Businesses: Small and Medium-Sized Enterprises

Lord Cope of Berkeley Excerpts

Tuesday 6th May 2014 Lords Chamber

Moved by

[Lord Cope of Berkeley]

That this House takes note of the actions which have been taken following the publication in 2013 of the Report of the Select Committee on Small and Medium Sized Enterprises (HL Paper 131).

[Lord Cope of Berkeley (Con)]

My Lords, I welcome particularly the former members of the Select Committee which produced the report which is the subject of this debate—the members of the old comrades association, if I may say so, of the Select Committee. Our committee report had a good reception from the Government and others last year. We were particularly glad that the Government agreed to report again on developments a year later, which my noble friend the Minister did on 27 March, and to facilitate this further debate.

The theme of our work was government help for SMEs—small and medium-sized enterprises—to export. Exporting is obviously good for SMEs and essential for the prosperity of our country. Government help for this purpose is not controversial between the parties or, for that matter, within the coalition but it is also supported and assisted by many outside bodies. The Government’s support is of course shown by the appointment and excellent work of the Ministers concerned, particularly, until not long ago, by my noble friend Lord Green of Hurstpierpoint and now by my noble friend Lord Livingston of Parkhead.

Our report was very strong about the need to improve awareness of UK Trade & Investment and UK Export Finance—UKEF—among businesses. It is after all no use for UKTI to make excellent services available, as it does, if not enough SMEs know about them. The Federation of Small Businesses, among others, emphasises that increasing awareness of the services available is the most pressing need. It is of course not always easy to get through to SMEs. They are very busy and self-reliant, almost by definition. They are used to working out problems for themselves. They have a lot to think about and their dealings with government and their many agencies are usually about taxing and regulating them. So the message “We are here from the Government to help you” does not immediately switch on the “Welcome” sign. I hope that my noble friend the Minister can tell us a little more about the progress and effects of the effort, mentioned in a recent paper, to contact all the 8,900 medium-sized businesses by this summer. The Bank Holiday weather has encouraged me to believe that summer—that most flexible of dates—is about to arrive. How, too, are they getting on with the “Exporting is GREAT” campaign?

A real shock to us on the Select Committee was the tiny number of firms, or at any rate of SMEs, being supported by UKEF. We were told of UKEF’s new marketing campaign, which of course I welcome; that three new schemes had been introduced in 2011, particularly to help SMEs; and that UKEF was recruiting additional staff. In the recent Budget, some further proposed improvements to UKEF’s terms were announced, whose purpose included trying to ensure that smaller companies could benefit. Can my noble friend the Minister tell us what is now expected to be the level of UKEF support to SMEs in the coming period?

On SME finance generally, we were, like many others, critical of the banks. Recent figures suggest that the borrowing environment for smaller businesses has improved. Certainly, when one goes into branches of the large clearing banks one sees trays of leaflets encouraging SMEs to approach them and start-ups to come and see them. However, I have also seen recent evidence that decisions are still made well above the branch level and take a long time to gain approval, longer sometimes than the timetable that export sales require. Captain Mainwaring of Walmington-on-Sea is dead—replaced, one feels, by distant computer watchers.

One of our points was that businesses can borrow from a much wider range of sources than just the clearing banks. This has been widely discussed since, with much talk of challenger banks and so on. SMEs can and should look around. There are many ways to access finance and the clearing banks have lots of competition in this field nowadays. Some of it was formally considered novel but is now thought normal, such as internet banks, crowd funding or peer-to-peer lending—a term that can be misunderstood in your Lordships’ House. SMEs have a vitality that needs to be matched by flexible financial backing, and that is available.

We did not deal separately in our report with the effects of technology on SMEs, although the amazing changes that it continually makes ran like a thread through much of what we did. My noble friend Lord Livingston has great expertise in this area, not least from his period as chief executive of Dixons plc and PC World. As technology connects the world at an ever faster rate, it changes markets radically. You can find and reach customers much more widely across continents. The English language is helpful in this. After all, it is so often the language that computers use to speak to humans. But retail customers in particular need to be spoken to in their own language and with regard for local customs. Finding customers by technology is one thing, but selling also depends on how easy it is to deliver to your customers in distant places. More and more can be delivered electronically—books are the obvious example—and other products of the creative industries, which are so important in this country.

We have always been an innovative and outward-looking country, and IT gives us so many extra chances both to innovate and to reach out to the world. SMEs, with their flexibility, are in the forefront of all this. However, IT also makes the world more complicated. It is partly responsible for the increase in regulations and forms of every kind in all countries. That is one reason why the Government need to help SMEs to export through UKTI, the FCO and other bodies such as the chambers of commerce.

I particularly want to mention two more detailed matters that we referred to in our report. The first is intellectual property. As we learn with morbid fascination of the latest developments in that great lawyers’ feast, the titanic intellectual property struggle between Samsung and Apple, which I think is now in its third year, we should remember that for SMEs such things can be an existential challenge. How can you protect your idea or special product in foreign markets in many countries? I am not going to go into all the aspects, but I ask the Minister how the new IP attachés in our overseas embassies are doing in China and elsewhere. Is there any recent progress to report on international negotiations on IP? China at least is said to be realising that it has intellectual property to lose these days as well as to gain from.

I also want to mention bribery law. The definitions of what precisely constitutes a crime remain only partially understood by SME exporters despite 40 pages of careful legal guidance from the Ministry of Justice. We on the committee worried that the Government were waiting for case law to remedy this deficiency—in other words, that some businesses may suddenly find themselves the specimens being pinned down for examination in the courts while lawyers and judges work out in their confrontational way, in ever higher courts, what this Parliament intended the legislation to mean in practice.

The International Chamber of Commerce wrote after our report saying what was needed was not more parliamentary scrutiny or change in the law or guidance, but more efforts to promote awareness of the present guidelines, particularly by our embassies in relevant countries. We agree about awareness, but we thought that further consideration in a Lords committee might help both awareness and clarity.

All are agreed that the Government should, through their agencies, help SMEs to export in whatever ways are effective. I welcome the appointment of Dominic Jermey as chief executive of UKTI. He has unusually wide experience, including in both UKTI and the FCO, recently as ambassador to UAE.

I pay tribute to my noble friend Lord Green of Hurstpierpoint for his unceasing efforts while he was in the Government. He invigorated the whole process, and UKTI in particular. He proved once again the case for people of energy and expertise to be appointed to the House of Lords specifically to be Ministers. I am delighted that he is here today to speak. His successor, my noble friend Lord Livingston of Parkhead, has brought his own successful high-level commercial and financial experience, as well as his vigour, to the job over the past few months. It is essential work for our national prosperity. We wish him well and look forward to his speech today. I beg to move.

--- Later in debate ---

[Lord Cope of Berkeley]

My Lords, I thank everyone who has contributed to the debate. I thank particularly my noble friend the Minister for a clear and encouraging speech, for which we are grateful. I am grateful to all those who complimented the Select Committee’s report, particularly those who were not on the Select Committee.

I am excited about the prospects for Britain in the digital revolution, which I think are as great as they were in the Industrial Revolution all those years ago. That is partly why I worry about IP and issues of that sort.

The Minister spoke about “salesmanship” being the word of the debate, as it were—at least following the speech of my noble friend Lord Grade. After all, if the House of Lords cannot confer respectability on salesmanship, who on earth can? It is our job to try to do that, and I would add engineers to the list—as was suggested from the opposite side. By the way, if anyone wants to look up the exquisite hand-made cakes, the reference is on page 65 of the report. One can follow up from there, and I believe that the cakes are delicious.

Also mentioned was my noble friend Lord Green’s reference to the task of rebalancing the economy as being a marathon, not a sprint. That may also prove to be true of debates on SMEs and exports. I feel sure that we will contrive further debates to monitor the progress of UKTI in particular and rebalancing the economy in general. My noble friend Lord Popat started something when he godfathered the creation of the committee. This will run and run until the economy is rebalanced.

Motion agreed.