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The recession's behind you! Oh no it isn't...

London, UK (21/10/2009)

LONDON (Management Today) Small businesses are optimistic about the economy, says one survey. There's worse to come, says another.

According to a report this week from BT Business, 75% of small businesses believe the economy will see an upturn in 2010, with 35% expecting improvement as early as January. But just as we're about to break out into a patriotic toast, along comes insolvency crew Begbies Traynor saying we can expect a ‘deluge' of business failures in the coming months.

From bubbling confidence to Biblical warnings - the current business environment would scarcely be more confusing if a plague of locusts descended from the sky and started running the stock market.

Now we'd like to believe the more positive story. BT boasts that its Business Pulse survey, of 7,200 SMEs, is the largest of its kind in the UK. And it does make uplifting reading: 61% are confident about their business prospects for the coming year and, incredibly, 45% say their business operates for the better as a result of the downturn. Hence BT saying we're at a ‘tipping point', to coin a phrase from Malcolm Gladwell.

Not only does this make for cheery reading, it could actually be reflective of change: the economy often functions as a confidence game after all. But with BT currently promoting Small Business Week, dedicated to ‘championing commercial, industry and government support for the UK's 4.7 million-plus smaller enterprises' it's hardly in a position to urge grabbing loads of pairs of animals and jumping in an emergency life-raft.

Begbies Traynor  seems to disagree on our fate. The restructuring company reckons we're in the middle of a W-shaped recession. That means we've completed one a big dip and have since risen again, but now we're poised for another sharp drop, like a big cartoon pencil teaching kids to write on a 1980s TV show.

Begbies Traynor said 134,000 businesses still showed ‘material signs of distress'. It points to the recession of the early '80s, which saw a temporary rise in business confidence in 1981 before things turned rapidly more stormy in 1982. Statistics from recessions over the last 40 years show insolvencies peak one to two years after GDP stops shrinking. Which doesn't sound too pretty either.

Begbies' W-shaped warning echoes similar foreboding from Ernst & Young, which reckons Britain faces a painful and prolonged ‘VW-shaped recovery', with the economy held back by weaker consumer spending and government cost-cutting. According to its report, growth won't return to its long-run average till 2012. Although quite what that has to do with Beetles and camper vans we have no idea.

As to which view is the more accurate, time will of course tell.
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