakest. Short days followed by long nights. Consumers with little to spend after their Christmas splurge and businesses struggling to maintain costs.

This year, business closures had tripled and unemployment shot up. Small businesses were not getting a look-in, let alone an appointment from their bank manager.

The economy was heading for the rafters and consumers were busy not shopping and businesses were cutting costs. However, by Easter something interesting seemed to be happening. The banks had been saved and were beginning to dish some money out to supplicants from the world of commerce.

The proposal from the Federation of Small Businesses for a special loan fund for micro-firms was in place and working. By June, FSB members were seeing an increase in trade and most were confident about the future prospects for their business.

There was talk of a recovery – albeit a slow one – and some were even referring to seedlings in the ground. House prices were beginning to stabilise and rescue plans for the car industry were beginning to deliver results.

The talk of the town was that the second quarter of this year would see the recession bottom out. The Bank of England was doing what it is always best at – being boring and holding base rates at 0.5 per cent. Bosses and workers were calling for measures to avoid a massive number of redundancies.

Everything seemed to be going smoothly especially exports, given the state of the pound. Economists and business organisations were holding up the V-sign – not meaning victory but as a way of describing our way out of recession.

We all held our breath, closed our eyes and crossed our fingers.

But sadly – and only in the last fortnight – our fingers are showing the dreaded W-sign to signify the least favoured way out of recession. The onset of the swine flu pandemic is partly to blame.

With hundreds of thousands of workers set to be immobilised and equal numbers of consumers staying put, it is inevitable that production will fall along with demand. Unemployment continues to increase. All in all, it is no surprise that the economy contracted 0.8 per cent between April and June.

We can still avoid the W-shape to this recession. The banks have been hauled in to see Alistair Darling and he must know the true figure on lending to small businesses. The banks must commit to giving the Treasury daily figures on business lending and must reduce their charges to reasonable levels.

Mr Darling must also insist that the banks allow dissatisfied commercial customers to switch their account to another more helpful bank and within five working days.

With some steely reserve and some imaginative policies, we can come through these difficult times and enjoy giving the recession the V sign first and foremost.

After all V does come before W in the alphabet!

The author is Head of Public Affairs at the Federation of Small Businesses

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