While the economy is now formally out of recession, many nursery business owners could be forgiven for questioning whether the worst is really behind us. The economic signals still remain mixed, with the recently formed Office for Budget Responsibility (OBR) predicting that the economy will grow next year by 2.6 per cent, compared with the 3.25 per cent figure forecast by Alastair Darling in March. The OBR also reports that government debt will increase to 62.2 per cent of GDP during 2010-11, a position forecast to increase further to 74.4 per cent by 2014-15. Against this backdrop, the coalition Government's plans to cut spending have led commentators to speculate whether something akin to a double-dip recession may be on the horizon.
But it's not all doom and gloom. Unemployment levels remain a key driver of demand for nursery owners, and here the picture is more positive. While recent Labour Force Survey measures indicate that employment levels continue to fall, the OBR expects them to stabilise this year and start rising in 2011. Moreover, wages and salaries are expected to rise by 1.25 per this year, which should boost demand for nursery services.
Credit availability also appears to be increasing on the back of an improved economic outlook for businesses and slight improvements in lenders' funding costs. Within its credit conditions survey for Q1 2010, the Bank of England reports that the availability of credit to corporates improved during Q1 2010, with further improvements in credit availability forecast during Q2 2010. This in turn indicates positive prospects for good-quality nursery businesses to secure funding both to meet short-term liquidity needs and to finance growth plans.
However, having struggled to invest in recent times, some businesses may be tempted to 'over trade'- to grow too quickly in order to return to a position of health. This in turn can create issues if your business has insufficient cash to trade at this level of growth. With this in mind, nursery owners should ensure that any growth plans are realistic and achievable for their business.