SMALL FIRMS AND THE PROSPECT OF RECOVERY: A NOTE ON POLICY

Abstract

There has been a trickle of recent evidence that the current recession is coming to an end. From a number of perspectives it may be argued that it is fortunate that the pace of recovery from the longest post‐war recession is faltering and slow. How can slow recovery from the longest recession since the war be welcome when almost 44% of the small businesses responding to the National Westminster Bank / Small Business Research Trust surveys report low turnover or lack of business as the major constraint, with the smallest businesses being affected most? The reason is that the economic and social policy cocktail which offers the prospect of sustained growth has yet to be discovered in the UK, if indeed such policies exist. Over the past thirty years (excluding the oil shock of the early 1970s) two periods of decline in real GDP have occurred, both since 1980 (Budget Statement 1990/1). It thus appears that the downside swings in the economy are becoming more pronounced. Recent reductions in interest rates are helpful in encouraging recovery but policies which smooth rather than accentuate fluctuations in the levels of economic activity are what is really required. These policies need to be established within the context of a strategy for managing the UK economy. Such a strategy must incorporate the role of small firms which, as recent evidence shows, continue to be a very important segment of industry and commerce despite the ravages of recession.