So the coalition government set out its stall this week by outlining
measures it believes will aid the UK’s five million or so small and
medium-size enterprises (SMEs).
Hosting the launch event – loftily entitled the Summit for Small
Business – Business Minister Mark Prisk said: “I entered government with
the goal of making this the most entrepreneurial decade in our history
and I'm confident today's announcements will make that a reality.” Big
ambition. Bold claim.
All the major parties agree on the pivotal role SMEs are likely to
play in reviving the UK economy. SMEs provide 60 per cent of the
nation’s jobs and half of its GDP. And with so many public sector
workers likely to lose their jobs, many will hope to find gainful
employment in the private sector.
The government’s three main aims, as revealed at the Summit, are to:
improve access to finance; make it easier for SMEs to win public sector
contracts; and allow social tenants (ie someone who rents a property
from a local council or housing association) to start their own
home-based businesses (currently this isn’t allowed).
Despite the taxpayer bailouts and criticism from business groups,
still too many small firms are met with refusal when seeking a bank loan
or overdraft extension. Business Secretary Vince Cable has certainly
been a vociferous critic of the banks in this regard.
The government says it is committed to ensuring a wide range of
finance options for small businesses. The Enterprise Finance Guarantee
(EFG) scheme will remain live for another four years. According to the
government it will make “£2bn available to viable small companies [that
lack] credit history or collateral. This will provide support to 6,000
SMEs a year.”
A further £200m will be committed to Enterprise Capital Funds, which
will “support equity investments in the highest-growth potential
businesses over four years.” The first of the new funds is expected to
begin investing in early 2011.
The government will also work with banks in their response to the
Business Finance Taskforce green paper, including the £1.5bn Business
Growth Fund, mentoring and drawing up of a new lending code. Vince Cable
said: “The government is doing its bit. The banks [must] play their
part [by increasing] normal commercial lending to get the economy
growing.”
Chancellor of the Exchequer George Osborne noted: “The private sector
is also taking steps to provide a diverse range of finance options for
businesses – a development which is welcomed by government.”
The government also wants to make sure SMEs are awarded at least
one-quarter of public sector contracts, which will be welcome news for
those eager to get a slice of a multi-billion pound pie. To speed up the
process a standardised ‘Pre-Qualification Questionnaire’ (developed in
co-operation with the Federation of Small Businesses) will be introduced
in December. Designed to ease cashflow pressures, the government has
committed to pay 80% of its prime contractors within five working days
and these must pay their suppliers within 30 days (more good news for many small suppliers).
Cable, Osbourne, Prisk et al are not the first politicians to make
speeches underlining the huge contribution SMEs make, as they quietly go
about generating wealth and providing employment. Praise is one thing.
Time will tell whether these latest measures are enough to have any a
quantifiable positive effect on SMEs’ fortunes in the difficult few
years yet to come.
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