Lord Sheikh’s Speech in the House of Lords on Small and Medium-sized Businesses: Access to Finance
My Lords, I should like to thank the noble Lord, Lord Berkeley, for introducing this debate on an important subject. I express an interest in this debate as the chairman of an insurance organisation that helps smaller organisations to place their insurance covers.
I have always supported the cause of SMEs. I echo the words of the Prime Minister earlier this week when he said that SMEs are key to Britain’s economic recovery and make a great contribution with their innovation, hard work and determination. They make up around 99% of all private sector businesses and provide nearly 60% of private sector employment. During this Parliament, a number of measures have been brought forward to help SMEs grow. Among them are the cutting of £l billion-worth of red tape and the extension of small business rate relief. The Government have also worked to make Britain’s tax system more competitive, with corporation tax being the lowest in the G7 and a £2,000 tax cut on national insurance contributions coming in from April 2014.
The problem that SMEs have in accessing finance has dominated debate in recent years, but some important steps have been taken. The £1 billion British Business Bank aims to increase the supply of capital to SMEs and introduce more competition to the banking sector. In addition, businesses that would otherwise lack adequate security for a loan are being helped through the enterprise finance guarantee.
It is also important to remember that banks are encouraged to lend to SMEs. The Government hope to do this by allowing banks to borrow from the Bank of England at cheaper than market rates through the Funding for Lending scheme. More also needs to be done to allow more people to start their own businesses. The Start Up Loans initiative was created to help people to get their businesses off the ground. As someone who promotes Islamic finance, I was very pleased with the recent announcement by the Prime Minister that start-up loans will also be available on Islamic principles. However, we are in a competitive world and there is always more that can be done.
Despite multiple support schemes for small firms, research has suggested that unfortunately there has been limited success. The Federation of Small Businesses has said that current business support is congested and confusing. Many SMEs still struggle to access the finance they need, and recently overall lending to SMEs has fallen. I ask the Government for an explanation of what is being done to ensure that the right support is targeted at the right businesses.
I also believe that more should be done to make these schemes act as a coherent programme rather than a collection of separate initiatives. I ask my noble friend the Minister what, if anything, is being done to this effect. We also need to get more of the UK’s large businesses to play a supporting role for SMEs. Often big businesses do not pay small suppliers promptly. Small firms suffer cash-flow problems because work is not paid for in the agreed time, and they spend valuable time chasing payments.
As someone who has promoted the undertaking or more overseas business, I believe that all exporters, no matter how small, should be able to access high-quality government support. In conclusion, the Prime Minister has said that we are in a global race, and more SMEs should build overseas connections and be involved in enhanced trade.