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Credit crunch 'only biting City firms'

Talk to a company inside London and you’ll hear the gloom stories of the economic downturn; go further afield and you’ll get a response that is more upbeat and accurate.

So argues David Frost, the director-general of the British Chambers of Commerce, who yesterday said that “too much attention” is paid to what happens in the capital.

His verdict stems for a survey of 250 small businesses, commissioned by the group this month, which found that the majority have not been affected by the credit crunch.

Typically, these firms are either not in financial services or are located outside the capital, meaning their exposure to the turmoil, which started in August, is limited.

“If you lived your life in London you would often be left with the impression that the economy was about to fall off a cliff,” Mr Frost told the BCC convention yesterday.

“From my visits around the country I can assure you it is not .When I speak to them, be it in Aberdeen, Birmingham, St Helens or Rotherham, they not only inspire me with their success, but they tell me that whilst business is challenging they are doing well.”

In the survey, a quarter of firms reported problems accessing fresh funds since the credit crunch, and just over one third had put off expansion plans as a result.

But when asked whether their new funding or expansion plans were hit as a direct result of the credit woes, about six out of ten firms answered “no.”

It is not the first time that a brighter outlook than headlines might suggest has been suggested: the CBI director-general Richard Lambert has repeatedly said trading has not slowed outside of London.

Perhaps what’s to blame, Mr Frost argued, for the doom and gloom is a “pre-occupation” with financial services.

Heading off the counter-argument, he explained: “Yes London is the centre of global financial services, but this should not detract from the contribution to this country of the millions of small businesses not engaged in financial services, but contributing to the wealth of this country, be it in manufacturing or support services.”

Small companies, he said, are “the backbone of the British economy and they are in the frontline of these intense global challenges. What has impressed me over recent months has been their amazing resilience.”

However, the findings are not an excuse for small firms to get complacent. The BCC believes too much focus has been placed on the consumer driven economy to the detriment of an export led model, as illustrated by the £50bn trade deficit.

But it is this area that, so far, members of the group are championing.
“They are succeeding in tough export markets,” Mr Frost said.

“They understand that the current global credit difficulties will impact, but they tell me that far too much attention is paid to what happens in the square mile and Canary Wharf and not the real economy outside.”

Apr 29, 2008
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