Small Businesses

Lord Shipley Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Shipley (LD)]

My Lords, I welcome this opportunity to say something about the importance of small businesses to our economy and to growth, and I shall be saying some things very similar to what was said by my noble friends Lord Risby and Lord Cavendish of Furness. I want to address in particular issues around business rates, public procurement policies and problems caused by late payment, all of which can be barriers to local growth. I declare my vice-presidency of the Local Government Association.

On business rates, I think that we would all agree on the vital role that small businesses play in their local economies. It is clear that some small firms and businesses feel penalised by business rates in their current form, not least in the retail sector, where they can face enormous competition from the internet. Retail businesses trading from premises rather than online can be unfairly penalised by business rates, particularly at their current levels.

I noted the announcement in the Autumn Statement of a review of the future structure of business rates, which is most certainly needed. I hope that we will get a much more flexible system that would allow councils greater discretion to support the economic growth of small businesses.

On procurement policy, I agree entirely with what my noble friend Lord Cavendish of Furness said, and I hope that the Government do not plan to use powers in the Small Business, Enterprise and Employment Bil1 simply to centralise procurement more and introduce a one-size-fits-all approach. That would not help local government's support for local small businesses and voluntary organisations. We should note that half of local government’s total procurement spend is with SMEs, compared with around 15% for central government. We have already seen the impact of centralised procurement in some areas, such as construction, which can advantage national companies rather than regional or more local companies, which employ and train a long-term local workforce.

I share particularly the concerns of my noble friend Lord Risby about late payment. I know that the Small Business, Enterprise and Employment Bill currently being considered in this House is attempting to address some of the problems of late payment, which can impact on the viability of small businesses and in turn on their growth potential. I note that there will be a requirement for companies to report payment practices towards their business suppliers. I am pleased, therefore, that the Department for Business, Innovation and Skills is now developing a better understanding of the payment practices across different industrial and commercial sectors and is assessing whether to take action sector by sector to encourage better payment practices. At this point, I welcome the work of the construction industry in its fair payment commitments, with its clear plan for delivery of reduced payment timescales over the next 10 years. I wish them well. This is not a matter just for central government; it is the responsibility of everyone. In some cases, the pressure placed on the finances of businesses can be so great that it can result in bankruptcy.

I would like to draw attention, at this point, to the valuable role of the North East Institute of Business Ethics, which was established in May 2013 as an independent regional resource to encourage responsible business behaviour. It encourages regional firms to adopt a fair and ethical approach towards their supply chains. I welcome strongly the Pay Fair campaign; through the Journal newspaper, the local press is encouraging north-east companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain. The problem is that, in a contract with 30-day terms, some will inevitably pay late. In the UK, the average payment was 15 days late. The Federation of Small Businesses says that, on average, its members in the north-east of England are owed around £40,000 and are waiting eight working weeks to get paid. It also tells us that it costs in the region of £100 million a year for small businesses to chase payments. Clearly, if more companies paid on time, it would really help other companies and the economy more generally.