Small and Medium-Sized Enterprises

Lord Teverson Excerpts

Wednesday 26th June 2013 Lords Chamber

[Lord Teverson]

My Lords, I briefly declare an interest as a director of three SMEs.

Every week when I come to this House and join your Lordships, I leave home and come to a different atmosphere, but until last year I had never been tempted to go speed-dating to fill up my time. However, last year I was, and I took a trip down the M4 to a speed-dating service in Bristol, organised by UKTI, as a member of one of the companies that I am associated with. I went to a hotel where there were some 40 advisors from different nations, right across the globe. I spoke to people from Austria, the Netherlands, Ethiopia and Argentina. There was a fantastic variety; some of them were Brits who were based in embassies, but many were foreign nationals based in our embassies—and it was really exciting. The noble Lord, Lord Selsdon, has mentioned some of these occasions. We spoke to around 10 of these advisors; it was very well organised, and we have followed some of those up. I will come back to that later.

I congratulate UKTI on that experience. The great thing about the Passport to Export programme was that it had a good balance to it, and it gave you opportunities as you went through it—not completely at the taxpayer’s expense. You had to contribute to it yourself, so you took some responsibility for the outcomes. You met other people in different sectors who had gone through those experiences before, so you learnt and found out about the export business. Information barriers and risks were explained and taken away, so you had a much better ease into that market. This is all essential for smaller companies and organisations.

At that time, I was also a member of a Local Enterprise Partnership in the south-west. Some research done on behalf of LEPs more broadly was very factual and pointed; in reality, the factors which determined whether an SME was a good exporter were whether it invested sufficiently in research and development, and whether its products and staff were knowledge-led. It helped if it was in a cluster of businesses in the area that thought in a similar way, and whether that cluster had connections to other growth areas in the globe. However, the key factor as to whether you were going to be good at exporting was, I regret to say, size. The larger you are, the more you are able to commit resources and be able to negotiate barriers to moving out into export markets. That is one of the things that, in terms of my work with the Local Enterprise Partnership, made me think about SMEs.

I am going to commit complete heresy in this forum. In some ways, SMEs have acquired a sainthood in British politics and beyond over the last 15 years. They are an incredibly important part of our economy, but most of them are risk-averse, lifestyle businesses; they deal only with local, not even national markets. I would accuse the so-called entrepreneurs—although we used to call them “capitalist pigs” when we were students in the 1970s—of not actually playing the role which their staff, their colleagues and employees deserve, which is to grow those businesses. There are huge numbers of exceptions in Cornwall, where I come from, and the noble Lord, Lord Cope, mentioned some fantastic examples of successful businesses that export and work worldwide, through the internet or whatever. I would disagree with the noble Lord, Lord Haskel, when he said that we should concern ourselves with those businesses that cannot get their heads around IT. If they cannot do that, they should either not be in business or should be written off as potential exporters. Let us concentrate on those entrepreneurs who really want to move forward, take sensible risks and give their employees the opportunity to develop their careers.

I come to the message that I want to put over this evening. We talk a lot about corporate business, which I was privileged to be a part of in the early part of my career, and SMEs, but we forget the mid-sized businesses and some of the medium-sized businesses at the top end of this category. Companies that have a turnover of £10 million to £100 million and have 50 to 500 staff account for only 1% of UK businesses but they have 20% of business turnover and 16% of employees. This says something about their efficiency and how they work. I congratulate the CBI, for which this is not natural territory in our minds, for bringing out a report called Future Champions around this area. Was this a clever invention? No. If we look to Germany or even to France, we see that this sector of business is the engine of their economies. The Mittelstand—and it sounds as if the committee went and saw some of this—is the engine of the German economy and is excellent at exporting. Those businesses tend to use local supply but export globally; they think globally, but act locally. They tend to have quality products, niche markets and highly skilled employees, which gives them a higher earning capacity. They tend to be more in the manufacturing area, which causes rebalancing. Most importantly, for people like me who come from the regions, they are far more geographically dispersed than large businesses and, perhaps, some small businesses as well. They also tend to allow their staff to have real career progression within the organisation. If things are difficult, they tend to have deeper pockets and financial substance.

France and Germany have learnt the importance of that sector in driving their economies forward, yet we hear almost nothing about it in the UK. The noble Lord, Lord Haskel, is absolutely right about KfW, the big bank which helps promote these, SMEs and green technology. I welcome the attempts of BIS to start that sort of process here as well. I ask the Government not to forget the middle-sized business community in the UK, which could be an excellent area of growth and export. SMEs are vital. The good news is that the company I went speed-dating with in Bristol will, next week, be recruiting its first person to concentrate on exports. I am pleased to say that she is a Spanish-speaking Brit, and that the company will be looking not just within the European mainland but to South America. Do not forget the middle-sized companies and let us make sure that we help the SMEs which want to move forward and take their staff with them, but let us leave the lifestyle ones to get on with life.