Wilf Stevenson on Labour’s plans to help SMEs
What is the role of government in supporting small businesses across the UK? This is the question posed in a Lords debate later today by a Labour backbencher Tony Berkeley.
Labour’s BIS team has been developing its thinking about how to support small and medium sized enterprises. If Britain is to grow its way out of the cost of living crisis that people are experiencing, and we are to build a balanced recovery that lasts, we need to do all we can to help our small businesses grow and create new jobs. To create more and better-paid jobs, Britain needs more small businesses, and it needs the best of them to scale up.
This is what prompted us to initiate the UK’s first ever Small Business Saturday, which took place on 7th December last year. 50 business organisations backed it. More than 40% of local authorities, of all political persuasions, took part in it. Half of UK consumers knew about it. The result: the day pushed an additional half a billion pounds of trade to small businesses.
Initiatives like this can help, but we also think the government needs to get active. And, of course, active support also means ensuring that firms get access to the finance and capital they desperately need.
That is why Labour will ensure there is greater competition within banking. It’s why we support the growth of alternative finance so there is greater competition to banking as well. And we need something that every other G8 country has: a proper, state-backed lending institution. This is why we are committed to creating a proper British Investment Bank – an independent institution with a focus to address this. Alongside it, we will build a network of regional banks that really understand local business needs, following the recommendation of our Small Business Taskforce.
And we will go further. My colleague in the Lords Andrew Adonis has recently published a report on how the government can be a better customer to small business and a more effective servant of them too. Andrew’s key recommendation is the need to establish a UK version of the successful US Small Business Administration (SBA), which we intend to set up if elected in 2015.
A UK SBA would create a step change in the opportunities for small businesses from government procurement; and improve the quality of support available, operating alongside that British Investment Bank and a network of regional banks.
Government has a key role to play, by radically improving its own commercial relationship with small businesses. Indeed, Andrew has suggested that the SBA could work with Whitehall departments and agencies: to drive up the value of government procurement with small and medium sized businesses to 25% of prime contracts (directly with government) and 25% of tier one contracts (in the supply chain) from major government suppliers; to scale up the Small Business Research Initiative so that departments are committing at least 2.5% of their research and development budgets to SMEs; and to increase levels of awareness and satisfaction with key government support and finance schemes for small businesses.
The US and Germany – two of our strongest competitors – are far ahead of the UK in the degree to which they use government procurement and R&D to scale-up successful small businesses. The US has a requirement that small businesses receive at least 23% of all federal contracts; in Britain they currently receive just 10.5% of government contracts.
The government must practice what it preaches and contract to a far greater degree with small businesses. A new SBA should promote state contracting with smaller firms, as does the one in the US, not least by monitoring and publishing how well departments and agencies are doing to contract with small businesses.
There need be no new bureaucracy. BIS has 3,000 staff yet no director specifically responsible for small business. We need to reprioritise and remodel it so that the Department reflects the need to support and focus on small business.
Lord Wilf Stevenson of Balmacara is a Shadow BIS Minister in the House of Lords. He tweets @Missenden50
Published 30th January 2014