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Recession in the Eurozone

This week there has been more bad news from the Eurozone. While the crisis in southern Europe has been ongoing throughout recent times, now we’re seeing this crisis creeping north. Economists are blaming this on excessive austerity measures in the south coupled with unwillingness of northern countries to do anything about it. Whatever caused it, however, it spells bad news for Europe – including the UK. With small businesses already struggling, news like this is the last thing we need.

The economy of the 17 country Eurozone block contracted 0.1% between July and September, after shrinking 0.2% in the previous three months. The last Eurozone recession dates back to 2009, when economic growth contracted for five consecutive quarters.

While countries such as Greece have been bailed out, larger economies such as Spain have instigated spending cuts to avoid having to ask for such action. As such, news of this double dip into recession is far from a surprise – combine slowing world growth, austerity policies and a dramatic decrease in activity from the usually strong economies of Germany and the Netherlands and recession is not going to be far off.

While the UK is not part of the Eurozone, it is the nation’s biggest trading partner and as such events there are likely to impact on our own shores. While the UK economy grew by 1% in the third quarter of the year, boosted of course by the Olympics, policy makers need to take note of the predicament of the Eurozone. Indeed, it was the decline in Eurozone growth which earlier in the year pushed the UK into its own double dip recession.

Small businesses with trading partners in the Eurozone may need to boost their cash flow if customers are finding it hard to pay in light of their tough economic climate. Invoice finance could be able to help – often, it is a great way to reduce some of the risk of trading abroad. Both invoice factoring and exports have been hailed by the government as an essential part of recovery, so why not take advantage of both.

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