Wednesday, 14 January 2009

Desperately trying to preserve the status quo

Interesting to watch Peter Mandelson's announcement this morning of the package of support which has been put together by BERR to support Britain's small business through the current economic crisis.

For those of you who didn't see it, main features are £20billion worth of guarantees matching bank lending 50:50 (so if a bank lends £100k, £50k is guaranteed by the government) plus a £75 million enterprise fund providing seed & working capital for small business.

Small print is that the £20billion support is only going to 'ordinary risk' businesses - and interesting also that the government is only making a provision for £225million in defaults - which is around 1%. Methinks it will prove a lot more expensive to the taxpayer than that.

While it's great that support is being provided for UK business all this feels a bit like King Canute trying to stop the tide coming in. It feels like the government is desperately trying to preserve the business status quo rather than addressing the REAL issue of where is our future wealth going to come from?

As I've said elsewhere on this blog, I would really like BERR to identify key growth sectors - or sectors it would be foolish/dangerous to lose - and target all this financial support at those. For example, renewable energy, manufacturing, engineering, farming and bioscience. That would encourage ailing businesses to divert their energy and resources to exploring new, higher growth areas as well as build a really strong economy to secure the future (which in turn will provide the money to pay for all these current bailouts!)

Like it or not, the world economy is changing dramatically, and much as governments may try I don't think we will ever go back to the mass consumerism era of the past couple of decades.

It's just not sustainable.

26 comments:

Stephen said...

The government is a small child in the midst of a raging inferno. It is only capable of throwing small buckets of water on the problem in some vain attempt to put the fires out.

An alternative view would be that they know exactly what they are doing. This may be the end of one era, but they are making sure that all the goodness is syphoned off to the fat cats, prior to the shit really hitting the fan and that this new word "credit crunch" is really just some "black pr" in operation.

Who really knows i guess.

whether we need more strategic intent or not.

We just don't know what is really going on behind the scenes!

Anonymous said...

Rachel

With respect you appear to be confusing two issues. The first is trying to prevent or at least mitigate unemployment from existing businesses. The second is strategic investment in future growth industries.

I wonder if you'd have such an attitude if you were still actually in business and experiencing the credit crunch first hand rather than commentating from the comfort of your armchair. Lets not forget that you collapsed a sound business when access to capital was good.

Strategic investment in growth industries is ALWAYS important. Providing access to credit for sound businesses now is important NOW.

C

Anonymous said...

The reason for my annoyance in my previous post is that I have just witnessed the demise of one of my suppliers. The business employs about 30 people and is fundamentally sound. The issue for them is simply that they could not renew a revolving facility. So sorry for the vitriol in the last post but I see short term loan guarantees as being very important to some real people facing real hardship now.

C

TheDLOG said...

Ooh Mr C,

Just read your comment.

That was a bit harsh on Rachel, wasn't it.

dlog

2009 said...

Dlog you are correct what Mr C said was rude but nevermind it is an opinion this is what a blog is here for.

In relation to the topic Growth sectors will always need funding and looking at of course this is true, but what about business that only exist of what i believe jumping on the van wagon.
recruitment business - please dlog if you have an opinion on theese i would like to hear it, they are not a growth secotr but they are a Service provider to business and make lots of money... But could we see a lot of theese demise this year?

Then the Mr Duncan Bannatyne whom i have read all book and attending many seminars of, his industries are stable becuase they provide a service also to the consumer side however - theese are not growth sectors but indeed they will survive.

A business such as Red Letter Days, this is still not a growth sector it is a consumber service or alternative service - it is tragic what happend but there is at least 3 similar companies doing the same thing as RLD that are thriing in this economy why? why them and not rachel? life i guess.

Business is about common sence, and accuracy with a good SWOT analysis on a regular basis..

Back to work

Anonymous said...

I am sorry for being rude.

However, I think Rachel is wrong, somewhat hypocritical and insensitive with her comments on this one. I am working in sectors where the credit crunch is having a real impact. Ok some businesses should go to the wall but I am seeing really good businesses fail too for lack of capital. Suggesting that these businesses should be encouraged to explore new higher growth areas shows a complete misunderstanding of what the situation is actually like.

The patient is suffering from a heart attack and you are suggesting they get more exercise.

Get real.

C

2009 said...

I understand where this is coming from C - again it was only an opinion so don't worry that much.

Credit crunch is tough so much so i even have decided that next week i will take the bus to work, and not drive the car i will save petrol but loose time.. hmmn what should i do? save money or time? Tricky decision.

That was rather random.

TheDLOG said...

2009,

Leave earlier and stay later!!

dlog

2009 said...

Dlog,

But if i do with the car the NCP raids me in the city all i can park in is an NCP and they are a savage...

You must be lucky

TheDLOG said...

No, what I was saying was if you use London Transport, leave earlier and stay later.

dlog

Anonymous said...

2009, you won't need to worry if you work in one of the 'non-growth sectors' as Rachel puts it. If anyone listens to her you won't have a job soon so no need to worry about the commute.

C

TheDLOG said...
This comment has been removed by the author.
2009 said...

hahaha i love C your funny i like it,

So rachel what should i do ditch the bmw? as it isnt a growth car.?

Peter Cook said...

Changing the mood of this comment page, I've noticed alongside the very serious debate being held by politicians, industry people and journalists a hint of desperation...

On Monday the FT letters column had some advice for Mr Brown from punk rocker Captain Sensible - probably no less valid than all the academics!

On Tuesday, there was a reply from someone citing Kate Bush..

And either tomorrow or Friday, I get to add my two penneth worth, via the wise words of Pink Floyd, The Pet Shop Boys, Sir Billy Bragg and REM.

Things (as the song goes) can only get better (but not by replicating the same strategies as got us into this mess)...

Peter Cook

Stephen said...

What concerns me is the lack of fat cats hanging themselves. This recession cannot be compared to Wall Street in the 1920's cos very few wealthy seem to have caught a cold. Where are the greedy people jumping out of windows?

Seems like the colds, flu and other woes have been targeted to the less well off.

How i'd like to get hold of the company and stock market data prior to Northern Rock.

I bet that would tell ya the real story - of theft and deception.

But oh....hang on... do i hear you say?!"!"

No need to concentrate on the past - lets be positive and move forward.

Heads should be rolling for this.

You can pick up the pieces, but someone should be getting to the source of this instability.

This is serious and people are going to die because of what the financial community have allowed to happen.

Jed said...

I own a few business
Recruitment business
Property management
Estate agency
Music promotions

And i am loosing sight of the finances i have made no cut backs yet, but i may have to.

Jed

Rachel Elnaugh said...

C

I will forgive your comments. They were made through anger.
Anger backed by fear.
I too would be angry and fearful if my perfect world were crumbling around me...

The point of my Post was that I don't think this is a temporary 'blip' which we need to get through before things return to normal.

I think it is the ongoing seismic shift in the way we humans do things on this planet...

Can't you already see it on the internet - stuff you once had to pay for is now all available there for you - for FREE!

We don't need newspapers to inform our opinions now - everyone is a journalist and an opinion maker...

So you want to protect jobs? I see a world where there are no longer any employees - everyone becomes a freelancer.

My own [virtual] organisation works like this - and I can tell you it is a lot more efficient than herding 150 cats to work in an office somewhere in Muswell Hill...

What we are going through is not a blip, it is a re-invention.

Those that have the vision to see this will start making the necessary changes NOW to protect their future.

As Lord Digby Jones said yesterday of his 18 months as a junior minister, most people he worked with deserved to be sacked.


R

Peter Cook said...

It seems that you are right - everyone is a journalist as I discovered today when the Financial Times printed a letter I wrote. This more or less said that we don't need academics, analysts or economists to tell us what we need to do about the UK plc. It is just as good to take advice from the lyrics of songs by Pink Floyd, The Pet Shop Boys and Billy Bragg. Apparently it was picked up by Radio 4's Today programme.

Common sense is frequently ignored and twisted around by intellectuals with their own agenda.

Stephen said...

yes, being payrolled for 30 years and building up an ego the size of Wales - only to find your on the scrap heap.

Truth is. The person that sacked you just did you a favour, cos now you can become an independent and not take shit from anyone.

I am not saying its easy going from the conditioning of being an employee, to fulltime independent business person. Just that the sooner people wake up and get through the fear of becoming MORE - the sooner they will begin to be successful and have a much richer, healthier lifestyle.

Don't work for anyone else, unless you are a civil servant.

You can make it on your own.

Take it from someone who is just starting out on this adventure.

If you need someone to bounce off - feel free.

Stephen@seodragons.com.
www.seodragons.com
qualified leads direct to your web

Anonymous said...

Rachel

It was not anger that led to my comments but sadness at your remarks.

There are millions of people working in businesses that won't be in your 'key growth sectors'. That's not their fault but you appear to have decided that they are not worthy of help. Worse, you suggest they simply stop doing what they are doing and refocus their efforts to new higher growth areas. I wonder why they are not doing that?

I agree with you that the recession should define a new economy but personally I would prefer to try and help support people to make the change. Some businesses and industries will and should disappear but there are many out there that need temporary help to adjust to the new paradigm.

As for me, don't worry, there is no danger of my personal world crumbling around me because I don't define myself by stuff. Be I rich or poor, I define myself only by things that cannot be taken from me.

C

Stephen said...

C,
Don't be surprised that Rachel doesn't see things the way you do. You have to try to understand her a lot more than you do. She is someone who has a history of projecting her imagination into the future and then creating new markets for today.

I don't understand why people can't understand the significance of what she acheived at RLD.

There are very few people in this country who can lay claim to what she has achieved.

Anyway, try to look at last years economic fiasco as a seizmic shift in world events. The fallout will be far ranging and on a scale never seen before in recent history.

We simply cannot prepare by maintaining the status quo.

I believe this is all Rachel has been saying.

Rachel Elnaugh said...

Thanks Stephen, you exactly understood my point.

Too much short term thinking may provide a quick fix but how as a country do we build not just economic growth and stability but SECURITY (in the widest sense of that word) to the British people?

R

Mr A Dragon said...

The sad and unjust fact is that, despite the taxpayers bailout of the banking sector, many businesses will go bust, simply through withdrawal of credit facilities.

I myself have a business which for the first time in 3 years, my bank has "asked" me to come in to discuss the renewal of our overdraft facility.

Of course, I am worried.

And its a cruel irony that many of the owners whose businesses are forced into administration in this way, will as taxpayers be paying for the bank bailout for years to come!

I believe that many of the banking sectors actions amount to an abuse of power, that unfortunately, the governments best intentions wont resolve.

Anonymous said...

"Too much short term thinking may provide a quick fix but how as a country do we build not just economic growth and stability but SECURITY (in the widest sense of that word) to the British people?"

Your hypocrisy is staggering. You advocate state support to keep people in their homes because it costs more to rehouse them. But that doesn't seem to extend to keeping them in employment to enable them to stay in their homes.

Mind you why should we listen to someone whose own track record in matters economic is less than impressive.

C

Stephen said...

C, you don't know what the hell you are talking about. How many £100million businesses have you built? How could you even begin to understand Rachels contribution?

The sad fact is that many people think they understand what it is like to build companies like RLD, but very few really do understand. Its the old shop floor mentality coming in - and i have been around long enough to see businesses from both points of view.

The simple fact is she built a fucjkign business from her kitchen which had millions of turnover using a facinating concept - which gave birth to entirely new marketplace.

To diminish Rachel, is to diminsh every inventor, entrepreneur and passionate visionary on this planet.

Rachel is also right about SECURITY. Do you realise that our economic decisions have actually threatened to undermine our national security? We have given far too much of our infrusctrure away and placed it in the hands of foreign elements. This alone is cause for serious concern, should our country ever be threatened in the future. The way forward is for our people to be given the opportunity of becoming independent. Not leeching off the state. It just takes a bit more thought than the status quo.

Anonymous said...

Stephen

Let's look at that £100m business. It was £100m turnover over 16 years. Profit? I think I read somewhere that RLD's best year was £1m but even that is questionable given the way the company used to bank gross income without provision for the resultant liabilities.

As for creating a new sector, I think you are right. However, it's not like she discovered a cure for cancer is it? Some might say it is hypocritical of her to criticize rampant consumerism when the product she used to sell was part of that boom.

Now don't get me wrong, I think Rachel has done some great stuff and has an informed and interesting viewpoint. But let's not eulogise her. RLD failed in benign market conditions so I am not sure she's in a great position to lecture others running successful businesses in these conditions.

Incidentally, if we are going to adopt a macho alpha size matters comparison of turnover, who is your business doing Stephen?

I like Rachel but I like her for what she really is not the pedestal version you seem so fond of.

C