Small Businesses

Julian Smith Excerpts

Thursday 28th November 2013 Commons Chamber

[Mr Bain]

Indeed; it is a great pleasure to follow the tremendous speech by the hon. Member for Newton Abbot (Anne Marie Morris). I thank her and the Backbench Business Committee for scheduling the debate.

I represent a constituency that has one of the largest problems of family poverty and long-term unemployment in this country, but it also has some rapidly expanding SMEs. I have been in contact this week with Gaia-Wind, which is the fastest growing private company in Scotland and the eighth fastest growing SME anywhere in the UK, to hear its exciting plans for expansion. It also, however, shows us some of the particular needs of participants in the green economy and the problems that they face.

There is a lack of investment in our economy. We discovered yesterday that investment by businesses has been largely flat over the past year. In fact, business investment contributed only 0.1 percentage points to the 0.8% of GDP growth in the third quarter. We also know that access to finance is a huge problem for the SME sector. Although the small regional banks in Germany, the Sparkassen, were able to keep lending to support SMEs during the recession, lending by institutions in this country, such as the Royal Bank of Scotland, shamefully fell to spectacularly low levels, which had a huge and disproportionate impact on the SME sector.

In the coming weeks, we will celebrate the contribution that small business makes to our local economies and the national economy. We will celebrate the fact that there are 4.9 million businesses in this country employing 24.3 million people. However, we must be aware of the need to take firm action on business rates, the need to expand the range of financial institutions that are able to lend to SMEs, and the need to do much more on skills, and research and development.

[Julian Smith (Skipton and Ripon) (Con)]

Will the hon. Gentleman also celebrate the excellent, detailed, cross-departmental work that the Government have done to support British businesses—big, small and medium—and to get the economy in a position to turn a corner and move into accelerated growth?

[Mr Bain]

I certainly will not celebrate the three years in which we have had very little growth, which had a huge impact on SMEs. With respect to the hon. Gentleman, I want to speak about the positive issues on which we might find more cross-party agreement in this debate.

I refer hon. Members to the excellent report that Santander and Dods published recently in the House. It contains key recommendations that the Government should attend to quickly. It shows that 285 separate schemes are available to SMEs which, in the view of the report’s writers, is far too many. It sets out the good recommendation, which the Government could implement straight away, of developing a single portal through which SMEs can have contact with central Government. The report found that only 29% of SMEs were aware of the existence of the funding for lending scheme and that 28% of businesses thought that access to finance would be the biggest impediment to growth in the next few years.

Shockingly, the report revealed that only 12% of students in our colleges and universities would make working for an SME their first choice on graduation. That is a real concern, given that the vast majority of job creation in the coming years is likely to come from the SME sector, and it shows that there is much more that the Government, SMEs, colleges, universities and schools need to do to promote founding and working in small businesses as good career paths.

As a country, we need to do far more work on skills. Only yesterday, the Minister illustrated in a written answer to me the growing gap in early rates of pay between those who have level 4 skills and those without any qualifications at all. That hourly pay gap of £8.84 has widened by a tenth in the past six years alone. SMEs, the Government and local authorities need to do a huge amount to improve in-work training so that people can see wage progression in a job, and so that a job in a small or medium-sized enterprise can become a career with long-term prospects.

We need to improve the shockingly low rates of research and development in this country. In public and private sector research and development, we lag way behind our main competitors in the EU and many of the emerging markets. The Government must do much more to boost the innovation that comes from the many millions of small businesses throughout the country, such as Gaia-Wind in my constituency.

As a matter of urgency, we need to improve access to capital. When I speak to SMEs in my constituency, they make it clear that they are willing and able to take on more staff, and that they want to create more demand across our country. However, the banking system is simply not working for SMEs. We need new players to come into the banking system and regional banks that focus on the needs of the economies in Scotland, Wales, Northern Ireland and the different regions of England.