Small and Medium-Sized Enterprises

Lord Empey Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Empey]

My Lords, I thank the noble Lord, Lord Cope of Berkeley, for the courtesy and patience which he exhibited in great measure throughout the Select Committee’s work. It was the first opportunity that I have had to be on a Select Committee in your Lordships’ House and it was a thoroughly enjoyable experience. I thank the noble Lord, Lord Cope, for his consideration. We were also extremely well served by a very active and dedicated staff. As has been pointed out, due to the accidents that we seemed to attract, there was a sense of embattlement as we came towards the preparation of the report. Members of the committee and staff seemed to be dropping like flies. However, they all rallied round—even from hospital beds—to produce the report. That indicates their commitment. I would also point out that, as I am sure all noble Lords will know, nobody puts words into the mouth of the noble Lord, Lord Cope of Berkeley. What he says, he says for himself.

I should like to touch briefly on the finance from a slightly different point of view. As was said by the noble Lord, Lord Teverson, there are two sides to this story. I was recently invited to chair a meeting of a business forum in London. A representative of the Institute of Chartered Accountants in England and Wales was present and we looked at alternative sources of finance. In this country we are heavily dependent on bank finance, which accounts for about two-thirds. However, that is not the case in other countries, such as the United States. We now have things such as Funding Circle and peer-to-peer lending, and new opportunities are out there.

What struck me most on that occasion was a story relayed by the accountants. They had carried out a survey of SMEs, asking them how much preparation they did before putting a business case to their banker. The average answer was two days. I was shocked by that. The fact is that banks should not agree to all applications from SMEs, and in fact that is part of the reason we got into difficulties ourselves. I remember being in business and paying at one stage an interest rate of 22.5% on business loans. Can one imagine what would happen in this country if interest rates began to rise to any extent? We have been living in a fool’s paradise, believing that you can have money for next to nothing. It is not going to be like that for ever. SMEs must sharpen up their act. No matter who you are, putting a business case together in such a short space of time is totally unrealistic and, in fact, reckless.

As was mentioned by the noble Lord, Lord Cope, we were shocked by the statistics given to us by UK Export Finance. Of course, most of the work that it was doing when it came to see us in the summer of last year was for Rolls-Royce and BAE, which we fully understand. When we pressed the organisation, we discovered that at the time it was helping 17 SMEs. I know that since then it has appointed regional representatives, and it is widening its scope and trying to make its services more available. However, I would be very interested if the Minister could update us on how that process is going. Are the regional representatives settling down? Are they actually helping to deliver the growth that we all want?

The other area I want to mention is training. The noble Baroness, Lady Coussins, gave us a very interesting speech on language. The committee heard a lot about that, and I think we have lots of lessons to learn there. However, other qualifications are necessary, over and above language. I declare a non-pecuniary interest as a vice-president of the Institute of Export, a charity which was established in 1935. It is the only professional body in the United Kingdom offering recognised, formal qualifications in international trade. It seems to me that if you are going to drive a car, you get a lesson in how to drive. If you are going to become a mechanic, you learn and you serve and you become a mechanic. If you are going to export, why should it be any different? Why should you not learn the ropes? Why do you not get qualifications in it? Why do you not learn what is involved in international trade? Having that knowledge enables you to avoid many of the pitfalls. These qualifications are recognised by Ofqual, and they are not hugely expensive. There are short courses, and they can be done by distance learning.

It is essential to have that basic skill as taking on exports can be a very difficult business. People are afraid of not getting paid and they do not know the customs in a local area. As the noble Lord, Lord Cope, pointed out in his opening remarks, with the change in the population mix in this country, people came to the committee to offer their services, because they had connections in some of our future key markets. There are people living in this country who are dedicated to doing business and we are not actually using that expertise which is on our own doorstep. We need to ensure that people get these qualifications.

The whole business ethos and the culture in this country have been anti-business for a number of years. I know the Minister has tried very hard during his term of office to change people’s minds about that. At the end of the day, as was said by the noble Lord, Lord Selsdon, it is true that we have a huge trade deficit, but a country which is economically weak is weak from a defence point of view, is weak from an international point of view and is weak from an influence point of view. We need to get that message to our schools and get mums and dads to say, “Well, there could be career opportunities here”. I think it is a matter of drawing all those things together.

I would like the Minister to tell me what progress has been made with UK Export Finance, and what advice he and the Government would give on trying to promote the acquisition of suitable international trade qualifications. This would ensure that when people in SMEs knock on the door they have the expertise and they know what a customer is. That knowledge is somewhat lacking in this country. I have often felt that we have to readjust, because we should be an outward-looking nation. We can survive only if we can trade and move in and out, keeping our inlets and our outlets open. We will succeed only if that is ingrained in people at a much earlier stage throughout the education system.