Small businesses are next….

How will small businesses make their payrolls if the credit crunch persists? This is the nightmare scenario facing many small businesses. The standard response you get from small business people is that “we always make our payroll, even if we don’t pay our suppliers”. The trouble with this thinking at a time like this is that everyone is thinking the same thing. Suppliers may not be getting paid as the firms further down the supply chain start to hoard cash to pay their own staff should things get just a little tighter. Once a firm at the bottom of the supply chain goes bust, the result cascades up the supply chain and could set off a chain reaction.

How does the government avoid this catastrophe? Simple…they bail everyone out…or they do nothing. My gut reaction is that they will do nothing. As banks pull 20 year old credit lines left and right, smaller firms, who in less tough times could have got a loan from the bank secured on their property are really struggling to avoid closing the doors for the last time.

Business groups called on the Conservatives to announce more radical policies to deal with the deteriorating economic environment. Miles Templeman, director general of the Institute of Directors said: “Both measures would give small businesses a boost during the economic downturn. However, they do not go far enough, and we hope that more ambitious plans will emerge in the near future.”

Liberal Democrat Treasury spokesman Vince Cable said: “My own preference would be that, if there’s room for tax cuts, to give ordinary people their own money back.

How many will go isn’t clear right now, but the unhappy fact is that many in the homebuilding sector have gone already and many more in the real economy look set to go bust unless some remedy is found. If the UK loses its small business base, the seeds of tomorrows multinational companies, then it’s isn’t just a recession or a depression, it’s a tragedy that could take a generation to fix.

• How You Should Start Making Passive Income Online Many people are always curious on the methods of creating...
• Blogging: Top Ways To Establish Online Credibility A big dilemma in the internet today is that information...
• Debt? What debt? Anyone that has ever dealt with an addict know's that...

Tags: Credit, Credit Crunch, Economic Downturn, Economic Environment, Homebuilding, Miles Templeman, Recession, Small Businesses, UK Banks, Vince Cable