Doomsday predicted for British entrepreneurs
The end of the era in England and Wales is near for enterpreneurs. The stock of small businesses could drop by as much as 150,000 by early 2010, according to Barclays, blowing the froth off Britain's enterprise culture.Updated: Sep 04, 2008 14:33 IST
The end of the era of entrepreneurs in England and Wales is near, a new business study by Barclays has warned.
The stock of small businesses could drop by as much as 150,000 by early 2010, according to Barclays, blowing the froth off Britain's enterprise culture.
As it is, the enthusiasm of would-be entrepreneurs has already been damped by tighter credit and tougher trading conditions, the bank reports.
"We will probably see the (business) stock fall by up to 150,000 in the course of the downswing," said Richard Roberts, head of small and medium-sized enterprise analysis at Barclays. "Growth has already stopped - closures have been higher than start-ups for some time."
Roberts said there would, however, be fewer business failures than in the recession of the early 1990s. Company liquidations jumped by almost 15,000 to 24,000 between 1989 and 1992 as economic growth faltered. He said: "In the early nineties there were a larger number of new companies with heavy debts, which were often overdrafts repayable on demand." These days, small businesses have total deposits equivalent to their total debts, having shared in the recent bonanza in corporate earnings.
His forecast covers ventures large enough to have business bank accounts. These have risen in number to about 2.85 million in response to steady growth and low interest rates.
According to the Financial Times, the prediction is further bad news for Prime Minister Gordon Brown, a vocal champion of entrepreneurs.
His ministers have used record growth in small enterprises of all kinds - to a total of 4.7 million in Britain at the end of last year according to their own statistics - as a vindication of government policies. The mood is now turning sour as conditions for start-ups deteriorate.
Kat Callo, who quit an executive career in 2002 to found Rosetta Consulting, a specialist property company, said: "Many young people and corporate employees who were thinking of establishing their own business are deciding not to. It is a sobering time."
Rebecca Harding of Delta Economics, an enterprise economist, predicted the percentage of Britons either setting up business or planning to do so would fall half a percentage point to just under six percent. She forecast more start-ups would close ignominiously after two to three years, saying: "You see huge attrition at that stage - around one-third of the total - and that could be going up substantially."
Harding said the ability of many entrepreneurs to raise funds had been hit by the fall in the value of the homes used as collateral. Owners of small businesses report that banks are increasingly zealous in pursuing interest payments. At the same time, big customers are squeezing small suppliers by honouring invoices ever later.
However, there are those who are not scared by the prophesy. Harry Rich, chief executive of Enterprise In-sight, which coordinates Enterprise Week, an annual national festival, said: "Enterprise is more important than ever in tough economic times. All the external drivers, such as the need to move away from an old-style manufacturing-based economy, are still there."