Sugar Not The Icing On The Small Business Cake.

Lord Sugar’s – the government’s enterprise czar – outburst last week where he allegedly called small business owners moaners and said:

“I can honestly say a lot of problems you hear from people who are moaning are from companies I wouldn’t lend a penny to. … They are bust and they don’t need the bank – they need an insolvency practitioner”

is an unbelievable insult to all small business owners in this country.

Small business owners were being squeezed by this government even before this recession started, now they have to endure this recession, which was started by the very same people who pay themselves billions in bonuses while asking for more tax payers money (30 billion) to bail them out even further.

As if this was not enough they now have to endure a verbal onslaught of a – in my opinion – half educated and half witted Sir, Lord, Czar or whatever Mr Sugar.

It is this community of small business owners who keep this country together:

• over 50 % GDP is being produced by this sector
• over 50 % of employment is generated by this sector
• over 60 % of innovation comes out of this sector

Given these numbers may I ask what percentage of the money that this government has wasted so far has gone to the SME community? It is most certainly not anywhere near 50%! These ‘moaning’ SMEs have probably paid more in taxes, which then have been used to bail out the banks and the government, than they have received in financial aid.

SME don’t borrow money anymore because they cannot trust the banks and they cannot afford to borrow the money. While the Bank of England has lowered the interest rate to the lowest level on record, the banks have doubled the interest they demand from small business owners, up to almost 20% for certain loans – that is a 19.5% spread.

As I mentioned in my CNBC interview last week, these high interest rates take all the profit margin out of the business that can be done out there. Let me spell it out for anyone who really has not got the picture, businesses go bust because:

• The banks will not lend money to them;
• Even if they lend the money it is so expensive that it takes any profit out of the deal;
• They run out of savings.

I am furious that Sugar is insulting the SME community in this country in this way, like the rest of this government, he has lost any sense of reality. The spin coming out of the Brown government is as unbelievable, as it is insulting to the general public.

Who the hell made Sugar a Lord anyway any why? Sugar certainly is the icing on the government’s cake of incompetence, if nothing else, IMO. -ST.

7 Responses to “ Sugar Not The Icing On The Small Business Cake. ”

1. Mark McCormack
   
   Said on November 10th, 2009 at 9:59 am

   I agree Stefan. The idea that Alan Sugar would do anything to help someone other than himself was a joke and this just emphasises the point. More window dressing from the celebrity obsessed political class.

2. Patrick Johnson
   
   Said on November 14th, 2009 at 9:43 pm

   I completely agree with Sugar.

   Lack of planning and lack of working capital and a dependency on lending is what has caused companies to go bust.

   The simple facts are that whatever your business does you should be able to work at less than half capacity and be able to tick over. I also think that we are business people and loosing staff is something that happens in a recession. As business people we need to take an objective stand point and work not run our businesses into the ground for the sake of emotion.

   Don’t think I am being arrogant or even ignorant. I was made unemployed in January for the same reason.

   We all need to face facts and stop following the medias over hyped version of what is essentially a problem with lending and nothing else. Surely this should prove the good from the bad businesses. However because of all of the hype people stop spending even though they never would have been borrowing anyway.

   Surely this ignorance and businesses using the recession as an excuse is the main problem.

3. Stefan Töpfer
   
   Said on November 14th, 2009 at 10:53 pm

   Patrick,

   Thank you for your reply.

   As you would expect, I do not agree with your standpoint, fact is:

   1. this recession was caused by the banks and governments, not the small businesses;

   2. the interest rates for small business have gone up by sometimes over 100%, while banks can borrow at the lowest rate on record;

   3. the recession is nothing the media hyped up, since you lost your job because of it, you should know;

   4. you are right it is a problem with lending, but not a problem with lending to small business, but to people who can’t afford the house they bought and banks who believed in a lending model without risk – had they done some basic cash-flow planning they would have known better;

   5. only big businesses use the recession as an excuse to restructure;

   6. many manufacturing companies need cash-flow in form of loans, to take that away from them means killing their cash-flow and sometimes their business.

   We have over 100,000 business clients and some had to stop trading not because their business was bad, but the banks pulled the plug, to help their own balance sheets.

   I disagree with your view that all businesses owners currently in trouble are ignorant, maybe you need to start talking to some small business owners who are not in the services industry to get the real understanding of the problem.

   IMO, Mr Sugar has not a clue what he is talking about, he is just helping his Labour pals with some PR. Just imagine saying we are no longer in a recession, when we just had the numbers. Even Labour could not spin these numbers.

   This recession is not over until unemployment falls, and we are a long way from that, wouldn’t you agree?

   VB, Stefan

4. Patrick Johnson
   
   Said on November 16th, 2009 at 1:39 am

   Hi Stefan,
   Thanks for your structured reply.
   I agree Sugar is not the person for the job and the fact that he was mentioned for the role in the same week as the finale of the apprentice is not a coincidence.
   I have no arguments as to how the recession was started but this was merely when a downturn started however a recession ensued many months after. The simple fact that there was not legislation in place before sub-prime lending started was a huge factor.
   As far as the media having nothing to do with the recession is completely narrow minded. Yes the proverbial faeces hand hit the fan at the banks but what followed was a media bandwagon where it was seen as the worst thing to happen since the dawn of time. Had this not happened people would not have been so worried and would still be spending money therefore people would be making money and the circle continues.
   Small businesses are using the recession as an excuse and there was no reason to stop spending if:
   1- Your business did not need to borrow money
   2- You did not need your customers to borrow money to purchase your products
   3- You personally did not need to borrow money.
   I am a website designer who builds websites mainly for small businesses. People have stopped spending because they are being told they shouldn’t. Therefore people are not buying from small businesses and small businesses are making less money.
   I think it is ridiculous to say that the media paid little part in causing the recession.
   I didn’t say that business owners using it as an excuse are ignorant. I mentioned that ignorance to the fact that the media hype has caused it and if every one fought against it and started spending, which is probably too little too late, we would be out or recession or at least out of the mental recession we have.
   In reference to your point 6 i completely believe that at some point businesses should be self sufficient however there are a lot of product/manufacturing related industries in trouble because of it and to some degree it is their own fault because they should be self sufficient. I know of companies that are constantly back to the banks because they need to supply a big amount of product however self sufficiency should be the top of a business’s agenda.
   As far as unemployment is concerned it has been slowing for a while now and is due to fall towards the end of this year and the beginning of next. I believe we will be out of recession by early next year.

5. Stefan Töpfer
   
   Said on November 17th, 2009 at 10:34 pm

   Dear Patrick,

   I’m glad we agree on Mr Sugar.

   As far as your ‘let’s shot the messenger’ mentality goes may I remind you that you and me are part of this media, you write a blog, I write a blog and so on. What you class as media is slow, you want to know what is happening right now? Go to twitter, Patrick we ARE the media!

   This problem with credit was highlighted in 2003 by the FT (media) – everybody ignored it. The banks did nothing as did our government. So to call this a media hype is not even close to the mark.

   I do understand you are suffering with your business, but pretending all is OK with our economy and blaming the media is not going to help.

   I’m also a little concerned about your business finance understanding – you may not know but it is the banks job to finance new business. I’m talking about new business, not financing overheads which they have been doing in part.

   There are many businesses out there needing business finance and they can’t get it, they are loosing out to other companies – often from other countries – how is that going to help the UK?

   The banks are being self-centered and totally irresponsible when it comes to our domestic business infrastructure.

   The UK taxpayer has spend £200bn to bail the banks out, that is not media hype that is a fact! This money is not being used to stimulate the economy – it is being used to help the bankers and their £20bn+ bonuses that they will pay themselves.

   As far as unemployment is concerned – inflation is rising, the government will have to cut public spending, quantitative easing will have to stop sometime soon, VAT is going to increase in January, interest rates will have to go up, we are still in a recession, the US may very well get back into a recession Q1 next year – but hey, I hope you are right.

   Thanks for your comment again, maybe we should have a chat, I love to talk about this stuff.

   But you want to be mad at people start with Gordon Brown, Darling & Co – and don’t forget the bankers.

   VB, Stefan

6. Patrick Johnson
   
   Said on November 19th, 2009 at 3:20 am

   Hi Stefan,

   I’ll keep this comment brief and to the point.

   I do not argue with the facts regarding government backing of the banks nor do I argue that the banker’s bonuses in most cases are completely ridiculous.

   If I refine my argument regarding ‘the media’ to something more general and less blame oriented. My argument is the mass media has perpetuated and hindered public and small business (within the service industry mainly) spending.

   I will back track slightly and say that if the media had not been there we would still be in recession however many more businesses would still be around. However people see the doom and gloom in the newspapers, TV and radio and think that they have to hold on to their pennies.

   Please feel free to get in touch. My email address is Patrick(at)PMJohnson.com. I’ll email you back with contact details for you to get hold of me and we can have a chat.

   I really enjoy reading your blog and you cover almost all of the topics any small business needs to know about.

   Patrick

7. Stefan Töpfer
   
   Said on November 19th, 2009 at 9:41 am

   Hey Patrick,

   I guess, given my history, I’m as much to blame for the speed with which news is being distributed around the world today, as anyone else.

   The media often paints ‘one-sided’ pictures, which may not help, but as I mentioned the unbelievable stupidity of governments and bankers, in this context, is mind-blowing.

   I’ll drop you a line by email and then we can have a chat. I’m looking forward to it.

   Thank you for engaging with me on this topic, hope to see you back on my blog with comments.

   VB, Stefan

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