Vince Cable
Speaking at the Federation of Small Businesses conference Dr Cable set out the practical steps Government is taking to help SMEs and boost business investment and cut red tape, including:
The £125 million Advanced Manufacturing Supply Chain Initiative, which will open for applications from 29 March; and
A new ‘Focus on Enforcement’ campaign to identify where inappropriate or excessive enforcement of regulation is holding companies back.
Business Secretary Vince Cable said:
“This Government has an absolute commitment to clearing away the barriers that act as a brake on growth for British SMEs. That is why, for example, we are not just reviewing whether there is still a case for each regulation, but now we are going to tackle how regulations are actually enforced as well. That commitment to lighten the load lies at the heart of our strategy for achieving economic transformation and recovery.
“In addition the Advanced Manufacturing Supply Chain Initiative will help build manufacturing capacity and ensure that more of the necessary components can be sourced in this country. We will support projects that deliver economic growth, greater competitiveness and safeguard or generate jobs.
“We will also increase the supply of capital through non-bank lending channels via our £100m SME focused Business Finance Partnership, targeting finance channels other than loan funds.”
The Advanced Manufacturing Supply Chain Initiative has been set up to help the existing supply chain grow, achieve world class standards and encourage major new suppliers to come and manufacture in the UK.
This initiative, to be run by Birmingham City Council, will provide grants and loans to successful projects demonstrating real ambition to create globally competitive supply chains.
The funding can support a combination of investment in capital equipment, associated R&D, and training and skills in recognition of the flexibility needed to overcome the barriers that suppliers and supply chains can face.
Vince Cable today also launched the Focus on Enforcement campaign – asking business to tell us where enforcement can be improved, reduced or done differently and to discover and celebrate where it works well, so others can learn from it. Government will pick up the best ideas for change submitted and look swiftly at how we can improve the experience of regulatory enforcement in those business areas.
Urging businesses to put forward their ideas for change and improvement to the Focus on Enforcement website, Dr Cable added:
“The Government knows that ill thought-out regulations cost businesses time and money – which is why it devised the Red Tape Challenge. But sometimes the regulations are fine, it is inconsistent, inappropriate or overlapping enforcement that is the problem.
“Focus on Enforcement gives all businesses, but especially smaller and medium sized firms that often feel the disproportionate weight of inspection and compliance, the chance to make a real difference to the way regulators visit, inspect and advise business and enforce the law.”
The Chancellor has launched the National Loan Guarantee Scheme (NLGS), helping smaller businesses across the UK (with an annual group turnover of up to £50 million) access cheaper finance.
The Government will provide up to £20 billion of government guarantees on unsecured borrowing by banks, enabling them to borrow at a cheaper rate. Around £5 billion in guarantees will be made available in the first tranche.
Participating banks will pass on the entire benefit that they receive from the guarantees to smaller businesses across the UK through cheaper loans. Businesses that take out an NLGS loan will receive a discount of one percentage point compared to the interest rate that they would otherwise have received from that bank outside the scheme.
The banks currently participating in the scheme are: Barclays, Santander, Lloyds and RBS. Aldermore have also agreed, in principle, to join the scheme.
The Chancellor said: “The Government promised to help small businesses get access to lower interest rates. Today, we deliver on that promise with a nationwide scheme. It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates onto businesses.”
The Government is not guaranteeing individual loans to businesses and thus not taking on the credit risk of loans made under the scheme. The banks retain the credit risk and therefore their usual lending and credit parameters will apply.
Official retail figures from the Office for National Statistics (ONS) confirm spending is growing more slowly than inflation, meaning people are cutting back on purchases.
They show a year-on-year growth in retail sales values for February of 2.6 per cent compared with a 2.3 per cent increase reported by the British Retail Consortium’s (BRC’s) own figures earlier this month. The official figures mirror the trends highlighted by the BRC, showing the food sector experienced some better growth but clothing and footwear worsened. Household goods had a particularly weak month.
The ONS also revised its January estimate to bring it more in-line with the BRC’s findings.
The day after the Budget, the BRC says these results show more should have been done to support the retail sector, particularly by tackling the eye-watering 5.6 per cent increase in business rates coming into effect in April which will make success on the high street even harder to achieve.
British Retail Consortium director general, Stephen Robertson, said: “The headlines from yesterday’s Budget do nothing immediate to change the tough reality millions of families are dealing with. It’s good the Chancellor’s done something to help households’ abilities to spend by raising personal tax allowances but disappointing it won’t take effect for another 12 months. Meanwhile the continuing rise in fuel prices keeps eating into families’ budgets and hitting their ability to spend.
“Total sales growth is still below inflation, so overall customers are cutting back on purchases. Food picked up but non-food sales deteriorated with goods affected by the slow housing market among those particularly struggling.
“The Chancellor’s move on Corporation Tax was very welcome but it’s important to remember the burden of other taxes needs to be addressed if they are not to act as a drag on growth. It’s deeply disappointing there was nothing done to bring the imminent 5.6 per cent increase in business rates more in-line with reality. Inflation is already much lower than this and due to fall further. Action on business rates is needed to show the Government is serious about wanting to revitalise our high streets.”
Experian has launched Experian Business Check, a new, online commercial credit checking service designed specifically for UK small and medium sized firms to help them make better business decisions.
Experian Business Check enables SMEs to access accurate and up-to-date information on the financial health and payment performance of other UK businesses, including limited and non-limited business. It will help businesses to minimise the risk of non-payment, late-payment, commercial identity fraud and exposure to the failure of key customers and suppliers.
Individual checks can be purchased from £13.99.
SMEs using the service can check details of company directors, enabling them to identify disqualified directors. They can also set up instant text or email alerts so that they can be alerted, whenever and wherever they are, to changes in the financial or management status of those businesses monitored.
Max Firth, managing director of Experian’s Business Information Services, commented: “More than 20,000 firms go out of business every year in the UK, leaving a trail of unpaid bills and out-of-pocket creditors. Furthermore, many firms are facing late payment issues, where the average time taken to settle bills is now almost 26 days beyond agreed terms. As a result, many smaller businesses encounter cash-flow problems that can even lead to their own failure.
“Experian’s commercial credit information is relied on by many big companies to minimise commercial credit risk and to enable them to make better, more informed customer decisions. Experian Business Check provides these capabilities in a convenient and affordable manner, so that SMEs can also use high-end business intelligence to limit financial exposure and improve cash-flow.”
Experian Business Check, which provides SMEs with a single score to highlight likely failure rates and payment performance, draws on data from Companies House, Registry Trust Limited, and access to information from Yell and Thomson – the two largest suppliers of non-limited business information. It also includes payment performance data from more than 22 million business-to-business transactions made every month. This information is already used by many of the UK’s largest businesses and commercial lenders to accurately understand commercial credit risk.
As an introductory offer, Experian is giving SMEs a 50 per cent discount on their first Business Check order. To receive the discount, SMEs must type in the code 50% when prompted.
Lending under the Government’s flagship small business lending scheme, the Enterprise Finance Guarantee (EFG), has fallen to another new record low according to independent finance provider Syscap.
The value of loans offered under the EFG scheme has dropped further to £77.8 million in the last quarter (to December 31st) down 24 per cent from £102.8 million during the same period last year.
The Enterprise Finance Guarantee scheme was designed to encourage banks to provide finance to SMEs with a turnover of less than £25 million. Under the EFG scheme the Government guarantees 75 per cent of the value of lending in an individual loan to a business.
Small companies borrowing under the scheme need to pay their bank interest and other charges and the Government an additional fee for using the scheme.
The poor performance of the scheme has prompted the Chancellor to change the focus of the scheme from encouraging banks to lend to the smallest class of companies with a turnover of under £25 million. Instead loans under the scheme are now available to bigger businesses with a turnover of up to £41 million.
Syscap says that opening the scheme to bigger companies may crowd out smaller companies.
Philip White, chief executive of Syscap, explained: “The smaller the company the harder it is for that company to get bank funding. The EFG scheme’s attraction was that it targeted just those smallest companies. Throwing the doors of the scheme open to bigger companies might lead to more lending in total but less lending to the smallest companies.”
“The failure of the EFG scheme combined with the cancellation of Project Merlin raises the question as to when the Government will find a practical way of substantially increasing bank lending to smaller businesses.”
Syscap says that the EFG scheme would have worked better if it had included leasing, the traditional way companies fund business investment and one of the few areas of business funding that is currently growing.
“Allowing lease finance into the EFG scheme would give a major boost to the availability and affordability of leasing,” said White.
“Making lease finance more readily available would mean businesses can make the investments they need now rather than postponing them indefinitely.”
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