The private sector could be in for a stormy year in 2012

The Forum of Private Business believes 2012 will be a tough year for small businesses, as the UK economy could take a lot longer to recover than was previously thought.

Philip Wyman, an economic adviser to the Forum, said SMEs have a stormy year ahead as the crisis in the Eurozone, rising unemployment and falling consumer confidence continue to plague the struggling UK economy.

He expects GDP this year to grow by less than 1%, which is in line with OBR predictions of around 0.7%. Wyman pointed out that these figures demonstrate an extremely weak recovery and is an indication that the economy is a lot more fragile than the majority of commentators realised.

Wyman went on to say that he expects unemployment in the UK to reach 2.9 million as private sector growth stalls due to global economic uncertainty. However, unlike some commentators, he does not expect unemployment to get as high as 3 million.

He went on to explain that it is hardly surprising that the private sector has been unable to absorb public sector redundancies when you consider all the financial pressures small businesses faced last year. Employers base their hiring and investment decisions on future expectations and weak trading conditions, falling consumer expenditure and the lack of inexpensive loans means their expectations are not likely to show any improvement in the immediate future.

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