Small and Medium-Sized Enterprises

Debate between Lord Cope of Berkeley and Lord Popat

Wednesday 26th June 2013 Lords Chamber

[Lord Cope of Berkeley]

That this House takes note of the Report of the Select Committee on Small and Medium Sized Enterprises (Session 2012-13, HL Paper 131).

[Lord Popat]

My Lords, there are 14 speakers in this debate. If Back-Bench speeches were kept to a maximum of eight minutes, with 10 minutes each for my noble friends Lord Cope and Lord Green, we can expect to conclude this debate just before 9 pm.

[Lord Cope of Berkeley]

My Lords, I was delighted to be appointed to this Select Committee and honoured to chair it. I have long thought and argued that SMEs—small and medium-sized enterprises—are the single most important variable in whether our economy is successful, and that the Government have a duty to do what they can to help them succeed.

Economists argue, particularly on days like today, about what the Chancellor of the Exchequer and the Governor of the Bank of England should do. That is interesting but not the real clue to whether our grandchildren will live in prosperous times. I am an accountant and have seen some companies falter and others flourish because of the enterprise, long-sighted decisions and flair of the people who run them. These days, it is no easy task to run an SME at a sustained profit. Regulations of every kind stand around you to prevent you doing the wrong thing. However, a positive attitude matters—spotting the opportunities and making the right decisions on time. If we can get the climate for SMEs right, if our entrepreneurs are motivated and successful and if sufficient of our young people have the optimism to take responsibility for their own future and for employing others, we will prosper as a nation. If we value our SMEs, we lay the foundations of the future. In particular, if our SMEs can export, we can thrive in world markets and pay our way in a vastly changing world.

Our committee was set up to see if government could help more. The initiative came from my noble friend Lord Popat, and we are grateful to him for that. He served on our committee until he was—as one can see—rightly appointed to the Government. The noble Lord, Lord Mitchell, was also promoted to the opposition Front Bench from among our ranks. The committee members have proved to have huge practical experience in running businesses of very varied kinds. Two of our members have apologised to me for not coming today because of board meetings that they have to attend.

Personally, I found serving on the committee most encouraging. Wherever we went—we travelled widely across the UK and a bit in Europe, too—we met vigorous businesses, many of which were taking advantage of the Government’s various programmes of assistance and finding them valuable. In south Wales, Concrete Canvas impregnates fabric with cement so that one can line a ditch or erect a hut with fabric that turns into concrete when you wet it. It is selling that all over the place, including to the MoD for use in Afghanistan. Viv Parry from Leeds opened up a market in New York for her Exquisite Handmade Cakes, although she was allowed to take over only a sample of the tin she sells them in, not the cakes. Noble Lords will understand that they are food products. Who would have thought a few years ago that a combination of plasticine models and sheer wit would give rise to Aardman Animations, which we met in Bristol and which sells all over the world, including in China? We give other examples in our report. We had to pick only a few and I have picked those, which is unfair. However, I wished to give some examples.

There is a whole series of ways in which UK Trade & Investment—UKTI—and other government agencies help SMEs, both directly and, most importantly, through local enterprise partnerships, chambers of commerce and so on. Our message to SMEs, if there is a single message, is, “If you have a problem, share it. Don’t be frightened of the undoubted complexities of exporting. Take them on and get advice”. Our main criticism of UKTI was not the services it delivers but the fact that it is too little known and therefore too little used. In the case of UK Export Finance, the very low take-up of its programmes shocked us, and very little use is made in the United Kingdom of the European Investment Bank facilities to support SMEs.

There is no doubt that availability of finance is a most serious problem for SMEs, as your Lordships’ House discussed again only yesterday. The large clearing banks did their best to reassure us. However, as we went round we heard constant criticism of their distant, formulaic and sometimes slow decision-making processes, which inhibit the ability of SMEs to borrow from them. We also heard of other options for funding, which are available and growing. The Government’s agencies, including UKEF, the coming business bank, Funding for Lending and the new regional export finance advisers are addressing the problem. We shall see in the next few years how successful this proves to be.

In the time available I will mention briefly three of the other specific areas that concerned us: languages, intellectual property and the Bribery Act. Languages are important in exporting. As we all know, English is very widely spoken in the world and for that reason we are not good at speaking other languages. Some businesses in very expert sectors said that they needed no other language. Clearly, however, in most sectors people prefer to buy from someone who speaks their own language. We drew attention in our report to the fact that these days the United Kingdom has a high degree of linguistic diversity as a result of immigration. We should use that fact more to help exports. I also think that more careful thought about how languages are taught could prove valuable.

Intellectual property protection is ever more important as the world gets smaller. The Government have been negotiating hard internationally and stepping up their ability to advise firms on the risks and what to do about them. It is most important to keep up this work.

The vagueness of the Bribery Act 2010 also proved a controversial issue. In the two years since it came into force, there have been no prosecutions, but it has caused constant worry to exporters about just what is permissible. We want more clarity about all this and suggested post-legislative scrutiny to find out what the authorities and others concerned think the Act means and promulgate it more widely. The Government’s attitude, shared, it seems, by the House of Commons Justice Committee, is that until the courts have pronounced, there is no value in having post-legislative scrutiny. In other words, we have to wait until some particular businessmen are selected to spend months and no doubt much money being dragged through the courts over some practice deemed doubtful in this country, but normal in the country in which they were trying to sell. Meanwhile, everyone concerned becomes thoroughly inhibited when selling in some markets by comparison with their competitors.

It has been an interesting time for me and I want to thank all my colleagues on the committee for their very positive and supportive approach. We had first-class help from our clerks, firmly led by Christine Salmon Percival, even after an accident from her sick bed. The noble Baroness, Lady Cohen, did the same, when she, too, suffered in the snow and ice. We had an excellent adviser in Professor Robert Blackburn of Kingston University, one of the most entrepreneurial universities in the land. By the way, in case any noble Lords read the small print in some of the Sunday papers, I should make it clear that they advised me as chairman what I might say, as you would expect, but I chose what to say and bear sole responsibility for my words. Our committee was also assisted by the positive attitude to our work of my noble friend Lord Green and his colleagues.

We were an ad hoc committee, which means, of course, a temporary one. Our collective work as a committee is finished, but the Government’s work goes on. It is urgent but long-term, and given the importance of SMEs, I think our most important recommendation was Recommendation 1—that the Government should report back, not only now, but in a year’s time. I am delighted that the Government have committed themselves to do this in 2014 and 2015. We are promised further debates then. In that way, I hope, the work of our committee will live on. Meanwhile, I commend the report to the House.