The Chair
Before we begin, I encourage Members to wear masks when they are not speaking. This is in line with current Government guidance and that of the House of Commons Commission. Please also give each other and members of staff space when seated and when entering and leaving the room. Members should send speaking notes to hansardnotes@parliament.uk. Similarly, any officials in the Gallery should communicate electronically with the Minister.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (George Freeman)
I beg to move,
That the Committee has considered the motion, That this House authorises the Secretary of State to undertake to pay, and to pay by way of financial assistance under section 8 of the Industrial Development Act 1982, compensation to digital technology product vendors in respect of a proportion of the costs of providing digital technology product to SMEs as part of the Help to Grow: Digital programme up to a limit of £296 million over three years.
It is a pleasure to serve under your chairmanship today, Sir George, and to be back as Minister for Science, Research and Innovation.
The UK has a long-standing productivity challenge. We are home to some of the world’s most innovative firms, but we also have a long tail of less-productive firms compared with other G7 countries. In 2019, the Department for Business, Energy and Industrial Strategy/Her Majesty’s Treasury business productivity review found that a key reason for the UK’s level productivity gap is the low adoption of basic digital technologies and weak digital leadership and management practices. While we excel at innovation, being eighth in the world, we are only 31st for ICT adoption. Our small business sectors are lagging in adopting digital technologies, and our tech adoption rates are far behind leading competitor countries.
That trend has been identified widely, including by the CBI, Be The Business and the Bank of England, and in developed economies 55% of productivity gains, according to McKinsey, could come from closing the gap between low and hight productivity firms through the adoption of existing best practice. We know from research commissioned for the European Research Council that adoption of tried-and-tested technologies can have a big impact on business productivity of between 7% and 18% as a minimum. Such technologies are not groundbreaking and include customer relationship management tools, online accounting and e-commerce products.
To turn the trend around as part of our plan for growth, the Chancellor announced at Budget 2021 two new Help to Grow schemes. The first, “Help to Grow: Management”, is supporting 30,000 UK small business leaders to undertake practical management training at our world-class business schools. The second, “Help to Grow: Digital”, is a new UK-wide digital adoption programme for our small and medium-sized businesses.
Our small businesses have been hit particularly hard during the pandemic, but they have also grasped new opportunities, particularly digital technologies, to survive and thrive. We want to build on that momentum. The new scheme will launch in autumn 2021, and we aim to support 100,000 small and medium-sized businesses across the UK over the next three years to adopt technology and to boost productivity and international competitiveness.
The scheme will consist of a new online platform through which businesses can access learning and advice on software to help them save time and money, and the platform will provide guidance on selecting software and how to embed them into their business successfully. The scheme will also provide an up to 50% discount on the costs of buying new software for the first year up to a value of £5,000. SMEs that have been registered in the UK for more than 12 months and have between five and 249 employees will be eligible for funding.
In the first wave, we will focus on e-commerce, accounting and customer relationship management software. We want to ensure that SMEs are accessing high-quality software products, which is why vendors will need to apply for them and their products to be accepted on to the scheme. Applications will be assessed for meeting functionality and quality standards. Vendor applications closed on 8 September with a strong field, and we will be reviewing them to ensure that we have a strong offering to present to small businesses at launch.
SME engagement is key, and we recognise the challenge of reaching 100,000 small businesses over three years. I am pleased to have the support of many business organisations, including the CBI, the Federation of Small Businesses, Be The Business and others. My officials have engaged extensively with organisations representing the software market, as well as with individual vendors, to design eligibility criteria that will ensure SMEs have access to high-quality products from reputable companies. Engagement with the wider business community is being conducted across numerous channels, with a view to raising awareness of the scheme even, and especially, among those SMEs that are hardest to reach, namely those that have not previously taken up Government support or introduced digital technologies into their operations.
“Help to Grow: Digital” is an ambitious programme—100,000 businesses over three years—but we are confident that it will provide significant benefits to small and medium-sized businesses, helping them to seize every opportunity to grow. The initiative is an important part of the Government’s wider plan for jobs, promoting opportunity, boosting employment and helping level up the economy as businesses recover from the impacts of the pandemic. I commend the motion to the Committee.
George Freeman
I thank hon. Members for some very intelligent questions. I thank the hon. Member for Newcastle upon Tyne Central for making it clear that the Opposition will support the motion, which speaks volumes about the sense of this initiative. Notwithstanding her pessimism about the UK economy, we are the fastest growing economy in the G7, and it is quite clear to most people up and down the country that the Government’s response during the pandemic to support businesses, and to make sure that the damage of the pandemic is minimised, has been widely recognised.
Chi Onwurah
I thank the Minister for giving way. I did not express any pessimism about our fantastic businesses and economic opportunities. I was talking about some of the figures for business start-ups in the last few years, which I hope he recognises.
George Freeman
Having a run a few myself, as colleagues here have, I am all for them. I simply make the point that we are the fastest growing economy in the G7, so we must be doing something right. The hon. Lady is right to highlight, as this measure does, the importance of SMEs.
This is a targeted measure. We are not trying to boil the ocean; we are trying to target specific funding at businesses for which all the evidence shows that the uptake of digital technologies such as those I have described will have maximum impact in terms of productivity and competitiveness. A number of us have started companies. Very often in the first three, six, nine or 12 months we find that digital technology is not necessarily the biggest barrier to getting going. It is important, but we are doing here is focusing where all the evidence from the business community suggests that support for digital uptake will have the biggest.
I will take the questions in turn. First, this is designed specifically for businesses, so charities are not eligible, but I am delighted to say that all social enterprises—businesses that recycle their profits back into good causes—are eligible, which sends an important message.
Martin Docherty-Hughes
Will a social enterprise that is also a registered charity be eligible, because most social enterprises, at least in my constituency, are registered charities?
George Freeman
Many social enterprises are not charities, but the hon. Gentleman makes a good point, because many charities also have an operating arm as a company. I will come back to him on that point.
Secondly, on take-up, I am happy to say that there have been a series of meetings, roundtables and engagement projects over the spring and summer. I do not have the exact figures, but hundreds of companies have already registered to take up when this opens shortly.
Thirdly, the hon. Lady mentioned the importance of this being across the whole UK, and I could not agree more. This project is not just for the golden triangle, golden and important though it is; it is absolutely about reaching companies across the Union, in Scotland, Northern Ireland, Wales and all the regions of this country. On her point about monitoring, one of the key assessments will be to ensure that we are reaching all across the country, so take-up will be monitored in that way.
Fourthly, the hon. Lady asked about procurement. I can assure her that Her Majesty’s Treasury, which is not quick to hand out taxpayers’ money, has been through this with a fine-toothed comb and is satisfied that the procurement process has been done properly. She asked about marketing, and I am delighted to confirm that the marketing budget for this is currently £7.5 million, which is a substantial sum, with £1.5 million in the first year to ensure that we are reaching out and raising awareness among those companies. With Her Majesty’s Opposition onboard, perhaps I can take this opportunity to encourage her and others to highlight the link on the gov.uk website, and to encourage businesses and social enterprises to apply.
Fifthly, on value for money, the Treasury and the business sector calculate that this £260-odd million, if we can get it out to these companies over the next three years, can produce a £7 billion boost to productivity. I think that speaks to the importance of digital productivity and competitiveness in our small business sector. Yes, I am incredibly proud that we are ranked eighth in the world for innovation, but we are 31st on digitalisation in the small business sector, and the level of digitalisation in that particular segment of companies is where Denmark was 10 years ago. That gives a sense of how important this is. I am sure that many of us know businesses in our constituencies that are very successful and doing well, with five to 50 or 100 employees, but that still use paper invoices and some very basic management systems. This is a very targeted scheme that is designed to help those businesses adopt digital technology.
Finally, turning to the very sensible point made by the hon. Member for West Dunbartonshire, from north of the border, I completely agree that this is, as he called it, “a state issue”, which is why we are absolutely determined to ensure that it goes across the whole UK, in Scotland, Northern Ireland, Wales and England. His point about cyber-security was well made. It was one of the issues considered in the assessment of how the scheme would work, and the system for making sure that only authorised procurers are part of the scheme. However, I will raise his point with the National Security Council, because one of the ways that cyber-security can be threatened is by getting into the software in small businesses at the bottom of the supply chain. It is a very good point, but I am delighted to know that the project also has support north of the border.
Question put and agreed to.