Cambridgeshire business directors have
delivered a stark warning that the government will jeopardise the UK's
beneficial macro-economic stability and threaten the existence of many
smaller companies by joining the European currency system.
The Institute of Director's Eastern
Branch chairman Stephanie Smye said: "It would be an act of the
highest folly for a future UK government to terminate the successful
monetary policy of recent years by participating in the Euro project.
"The government's macro-economic
policy since 1997 shows every sign of delivery the stability that the
business community wants. Entry into the Euro and subjecting British
business to the tender mercies of the European Central Bank would,
without adequate economic convergence, risk a return to economic
Miss Smye pointed out that the 3.7
million businesses in the UK today was still below the level that
existed before the last recession a decade ago when numbers fell from
3.8 million to 3.5 million. "This forcefully demonstrates the
importance of maintaining a stable macro-economic framework that will
prevent a return to high inflation and interest rates," she said.
Miss Smye added that the government
could improve the business environment by reducing the burden of
taxation on companies and individuals and cutting back on costly and
unnecessary red tape.
"Under the present government the
burden of taxation has increased from 32.5 per cent to 37.3 per cent
of gross domestic product, which means household disposable income has
diminished," she said. "Cutting taxes would allow businesses
to invest in growth plans and help individuals to accumulate
sufficient funds to start new enterprises."
She was commenting on new IoD research
that reveals that a majority (55 per cent) of directors rely on
accumulated profit to finance business activities rather than bank
loans (46 per cent) and overdrafts (42 per cent). Out of 70 per cent
of directors whose companies have cash deposits at the bank, 40 per
cent had increased the amount over the past year primarily to guard
against unforeseen circumstances (28 per cent) or an economic downturn
(23 per cent).
Despite a long-standing debate over
the level of bank support for businesses, the survey revealed that 74
per cent of directors did not believe it was difficult to obtain
finance for their business and 73 per cent said they had a good
relationship with their bank. Only 32 per cent reported having changed
their firm's bank in the past, suggesting that the quality of service
will improve as banks compete for customers.
However, the report called on banks
and accountancy firms to work harder in helping start-up enterprises
and small firms to improve their business propositions when
approaching venture capitalists for finance to support expansion
plans. "Many businesses may not fully appreciate the different
sources of finance that may be suitable to their needs," it says.