A fifth of Britain's businesses are still stuck in “survival mode”, unable or unwilling to invest to improve their productivity, according to a survey.
It appears that this means that these companies have yet to really get over the 2008 crash.
Three concerns stand out. The first is that if George Osborne is to balance his books he is relying on the highest rate of business investment in the UK since 1980 (and probably rather before). It really does not look like that is going to happen. In that case some serious changes in economic planning need to be acknowledged.
Second, this means that these companies may have problems paying the new minimum wage.
And third, we can expect corporate failures, especially if interest rates rise (as appears likely, however unwise that may be), we have a recession (as is likely) and if consumers do not borrow to the degree George Osborne expects (as is also likely if the first two hold true).
None of which is a pretty prospect because all indicate there is high risk in our economy at present.
But all of which help make the case for people's (or green) quantitative easing since that is based on a counter-cyclical investment programme, which I think we are going to need.
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Yes, I can see that underinvestment, everywhere that isn’t a bank.
Meanwhile…
How did I get so cynical as to predict that the minimum wage would be deliberately mismanaged to the disadvantage of the majority of businesses?
Overall, it’s a good thing: and I resent the fact that the retail sector alone receives £11 Billion a year in subsidies as top-up benefits to those in work and paid far less than they need to live.
It would be interesting to price up the subsidies on a pint of milk, for differing classes of taxpayer. Trivial, in some ways: but it makes the political the personal and the abstract economics tangible; and, sometimes, this kind of propaganda exercise catches public opinion. You never know until you try.
Maybe small and maybe some medium sized businesses may well have some trouble paying the new minimum wage, due in April, (though I am sceptical) but big business should have no such problems, especially on the back of rising profitability for many of them.
And, if I am proved wrong, so be it, but if interest rates do go up as a matter of government policy, I will do a streak around my neighbourhood.
I think I’m safe. 🙂
Or put another may 80% of business were not in survival mode and were willing to invest. Glass 4/5’s full?
Mary, given the number of the unemployed driven into self-employment by DWP, who don’t have the protection of the minimum wage and, in my experience, are most likely are underemployed, what you seem to be suggesting sounds pretty callous to me.
@Nick James and Marco. Why callous? All I’ve said is 80% of businesses seem to be ok which is simply a correct interpretation of the article. It’s unlikely that you will ever get to 100% as the nature of competition always means that there will be some business winners and some losers. The economy is growing and we are at a record level of employment by the way (perhaps not in the jobs and at the wages we would all like) but so it’s not all doom and gloom as is regularly suggested here. Clearly it can always go wrong and to be frank no one noes what will happen in the future.
Mary,
Your stagnant economy has been growing at a snail’s pace for what increasingly seems like an eternity and for all of that time you have been on the precipice of a debt-deflation spiral that could very easily become manifest. Your “record employment” (and growth, for that matter) reflects nothing more than population increase. It does not mean that unemployment is at a record low.
These things are all subject to observation. I’m not sure that they need to become the subject of a platititude contest.
@Marco. It appears that some of us are optimists and some of us are pessimists. It seems to me that you and Nick have had a very defensive reaction to a simple fact that if 20% of businesses can’t invest then by implication the other 80% must have said that they are willing to invest. That’s purely a logical deduction which apparently, in your opinion, I’m not allowed to say. Why are you so scared of this fact being raised that it requires zero tolerance?
Mary, if you are looking outside the context of a secular downturn, and assuming normal levels of growth and investment – the entire glass would be full. ‘Survival mode’ businesses would be an exception in the single figure order of percentages.
If, on the other hand, you are assuming that stagnation is the new normal, you may have a point.