Small Businesses

Fiona Bruce Excerpts

Tuesday 7th September 2010 Westminster Hall

[Jeremy Lefroy]

The hon. Gentleman makes two powerful points. The second point is true; as someone involved in small business for many years, I have been on the receiving end of that kind of draconian attitude many times—although not every time, I hasten to add. I am sure that the Minister will want to say something about red tape. I, too, have spent many late hours going through the red tape for my business, after having spent the rest of the day trying to make some money. Whatever the truth—it probably lies somewhere in between all the figures provided—it is clear that a substantial number of SMEs approach banks but do not obtain the funding that they need to maintain or expand their business.

In my constituency, I have seen the difficulty that farmers are finding in business diversification. Money is pouring in to help farmers buy land or get involved in agricultural activities, but they receive a limited response from the banks for the laudable process of rural diversification, which will create more jobs in that area.

It is likely that there are some people not yet in business who wish to start up on their own. However, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) mentioned, they might find it even harder to obtain that funding, perhaps because they have been made redundant. There might be good reasons for banks to refuse applications, and they must be confident that they will receive their money back. However, anecdotal evidence from my constituents—as, I am sure, from those of all hon. Members in the Chamber—suggests that banks are unwilling to take even the smallest risk if they find it difficult to assess viability, which is often the case with new and young businesses.

[Fiona Bruce (Congleton) (Con)]

My hon. Friend makes an excellent point, and I declare an interest in this debate as someone who has run a small business for over 20 years. A linked issue is the shortage of skilled employees across a range of businesses, which hampers their development. For example, I know from my own business that it is difficult to recruit legal secretaries. Businesses in my constituency claim that they cannot recruit engineering staff or that they need scientific staff. There is a small, green technology business in my constituency, based in Middlewich. It has about 30 staff who convert used cooking oils to diesel but it cannot recruit people with those skills. It is proud that it is training up young men who were stacking shelves at the local supermarket but are now becoming lab technicians. Nevertheless, the cost of training skilled staff is a disproportionate burden on small businesses. That is a funding challenge because finance for that training cannot be obtained from banks. It is not like the purchase of property where some form of collateral can be offered, but the country desperately needs such investment. If we are to recover economic health and well-being, we need an increased skilled work force and at the moment we are not providing the funding for that. I ask the Minister to look urgently at that matter because it is not easy for a small business to obtain funding from a bank for that purpose.

[Jeremy Lefroy]

I am grateful to my hon. Friend for her contribution. I had the pleasure of working with her on a training course in Rwanda one month ago, so I know how expert she is on the subject of training, and how much she knows about it. Her words must be taken extremely seriously.

The Government must step in on the issue of small business finance—indeed, they have already intervened. Since 1981, there has been a small loans guarantee scheme. The previous Government set up the enterprise finance guarantee in January 2009, and the current Government committed an additional £200 million in the June Budget. The public often demand evidence of cross-party consensus in the national interest, and this issue provides a fine example of that.

In his response, I would be grateful if the Minister answered questions on the enterprise finance guarantee, and told us how he assesses its performance to date. He is no doubt aware that the Institute of Chartered Accountants in England and Wales—of which I am a member—has called for the scheme to become more like the former small loans guarantee scheme in its design and operation. I would be interested to hear his views on that.

If a loan guarantee scheme proves successful and pays its way, it needs to be expanded further and rapidly at this critical time, so that as many SMEs as possible can be assisted. I would be grateful for the Minister’s views on that. Finally, on bank lending, what progress are the Government making to bring together banks and small business representatives to ensure that instead of the stand-off that we appear to have at the moment, we have genuine co-operation in our country’s most vital interests?