Government Contracts (SMEs)

Jim Shannon Excerpts

Wednesday 28th January 2015 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a pleasure to speak in the debate, Mr Davies. I congratulate my hon. Friend the Member for South Antrim (Dr McCrea) on setting the scene, which he did clearly and specifically with reference to his own area. I thank other hon. Members for their speeches. It is a pleasure to see the Minister in his place—I look forward to his response—as well as the shadow Minister, the hon. Member for Wigan (Lisa Nandy). Yesterday some of us, in discussion with her, mentioned that there were 100 days to the general election, but she said she was more interested in the next 91 days, because in 91 days’ time something more important for her will happen. We wish her well for when that occasion arrives—congratulations.

This debate is about a topic central to economic progress, on which opportunities to speak are much sought after. SMEs are an area of great importance for Northern Ireland for many reasons. We each have numerous SMEs in our constituencies, and in Strangford they are vital to job creation. There are four or five that began from a small kernel or seed and now employ about 200 people. They are of the utmost importance, because they have been proved to be vital to rebuilding and strengthening the economy in times of much economic uncertainty, such as the past five years. Not only that, but they form the centre of any financial strategy for progress with sustainable regional and national growth. For those reasons we should in all ways promote and encourage entrepreneurship in SMEs. My concerns have to do with funding—its availability, information about it, and the ability of anyone to apply for it.

Another concern stems from the multi-level governance dimension. In the coming months much responsibility will fall to local government, with the reform of the Northern Ireland council structure. Additionally, there are concerns about forthcoming EU directives and their implications for SMEs and Government contracts. A particular European issue recently has been changes to how EU directives will affect SMEs. Figures I have been given suggest that perhaps 150 to 200 SMEs have been forced to close as a result. Perhaps the Minister will comment on that.

I cannot emphasise enough how important SMEs are to Northern Ireland’s economy; I hope that that is shown by Northern Ireland’s European entrepreneurial region status for 2015, which has a focus on SMEs. I congratulate agencies such as Invest NI, local councils and all the SMEs that contributed to achieving that status. A lot of effort went into striving for it, and that effort delivered. I thank everyone who made it a reality. It shows that we are already charging forward in investing in our people, their creativity and their innovation, all three of which are important. What has been achieved is a recognition that we need to put support for such endeavours at the top of our agenda for stimulating sustainable growth and development.

For one thing, local businesses in Northern Ireland were responsible for 90% of the employment increase since 2011. That figure should not be ignored; it represents an astounding one in seven of the working population being employed because of an SME. Invest NI support for local businesses has created or promoted 1,783 jobs from April to the end of November, through targets to assist in SME expansion. Arlene Foster, the Minister at the Department of Enterprise, Trade and Investment, and our friend and colleague in the Northern Ireland Assembly, has been active in that area, and has made it a priority. She is very photogenic and is regularly in the paper announcing the expansion of jobs. It is great when that happens on a regular basis in Northern Ireland.

All that should be celebrated, but there is still a long way to go before SMEs gain the clout that they need to compete against larger competitors, as my hon. Friend the Member for South Antrim suggested in his detailed and informative introduction. It is troubling that small businesses in Northern Ireland exported only 4.8% across the EU, while larger businesses exported 80%. There is clearly a gap in our efforts to assist smaller enterprises, which must be addressed with much haste, as my hon. Friend said.

[Sammy Wilson]

Although we are hearing about the downside to procurement and all the rest of it, there are encouraging signs in Northern Ireland. A small company that starts up in Northern Ireland will last 75% longer than a similar company anywhere else in the United Kingdom. We need to put out the message that start-ups are very successful and there is resilience.

[Jim Shannon]

We all value my hon. Friend’s knowledge of business life in Northern Ireland, and he makes a valuable contribution to the debate. Some 30,000 micro-businesses accounted for 89% of local companies. We must emphasise the need to look at the barriers that prevent the rise of SMEs, especially with regard to Government contracts, and address them coherently and fully. Steps have already been taken to look at the accessibility of funding, to simplify the application process and to remove the red tape of bureaucracy that bumps up the costs of application and development in public procurement.

I sometimes wonder how anyone ever gets through the early stages of a business. Years ago, there was less bureaucracy, but today we seem to be entangled with it at almost every level. On the ground, SMEs still find it difficult, costly and sometimes unfeasible to compete with larger competitors.

I congratulate the councils, Invest NI, South East Economic Development and other agencies. Financing their endeavours is only the first of many hurdles faced by SMEs, and it is vital to their success. To have that stage of the process so well accounted for by those valuable agencies is paramount. Through the assistance of such agencies, bank loans to SMEs totalled £408 million in the second quarter of 2014, which represents a rise of 29% on the previous quarter.

Although that work has been important and successful, there is still a lack of clarity about how to identify and access the many sources of available support. I would reject any process that further impeded the accessibility of money through more and more layers of bureaucracy. As of 1 April, Northern Ireland will downsize to a new system of 11 regional super-councils, through which we will do our best to simplify the process and walk SMEs through the steps of accessing Government contracts and funding.

The Northern Ireland Members present are all former Members of the Northern Ireland Assembly. My hon. Friend the Member for Upper Bann (David Simpson) reminded me when we were preparing for the debate that the Northern Ireland Assembly insisted that Government contracts in Northern Ireland must include a 30-day payment scheme for those who had contracts, many of whom previously had to wait 90 days or longer for payment. It is absolutely ridiculous that small companies should have to wait so long. We can take some credit for moving forward that process in Northern Ireland.

I welcome the fact that the UK Government have pushed forward in their goal of awarding 25% of Government contracts to SMEs. Entrepreneurship will drive our economy forward through innovation and creativity. Therefore, we really need to make the leap of innovation—of becoming a successful endeavour—an attractive idea, given the risks of setting up and upholding an SME.

My hon. Friend the Member for North Antrim (Ian Paisley) referred to broadband, which is a problem not only in his constituency but in all our constituencies. I gather from my constituents that he has had some success in banging together the heads of those responsible, and making sure that the DETI and the NIE get together and achieve success. In my constituency, we have a similar problem, and those involved in online businesses have been prevented from expanding their businesses by the lack of broadband. That seems ludicrous. I cannot understand how the problem can be so prevalent in this age of modernisation. It seems simple to me to make the connection within 100 yards of a business to help it to progress, but we find layers of bureaucracy, obstacles, obstructions and reasons for not doing so. We need to act on that system in good faith and make it better if at all possible.

I have concerns about the EU directives and their implications for our ability to invest in our vital SMEs. I acknowledge that a range of positive measures has come from the EU, and not everything is negative. I know we have lots of problems with the EU, but there are positive aspects on a regional basis, such as the merging of funding into an accessible single portal, which includes the structural funds, with an emphasis on encouraging SMEs as a pivot of national economies. However, I am concerned about the upcoming enforcement of the EU public procurement directive. The directive states that

“for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition.”

I am concerned about the implications for local, regional and national SMEs, and about our obligations to protect SMEs on a national level, given that they have put so much back into our economy—not only in growth, but in lowering unemployment levels. What exactly will that mean for the distribution of Government contracts? Will the implementation of the directive create any obligations that will impinge on our goal of awarding 25% of Government contracts to SMEs?

I welcome any measures in the public procurement directive that aim to cut red tape and assist UK companies to make the most of the single market. I hope that the promised new regulations will benefit SMEs by encouraging buyers to break contracts into smaller lots and by reducing the cost of the bidding process. The European Commission claims that they may reduce that cost by as much as 60%. SMEs in my constituency and nationwide need reassurance that the process of obtaining Government contracts will not become more elaborate, confusing or inaccessible, and that their interests will not be compromised by the implementation of the directive. I thank my hon. Friend the Member for South Antrim for giving us all a chance to contribute, and I look forward to the shadow Minister’s contribution and the Minister’s reply.