While GDP (Gross Domestic Product) is how the government and financial institutions measure the state of the economy, it seems that small businesses are less convinced of its relevance.
UK GDP is designed to be an estimate of the total value of goods and services. Monitored year on year, the statistics are collated in order to decide upon how healthy the business climate is; notably whether there has been any significant growth or if there is a recession.
Despite the importance set on using this method for forming an overall financial picture, survey results show that the majority of British SMEs do not believe this is a relevant gauge for assessing how healthy or unhealthy the economy is.
Conducted by Bibby Financial Services, the study questioned 1,000 SMEs across the UK. Only around a third of business owners (34%) considered GDP as an appropriate way of measuring economic success.
Regional business performance is more relevant to SMEs
Edward Winterton, Commercial Director at Bibby Financial Services, said: “It’s interesting that while the quarterly GDP announcements are eagerly anticipated by the government, economists and bigger businesses, small businesses – the engine room of our economy – don’t feel it is an accurate reflection of the business environment in their local areas.
“For many of our business customers, an indicator of activity in their region or sector is more relevant than the broad, macro-economic view. GDP undoubtedly has its place as an indicator but this research suggests that businesses in the UK would value analysis on a more local level.”
“For businesses, understanding regional economic performance is likely to be more useful in a practical sense. Using a regional measure – like GVA – alongside GDP on a quarterly basis would offer a more holistic, macro and micro-economic view, which would reflect local business environments more accurately.”