GUEST BLOG: What does 2011 have in store for small businesses?

If you want to know where the boom sectors will be next year, prepare to be disappointed. There isn't going to be a 'boom' in anything. The only industries to show a marked increase will be leisure and tourism. Against Sterling, the Euro will fall 10% within the next 6 months, which will prompt a mass exodus to Europe. The 'staycation' era is over. Europe will be much more appealing: we are witnessing the beginning of the end of the Euro as we know it. Countries like Greece and Spain will slash their prices to attract much-needed tourism.

Back on British shores, online business will continue ruining the high street. Sales of big ticket items such as electronics will suffer as consumers continue to hunt for bargains on the web. The only high street businesses that will do well are those offering outstanding customer service and advice. These are the firms that are doing a roaring trade today: brands like Comet, Carphone Warehouse and Richer Sounds are pulling in a healthy custom by delivering exceptional face-to-face service.

Our manufacturing sector is also due to see an uplift, helping to pull up our exchange rate.

There will be a slight increase in DIY purchases. The property and banking sectors will remain sluggish so people are likely to concentrate on improving their homes - rather than moving. This is good news for small businesses catering to the home improvement market.

On the subject of sluggish banks, there will be little movement in the financial arena. In short, far less will happen than the public has been led to believe. Here is an area where there will be some softening of taxation plans. The political headlines and the execution detail will diverge somewhat. The Electorate despises the banks but they are vital to the UK economy and cannot be allowed to go offshore.

As to the ever-present double dip recession issue, my answer is 'No, there will not be one.' The double dip question refuses to go away. Especially after the Irish crash. The fragile UK recovery and the stuttering US recovery (combined with Obama's decreased authority) have served to undermine confidence and drive investors away from equities to treasury bonds, gold and other safer havens. This is despite the fact that corporations are generally performing well and certainly far better than a year ago. Even the airline industry looks healthier. Cash piles are also being amassed in the corporations. The cash pile in US large businesses is around $2 trillion - enough to effectively wipe out the US national debt.

So might we get a second dip?  Consumer demand remains moderate and many are still reducing debt and those that have cut personal debt are being more cautious. In the US, recovery has brought about a sharp increase in imports and a very unhealthy negative trade balance in 2010.  Confidence in the government's ability to manage the recovery is shaky.

The only likely cause of a second will be a climate of self fulfilling prophecy. Every one becomes a little more cautious and as a result most indicators go the wrong way. Even this will only cause a more of a blip, within the next three quarters. But as I have always said, the recovery will be bumpy (some call it choppy) and so we must not read too much into a new negative trend. All in all, the UK is one of the better economies to base a business in.

 

Stephen Archer is a director, of UK business and leadership consultancy, Spring Partnerships www.spring-partnerships.com and an economic and business analyst.

 

 

 

 

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