Businesses: Small and Medium-Sized Enterprises

Baroness Cohen of Pimlico Excerpts

Tuesday 6th May 2014 Lords Chamber

[Baroness Cohen of Pimlico (Lab)]

I thank the noble Lord, Lord Cope, for securing and introducing this debate on a subject so vital to our economy. Indeed, our report goes on giving. This is effectively the second debate that we have managed to have on it, and I very much welcome it. I also thank the noble Lord, Lord Livingston, for feeding as many of us as could be assembled in a hurry to discuss the report when he was appointed.

Britain Open for Business sets out an impressive range of services and improved delivery of those services, but it still does not seem to me to be directed towards the smaller end of the market—the smaller medium-sized companies, if I may so describe them, the really small companies and, above all, the problem of start-up. At one level, that is fair enough. In the short term, the big wins in increased exports must come from concentrating on larger and medium-sized companies. However, we need to look beyond them. In any case, they are reasonably well placed to access the information they need, once you prod them into action. We heard many views that smaller companies may not be able to spare a hand from the day-to-day business to put in the effort to export, and it is there that we need to concentrate.

Since our report was completed, and after reading the Government’s formal response, Britain Open for Business, I have been thinking about how the national goal of increasing exports can be achieved. Let us be clear that at the moment it is not a success story. Our balance of payments on manufactured goods is worsening. We must improve. I believe that means putting in the hard, long-term slog to get smaller companies into exporting.

In this context, when we think about concentrating on larger companies, the example of the proposed takeover by Pfizer of AstraZeneca stands as a kind of living, breathing horror about what can happen to your larger companies. As an ex-director of the London Stock Exchange and a director of many companies in my time, I say that fine words about carefully considering takeovers by foreign companies do not really come to much when you find yourself faced with a bid of 30% more than the existing stock market price. That tends to overrule any amount of careful consideration, partly because not to take account of such a stock market price increase would be damaging to the interests of shareholders. The Government—and we, when we are once more the Government—will have to think about how we protect jobs and vital national infrastructure in a reasonable and measured way.

For the moment, however, I am thinking about developing some more vital national infrastructure. I come to the report’s particular concerns and targets. The whole committee was started at the request of the noble Lord, Lord Popat, then a Back-Bencher in your Lordships’ House. He won the right to set up the committee that we are still discussing.

Small and very small companies need lots of encouragement and advice and access to finance at reasonable prices if they are to export and grow. We indentified a critical role in the advice and support for the LEPs and chambers of commerce. There is almost nothing about LEPs in Britain Open for Business, but I will not have a go at that one because my noble friend Lord Haskins will be speaking later in the debate. He chairs a large LEP and will be able to tell us.

We are not yet offering enough help, both advisory and financial, and we lack the culture to provide it. The noble Lord, Lord Heseltine, in another report, identified this gap and noted that is was filled in other European countries by the chambers of commerce. There is work to be done here. We were told on our travels that some chambers were inactive or unwelcoming. There is nothing in Britain Open for Business about how they might be revitalised. They could indeed be given funding to improve. Like everyone else, they need competent central organisers, which many cannot afford. I recommend this and wonder whether the Minister will comment on this in his reply.

We could also think more carefully about how small companies get started. This has been a lifelong interest for me. Although two of the companies that I have helped are restaurants and have never exported a thing, I could have done better if I had thought about it. That is also particularly true of whether we can find a way to help our immigrant business men and women, who can see a market in their countries of origin for goods made here. We met a couple of such businesses in our travels, one exporting curries and chutneys to the Indian subcontinent. Of course, this business had none of the obvious difficulties in exporting: it knew its markets, what to sell and to whom. There were none of the usual problems of language barriers. It would be well worth while for UKTI to consider zeroing in on such companies as a particular sector and helping them to grow. We noted that the owners of these businesses were careful people, only using such finance as could be generated within immediate family and friends. I have been there. This is how I worked but, with better information and advice, we could have grown faster.

In fact, the incentives available to friends, family and investors in general to invest in start-ups have been immeasurably improved by the introduction of the small enterprise investment scheme which allows top-rate taxpayers a concession of 50% on any investment after the enterprise in question has been trading for a few months. This last was introduced after our report and the Government are to be congratulated on it. When we are once again the Government, we should keep it.

Small businesses have difficulty servicing debt. When I was in the start-up business, like the careful Indian businessmen we met, I tried to depend as little as possible on a bank. However, if you have to take on debt, the new government scheme, which allows small companies to borrow up to £10,000 at about half the rate that any bank would offer, provides a welcome and timely piece of help and encouragement for start-up companies.

In conclusion, we do not yet do enough to encourage very small businesses and small business start-ups. Our report recommended several measures that would help, including working through LEPs and chambers of commerce, which are not yet happening. The SEIS and the government loan scheme are of real value on the financial side, but they are necessary rather than sufficient. We and UKTI could do more, possibly by concentrating more attention in this sector, particularly with people who have a natural route to exports to the countries from which they come. Start-ups are difficult and so are very small companies, but they are the medium-sized and larger businesses of the future. I ask the Minister what the Government’s further plans are to provide increased services to this most critical area.