The ‘internet economy’ + London 2012 Olympics = a unique opportunity for UK business recovery

Under the weather

Do you remember the old adage, “When America sneezes, Britain catches a cold”? In the time when the US was the only economic superpower in the world and drove the global economy forward single handed, then actions taken in America would indeed be transmitted across the Atlantic and Britain would inevitably feel the effects. In these post sub-prime-fallout days with the European Union as Britain’s premier trading partner and China sharing global dominance with the US, it rather seems that we in the UK are susceptible to catching every bug on the go. 

Such is the state of the global economy in the 21^st Century. Governments now have less and less freedom to make fiscal decisions for ideological reasons as they are swept along (indeed, some may say, swept away) by economic forces beyond their current control.

In such turbulent times, where government debt levels grab the headlines and citizens across Europe are voting against unpopular austerity measures like turkeys voting against Christmas, can businesses keep their heads below the macroeconomic parapet and use recession to their advantage? And what can the UK government actually do to make a real impact?

Defensive big businesses

In spite of (or perhaps because of) the devastation in the banking sector over the past 5 years, our largest businesses have been building strength in their balance sheets as a buffer against the storm.  They have cash reserves today that are typically much higher than they were in the recession of the early 1990’s but so far these British businesses have been reluctant to use it to stimulate economic growth.

It is the usual vicious cycle of consumers lacking the confidence to spend because of the uncertainty of their personal situations which causes business to lack the confidence to invest in products and services for their consumers. They don’t know whether to cut costs and ride out the storm, to invest now to gain competitor advantage when growth does return or to do both at the same time.  

Historically, big businesses were more typically national than international in their make-up and could take decisions based on serving local markets and satisfying local shareholders. They could take more measured risks and a longer view of future success. 

Today, there are just too many global factors to take into account to allow a typical board the freedom to jump too soon. For large businesses, and indeed for our hamstrung national governments, both so often the drivers of economic growth, there is a new conservatism, a new global reality, a new reluctance to grow.

The depths of recession

Medium sized enterprises, especially those in the traditional ‘high street’ retail sector have been suffering and failing at an alarming rate. Pressured by their high premises costs, mounting debts and falling sales they have been forced to discount heavily, close shops, shed staff and watch their share prices tumble. Some are now paying the ultimate price and entering administration. Although many could see the change in consumer spending patterns happening, not all were able to change their outmoded business models in time to take any advantage. 

Smaller entrepreneurial businesses on the other hand work differently. Many carry fewer costs, have more dynamic trading models and were faster to respond to recession in the first place. Some have quickly re-cut their cloth and are now best placed to spot and exploit the first green shoots of recovery. But with growing numbers of unemployed, continuing uncertainty in the markets and a shrinking public sector any recovery is likely to be slow. But when it does happen it is likely to happen among small, grass-roots businesses first.

Not all Doom and Gloom

Not everything stagnates in a recession. UK consumer behaviour has been changing fundamentally. Back in 2010, the Boston Consulting Group said that the ‘internet economy’ in the UK was worth £121bn and formed a bigger contribution to GDP than that of any other G20 nation. 
 
Even today it is predicted to grow at a rate of 11% per year until 2016. British consumers have embraced the web and are starting to embrace mobile technology with equal passion. This is reflected in the performance of businesses like Apple and Samsung who are selling mobile internet technology devices into the UK like hot cakes.

Government as enabler

To lift Britain out of our recession what is needed is encouragement and confidence. Encouragement must come from the government, which at a time of enormous national debt should get out of the ‘doom and gloom’ game and get into the ‘positive enablement’ game. There is much talk about reducing red tape for smaller businesses to encourage them to employ more people more flexibly but this is just tinkering about at the edges. 

One significant way to encourage optimism, and consumer demand, would be to recognise the shift in consumer behaviour and widen the conduit to the internet economy for British consumers. At the moment, limited internet access and slow data transmission rates are stifling the growth of mobile commerce and delaying the speed to market for many new technology businesses in the UK. 

4G will drive growth, why delay?

The government should be actively promoting 4G rather than endlessly talking about it. It needs to cut through the internecine strife among the mobile operators and compel the industry regulator, Ofcom, to speed up the introduction of 4G across the country. 

This will not only increase consumer confidence but it will also give huge encouragement to those key technology businesses in UK locations like Cambridge and the so-called Silicon Roundabout in London that rely on rapid, 'available anywhere' data access and transmission for their products to become successful. 

Will confidence return this year?

Confidence on the other hand is a strange, elusive creature. It is difficult to assess on a national scale but when national confidence is low everyone knows it. It can be sparked by the smallest of events but then needs to be supported and grown by concerted action. 

And in 2012, here in the UK, we have the opportunity to spark new confidence in the future. For once, the eyes of the world will be on this country as we celebrate Queen Elizabeth’s Diamond Jubilee and welcome the athletes of the world to the Olympic Games. 

In the scale of world economics these are both small events but they provide an opportunity to spark enthusiasm, restore a sense of national pride and instil confidence in this country’s future. It is a once in a lifetime chance to start to lift the nation out of recession and lead the world towards recovery. All it needs is the action to ensure that the flame burns for much longer than the Olympic torch.

After all, more confidence leads to more spending leads to more employment leads to more tax income leads to reduced national debt leads to more confidence; the virtuous cycle is born. And what a true Olympic legacy that would be for the people of Britain.

Our future can be bright

So for businesses the current economic climate remains a significant challenge. But it also presents a huge opportunity to establish a business paradigm to respond to, and indeed encourage, the change in behaviour of UK consumers. Time spent getting this right now will be rewarded by huge competitive advantage in the future. And for those entrepreneurs with great ideas for new businesses, it is worth reflecting that the biggest businesses of the next decade may not even be trading yet. 

Above all, there is no reason why those businesses shouldn’t be British. We still have the ambition, drive, skills and tenacity that created our greatest historical institutions. We just need encouragement and confidence in ourselves, and the steady nerve to capitalise on both. 

2012 can be the start of our bright new future. I wonder if we will make the most of this unique opportunity.