Businesses: Small and Medium-Sized Enterprises

Lord Haskel Excerpts

Tuesday 6th May 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I, too, congratulate the noble Lord, Lord Cope, on arranging this debate. It is nice to know that someone has listened to us and has read our work, and that the Government have kept their promise to report back. I also thank the Minister for his letter of 27 March. He told us what has been and is being done in response to the matters we have raised. From his letter, it seems that quite a lot is happening: refocusing the work of UKTI; building more partnerships and working with intermediaries in order to create more awareness and confidence; and focusing on medium-sized businesses. All this is very positive and a welcome response to our report. So, like the noble Lord, Lord Cope, I have to ask: does UKTI have the resources and back-up it needs for all this increased activity? Are adequate staff with business experience available, especially to satisfy the needs of medium-sized businesses, which will be more demanding?

As we have not taken any evidence, it is only indirectly that we can find out how effective all this work has been. For instance, the noble Lord, Lord Leigh, spoke of the various finance schemes. Parliamentary Questions last month in the House of Commons revealed that the export refinancing scheme has still not helped a single business. The direct lending scheme has not helped a single firm. These schemes were designed to replace the export enterprise finance guarantee scheme, which was abandoned after it assisted only five firms. Yes, the number of transactions by UK Export Finance has increased, up to a not very impressive 370, but how many of these deals apply to SMEs? Judging by the briefing received from the Federation of Small Businesses, not many do.

The point is that, as many noble Lords have said, this is a long-term project and it will take time. There will be mistakes, which have to be put right. While working on our report, we went to Bavaria, which interested my noble friend Lord Giddens. The state of Bavaria exports more to the UK than the whole of the UK exports to Germany and we wanted to find out why. Of course, having Mercedes there helps, but the real point is that the state of Bavaria has been supporting exporters for 60 years. There has been unbroken political support, whoever was in power.

That is why I was rather disappointed that the heading on page 9 in the Minister’s document Britain Open for Business: The Next Phase spoke about:

“Sustaining the many good initiatives of the last three years”,

as if it all started when the coalition came to power. The Minister is misinformed. There was government help for exporters when Labour was in power and before that. Many noble Lords have spoken about the need for continuity. For that, Ministers have to show that we are building on the past, not blaming previous Governments as this Government seem to like to do. This is what will help to convince small businesses that government is and will be serious about exports.

To give credit where it is due, I welcome the Minister appointing trade ambassadors from all the political parties and none. Do the ambassadors work with SMEs, or do they concentrate on big deals in special countries? Does that mean that the staff are organised on a sectorial or a geographical basis? I hope that the Minister will listen to other noble Lords, and take politics out of the equation and keep commitment and cross-party continuity in.

We also have to move with the times, which means looking at exports more broadly—perhaps more broadly than in the Minister’s report. The noble Lord, Lord Storey, mentioned intangible assets. On 31 March, the Minister’s own department told us that intangible investment,

“continues to outstrip investment in tangible assets”.

Perhaps this different kind of investment explains the success of many of our younger and newer rising SMEs. Is UKTI doing enough to encourage exports by this business sector? Events such as Export Week and the Liverpool festival that the noble Lord, Lord Storey, told us about are very welcome. They must help many business sectors, but do they help the knowledge sector?

Last month we won a contract to run 16 FE colleges in Saudi Arabia—yes, helped by a government unit designed to boost exporting education. Great—it is a welcome sign of co-operation between government departments and of using exports to assist building capacity. Were SMEs and UKTI involved? Education and intangibles are all part of the knowledge economy, requiring the best brains. So why does the Home Office put barriers in the way? The Minister does not need me to tell him of the problems between the Home Office and BIS over visas for students, technicians and engineers. We need them if we are going to build our exports of knowledge. Indeed, the Minister’s report speaks about this. It is no use saying, as the Minister does in his report, that because this is part of the cross-government industrial strategy there are no longer any problems. Every businessman or researcher’s day-to-day experience tells him or her otherwise. This is where there is growing export potential for SMEs, so let us have a unity of purpose over this.

In our report we emphasise the importance that SMEs attach to working with local organisations. The Minister hardly mentions this. There seems to be little in the Government’s report about the softer or more technical skills of exporting that are so important to SMEs—language and culture, licences, training, signposting. The noble Lord, Lord Cotter, got the same briefing as I did from the Federation of Small Businesses, which speaks of their absence. These are serious barriers and will become more so as normality returns.

At the IMF spring conference the Chancellor said that normality is returning—normal interest rates, normal rates of inflation and normal growth. This is already affecting our exchange rate and the price of our exports. How does UKTI see this affecting our export performance and what advice is it giving to SMEs to prepare for this?

At the same time lots of negotiations are going on under the auspices of the WTO. How are these going to affect our SME exporters? Are their interests being taken into account? Most importantly, how does UKTI respond to the promise of an EU referendum and the uncertainty that that creates, bearing in mind the importance of the European single market that was stressed by the noble Lord, Lord Green? I assume that UKTI has answers to these big questions because all exporters, large and small, must be thinking about them if they have not started asking already.

Finally, last month we were told that from September the Office for National Statistics is going to overhaul our national accounts. All our R&D, knowledge and intangible business are now going to be included in our GDP instead of being seen as a cost of production. Of course, this will bolster our GDP numbers. Leaving aside that this usefully coincides with the run-up to an election, and that there is more to life than GDP, what about exports? Will this reform bolster our export figures as well, to show that really we have been doing better than we thought and are getting closer to the admittedly very testing targets mentioned by the noble Lord, Lord Storey? If so, I hope the Minister will assure us that in no way will this reduce the commitment, hard work, energy, investment and support that UKTI and Ministers from other departments will put into encouraging SMEs to export. Whatever the new figures say, more exports will remain an essential part of balancing our economy in the general economic interest, as the noble Lord, Lord Green, explained, not just for business but for our common good. That is why we have to continue with our efforts, and I wish the Minister every success.