Uncertain times ahead

As interest rates remain low and mortgage lending soars, the Bank of England is maintaining its cautious message on economic growth. Consumer borrowing is a potential future problem for the UK economy, with the UK public collectively owing nearly £170bn on unsecured debt.

Until recently, the economy was propped up by consumer spending but there has now been a downturn. This is set against a background of the continued downturn in the UK's manufacturing industry. Orders, output and employment have all plummeted and the strong pound has contributed to export orders falling at their fastest rate this quarter for the past 18 months.

Manufacturers' main hope is that the US recovery following the end of the war in Iraq will help trigger a gradual recovery in the UK. Further cuts in interest rates may be necessary to boost the economy at this unsettled time. However, as inflation crept to 2.9% last month this looks less likely.

The SME segment is particularly hard hit. A recent report from the Institute of Directors reveals changes in legislation since 1997 have cost UK businesses nearly £6m a year. This is backed up by a report by the Centre for Business Research at Cambridge University, which showed the failure rate of the UK's small business start-ups has trebled in the past three years. Increased regulation was cited as the main cause of the increase in failures.

The next key legislative measures likely to affect small businesses are the Employment Equality regulations, which aim to bring the anti-discrimination rights for homosexual employees in line with those currently in place to protect women. They come into effect in December 2003. SMEs should also be aware that in 2006 the Age Discrimination Law will start to bite.

This will consider whether to abolish mandatory retirement ages or choose a default age of 70 at which employees will be required to retire.

Lack of links

The Small Business Council has called for a change in government strategy towards small businesses. This highlights the lack of links between education and the small business community. There is a wide gulf between the skills students acquire at school and university and the specific needs of the SME segment, meaning high quality graduates often opt to work for large blue-chip companies. This is exacerbated by the attractive recruitment packages these companies offer.

The SBC has pointed out that the government also falls prey to this, favouring procurement from large blue-chip suppliers over SMEs. If the government supported small businesses by buying from them instead of paying to prop them up, the sector would have a more certain future.

The proposed revisions to the Disability Discrimination Act could also hit hard. The new terms give disabled people the right to sue any organisation that discriminates against them. This is, of course, a welcome measure but is likely to have serious consequences for small businesses. At a time when the compensation culture is raging, the Federation of Small Businesses has expressed concern that the DDA revision may give rise to a new generation of so-called ambulance chasers. By specifically pursuing the disabled community, these profiteers may encourage people to make claims against businesses that simply cannot raise the capital in time to buy ramps, signs, lifts and toilets.

The government is to inject cash into the UK's first automotive academy in a bid to solve the skills crisis stifling the UK's motor industry.

Staff retention rates are less than 50%, the worst across all sectors of industry, and less than half of all apprentices working in car dealerships and garages stay longer than a year. Based in the West Midlands with 12 satellite centres across the UK, the academy is aiming to halt the number of car dealerships going out of business - a figure that has rocketed this quarter.

Fleet managers also need to review their mobile phone policies following the latest wave of mobile phone regulation. From 1 December, the government is introducing a ban on mobile phone use while driving. Anyone caught using a hand-held mobile phone while on the road will face a £30 fine and three penalty points - a move welcomed by health and safety organisations.

Finally, workaholics take note - Brighton beach has become the first UK resort to trial wireless internet access. And with BT's announcement that it is planning to turn 1000 pubs across the country into wireless hotspots, there really is no escaping that urgent email from the boss.