Why the Government should stimulate the economy through local business groups
TL:DR The downturn in the economy needs drastic measures. At Rangewell we believe that one way for the government to help stimulate the economy is through Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships. They are in the ideal position to support the recovery of small businesses of all sizes - and could be instrumental in helping the economy as a whole get back onto its feet. At Rangewell, we are starting a campaign to provide the funding required - and we will be focussing on these vital local business groups to do it.
The Covid crisis is now looking ready to run into its second year and the economic effects across the board remain painful.
Many business sectors have found themselves in lockdown once again – and even those businesses which are legally able to open their doors have reported a downturn.
However, there is some good news. The UK economy has swerved a double-dip recession. A double-dip recession is when the economy shrinks, briefly recovers and then contracts again.
The UK economy would need to shrink again for two consecutive quarters - or six months - to fall into double-dip recession territory.
But it has still shrunk at its fastest rate in 300 years in 2020. Gross domestic product (GDP) dropped by 9.9% over the course of the 12 months from January to December due to the Coronavirus pandemic. Last year saw the country plunge into the "worst ever" recession before bouncing back and growing by 15.5% in the three months to September.
To understand what this means, the record fall has, in effect, wiped out seven years of economic growth.
The contraction in 2020 is the worst in modern records, with GDP first measured in the aftermath of the Second World War.
The full impact of the crisis on jobs and businesses is currently being obscured by the government’s crisis funding schemes. CBILS and Bounce Back Loans have helped many businesses stay afloat that would otherwise have gone under, while the furlough scheme, offering 80% of salary to people unable to work because of the crisis, will only become fully apparent once the government starts to withdraw its support.
But some observers have said that they expect unemployment to double from 4% to 8%, with the same number of companies likely to go bust.
It comes after the Bank of England's chief economist announced his view that the UK economy is set to bounce back "like a coiled spring" after Brits saved up to £250billion during the pandemic lockdown. But experts say there is "still a mountain to climb" for the economy to fully recover from the pandemic.
The UK remains under tight lockdown restrictions currently, with schools, pubs, restaurants and non-essential businesses shut and holidays banned, despite the PM having released his exit strategy from lockdown. Some offices which are allowed to stay open have shut with people working from home – those that have soldiered on have adopted social distancing.
It means that all sectors of the economy are feeling the pinch in some form or another.
The economy is almost 10% smaller than it was before the pandemic hit this time last year.
What is the Chancellor doing?
Chancellor Rishi Sunak has said that he is worried, and admits that the economy has experienced a serious shock as a result of the pandemic and that the current lockdown continues to have a significant impact on many people and businesses.
He remains committed to doing everything he can to protect jobs, businesses and livelihoods.
Of course, this has already involved tax concessions and even tax holidays, and huge expense in the form of furlough payments, CBILS lending and Bounce Back Loans. Many observers point out that this largesse will need to be paid for, and are expecting large tax hikes in the budget this spring.
In the medium term, the prospects for recovery are actually exciting, with many people having built up a reserve of cash, and many new opportunities in the post-Brexit world. The Chancellor is not alone in suggesting that, in a year’s time, the growth could be in double digits – wiping out all the losses caused by the Coronavirus crisis.
But the question remains, what should be down now?
At Rangewell we want to offer a suggestion.
Helping stimulate the economy – with the help of local business bodies
At Rangewell, we believe that one way for the government to help stimulate the economy is through Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships.
These bodies cover the whole of the country and have their fingers firmly on the pulse of local businesses - and understand the scale of the opportunities they face in the future as well as the depth of the current challenges.
We propose using the network of local business support groups to do two important tasks.
- The first is to share information - make sure every small business is presented with all the facts they need, from news about local opportunities such as council contracts to the connections they need to help network through the current rough patch.
- The second is to act as a focus for funding provision - the funding that businesses now so desperately need.
We must declare an interest here. At Rangewell, we are leaders in the provision of funding for SME businesses. We can help businesses of all types and sizes - from one-person start-ups to large corporations - secure the funding they need.
We work across the entire UK lending market, using a combination of personal contact and our advanced technology to find the most competitive and appropriate funding for each task.
As part of our service, we have established close working relationships with Chambers of Commerce, Growth Hubs and Local Enterprise Partnerships across the UK. We intend to use this relationship to allow these vital local business assets to act as a funding focus for the businesses in their area.
To help us do this, we are calling on the government to provide their support to these vital business advisors in the form of grants. These will help fund the advice services they provide, allowing them to give struggling businesses expert support - and access to the funding that they need.
We will be putting our proposals to the government ministers in the next few days. We hope to be able to update you with his detailed response to our thinking - we hope with the news that our ideas have been accepted
In the meantime, if you are a business owner who is still experiencing challenges as a result of Covid - or have already identified ways to turn around your business, we may be able to find the funding you need.