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Reports of businesses downgrading

There have been reports of businesses of all shapes and sizes downgrading and contracting. Until recently, the notion of businesses downsizing was limited to institutions, large businesses and the government. But there is now talk of most businesses downsizing. If true, it has major implications for the economy.

And it will have major implications for the economy. But that's not important. What's important, if it's true, is why, and what are the implications? Chalestra has, thus far, talked about how upbeat small businesses are, and how they're likely to become the saviours of the economy. If there's a shift in practice, why is it happening, particularly when there's everything to play for, particularly for small businesses?

The most important implication, of course, is less income for the government, restricting their capabilities of getting the deficit down, the debt down, and getting on with government business.

As for why it's happening, it suggests that consumers have taken a new shift in thought, and are spending even less. That, in turn, suggests that their debts are not being paid down as fast as originally thought, or that they've become much more nervous of the future.

Small business relies heavily on consumers either directly or indirectly. If consumers are cutting spending to the bone, then the economy is likely to take another very serious knock.

But don't be too alarmed. Whilst it's being reported, Chalestra has seen no evidence of it, and remains upbeat about the future of small businesses. Nevertheless, the possibility of the situation is always present, for all of us.

Some might say that it's because of debt or fear, bur the reality is wider and more complex. Consider where the media get their information.

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