The Impact of Global Recession on Small Businesses - Dissertation Example

DISSERTATION PROPOSAL FOR MASTER OF SCIENCE (MSc) IN ECONOMICS The Impact of Global Recession on Small Businesses - How Educational Centre in United Kingdom that Implement Entrepreneurship Programmes respond to this situation. ABSTRACT Has Brunei Darussalam, my homeland, been affected by the global recession which has recently hit the world economy? What are the impacts of this recession to small businesses in Brunei? Is Brunei ready to tackle these challenges? Have other currently developing countries been affected by the recession, or will they in time to come? Brunei is one of the smallest countries located in South East Asia. The population estimate in 2008 was 398,000 persons where, of the total population, 106,200 persons were below the age of 15 years. The annual rate of increase was 2.1 per cent. In terms of Real GDP Growth Rate (%), GDP decline by 1.9% compared to a growth of 0.2 percent in 2007. In 2006, the GDP growth rate is 4.4%. Comparing this to the unemployment rate (%), the unemployment rate in 2006 was 4.0% compared to 3.4 % in 2007 and an increase to 3.7% in 2008. From this data, is Brunei Darussalam experiencing a recession? According to John Kitching in his study on “Have Small Businesses Beaten the Recession?” recession conditions pose major threats to, but perhaps also offer important opportunities for, businesses. The nature of these threats and opportunities, and their impact on businesses, varies with the nature and origins of particular recessions. While the precise causes of the 2008/9 recession, and the weight to be attached to them in particular national contexts, continue to be debated, it is widely accepted that the global banking crisis, sparked off by the widespread default of “subprime” mortgage holders in the USA, is one of the primary triggers (Peston 2008; Cable 2009). This project is to look into one of the developed countries that has been hit by the global recession in 2009, and see what the chances are that currently developing countries have at facing a recession, and how this can be avoided. Britain has been hit by its biggest recession in September 2009. Britains gross domestic product suffered another decline in the third quarter of 2009. GDP decreased 0.4% in the third quarter, according to preliminary estimates from Britains Office of National Statistics. The British economy officially entered recession in January after two consecutive quarters of negative GDP growth, which is the traditional definition of a recession. For the third quarter of 2009, statistics showed the biggest declines occurred in the hotel and restaurant industries, which fell by 1%; construction, which decreased by 1.1%; and agriculture, forestry and fishing, which declined by 1.6%. Britain’s economy is mired in its longest recession on record, as government figure a shock 0.4% drop in GDP. Britain officially entered recession on 23rd January 2009 when the office for National Statistics reported that the economy had shrunk through the last two quarters of 2008. There were job cuts, factories were shut down and families began counting their pennies. The unemployment crisis picked up pace, with more jobs losses in the retail sector and vacancies hitting a record low. Does this recession have a major impact on small businesses in Britain? How will this effect the young entrepreneurship program in secondary schools in United Kingdom? This study will also be based on a literature review from previous research on the impact of global recession on small businesses in United Kingdom. In my dissertation, I specifically want to look at how young entrepreneurship programs are set up in two secondary schools in United Kingdom. How are they adopting to the recent recessions and what are the related problems are they experiencing because of the recession? How do small businesses in Britain survive from this recession? In relation to this, it is with hope that the young entrepreneurship program in Brunei could help reduce unemployment in Brunei, as well as in other countries that are still in the younger stages of development. I would like to propose the implementation of the Young Entrepreneurship program to be taught as part of the curriculum in Secondary Schools in Brunei in hope of reducing unemployment. Literature Review Prior research done by John Kitching mentioned that small businesses are treated as highly susceptible to external shocks, such as recessions, with firm performance declining in line with GDP. Small firms possess limited resources, customers and product lines across which to spread their risk – all of which restrict a firm’s capacity to withstand competitive pressures in adverse macroeconomic condition. They are also much more likely to cease trading than larger enterprises (Storey 1994). Falling GDP at the macro level causes performance decline at the micro level and, in severe cases, business closure. Many economists have now been predicting the world global recession since the 1930s. Such grim warnings discovery spending by households and businesses, depressing output even more. America, Britain, the Euro area and Japan are almost certainly already in recession according to the popular rule of thumb of two successive quarters of falling GDP. In an updated World Economic Outlook, published on Nov 6th 2009, the IMF predicted the world GDP would fall to 2.2% in 2009, based on purchasing power parity (PPP) weights, from 5% in 2007 and 3.7% in 2008. GDP is a measure of the total value of production of goods and services by all resident producing units in an economy during an accounting period, which is usually one year or one quarter. While recessions involve falls in GDP, they are namely characterized by rising unemployment. Fear of a long recession stems not just from the distressing developed country figures. It is also triggered by evidence that the recessionary trend is affecting Asia as well. Purpose of this study Since my first degree was in Economics and I have been teaching since year 2000, the area of my concern on taking this master programme is for my professional development and understanding of the content in Economics such as in Microeconomics and macroeconomics. Not only is it my intention to obtain in-depth knowledge on these topics but also to aim to study more economics literature and the history of its development. By doing this study, we could see the impact of recessions to the United Kingdom’s small businesses and their responses to it. It will also look into how educational centres that implement young entrepreneurship programs in order to solve the unemployment problem due to recessions. This study will help us as a one of the many still-developing countries to take early preparation as a mechanism to deal with recession. Hopefully the findings from this study will be put into good use in classroom teaching for the Economics’ SPN 21 syllabus especially on the topics of recession and business organization. Hence, I look forward to inculcating more interest in students’ learning Economics for the SPN 21 syllabus that will eventually seek to boost results in their examinations. Methodology Two educational centres (Kingston Grammar School and Royal Holloway, University of London) in United Kingdom will be observed. There are several methods of gathering information that I would use: 1. Literature review done by previous research. 2. Quantitative method: distributing, collecting and analyzing questionnaires 3. Qualitative method: interviews and observations 4. Literatures in the library and internets Research Questions To support the research the questions below need to be answered: 1. Are small businesses in United Kingdom badly affected by the current global recession? 2. What are the characteristics to make Young Entrepreneurship Program in Secondary School in United Kingdom a success or failure? 3. How are educational centres in United Kingdom that implement Young Entrepreneurship programme adopting to the recent recessions? 4. What are the related problems they are experiencing because of the recession? 5. What are the possible ways of implementing this program ventures in Brunei? Target group 1. The business acumen which has contributed to successful business owner/manager procedures for 10-20 businesspersons in United Kingdom. 2. The economics teacher in selected institutions at United Kingdom who have successfully implemented the young entrepreneurship programme at their institution. 3. The students’ involvement in this program. Research Time Frame This research will be conducted within the year of the course program. DATES ACTIVITIES March – September 2010 Identifying Schools in United kingdom that implemented entrepreneurship education. September – December 2010 Literature review, making appointment with teachers and students and library research. January 2011 Preparing questionnaires February – March 2011 Data collection by distributing questionnaires and interviews some teachers and students from selected secondary schools in United Kingdom as well as selected businessman. April – May 2011 Writing research analysis. June – August 2011 Checking draft and the thesis. September 2011 Submission of the final draft of the thesis to the university senate. Conclusion The purpose of the paper is to look into the impact of global recession to small businesses and whether SMEs have beaten the recession. The 2008/9 UK recession has been reported as the worst since the 1930s, involving a collapse of the banking system, as well as falling GDP. Commentators have suggested that small businesses have suffered badly with many being forced to close. I also looked into how institutions that implement young enterprise programmes respond to the recession problems. Since Brunei is still considered a developing country, these findings can help us to be more alert of the possibility that global recession will also hit developing countries. I hope the outcomes of my research could benefit us with solutions to help restructure and refine the current Economic curriculum to produce better academic results. Read More