While the country may be out of recession and consumer confidence may have increased since last year, the fact remains that for many small business and company formation owners, market conditions remain tough.

This will not be helped by the fact that according to a report by the BCC inflation rose by 0.4% in March and the cost of living has risen accordingly. This is a consequence of the spiraling cost of petrol, January’s VAT increase and the fact that wages are no longer being increased in line with inflation.

As the small business sector waits for the impact this will have on consumer spending we ask a leading economist about the impact of inflation and a small business owner what he expects for the future of his company:

Economist Philip Smithfield, comments on the rise cost of living and the impact it will have on the company formation sector; “As Britain teetered out of recession many people felt that the worst was over, we had come out of the worst economic downturns of modern year and no we could begin to rebuild our economy. Wrong. Small businesses and companies which had recently been formed still had to deal with rock bottom consumer confidence and at increase in VAT.”
James Leah, founder of the ‘JLB’ chain of retail outlets, comments; “This Christmas was the worst one we have ever experienced and then came January’s ‘Big Freeze’ and the increased VAT rate which compounded the situation even further. It comes as no surprise to me that inflation has increased but what we need now is clear plans from all three political parties as to how they plan decrease it.”

When the government first announced the country had emerged from what had been the worst economic downturn for sometime, it was expected that growth would be slow; however, as reports from the first quarter of the year have come in, it appears that growth is even more anemic than expected.

Throughout the first quarter of the year the economy has grown by just 2 per cent. Many reasons have been given for this, the weather being just one of them.

Michael James, enterprise director at business consultancy ‘ MJ Consultants’ ,comments ; “ While we all knew that the pace of economic recovery would be considerably slower than other leading world powers, our recovery has not been helped by factors that are beyond our control, namely the ‘big freeze’ which devastated many retailers throughout January.”

“However, from the feedback we have received from our clients it seems that the majority of small business and company formation owners are positive. Yet as unemployment figures continue to rise and the number of small businesses and recently formed companies , which are looking to employ new staff members is decreasing, it is clear that many challenges are still ahead.”
Economist Alice Wallwork says that she expects recovery to continue but warns that it will not be a quick process; “Companies and entrepreneurs should establish and implement a recovery plan to ensure their businesses survive recovery as well as they did the recession. This is especially important for business owners who have recently gone through the company formation process.

Last month saw an overall increase in sales revenue for the retail sector. This has been helped in no small part by the fact that Easter fell a week earlier this year. However, while this is positive many small businesses are still struggling with market conditions and late payment.

As we have noted on a number of occasions on this blog, ‘cash flow is king’. Failure to effectively manage cash flow could result in your business going into unnecessary administration. Many economists have commented on the culture of late payment which pervade in Britain.

According to a recent report by finance company AXA, Estate Agents have the worst reputation for paying late, while people who work in a trade such as plumbing and building have the best.

 James Burns, enterprise manager at AXA, comments; “The majority of our clients struggle with late payment to some extent .There are a number of things a business can implement to ensure invoices get paid on time, but from my experience the most effective cash flow strategy is making sure you set out clear and definitive payment terms prior to doing business with anybody.”
 “Throughout the recession many small businesses have struggled with late payment and the average amount each small business is owed has risen from £2,000 in 2007 to over £8,000 in 2010. The government has attempted to help the situation with its Late Payment Charter, however, it seems to be encouraging the culture of late payment with its ‘Time too Pay’ tax scheme, therefore sending out a conflicting message to the SME sector.”

If someone had told us a couple of months ago, that an Icelandic volcano would ground all planes in and out of the UK and Europe, causing thousands of Brits to be stranded abroad and widespread disruption to business and people who have recently completed the company formation process, nobody would have believed them.

 While most airports are now open, businesses still have to contend with the fact that many of their employees cannot get into work. The economic impact of the Volcano for the airlines has been well documented, but what about the broader impact on small businesses and how should they handle staff absence? We speak to Jennifer Goodman, a solicitor specializing in employment law.

“At the moment we are advising our clients to by flexible with employees who cannot get back to the UK. While the situation is seen as an unforeseen, companies are not obliged to pay staff for the time.”

“However, if an employee is stranded abroad as they were trying to get back from a business trip businesses would be expected to pay them or come to some alternative agreement, whereby the employee can take the time off in lieu.” 
Adrian Marcus, founder of IT company ‘Axis’ comments; “For my company, the only tangible impact has been the fact that a lot of client meetings have been suspended. We have used the phone and Skype to deal with important things which couldn’t wait, but apart from that I expect we will only fully know the impact when things return to normal.”

During the televised debate last week, Gordon Brown mentioned the fact that, like Nick Clegg, he too wanted electoral reform. Indeed Mr. Brown seemed keen to emphasize the similarities between the Labour and Liberal Democrat parties at every available opportunity. However, it is worth noting that despite Labour’s attempt position the Liberal Democrats as a similar party, there are many areas of policy where the two are diametrically opposed.

One of those areas is the debate over whether the UK should join the Euro. The Liberal Democrat party are strongly ‘Pro Euro’, while Labour seem to have adopted a permanent ‘wait and see’ approach.

However, in the wake of a new report by the FSB, which found that over 45 per cent of small business owners feel that joining the Euro would be good for business, the Euro debate is about to get higher up o the political agenda.

Robert Dixon, founder and CEO of telecoms company RD Telecoms, comments; “Throughout their election campaigns all political parties have said they want to increase the strength of UK companies trading abroad. However, they are unwilling to make the changes that would make that possible; joining the Euro.”
Kevin Majors, who owns a chains of retail outlets, comments; “While in the past my company has benefited from not being in the Euro, I now think the pros of joining the Euro far out way the cons. People speak of the importance of retaining our history, but after the downturn we have just experienced I think most small business owners and people who have recently gone through the company formation process, would prefer to increase their revenue.”