You own a small business. You’re good at what you do, have built up a solid clientele and things are moving forward according to plan. Then the economy takes a turn for the worse, your profits decline to the point where you’re not making any profit at all and it is hard to make the payments on your loan. Such is the typical life of a small business owner during troubling economic times.
In the business world, it’s typically the small businesses that have the toughest go at it. They lack the corporate backing and, typically, the brand recognition and credibility of larger businesses, which makes it somewhat difficult to establish a clientele and grow accordingly. But in a struggling economy, small businesses have it even tougher due to the fact that they typically don’t have the financial means to ride out any recession or down period.
In England, Sir Mervyn King has surprisingly blamed the Bank of England, or BOE, which he governs, for the economic recession that has engulfed the nation, ending the run of so many small businesses and preventing many more from starting up. He said that the bank failed to warn about the turmoil that could result in the build-up of the banking sector. This rare admission by one of England’s most respected and influential leaders could, in turn, become a major benefiting factor for small businesses. And it’s perhaps more surprising considering his role as Governor of the BOE.
King’s statement is that the Bank of England reformed in a move that would force it to lose regulation. The bank sector was built up to the point of financial instability for small businesses. King argues that the bank should have acted more decisively in trying to prevent the financial disaster. But now, King’s criticism could help the bank to regain regulations, which in turn could be a boom for businesses. In fact, King has already said that substantial bank reform is already under way, a sign of the changing times and business climate. A case in point example of how small businesses have been hampered by the Bank of England is evidenced in an April 2012 story in The Telegraph, that details how small business loans have slumped since 2010, and annual lending to businesses is declining at a rate of 3pc.
In any economy, economic growth is typically derived from businesses, both large and small. And if businesses are folding faster than what they’re starting at, then you’re going to have a problem. When the reason for lack of start-ups rests with a powerful entity, such as a bank, then you’re going to have even further troubles. A lending bank should be working for the business owners, not against them. And the Bank of England has lost sight of this. It’s taken strong analysis and critical statements from Sir Mervyn King to influence reform for the positive. Positive because such reform could soon make the bank an ally of the businessman once again. More businesses would spell more jobs and get an economy back on the right track.