Last week’s GDP figures from the Office for National Statistics confirmed growth of just 0.2% in the second quarter of this year.

Various one-off factors have been blamed for the sluggish growth, such as the royal wedding, April’s warm weather and the Japanese tsunami.

George Osborne, the Chancellor of the Exchequer, said it was positive news that the British economy is still growing and jobs are being created. The UK is also seeing an increase in the number of start-ups, which should benefit umbrella company contractors. 396,000 new firms started up in 2010/11, up from 362,000 the previous year.

Kevin Walmsley from Wilkins Kennedy said that recessions present opportunities and the increase in start-ups shows that there are still entrepreneurs who are confident that they have a strong business model.

However, small businesses are being crippled by rising costs and more than 50% of them think their business will fail if the situation continues. Over the past five years, overheads have increased by 22.8%.

A survey by the CEBR and Make it Cheaper has discovered that rising costs are the most significant threat to 78% of small businesses. In fact 89% said the UK is an unbearably expensive country in which to conduct business.

67% of small firms said their profit margins have been eroded by increasing costs, 46% have had to increase their prices and 22% have reduced their headcount. 74% of the UK’s small firms think that rising costs have damaged their ability to grow and 86% say this is damaging the economic recovery.

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A report from the CEBR and Totaljobs.com has claimed that by 2015 – 16 the public sector needs to fill 2.1 million job vacancies.

This could ease fears of some umbrella company contractors who fear that work in the public sector could dry up.

The report also says that the public sector could save £2.5bn if it changed its employment practices in the next five years. The public sector could achieve this by implementing the following policy recommendations, according to the report’s co-authors.

They suggest that internal vacancies should become the exception rather than the rule and that the public sector should post the maximum number of vacancies online so that organisations have access to a wider pool of talent. In order to attract high calibre candidates, all roles should be advertised on the website job boards of public sector organisations and these job boards must be made accessible to everybody. Finally, HR personnel in the public sector must be trained in using online channels to their best advantage.

The CEBR’s managing economist, Richard Greenwood, pointed out that even though the public sector headcount is set to shrink because of the government austerity measures, the sector will need to continue recruitment activity due to natural churn.

However, it is now even more important for the public sector to be cost efficient and by saving £2.5 billion through online recruiting, public sector bodies can increase productivity as well as doing more for less.

Totaljobs.com’s director, John Salt, said that the results of their research show that the future for public sector employment is not as bad as was first thought. But changes do need to be made and one way to achieve this is by being more transparent when it comes to recruitment and taking advantage of the cost saving benefits of recruiting online.

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The FSB is calling on the coalition and the banks to give small businesses a bit of breathing space so that they can stay afloat over the festive season.

December’s severe weather conditions in the UK are thought to cost the British economy between £600m and £1bn each day. A lot of SMEs have already had a nightmare year in 2010 with confidence levels plummeting and the upcoming VAT increase means a bleak start to the New Year. The FSB now says that a lot of small entities are going to struggle to survive in the early months of 2011.

Even before the cold snap, many businesses said they expected to make redundancies and suffer hardship next year. Nearly 40% of retailers also thought business prospects in the 4th quarter would be worse than in the third and the cold weather will compound their problems.

More bad weather is on its way and some pessimists say the big freeze may last until the end of February. The FSB would like to see HMRC extend the Time to Pay scheme to help struggling SMEs, local councils delay their rent reviews and temporarily reduce the business rate bills for companies suffering financial difficulties and banks and utility companies giving breathing space to small businesses.

John Walker, the FSB’s National Chairman, said that many small businesses had banked on having a good festive season to compensate for the rest of the year. A lot of shops and restaurants took on additional temporary staff to cope with potential demand but bad weather last weekend caused a 30% drop in footfall in some areas.

At the start of the month, the CEBR warned that between 800 and 900 SMEs were under threat because of the cold weather. This figure is likely to have increased with the second wave of icy weather that blew in last week.

Small businesses are better prepared this time around than they have been in previous winters with about 40% of FSB members having made provision for staff to work at home and another 30% allowing flexible working hours.

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Within 5 years, unemployment levels will reach 10% in over half the regions in the UK predicts the CEBR.

The biggest drop in economic output will be in the North West, but other areas such as the North East, Yorkshire, Wales and the West Midlands will also fare badly.

A director for a Manchester based IT recruitment firm noted that there has been an upturn over the last 6 months but uncertainty remains as to the effect of the public sector spending cuts.

Paul Clutton, a director at Professional Recruitment Wales has an even more pessimistic view of the future saying he believes that Welsh unemployment will exceed 10% as the public sector accounts for between 60 to 70% of all recruitment activity.

On a slightly better note, the UK saw a 1.2% increase in GDP over the last quarter. The ONS originally reported a figure of 1.1% in July but this has since been revised. The increase is the fastest quarterly rise recorded for over nine years. The manufacturing and production sectors recorded stability in the last quarter with production output rising by 1% for the second consecutive three months and manufacturing rising by 1.4% in Q1 and 1.6% in Q2.

The September Economic Forecast from the BCC now predicts GDP growth of 1.7% for this year and 2.2% in 2011. However, the Chamber still expects unemployment to increase, peaking at 2.65 million in 2012.

On a more positive note, at least as far as the economy is concerned, the BCC expects the fiscal deficit to reduce faster than originally planned but with a sharp slowdown in growth as the VAT increase is implemented. The business group expects GDP to average less than 2% per annum for the next four to five years.

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The chief executive of Hays, Alistair Cox, has some worrying news for those in the public sector who work through umbrella companies and are worried about the loss of their contract.

The government is widely expected to wield the axe on up to 750,000 public sector workers in the next 5 years but the private sector is highly unlikely to be able to create enough new jobs to absorb them.

One measure outlined by Mr. Cox to encourage private sector growth would be for the government to abolish employers’ National Insurance contributions. This would enable companies to take on more staff. The coalition has already gone some way towards easing the NI burden for small businesses start-ups outside the south-east by granting a 12 month NI holiday on their first 10 employees.

The Treasury currently raises around £55bn from employers NI contributions and its abolition would leave a gaping hole in the government coffers.

As if that news isn’t depressing enough, the CEBR has more doom and gloom for people in the north of England. The Centre has predicted that 10% of northerners will be unemployed in the next five years. Economic output in the North-west, north-east, Yorkshire and the Humber and the West Midlands will fall whilst London and the South will get a larger share.

Manufacturing centres such as the West Midlands are already suffering more than other areas. Although the situation has improved strongly in recent months, it is still well below pre-recession levels.

The recruitment market has been showing signs of improvement but a large proportion of that is due to employees changing jobs rather than an influx of new jobs being created.

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The managing economist at the CEBR, Charles Davis, has cautioned umbrella company contractors that whilst the economy in the UK is recovering, the recovery is not yet robust.

We are still in the early stages of improvement and everybody must be aware that the government’s tight fiscal policy controls are coming into play almost immediately, he said.

The Monetary Policy committee meets this week to decide if the Bank of England interest rate is to be maintained at its historic low rate of 0.5%. Davis believes that interest rates will remain at this unprecedented low for the immediate future.

Recruitment demand for new employees remained unchanged in June, as did salaries, according to the Reed Job Index published on Monday. The Index is based on the reed.co.uk job board which is the largest in the UK. Every day more than 90,000 vacancies are advertised on the job board from 8,000 recruiters covering 37 career sectors.

Job demand is highest in the media, digital and creative sectors and vacancies for sales and qualified accountancy staff reached record highs last month. The financial and business sectors have also shown increased demand.

On the other hand, vacancies in the strategy and consultancy, marketing and PR and voluntary sectors, fell back from the highs seen in May. And as expected demand in the public sector fell after the job freezes announced in the budget. Yorkshire and Humberside and the East Midlands recorded an increase in demand whilst London and the South East saw demand drop.

Reed.co.uk’s MD, Martin Warnes, said that although green shoots of recovery are now visible, the jobs market appears to have held its breath last month.

The Markit/CIPS Business Activity Index showed that the service sector experienced its slowest growth rate for nearly a year last month. A senior economist at Markit said that the latest results were worrying and although we are hoping to see a slight rise in GDP for the second quarter, this may already be a peak in the recovery cycle.

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