Sophie Murra, manager at small company stock market Sharemark, offers her view on the implications for SMEs if the UK were to enter another recession.
In the last recession, smaller companies had difficulty accessing finance to help them grow. When the coalition government came into power, there was a lot of rhetoric about how they saw small businesses as one of the keys to growth in this country.
A large, established business can still keep expanding but it doesn’t have the potential to double in size, whereas a smaller company can. That leads to new employment and money going back into the economy.
The banks have promised to lend a certain amount through Project Merlin, but although the situation has improved they are still not lending the amount requested by the government.
I think that is the real fear – if we go into another recession, it’s going to be even more difficult for companies to access funding through the banks. Then there is the fact that there would be reduced consumer spending – a situation that could result in many businesses failing. We saw so many high-profile companies fail as a result of the last recession and the potential for that to happen again is a major concern.
It could be much worse for smaller companies who are trying to establish themselves. I think they would be left in a more vulnerable position because new businesses are the ones most dependent on bank loans to finance growth.
Those companies could then find it difficult to take the vital small steps forward that they previously managed to take. Unfortunately, if the UK were to fall into recession again, I can see a situation where they would end up taking rather large steps backwards instead.