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Thousands of small businesses face bankruptcy
Peter Dominiczak31 Dec 2008
MORE than 4,500 small businesses in London will go bust next year as Britain plunges into recession, campaigners warned today.
The Federation of Small Businesses predicted a bleak 2009 for many of the capital's small firms and has warned that more than 22,000 jobs will be lost.
Experts warned that urgent action is needed to limit job cuts.
Stephen Alambritis, spokesman for the FSB, said: "Many of these small businesses are in dire straits. The sector is hugely vulnerable and it is a fertile ground for closures. Margins are so tight for these businesses and constant cash flow is vital, so any reduced turnover over the Christmas period is enough to make these shops go under."
He also warned that areas of London will be damaged as stores close.
"Parts of the capital are set to really lose out because of these closures. We may even lose whole high streets that are dotted with these independent shops. Places like Portobello Road, Balham High Street and Clapham High Street rely heavily on small businesses and are going to suffer," he said.
The FSB is now demanding a cap on credit card charges to reduce businesses' costs and help consumers. Mr Alambritis said: "One quarter of London's small businesses are financed on the credit card. With interest rates at two per cent we urge the Government to cap rates, thus releasing more money into London's economy." Matthew Sinclair, research director of the Tax Payers' Alliance, said: "London's economy is built on small businesses that are always under threat from large chains and increasing tax bureaucracy. It desperately needs the Government to impose less burdens on these vital firms."
John Dean, chief executive of the British Shops and Stores Association, said newer businesses are going to be in danger as bankruptcies start to hit.
He said: "It is inevitable there will huge casualties. The worst affected will be the immature firms that are about two or three years old and simply have not had enough time to stabilise."
Mr Dean added: "Once these independent businesses are gone, they are gone for good and it is a tragedy."
Reader views (4)
banks caused property crash .
banks demand asset sales at reduced prices .
banks leave customers penniless and enslaved by debt .
customers go bankrupt .
no customers .
what will the banks do then ?
ps - enterprise loan scheme complete dead duck - all bank managers terrified to take risk of any lending at all .
anyone in govt listening ?
- Penny Mason, worcester uk, 18/02/2009 23:52
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One of the biggest threats is actually the legislation that governs recievership and administration of companies.
I have recent expereience of this where panicking banks have administrators sent in.
They close the business just prior to the most profitable month of the year and fire sale the assets in 2 days.
The banks get their money, the staff get most of the money they are due, the other creditors - small business and individuals are owed in total just over £600,000 will get nothing.
But the administrators will get paid over £100,000.
The small creditors will in some many cases go bust - they wont pay their suppliers so they will also suffer.
This is not a sensible way to manage company problems - all it is doing is creating a spiral of company and individual bankrupcies.
This whole area needs to be addressed or the whole economy is in danger from cascading failures caused by the banks panicked reactions to the downturn.
- John Whitby, Peterborough, Cambs, 01/01/2009 23:13
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A reduction in the ridiculous level of business tax might help - or don't councils wan't to hear that - if you look carefully at most towns these day's even before the credit crunch most of them were being used by charity shops exactly because of the cost of outlandish business tax
- Edriordan, Wisbech, 31/12/2008 14:49
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The Federation should be directing their ire at the banks instead of the Govt which is doing all that can be done to help them out of the hole. Please note 1/3 of small businesses fail anyway because of poor planning, training, advice and assistance from their professional bodies.
- Dhanraj, Basildon Essex, 31/12/2008 14:24
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