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12 December 2008
SOUTHWARK CHAMBER, like all of us over the last few weeks, has been trying to keep pace with the cut and thrust of our economy: vast sums being handed over to banks, interest rates going down, 'experts' pontificating, politicians running for cover and worst of all businesses and their employees worrying about what the future will hold over the chill of winter.
Already we now that we have not only talked ourselves into a recession, but worse than that we are in danger of losing our confidence in the future. There is much to be said that the action to support the banks to stave of their own bankruptency was a step in the right direction, or was it?
There is an emerging counter opinion that perhaps we should have let the banks go bankrupt - as why should we support any business that had so plainly failed in its duty to behave correctly in managing its finances, by borrowing vast sums of money without security, whereas they themselves will always demand such security from businesses - somewhat of a double standard.
So if we let the banks go bankrupt, it would write off all the debt in one fell swoop, everything is triggered back to zero, a debt free society. Is this not what this Government and many others have been aspiring to do by writing off the billions owed by countries in the third world sector? Why not practise what we so arrogantly preach on our own door step. But it would never happen here - too brave a decision to be made and too many vested interests, who would wish to protect the status quo of greed and malpractice.
So what is now needed to tackle what will become a deep seated problem that will invade so many areas of our lives?
The Southwark Chamber wishes to ensure that timely and appropriate support is provided for businesses in Southwark. In short we are seeking:
- Actions that will ensure the transfer of the full bank base rate cuts to business.
- Actions that will ensure that existing borrowing arrangements are protected and that new credit is made more accessible at rates that are realistic.
- Actions to realign business support so that it is flexible and focused on the needs of businesses to get them through this crisis.
- A reduction in Employers’ National Insurance which will help employers to maintain jobs.
- A halt, albeit temporary, to further regulatory obligations on businesses, to enable them to focus on their survival rather than on government forms.
- All possibilities and every avenue must be explored to alleviate financial pressures on businesses and residents in Southwark - particularly those on low incomes, by providing some relief from the fees and charges levied by the council itself.
- We suggest that the council should explore setting up a local version of the social fund, to provide emergency grants or short-term interest free loans, to assist those residents in acute financial crisis.
- All major bodies should improve communications to all, as a means of simplifying the process of accessing the right advice.
- The Chamber to lobby for set aside funds, to allow local councils to offer mortgages under prudential borrowing rules, to help first time buyers and the housing market
- All major companies and statutory bodies should work to reduce the payment time for suppliers from 30 days to a target of 10 days.
- There must be a greater awareness of promoting the Small Business Rates Relief
- The Chamber will create a focal point for businesses in Southwark to share ideas for the challenges of the current economic downturn. Please visit the Chamber web site for details.
The reality is that the cost of formal borrowing from banks is closer to twelve per cent for many of our SMEs. This assumes availability of credit, which we know from our sources, is not as available as we are led to believe.
Many members have had facilities reduced or withdrawn by banks. SMEs are likely to be driven to informal lenders with APR rates of over 250%! The issue is to get real assistance to SMEs quickly and appropriately. The banks are failing to respond and other agencies like Chambers of Commerce should be brought in as a matter of urgency to drive forward real solutions.
The Government needs the help of traditional enterprise agencies more than ever before and must also ensure that there is a much lighter touch in the access to funding. This worked very well in the 1980s and there are still some remaining in south London. Enterprise agencies deliver locally appropriate services to help local business to survive, grow and prosper.
Measures need to be introduced, temporarily to suspend employment protection measures for firms with less than five employees to encourage more employment and not penalise it.
Today, one in three small businesses are unable to obtain finance. With over 13 million people working within small firms, the threat of this recession is huge.
Everyday life has become increasingly more expensive over the past year. The rate of inflation has been significantly higher than the government target since the end of 2007.
Significant increases are evident in the Consumer Price Index (CPI) and the Retail Price Index excluding mortgages (RPIX). By July 2008 inflation levels were: CPI - 4.4%, more than double the July 2007 figure and RPI - 5.0%, which is also a significant increase from the same time the previous year.
Though the Bank of England has recently cut interest rates by 1%, this decrease has not been reflected in the London Interbank Offered Rate (LIBOR), which has been decreasing at a much slower rate. The LIBOR currently stands at 3.91%, having stood at around 6% at the beginning of the economic downturn. This has meant that the benefits of the interest rate cuts have not always been passed on to consumers and homeowners.
The rise in inflation has been exacerbated by the fact that there has been no such rise in wages and benefits, meaning that in real terms, as inflation rises, people are getting poorer.
Overall, if we all have clarity on what has to be done, then like any business strategy, good decisions based upon facts can be made in a timely fashion, that ensures sustainability.
The Chamber has an expectation that the current roles of leadership - be they at a bank level, central government level or local authority level - listen, listen and listen again to the real people, who are the backbone of this country and its economic heartbeat.
No comments have been posted.
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