Businesses: Small and Medium-Sized Enterprises

Lord Livingston of Parkhead Excerpts

Tuesday 6th May 2014 Lords Chamber

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Livingston of Parkhead) (Con)]

My Lords, I thank my noble friend Lord Cope for initiating this important debate and I thank all noble Lords for their contributions, particularly those who were members of the committee which produced such an excellent report last year. I particularly thank my noble friend Lord Popat, who not only initiated the report but chose to keep me company on the Front Bench.

It is clear that those who have spoken this evening understand the challenges small and medium-sized businesses face and the advantages to be gained from trade not just for them but for the UK economy more widely. Many good points were made, and I will try to pick up as many as I can. Noble Lords will understand if I focus particularly on exports rather than on wider economic policy, given the time available.

The noble Lord, Lord Grade, raised sales and salesmanship. I can assure him that in the Government I have seen a huge focus on selling the UK and UK trade around the world. In fact, the Prime Minister is one of the best salesmen for Britain, and the reason I am standing here doing this job today is that he is such a good salesman. We note the need for very good salesmen. I come from a family background of sales, a bit like the noble Lord does.

UKTI recently issued Britain Open for Business: The Next Phase. It was called The Next Phase because it builds on the very good work of my predecessor, my noble friend Lord Green, who spoke in the debate today. We are seeing progress. We are seeing more companies than ever being helped by UKTI. That means that more companies are receiving advice on how to enter new markets; more companies, particularly small ones, are being helped to go to trade shows; and more are using UKTI to improve their digital presence around the world—again, particularly small companies. Indeed, in the current year, we are looking to double the numbers of companies assisted four years ago. It will be a substantial improvement, and that means more small and medium-sized companies are getting help.

The noble Baroness, Lady Cohen, asked about overseas chambers of commerce, and my noble friend Lord Green highlighted the point. We are supporting chambers of commerce around the world to improve the services they offer to exporters. As part of this initiative, I have been travelling around the world. In the past few months, I have opened British business centres where British businesses, particularly small businesses, can go, meet people, use the facilities and get advice. I have been to Mexico City, Dubai and Budapest, to name but three. We will continue to work with the chambers of commerce and see the overseas business networks as very important. We will encourage those chambers which do not exist to exist and those which do exist to be better, and those which are good to become real champions of exporting for UK companies.

My noble friend Lord Leigh stated that Britain’s diplomatic network overseas is now a real asset to British business. Our diplomats and UKTI officials are helping new businesses export every day. I have had so many unsolicited comments from companies of all sizes about the help they receive from embassies or people in post. Of course there is more work to do, but the improvement over the past five years has been outstanding. We are also seeing a positive impact from some of these changes. We have seen surveys from the CBI and chambers of commerce showing a high degree of confidence among manufacturers in exporting.

A number of noble Lords raised the point about recent falling exports. This is of course one of the impacts of the high pound. Just translating goods sold in foreign currencies into sterling has an impact. For instance, in dollar terms, in February our exports actually rose by 8%. Certainly, a 10% increase in the value of the pound will have an impact on the translation of foreign currency exports, which many of them are, into sterling. Indeed, despite all the improvements, I recognise, as many noble Lords in the House have said, that there is a lot more to do. That is what I want to talk about.

Before I get into the details, I want to make an important distinction. We talk about SMEs but, actually, medium-sized companies—the “M”—are different from the small. Medium-sized companies are typically small versions of large companies rather than large versions of small companies. They have to be treated differently. They are also the area, as was highlighted by some noble Lords, where the UK underperforms our competitors. This is what the CBI calls “the forgotten middle” and focusing on them as a country, the CBI believes, could be worth to our economy overall somewhere between £20 billion and £50 billion.

That is why I recently wrote, as was mentioned by a number of noble Lords, to the 8,900 MSBs in the UK to raise awareness of how UKTI can assist them. A UKTI team will then contact each and every one of them, as long as they can get through on the phone, and find out, first, if they are exporters, and, if they are not, whether they could be exporters. If they can, they will offer them a tailored programme and a named account manager. Simply, there should not be a medium-sized company in the UK that does not fulfil its potential as an exporter because it is unaware of the help that government can provide. That named adviser will also be able to point them to other government assistance; the noble Lord, Lord Leigh, raised this point. That may be relevant to their business, because they will get to know them as salesmen and account managers do. They will also form a first point of contact for many government issues for these businesses.

Moving more generally to companies of all sizes, I say that the issue of awareness is very important. It was raised by my noble friends Lord Cope and Lord Cotter, among many others. We are very much revising our marketing strategy, first to ensure that we understand what smaller, often first-time, exporters need, and improving our communications to make them, frankly, more relevant for businesses. We will also be significantly improving our use of the internet. The “Exporting is Great” campaign, of which many noble Lords will be aware, will raise awareness of the benefits of exporting and of the support available. Export weeks continue to bring in new customers. Last year, we held two export weeks which brought in 8,600 customers to UKTI. Our latest export week took place just a few weeks ago and reached over 3,000 companies on its own.

We are also working with intermediaries, whether they are business representative bodies—such as the CBI, the Engineering Employers Federation, the FSB or the British Chambers of Commerce—professional service firms and even the banks, to increase awareness of UKTI among their members or customers. We are also co-ordinating with other government bodies to ensure that this is a cross-government effort to raise the profile of our export efforts.

My noble friend Lord Storey kindly advertised some of the conferences we are holding. I echo his comments on the Liverpool International Festival for Business: noble Lords should visit it. I will be speaking there, but there will be other, better speakers. The noble Lord advertised Liverpool, and if he does not mind, I will advertise Glasgow. At the Commonwealth Games we will have the British Business House and a business conference which will encourage both inward investment and exports. Also, so Yorkshire does not feel left out, I mention that the Tour de France is leaving from Yorkshire—Le Grand Départ. I was up there recently and we will shamelessly use this as an opportunity to sell the UK around the world.

As my noble friend Lord Leigh highlighted, government could generally simplify the business assistance proposition. I can assure him that senior BIS Ministers are currently engaged in a Star Chamber process to look at how we can improve matters. UKTI itself, however, talks directly to companies and tries to provide a tailored service which depends on what they need rather than trying to sell them individual products.

On the question of access to finance, availability of finance is a topic that arises whenever the issue of companies—in particular our smaller companies—is debated. That issue was raised by many noble Lords, including the noble Lords, Lord Giddens and Lord Stevenson. While there is some improvement in the position, bank lending remains muted at best. The Government have introduced a number of schemes to assist with this, such as Funding for Lending, the Start-Up Loan Scheme and the establishment of the British Business Bank. We are also trying to encourage a number of challenger banks and non-traditional sources of finance. Unfortunately, to discuss all those initiatives in depth would take a full debate on its own, so I hope noble Lords will excuse me if I concentrate on what UK Export Finance is doing to help exporters.

Our aim is to make UK Export Finance one of the most competitive export credit agencies in Europe and to substantially increase the numbers of companies it supports. It is a reasonable criticism that it concentrates on the large companies, but we are seeing some improvement in that position. The number of companies that UKEF helped last year has risen by 50%. However, there is more to do. We have doubled UKEF’s lending facility to ensure that more businesses are able to take advantage of it. We have improved and widened UKEF’s product range to better support exporters and their customers who want to buy British. We are doubling the number of export finance advisers that are available to UK companies. They will not only advise on what UK Export Finance can do but will also provide advice to smaller companies on how to structure their help from banks, which is very important.

We also have a marketing campaign to raise awareness of UK Export Finance, which is, unfortunately, somewhat lower than UKTI—which in turn needs to improve its awareness. Further, we hope to introduce new legislation next year that will enable UKTI to lend to exporters rather than just supporting individual contracts, which it cannot currently do under the law. It will also widen the type of exports that can be covered by UKEF in future. We are consulting with businesses and business groups such as BExA on further improvements to both products and processes within UKEF and are in close contact with the banks to ensure that they are geared up to play their part in expanding our activities.

My noble friend Lord Cope raised the issue of intellectual property. UKTI works closely with the Intellectual Property Office. There is a significant amount of joint working both with the UKTI regional network of international trade advisers and the geographical desks. IPO trains business advisers through its IP Master Class, which is integrated into UKTI programmes. UKTI posts overseas also provide help locally through our IPO advisers in key markets and the regions around them such as Brazil, China and India and south-east Asia. They work with local IP enforcement agencies to protect British products, alerting companies to IP exposure and supporting UK businesses with IP issues. Indeed, they helped over 200 companies in the last year alone.

Many noble Lords highlighted the issue of confusion among companies around the Bribery Act; I can provide some help on that. The MoJ and BIS are currently engaged in a project which seeks to obtain feedback from small companies on the impact of the Act and the MoJ’s guidance on it. I hope that that will provide some guidance to us on our next steps to make matters clearer for smaller businesses.

I turn now to the digital economy, which is becoming more and more important for exporters. We should be proud that the UK is the leader in the whole of the EU in online selling, but we should note that we can build on that position. That is why UKTI has launched the Grow Online, Expand Worldwide campaign, which delivers training and advice to exporters and provides funding to help to improve their web capability and capitalise on the rapid growth of mobile technology and social media.

In addition, UKTI’s digital acceleration programme is designed to enable companies to exploit the opportunities in the world’s online shopping malls. For example, the Prime Minister and I, on our trip to China in December mentioned by the noble Lord, Lord Leigh, announced a partnership with the massive online shopping platform Alibaba Tmall, which will support UK brands and have a UK channel. In doing that, we see a great opportunity; in just a few months since we announced the deal, 100 companies have applied to join the scheme and roughly a quarter have their products online.

I turn to free trade agreements, which this Government are championing between the EU and its trading partners around the world. One of the most important of these would be with the US. TTIP, as it is known, is a huge opportunity, but there is often a misconception with it, in that people think that it is about large companies—and that is the same for free trade agreements more generally—but, actually, it is the smaller companies that cannot cope with regulatory differences between countries, non-tariff barriers or the impact of tariffs on their businesses. Our role in championing free trade agreements is most important for small businesses, and that is what we will continue to do.

My noble friend Lord Green pointed out that completing the single market was a very important part of that. Again, this will help small businesses. Often the UK is painted in terms of what it is against with regard to the EU; I would like to state what it is for. It is championing the single market, free trade and competiveness for EU companies, and we will continue to do that for companies of all sizes.

A number of noble Lords mentioned languages. Of course, the English language is used around the world, but we need to improve the language capabilities of our exporters to give them an edge in competitive markets. UKTI recently commissioned an academic report to review the impact of language skill deficiencies on UK exports. I have to tell noble Lords that it was significant. We have provided funding to each English region to create language and culture adviser posts, which will deliver advice to small and medium companies who are exporting. UKTI also provides small companies with an export communications review, a bespoke report that will look on how they can overcome language and cultural barriers when working overseas. Over 700 companies are expected to take advantage of this service in 2014-15.

In direct response to this report and debates in this Chamber, we have recently announced the launch of the Postgraduates for International Business scheme. This aims to improve language capacity for smaller and mid-sized businesses by placing postgraduates with language skills, who usually have come from other countries, in companies to undertake project work, either during or shortly after their degree. I also remind noble Lords that we have a large number of locally engaged FCO and UKTI staff in posts around the world who are expert in the local language and business culture and who offer day-to-day practical advice to new companies on doing business in the countries that they are based in.

I shall pick up a number of other comments that were made. My noble friend Lord Storey raised the issue of LEPs and the RGF. It is up to LEPs to bid for funds, and we will continue to work with them to raise the funds that they need to improve exports and inward investments. The LEPs, the chambers of commerce and UKTI regional staff work together very well in a number of regions. However, I will not pretend that it is uniform or effective in all places; we are certainly looking to bring the best as a model and bring the others up to that standard.

The noble Lord, Lord Giddens, raised the issue of reshoring. The Prime Minister announced at Davos that we would establish Reshore UK, a one-stop shop, as part of UKTI and the Manufacturing Advisory Service, to enable UK companies to come back to the UK and set up again. I believe that, with the attractiveness of the UK as a market, this presents a real opportunity to reinvigorate our manufacturing and supply base.

The noble Lord, Lord Cotter, referred to OMIS, which is a heavily subsidised service. The cost is usually about £1,000 to £1,500, which I think is reasonable for a very valuable service. As always, we have to balance priorities. We will continue to review its use, and our support for it, along with the many other services we support, virtually all of which are done on a subsidised basis.

The noble Lord, Lord Haskel, and, I think, the noble Lord, Lord Stevenson, mentioned business advisers and trade envoys. I should clarify that we have business advisers who are usually business experts who travel round the world on behalf of their companies. They tend to be the CEOs and chairmen of large companies. When they do so, they raise the profile of British businesses free of charge, particularly in the sectors they represent, whether that be professional services, automotive or whatever, and do an excellent job. The trade envoys are geographically based. In fact, many of them are Members of this House and also do an excellent job. They seek to promote the UK in countries which do not get the level of ministerial visits that others do. I would be very happy to provide a list of them, as requested by the noble Lord, Lord Stevenson, and take this opportunity to thank all of them for the very difficult work that they do. It is unpaid and sometimes thankless but is very important.

A number of noble Lords raised the possibility of introducing some sort of tax credit for exporters. As anticipated by the noble Lord, Lord Stevenson, of course I would say that this is a matter for the Treasury but I know that it is aware of this suggestion. There are challenges with such a scheme, not least that of people exporting and reimporting but, as I say, I know that the Treasury is aware of this suggestion.

I apologise if there are any matters that I have not covered. I have tried to pick up the main issues and will follow up any others in writing. I end as I began by thanking my noble friend Lord Cope and his committee for the report. I also thank all noble Lords who have taken part in the debate. I thank noble Lords for their continued interest and for being salespeople—that seems to be the phrase of the day—for our export effort and ask them to continue to be so.

I echo what my predecessor said. I expected him to say that this issue is not a sprint but a marathon, and, sure enough, he said just that. We have suffered for decades from a weak trade performance over a number of Governments and it will take some years of sustained effort to change this. I assure the noble Lord, Lord Haskel, that we will continue with this effort and work tirelessly. Irrespective of what the figures may say, we will continue to push to make exports and our export efforts for companies of all sizes, but particularly for small and medium businesses, a key priority of our Government.