More businesses closed than started up in 2009, according to recently released statistics from the ONS.

Last year about 279,000 businesses closed their doors, the highest number since 2000 when the business demographic survey started.

As far as business births were concerned, the highest rate was in business administration and support services at 13.9%. 48,000 new businesses were created in professional, scientific and technical, representing a birth rate of 12.5%.

Over 44,000 construction companies died in 2009, whilst 42,000 professional, scientific and technical faded into oblivion. Business administration and support services had the highest death rate of all at 14.8%.

London had the highest birth and death rate, recording 12.6% of all new start-ups and 13.7% of business closures. Northern Ireland, on the other hand, recorded the lowest rate in both categories with 6.6% of new businesses and 9.2% of business deaths.

The CBI has now predicted that business growth next year will be slower than it had first thought. The employers group now predicts growth of only 0.2% in quarter one next year with a total growth for 2011 of 2.0%.

The first few months next year are expected to be especially sluggish due to the VAT rate hike, according to the CBI.

Ian McCafferty, the chief economic adviser to the CBI, said that economic growth had surpassed expectations in 2010 but this is not expected to continue as government austerity measures and VAT rises enter the economic equation.

The CBI has also predicted that economic growth will increase by 2.4% in 2012.

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Contractors could be amongst those set to benefit from internal skills shortages at UK firms as we go into 2011.

The Chartered Management Institute recently said that 43% of managers in the UK think they cannot fulfil their objectives for next year with the staff they currently have. As a direct result, 48% are expecting to make further redundancies in 2011. This could lead to openings for highly-skilled limited company contractors as companies look to complete tasks without increasing the size of their permanent workforce.

The CMI’s chief executive, Ruth Spellman, said that 2010 has been a very difficult year for managers and in many cases they have had to deal with the difficult conditions without a suitable team.

There are also conflicting reports on the state of the UK economy and its jobs market. The latest figures from the ONS show that unemployment reached 29.13 million in the quarter to October. 33,000 of the 35,000 job losses were in the public sector which is to be expected considering the government’s austerity measures.

The CIPD says the figures bring no joy to jobseekers and its chief economic advisor, Dr John Philpott, said the data was far worse than expected. He believes the jobs market has run out of steam which does not bode well for prospects in 2011.

The British Chamber of Commerce, on the other hand, said that whilst the figures were disappointing, they gave no cause for despondency and longer-term trends point to a strong labour market.

The REC was also disappointed by the latest figures. Kevin Green said that employers are still cautious about hiring new employees but he still believes growth will return to the jobs market in the New Year. However, contractors, temporary staff and interim workers are likely to play an important role in helping businesses meet increased customer demand.

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Contractor accountants and other freelancers are becoming more enterprising and creating opportunities for themselves according to figures released by the CIPD.

Data from the Institute shows that an extra 350,000 jobs have been created this year and 30% of these can be attributed to the self-employed. Two thirds of these new jobs went to people in the under 35 age group and the remaining third to people over 50.

However, this job creation seems to have completely bypassed those aged between 35 and 50. The author of the report, Dr John Philpott, said that it is easy to see why many people are still unconvinced that the economy is recovering when a core element of the workforce has not benefited from the recovery in the jobs market.

Once more permanent full-time opportunities become available, the middle age group should start to feel the benefits but this could take time as growth is likely to slow down somewhat in 2011.

The government is keen to encourage people to set up their own business. Mark Prisk, the business and enterprise minister, recently laid out measures to encourage micro-lending to small enterprises and called on Brits to display their spirit of entrepreneurship.

The Enterprise Finance Guarantee Scheme is to be reformed to increase community development finance institutions access to funding. Prisk said that he wanted to encourage everybody to start their own enterprise, regardless of their previous background and CDFIs give vital support to businesses in depressed communities.

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Contractor accountants with clients operating in or relying on a number of UK sectors will be pleased to hear of some positive growth.

For example, new research from the EEF shows that the UK’s manufacturing sector reported strong output and good order balances in quarter three.

Manufacturers have already started hiring new staff and making new investments which will undoubtedly come as welcome news for contractors. Ms Lee Hopley, the chief economist at EEF, said that the manufacturing industry was ending 2010 on a high and this will provide the sector with a strong footing to begin the New Year. EEF also predicts that manufacturing and engineering will outperform other contributors to the UK economy in 2011.

It’s not only the UK that has witnessed this welcome boost in manufacturing either. Markit Economics recently reported that last month, the manufacturing sector across Europe increased at its fastest rate for 4 months.

But manufacturing isn’t the only sector planning to expand next year. Research by PwC shows that 28% of firms in the UK intend to increase recruitment in 2011. In addition to manufacturing, the technology and services industries should see vigorous recruitment, the study showed.

The recent Growth Review from the government also contained encouraging news for a lot of UK contractors.

David Frost, from the British Chamber of Commerce, said that enterprises will be reassured now that the focus is to return to balanced, sustainable growth. The review talks about creating a framework for growth and also acknowledges the vital contribution made by SMEs. However, it remains to be seen whether the coalition can bring down the barriers that have been preventing firms from thriving.

One piece of not so positive news regarding the service sector has come from the CBI. Although professional and business services have remained steady over the past few months, consumer services have tumbled. The CBI cited reduced consumer discretionary spending as a contributory factor along with rising costs and falling prices.

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I’ve written before about the confusion in the debate about immigration and the constant refusal of government and the press to separate genuine immigration from abuse of the system, especially the misuse of the ICT programme. That debate has been raging for a while now and remains unresolved, although we did think we might be getting the message across.

Then, all of a sudden it seems we have a major triumph. We, via our fiends (sic) in Brussels, have just signed a trade agreement with India. Nothing much wrong in that by itself, we need to trade and India is a growing economy. But look a little deeper…

In exchange for India relaxing its import rules so the EU can sell into that market, we have apparently agreed to give their engineers, IT workers, project managers and other skilled trades virtually unlimited access to our market. OK, so it’s a free world and we all have to get work where we can at the best rate we can. But given that India’s official language is English, and there aren’t that many English-speaking countries in the EU – even if you count Scotland – I somehow get the feeling that the traffic in this direction will be rather heavily biased in our direction.

Again, not a problem, except that, as with the ICT scam, these aren’t likely to be long-term immigrants. Some will no doubt be here for a long time, and some will genuinely contribute to the UK economy. But I have a nagging feeling that an awful lot of them will be here to learn how to do the job we’re doing for ourselves and then move it back home where the labour rates are considerably cheaper. That might cut the bottom line but it is a horribly short-term view of things. It won’t take too long before all the real work in IT, for example, is offshored and our service economy – once one of the world’s strongest – has gone the way of the Dodo.

So if this is good news, I would really hate to see a tragedy.

And what really annoys me is that one part of Government is talking about limiting immigration, another part is making positive noises about ICT use and abuse while another part is selling us down the river. Well thanks, guys, great job.

And let’s be clear here. I have absolutely no problem with India or the Indians and never have done. I have no objection to skilled people coming into the country and benefiting us as a whole. I don’t even have a problem with the ICT system, which allows the simple transfer of key staff for shot term purposes.

But I do have a problem with our government doing all they can to close down the industry I’ve been working in for the last 35 years.

Someone has got this badly wrong. And I don’t think it’s me…

Alan Watts can found at LinkedIn.
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Restraint should be the name of the game if we want to avoid another economic recession. That’s the message accountants are sending to George Osborne in advance of the June 22nd budget.

Although VAT and CGT rises are anticipated, members of MGI UK and Ireland hope there will be some assistance made available to counter any damaging consequences of these rises.

An interesting idea put forward by Andy White of Carter Backer Winter is bound to gain widespread support from employers. He wants to see employers’ national insurance contributions abolished completely; a move he says which would encourage companies to take on more staff. The resulting loss of revenue would be compensated for by an increase in income tax collections and the reduction in the amount of state benefits paid to the unemployed.

Other online accountants say they would like to see a cut in corporation tax rates and an overhaul of IR35.

Meanwhile, government departments are going to have their work cut out in the run up to the summer recess. They need to outline spending plans, which will then be checked against tough criteria, if they want to have funding approved. One of the new criteria that must be met is that projects are essential to help meet government priorities.

Small firms and limited company contractors could benefit from this rule as outsourcing the work could prove the most efficient means of getting projects completed.

George Osborne has said that we face a great national challenge. Government must rethink the way they spend money. Gone are the days of debt, irresponsibility, and waste and we must now find ways to get the country living within its means.

We inherited this terrible economic crisis but if we all work together we can put it right, he added.

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Fears of a double-dip recession have been alleviated, at least temporarily, by a report released at the end of last week that showed that GDP rose 0.2% in the first quarter of 2010.

Self employed contractors and limited companies in the financial sector should definitely be encouraged by this news as the rise was mainly due to a growth in financial industries and business services of 0.6%.

Other sectors that contributed to the growth were communication, government, storage and transport.

Some industries however did not show such positive results, with construction, distribution, hotels and restaurants all showing a decrease in output

The treasury spokesman for the Lib Dems, Vince Cable, was not particularly optimistic at the news. He said that there is still a real danger of the country sinking back into recession as the marginal growth shows there are very few visible signs of the promised recovery.

He added that whilst the banks continue to starve businesses of credit and people struggle to get out of debt, the recovery is likely to remain in a fragile state.

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Further signs that the country has seen the back of the recession came in the form of the Lloyds TSB Business Barometer.

The barometer revealed that 54% of UK businesses expect to see an increase in business activity this year, whilst only 5% are expecting a decrease. The findings are based on a poll of about 200 companies, including several leading contractor accountants and umbrella companies.

The business bank account believes that confidence has finally returned and they expect the economic recovery to continue.

There was however an air of caution in the report as 12% fewer firms said they were more optimistic now than they were 3 months ago and it’s the larger firms that are showing signs of pessimism.

This pessimism could affect the contractor accountant marketplace, as many of their clients are likely to provide services to these companies.

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