Friday, 14th December 2012
BUSINESS SURVIVAL RATES DROPPING IN THE UK - According to the latest government figures from the Office for National Statistics, nearly one million companies have ceased trading since the 2008 credit crunch and the number of small business failing within less than a year is at an alarming rate.
Businesses in the UK – Quick Overview
Currently 2.3 million businesses are operational in the UK
Start Up Business in 2011 – 261,000
Number of Business failures in 2011 – 230,000
So of the 261,000 business started in 2011 only 31,000 remain in business. It appears, from the statistics, that the number of start-ups in the UK are on the rise and in my view this could, and is most likely, attributed to the issue of high unemployment where little opportunity exists in the employment market. The realities of starting a business and keeping it operational are not something that most are fully prepared for. I can tell you from the vast experience I have had over the years that most start up owners confess that if they had been fully aware of the risks and workload they would never have started their business in the first place.
The Forum for Private Businesses reported that during 2000 to 2009 some 25,000 retailers closed shop permanently and in just the last few months we have seen one of the largest UK Retailers, Comet, fall into the hands of Administrators.
Why are we seeing such a decline, especially in the high street retail sector? In my view the signs are crystal clear and include, but are certainly not restricted to:
Restricted Cash Flow - Nearly all businesses, especially small businesses, rely on the assistance of the major banks. With the problems the bank are in the amount of finance available has significantly reduced since the credit crunch which restricts cash-flow therefore forcing many businesses into liquidation.
High Street Vs. Online - It is often much more cost effective to run an online business. High street premises are notoriously expensive, not simply in the levels of rent but with the added strain of council taxes which often raise the cost of running the premises by as much as 50 percent.
Falling Customer Spending - The credit crunch has taken its toll with all of us, not just businesses. People now are more concerned about paying the mortgage and are foregoing the luxuries in life and whenever a purchase looms the question on most people’s minds is “Do I really need this?”
There are of course all manner of other issues that businesses face, many of which start up businesses are ill equipped to deal with, such as:
Employment Issues - These are wide and varied and include such issues as Employer Responsibilities to Staff, PAYE, Health and Safety and a lot more legislative requirements imposed on business by the government.
Taxation Issue - Again look at employment which carries PAYE and National Insurance. On top of this you have VAT. All of this paperwork has to be completed in order to avoid prosecution and fines imposed by HM Inland Revenue and HM Customs & Excise. Most business has a real issue with having to deal with the added work, of which you are effectively an unpaid tax collector for the government.
There is a myriad of legislation imposed on business, regardless as to whether you are a large multinational or a one man band start up and for the start up in particular this often proves to be too much to bear.
I can tell you that starting a business is NOT something you should do without proper due diligence – that is research carefully what you are getting into and ask yourself then are you fully prepared to take on the fact that your business is likely to fail within the first year. Finance is the all important thing and unless you have cash reserves or can obtain finance to cover your operational costs and contingencies then you face almost certain failure.
The Federation of Small Businesses continues to push the UK Government for more help for start-ups by reducing taxation, red tape and easier access to financing but with the UK in such a financial mess itself these calls are most like to fall on deaf ears. Maybe if the UK Government was to cut Foreign Aid spending they might be able to do more at home.