Lord Risby
Main Page: Lord Risby (Conservative - Life peer)
Lord Risby
To ask Her Majesty’s Government what steps they are taking to encourage the growth of small businesses in the United Kingdom.
Lord Risby (Con)
My Lords, the statistics regarding small businesses are truly remarkable. Small businesses account for 33% of turnover in the private sector and employ 12 million people. Of our country’s 5.2 million private sector businesses, those with fewer than 50 people account for 99.3% of the total number.
For many years I have been deputy chairman of the Small Business Bureau. In November, a number of our directors produced an SME manifesto called “Liberating the Entrepreneur” under the Genesis Initiative. I pay tribute to the many parliamentarians of all parties in both Houses of Parliament who have highlighted the needs and potential of our small businesses over the years.
I most warmly welcome the Small Business, Enterprise and Employment Bill, which deals with key areas, such as access to finance, regulation, public sector procurement and filing requirements. This, of course, builds on the Government’s publication, Small Businesses: GREAT Ambition of December 2013.
The increase of over 40% in the overall business population since 2000 has been driven by SMEs. In turn, that figure was driven largely by the increase in the number of businesses without employees—for example, sole proprietorships, run by one self-employed person, or ordinary partnerships, run by two or more self-employed people. Most of the growth in non-employing businesses comes from unregistered businesses. The smaller ones not registered for VAT has increased by 83% since 2000. This trend arises from the possibilities offered by modern technology and communications.
The Government have plans, which I applaud, to extend superfast broadband, but it is a question not only of cover but of the quality of the cover. A note that I received from the City of London Corporation indicated this to me. Many SMEs in and around the City do not have access to the superfast broadband required to boost their growth and, while larger businesses are able to afford dedicated fibre optic broadband, the needs of SMEs have been overlooked by the large telecoms companies. As a result, average speeds for SMEs in the City are half that of the London average. Given that, and considering the particular impact on small and microbusinesses of broadband, I would be grateful if my noble friend could indicate what percentage of the UK will be covered by at least one of the four main networks and by when, and how we deal with areas where broadband infrastructure may not be commercially viable.
Inevitably, following the financial crisis and a change to the regulatory framework, lending institutions became very cautious. Over the years, we had seen the growth of a concentrated banking structure in this country. In 2007, at the peak of business lending, there were perhaps only 100 lenders to business; that number then halved, but today there are at least 300. I greatly welcome the vast number of government schemes and assistance under the umbrella of “providing finance and support for your business”. However, many feel that all that can be confusing and time-consuming for a small business owner. Therefore, the issue is not only the availability of funding but awareness and access; a recent survey indicated that only 6% of SMEs are fully aware of the whole array of borrowing possibilities. Is my noble friend confident that the now vast range of funding available for business is being made available on a clear, easy to access basis, and does he envisage some further improvements in enhancing access and clarity of information?
While it is true that interest rates remain very low, and general corporate profitability has much improved, the issue of late payment remains a continuing burden. The FSB has indicated that some half of the invoices of its members are paid late, persistently. Additionally, of course, suppliers remain nervous about pursuing larger businesses, for very obvious reasons. It is good to have a new reporting regime to help small business to identify best payment practices, with attendant benchmarking. However, it is very daunting for a small business to deal with the might of a major purchaser. Is my noble friend satisfied that, by giving smaller businesses more rights to challenge unfair terms, that problem will be reduced? While I greatly welcome the strengthening of the prompt payment code, would it not be advantageous and very reassuring for SMEs to have a small business conciliation service to resolve those disputes?
With their Red Tape Challenge, the Government have sought to address needless regulatory pressures. It is gratifying that the World Bank’s Doing Business 2015 report showed us as eighth out of 189 economies—up two places—as domestic regulation has been reduced. However, given the considerable impact of EU legislation on businesses, can my noble friend confirm that the Government are pressing for an annual statement of the true cost of EU regulation and legislation? That would certainly be advantageous to all EU members in a generally static European economic environment, which of course impacts on us, too.
I salute the substantial increase in direct lending finance by UK Export Finance and the package of support for first-time exporters. As somebody who is involved with UKTI, I find the new and functionally improved emphasis on highlighting what is available to support SME business activity abroad most encouraging.
In 2014, the House of Commons BIS Select Committee identified business rates as the main threat to the survival of existing retail businesses on the high street, and the biggest obstacle to entrepreneurial new retail businesses starting up. Business rates on the retail sector account for 25% of taxes on domestic property, and many small businesses pay more in business rates than they do in rent. The introduction of the 2% cap in 2013 certainly recognised that. The next revaluation is due in 2017. There have been suggestions that property revaluations should be more frequent. Perhaps my noble friend can comment on whether there are any thoughts in place for a long-term reform of business rates, particularly for small companies.
SMEs feel better supported today than at any time—which is absolutely excellent news. As I know from personal experience, starting a business is very daunting, and to grow that business requires confidence in both economic environments and growth, and a pro-business atmosphere. It is significant that this country has been such a magnet for many young people from neighbouring countries where youth unemployment is shockingly high, and where in some instances anti-business sentiment and policies apply. Tech City is a brilliant example of attracting business-minded young people from all parts of the United Kingdom and abroad.
Of course there have been differences, but essentially a message has gone out from this Government and from the previous Government that Britain is open for business, and that spirit has prevailed in debates about current business legislation and in the export debate last week. Recently, however—I feel compelled to say this—some senior political figures have taken to attacking business and successful businesspeople. Those comments have been ill judged, and I hope will cease on sensible reflection, because they undermine the vitally necessary pro-business message in this country and, quite frankly, they are profoundly counterproductive.