Contractors working for umbrella companies will be as anxious as anyone else about the disturbing 0.5 per cent contraction in the UK economy recorded during the last quarter of 2010. It’s widely acknowledged that developments like this, if continued, will hit smaller businesses far more adversely than large commercial enterprises. Although the Chancellor, George Osborne, moved quickly to reassure observers that the figures do not represent a trend, his government has met some robust criticism from the Federation of Private Business (FPB).

Mr Osborne blamed the disappointing shrinkage on adverse weather conditions, which he insists impeded retailers in particular from keeping shelves fully stocked and dissuaded shoppers from venturing forth onto the high street. But according to the FPB, this is only part of the reason for the poor performance of the economy.

The FPB’s senior policy advisor, Alex Jackman, conceded that bad weather played a role but believes there are other factors which are more deeply rooted. Mr Jackman acknowledged that the snow and ice cost the economy around £230 million per day at its worst, but urged the government to do more to release the “shackles” on small businesses caused by increased taxation, red tape and insufficient access to affordable funding. He warned that unless these issues are tackled as a matter of urgency, there was indeed a real risk of a double dip recession which “could spell disaster.”

Last week, the Recruitment and Employment Confederation’s Director of Policy, Tom Hadley, urged small businesses in the UK to make greater use of temporary workers such as PAYE umbrella contractors to gain the commercial benefits of a highly skilled and highly flexible workforce. If Mr Jackman’s warning of a double dip recession were to materialise, however, recruitment of all kinds is likely to suffer.

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