Small and Medium-Sized Enterprises

Lord Haskel Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Haskel]

My Lords, rebalancing the economy is in favour all round the House and rebalancing means a move away from consumer spending and a rising housing market fuelled by debt towards producing and selling more goods and services through investment. It particularly means selling overseas so that we can cut our current account trade deficit and cut it by encouraging SMEs to export.

During my business life, part of my activity was exporting, so I was delighted to serve on this topical committee; a committee so ably led by the noble Lord, Lord Cope, so ably advised by Professor Blackburn and so conscientiously served by staff led by Christine Salmon Percival. We are fortunate to have such an able and versatile staff. To my knowledge, Christine Salmon Percival has been clerk to a committee reporting on science and technology; a committee reporting on legal and constitutional matters; and a committee reporting on the economy—now that is versatility.

We started our inquiry by taking evidence from BIS. It soon became obvious that it was in the process of setting itself up, of putting into practice, its plans to encourage SMEs to export. The Government’s response tells us that UKTI continues to hire more staff. The Chancellor in his Autumn Statement provided additional funds for support in the next two financial years. We are also told that there are plans to use a number of websites to bring existing and future services of UKTI to the attention of business; services for contacts, for mentoring and for other practical help. All this confirms the importance the Government attach to encouraging SMEs to export and it is very welcome, as are the Minister’s efforts, because I know he travels around a lot.

However, it has to be put into practice. The noble Lord, Lord Cope, told us that our inquiries indicated that many SMEs are not aware that all these services are available. We would like business intermediaries, professional advisers, LEPs, chambers of commerce and all the professional organisations also to convey the message. The Government's response agrees with this and I think this is beginning to happen. I do not know whether the Minister went to the BIS open event in the Jubilee Room last Wednesday, but we were told that the Government’s commitments are to do more of the same. It was a very good demonstration of what the Government are proposing to do.

Is it working? Figures published last week show that the value of exports has fallen by 1.3% in the past quarter. The CBI describes these trade figures as “unsatisfactory” and comments that the Government need to do more to help to raise exports to the fast-growing economies. Is there anything more or anything different that can be done?

Did the Minister hear the maiden speech of the noble Baroness, Lady Lane-Fox? She is working with the Cabinet Office to help us make the most of digital technology in communications. She said:

“British businesses also need support, as has been mentioned here already, and small and medium-sized business in particular. We know that only 30% of them are able effectively to use online tools, and that there is a potential £18 billion in the economy if we are able to give them more advanced skills to sell and buy online”.—[Official Report, 13/5/13; col. 160.]

If 70% of SMEs do not have the IT skills to use online tools, maybe UKTI should be working with the Cabinet Office and the noble Baroness to train UK small and medium-sized businesses to use these tools—a bit of joined-up government perhaps?

On 13 June, at col. 1716 of Hansard, the Minister’s noble friend Lord Howell of Guildford argued that trade is operating in a completely different way and that the world's largest single market is now the cybermarket on the world wide web. Are the Government listening to their friends and advisers? What is being done to give SMEs these more advanced skills to help convert them into exporters?

The world of business is changing in other ways. There are other ways of exporting which may be more suited to particular companies or markets or products. Franchising, licensing the product, licensing the know-how, the patent, the trademark—is UKTI helping with this? There was very little evidence of this. Perhaps another way is for UKTI to be more selective and to try to nurture new export sectors—those sectors where the UK has a competitive advantage. Last November the Chancellor, in his address to the Royal Society, listed eight such sectors that would receive special encouragement and money. Again, a bit of joined-up government could make UKTI part of this arrangement by encouraging the SMEs in these sectors to export.

Our report and the noble Lord, Lord Cope, spoke of the problems that SMEs have in getting export finance. We learnt of one solution during our visit to Bavaria. Incidentally, the single state of Bavaria exports to the United Kingdom more in value than the whole of the United Kingdom exports to Germany. For 60 years, it has had its own local state-backed investment bank, which makes export finance one of its priorities. Surely this must be one of the reasons for its success. What is happening to our Government’s business bank, and will it be as local as the noble Lord, Lord Heseltine, would obviously like it to be? In fact, aiding and encouraging local firms to export could well be part of the Heseltine proposals to localise business services by government. However, today’s Statement is not very encouraging about that.

We know from our inquiry—and the noble Lord, Lord Cope, reminded us—that it is not easy for small companies to export. There is the inconvenience, the time, the expense and the preparation. Time and again we were told that the most important thing is for people to have the get up and go—the will and the initiative—to do it. In small and medium-sized companies, exporting often depends on the personality of just one or two people, irrespective of the benefits and financial rewards that exporting brings to the business. So how do you identify these people and these companies? There is a supplement in today’s Financial Times telling us how. Firms using big data identify a potential customer for their style of clothing or people who like a particular kind of holiday or food. Could not UKTI write an algorithm that would identify from big data potential exporters among the SME community? That would be a wonderful cost-cutter.

The point I am trying to make is that the objective of inquiries such as this is not criticism by political point-scoring; it is to question the policy, to question the strategy and to question what is being done.

I think that we all welcome the enthusiasm and energy that UKTI is putting into the work, but the Government’s response seems to say, “Yes, we agree with your analysis. Thank you for your recommendations but we are going on as we are”. I found that rather disappointing because there is obviously more that can be done to achieve what we all seek, which is to rebalance the economy.