Assessment of The Economic Climate in Britain, Pertaining to Starting up a New Business - Essay Example

?DISCUSSION: IN THE CURRENT ECONOMIC CLIMATE IN BRITAIN, THE RISKS OF STARTING UP A NEW BUSINESS OUTWEIGH THE BENEFITS. Starting up a new business isa critical decision and requires assessment of conditions pertaining to factors prone to pose impact on the business operations. Hence, decision to initiate business is made on the basis of the net outcome from the positive and negative impacts from affecting factors. Among large number of factors economic conditions of the country is the most important one for assessment. Underlying discussion is an assessment of the impact of economic conditions of the UK on the business. Due to global financial crises that hit most of the countries including the UK and the recovery efforts not making its way (Adair, Berry, Haran, Lloyd, and McGreal, 2009), it is being considered that doing business in UK carry greater risk than ever. Therefore, given discussed below is the discussion pertaining to impact of risks on business environment of UK. Global financial crises that erupted in the autumn 2007 in US made its way to UK and round the world in the fastest possible way. European markets including UK initially rejected the anticipated impact from US credit crunch; ignoring the downside of the risks shared and spread with investment diversification (Bourke, 2007). For instance, Bank of England’s crises expectation provided with property market comparison of UK and US was rejected in all until the crises hit investors (ibid). Nevertheless, the broadened scale of impact of the financial crises halted the global economic growth (Adair, Berry, Haran, Lloyd, and McGreal, 2009). This in impose negative implications for the entrepreneurs who are looking forward to start up their new business, as there is high risk involved in getting the required return on investment in this uncertain financial environment. Despite consistent efforts the weak performance of UK economy is still creating greater uncertainty for the people who are interested in starting their own business venture. For instance, negative signals such as UK to borrow much higher in 2012-13 as compared to previous year with almost public sector job cuts reaching 1.2 million and further 2.7 million by 2018 (HM Treasury, 2013), BOE will be required to continue pumping money in economic condition, the year (2012) closing with triple dip recession alarm with industrial production dropped by 9.8% as compared to 2011 and highest decline in 20 years (Elliot, 2012), results in imposing negative pressure on the business start ups as it seems difficult to reap considerable profits in this economic condition. On the other hand the positive signals such as growth forecast to remain 0.9% in contrast to -0.1% in 2012 and the UK job hiring pick-up (Murray, 2013), encourage the entrepreneurs to establish their own business set up as there are growth chances. Year 2013 gives mixed signals of growth such as reports of further decline in industrial production in 2013 while on the other hand, February 2013 reported permanent job hiring increased for four consecutive months in January 2013’ anticipating growth of almost 0.7% for 2013 (Murray, 2013). The decrease in the industrial production impose risk on the start up of a new venture as it reflects decrease in the supply of products and hence increase in inflation. On the other hand the growth in the employment rate is beneficial for the start up businesses as it signals more consumption on the part of the individuals. Mixed signals despite consistent efforts traces trend mainly from triple dip recession due to deepened Euro-Zone crises and increased inflation curtailing consumer demand (Elliot, 2012). Ranking of UK on Doing Business chart developed by World Bank has improved from 8th positions in 2012 to 7th position in 2013 (World Bank, 2013; Schwab, 2012). This improvement is based on the factors assessing ease of doing business; therefore, self refers that ease has been increased in order to encourage investors to initiate business and gear up economic activity. Moreover, these positive factors are also reflecting acceptance in the financial market and FTSE 100 index is trading at highs for the year (HM Treasury, 2013).Since establishing and doing business has initial concern related to establishment and operational cost; therefore, in addition to increased ease in doing business factors such as job losses reported and unemployment would also support the greater pool for picking up labor at comparatively at the lower price. This will allow the owners of the new business ventures to keep the overall cost low. Moreover, since unemployment has not surged as expected hence, business shall expect sales generation and hence more profit generation. Concluding the UK conditions where unemployment has not been as high as expected, austerity plans of government stuck and jobs being created (though in slow pace) are all dampening recovery of economy as well as local demand. Conversely the stimulus is positive from external demand. Increase in the local and external demand results in providing the new start up businesses with better operating environment leading to rise in the overall profits and returns. Therefore, it can be confidently stated the conditions to do business are much better for concerns intend to capitalise on this increasing demand. Business conduct leverage concerns from large number of factors with economy to have most dominant impact. The assessment of UK economy posing risk has been assessed in the discussion above. Exploration of economic conditions as well business conditions in UK refer business condition in UK to be less risky. However, the concerns are for demand side. Dampened UK demand and less expectation of condition to change greatly in near future of current year and even year to come requires business to focus on the demand from the external market of US and China etc. Hence, variance in risks exists in doing business in UK depends upon the business type and respective carved market. References Adair, A., Berry, J., Haran, M., Lloyd, G., and McGreal, S. (2009). ‘The Global Financial Crisis: Impact on Property Markets in the UK and Ireland’. University of Ulster Real Estate Initiative, Available from http://news.ulster.ac.uk/podcasts/ReiGlobalCrisis.pdf [Accessed 10 February 2013] Bourke, C. (2007). Feeling the Pinch. Estates Gazette. Elliot, L. (2012). ‘UK on triple-dip recession alert after industrial slowdown’. The Guardian, Available from http://www.guardian.co.uk/business/2012/dec/07/uk-triple-dip-recession-alert [Accessed 10 February 2013] HM Treasury. (2013). Forecasts for the UK economy: A comparison of independent forecasts. Available from http://www.hm-treasury.gov.uk/d/201301forecomp.pdf [Accessed 10 February 2013] Murray, C. (2013). ‘Hiring pick-up adds to signs of economic recovery’. Reuters, Available from http://uk.reuters.com/article/2013/02/08/uk-britain-jobs-recruitment-idUKLNE91700220130208 [Accessed 10 February 2013] Schwab, K. (2012). The global competitiveness report 2012-2013. Available from http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf [Accessed 4March 2013] World Bank. (2013). Doing Business 2013: smarter regulations for small and medium size enterprises. Available from http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Annual-Reports/English/DB13-full-report.pdf [Accessed 4 March 2013] Read More