GDP rises, but there’s no bunting for Britain’s small businesses

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

The economy is creeping forward, but small business owners can be forgiven for wondering when the good news will reach their tills. Growth offers encouragement, yet cautious customers and stubborn costs leave many firms with little reason to celebrate.

The latest figures show GDP grew by 0.1% in August, following growth of 0.4% in both June and July. Over the three months to August, the economy expanded by 0.7%, suggesting progress despite the sharp slowdown in monthly growth.

An uneven recovery

Services led the expansion, growing by 0.9% over the three months. However, production fell by 0.2% and construction contracted by 1%, showing that the recovery is far from spreading evenly across the economy.

That matters because businesses depend on one another. When building projects are postponed or cancelled, the consequences reach plumbers, electricians, decorators, suppliers and the many subcontractors whose livelihoods depend on work moving ahead.

A fall in production also raises concerns for smaller manufacturers and their suppliers. The headline figure alone cannot explain conditions in every industry, but it provides little reassurance to firms already struggling to keep orders coming and margins intact.

More spending power?

Photographer: Mircea Solomiea Unsplash photo ID: pZGDblyRFQw

There is some encouragement for businesses serving consumers. Real household disposable income per head rose by 1% in the second quarter, potentially giving households more room to spend.

But extra spending power does not automatically become extra spending on the high street. If households need that money for energy, fuel and other essentials, shops, cafés and personal service businesses may see little benefit.

Nor does GDP growth establish that business costs are easing. A firm can increase its sales and still find itself worse off if the cost of delivering those sales rises faster.

The view from the shop floor

National growth figures measure the economy as a whole; they cannot describe the daily experience of every small business. A busy service company and a struggling building subcontractor can inhabit the same economy while facing very different prospects.

Even within a growing sector, the smallest firms may lack the reserves to withstand late payments, unexpected bills or another disappointing month. For them, recovery means reliable orders, manageable costs and enough cash left to invest.

A long way to go

There are reasons for cautious optimism. The economy is expanding, services are providing momentum and household incomes have improved, but weaker construction and production leave important parts of the recovery exposed.

Small and micro businesses have shown considerable resilience. They now need growth that translates into stronger demand and healthier margins, because an improving national total is only the beginning of the story.

This is an abbreviated article by Liz Barclay – read the full article at Business111.com/news

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