THE RECESSION IMPACTS ON SMALL LOCAL BUSINESSES

THE RECESSION IMPACTS ON SMALL LOCAL BUSINESSES

How the country’s recession has been affecting small local business and

what could be done to reverse this current situation.

T h e R e c e s s i o n I m p a c t o n S m a l l L o c a l B u s i n e s s e s

1 | P a g e S t r u c t u r e d R e p o r t T a s s o D i a s

Contents

AIM ................................................................................................................................................................ 2

Introduction .................................................................................................................................................. 3

The impact of the country’s recession .......................................................................................................... 4

Online Shopping and Local Big Businesses Influence ................................................................................... 5

The effects of government incentives .......................................................................................................... 6

Conclusions ................................................................................................................................................... 6

Recommendations ........................................................................................................................................ 8

Bibliography .................................................................................................................................................. 9



AIM

This report will focus on the reasons that have been impacting the development and surviving

of many small local businesses at this current recession time which Ireland has been facing for

the last couple of years. Primary research was used in the form of detailed questionnaire

completed by some business owners and some customers. Also I used various web articles as

secondary sources.



Introduction

A recession can mean a lot of changes for small businesses. A decrease in revenue, tighter

lending conditions and increased costs of operation are some of the impacts that most of small

local businesses are face during this time

of recession. Many of them have failed

during difficult economic times and others

have just been struggling to keep the

business carrying on with short incomes

and low demand. This report will attempt

to examine the reasons that are affecting

small local businesses and what impacts

the country’s recession has caused to

them so far.

The most common recession effects have been the low disposable incomes, variation in

profitability, and the increasing unemployment index among others.

The report will consider the impact of the country’s recession directly on small local businesses.

Then the report will examine the effect of local people shopping on line and buying in big

business rather than small ones. Finally, the report will consider the government incentives

effects on small local business.



The impact of the country’s recession

According to the website en.wikipedia.org, in economics, recession is a business cycle

contraction, a general slowdown in economic activity. In basic meanings, it uses to be more

offers than demands. With a general slowdown in economic activity the population tends to

not spend their money due a lack of disposable incomes. One of the main consequences of it,

many small local businesses see their business revenue going down and many of them seem to

be forced to close the doors after struggling with tighter lending conditions and increased costs

of operation. Productivity tends to fall in the early stages of a recession, and then rises again as

weaker businesses close. Also the variation in profitability affects the business perspective of

reinvestment and growth.

According to figures released by Vision-net.ie, which provides information on business

performance and credit risk, 195 companies – an average of 10 per working day – were

declared insolvent this month in Ireland.

As part of this report I conducted a questionnaire survey aimed at some small local business

owners and some local customers they service. Basically the questions focused on:

1. The issue of current unemployment index

2. The decrease of revenue and variation in profitability

3. The locally influence of big business

4. The influence of online shopping

5. Lack of disposable incomes



Online Shopping and Local Big Businesses Influence

The globalization might be the main responsible for the Big Business domain and Online

Shopping increases. These two figures have partially or even mostly affected the small local

businesses.

Usually the small town business gets mercilessly taken

out by the big business in town. During recession the

big businesses like ALDI, LIDL, Tesco, Supervalu and

others take a big parcel of customers due their super

offers and low price compared to the small grocery

shops. They use to take full advantage of the perks of

globalization – such as outsourcing, uneven exchange

rates, and low-margin high-volume sales models –

making them nearly impossible to compete against.

Online Shopping have increased a lot the last couple of years and as the population have been

facing the lack of money during country’s recessing, buying on line has been the best option.

Nowadays it is possible to buy mostly the things online, from small expenditures to big ones like

clothes, shoes, cars, computers and more.

The big majority of local people buy online. The reason is basically very simple. Why should

someone expend more money buying locally if it is possible to buy the same thing online for a

better price with tax and delivery included?

As a small business, it’s nearly impossible to protect yourself from this kind of assault, according

to the article at www.businessdictionary.com.

http://www.businessdictionary.com/



The Government incentives and Investments

Irish Government’s Action Plan for Jobs contains excellent incentives for start-up’s in Ireland.

And also a number of government bodies and agencies provide funding and other supports to

businesses, particularly small businesses.

Some main Irish Government incentives:

Seed Capital Scheme

Three Year Corporate Tax Exemption

R&D Tax Credit up to €100,000

PRSI Exemption Scheme

Micro Finance Fund

Credit Refusals

New Frontiers Programme

One of the main Irish government incentives is The Business Expansion Scheme (BES)

introduced in 1984 to incentivise private investment in long-term equity capital in companies.

With the incentive of BES, so far small companies have continued to generate new jobs despite

the economic downturn. The graph below shows the level of capital raised by companies under

the BES over 2006 to 2009.

The main effects of the Government investments and incentives have been totally positive.

However, it has not been enough to overcome the devastating recession impacts. Many small

local businesses are quite unaware of those investments, and this unaware is certainly

collaborating to keep the economic situation stagnated.



Conclusions

The low disposable incomes have been one of the main effect so far. It has drastically affected the small

local business trade.



Recommendations



Bibliography

http://en.wikipedia.org/wiki/Recession

http://www.investopedia.com/articles/economics/08/recession-affecting-

business.asp#axzz2LUKwWdUX

http://vision-net.ie/

http://www.businessdictionary.com/article/583/impact-of-globalization-on-small-businesses/

http://taxpolicy.gov.ie/wp-content/uploads/2011/03/EIIEconomicImpact.pdf

http://www.companyformations.ie/blog/action-plan-for-jobs2012/

http://en.wikipedia.org/wiki/Recession

http://www.investopedia.com/articles/economics/08/recession-affecting-business.asp#axzz2LUKwWdUX

http://www.investopedia.com/articles/economics/08/recession-affecting-business.asp#axzz2LUKwWdUX

http://vision-net.ie/

http://www.businessdictionary.com/article/583/impact-of-globalization-on-small-businesses/

http://taxpolicy.gov.ie/wp-content/uploads/2011/03/EIIEconomicImpact.pdf

http://www.companyformations.ie/blog/action-plan-for-jobs2012/

THE RECESSION IMPACTS ON SMALL LOCAL BUSINESSES

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