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.
Mark Williams, Start Up Donut editor