New businesses thrive in recession


While Britain ("best placed of all major economies to face the financial crisis") remains the only member of G20 still in recession, there is some good news. It is that the services sector continues to expand, as opposed to the more fragile manufacturing and building sectors. The services sector is reckoned to account for nearly three quarters of the country's GDP, so its recovery is important.

The fact that much of this is new business is important, too. That is the one bright spot about recessions. As demand slumps, marginal and over-extended businesses go to the wall, leaving both capital and market space to new business activity. What governments should do in a recession is make life easier for new and growing businesses. What they should not do is prop up the ailing ones, for that simply prolongs the recession and denies the economy the few positive things that it brings.

This recession, already the longest for post-war Britain, has seen record amounts of taxpayers' cash used to bail out ailing businesses in an attempt to stop them going under. We might have been far wiser to let the recessionary axe take more of a toll, and concentrate our efforts on helping the new businesses to build themselves up in their place.

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