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Federation of Small Businesses Annual Forum

Baroness Shriti Vadera,  Minister for Economic Competitiveness and Small Business (jointly with Cabinet Office)
Novotel Hammersmith,  14 March 2008

First I must commend John and Stephen for running the FSB as such an effective voice for small businesses. It was on my second day in the job that I heard loud and clear what your issues were. So John and Stephen – thank you for at least letting me have that first day off.

I’ve been adjusting to my new role – after 8 years in the Treasury, I’ve moved from the person whose job it was to say no, to the person whose job it is to persuade them to say yes.

My role is to help this government realise its ambition: to make the UK the best place in the world to do business.

I know that sounds ambitious indeed for the way some of you may feel right now. I realise that the government has taken some difficult decisions around tax in the past year that will have disappointed many of you.

And it may feel like we have changed our ambition. We haven’t. The world bank survey tells us we are amongst the best places in the world to do business – but we are not complacent. We know we need to be the best.

It may feel like we have stopped listening. I assure you we haven’t. I hear you. And I know you represent the wealth creators. Coming from the City, I certainly appreciate the profit motive. When your members succeed, the UK economy succeeds. I know we have to work harder for you, to maintain our competitiveness when it comes to tax, regulation, skills, innovation and a risk-taking entrepreneurial environment.

Despite what you might feel about some recent decisions, we need to remember this country has a lot to be proud of in the last decade. The UK now has a record four and a half million businesses. More small businesses now have an ambition to grow compared to a few years ago – 2/3rd in fact. 8% more businesses are surviving their first three years than in 1995. Over two million of you have undertaken either product or service innovation in the past 12 months.

Two days ago, on the same day as the budget, we published our enterprise strategy. And we set out our ambitions. We want to see

• A greater proportion of people wanting to start and grow a business
• A greater proportion of businesses receiving free help and advice
• Fewer businesses finding it hard to access the finance to grow
• More innovation in your products and services
• And no unnecessary increases in regulatory burdens

We listened to over 600 businesses in the last 7 months. And to achieve these ambitions for Britain, we set out in the enterprise strategy a framework: identifying the barriers to growth that you pointed out to us. We are now going to structure ourselves around these issues – “enablers” we call them. We have identified five broad enablers to drive the enterprise agenda forward –

• Culture
• Knowledge and skills
• Access to finance
• Regulatory framework; and
• Business innovation

 We set out new measures I want to highlight under each enabler. But I want to emphasise this is not the final word but the next steps in our agenda which we will drive forward over the next few years.

Firstly, the burden of regulation.

I know that small businesses feel this burden disproportionately. Large companies can employ specialists in different areas of regulation. But many of you have had to become experts in all of them yourselves. This gives large companies a natural advantage.

In 2006 we committed to cut 25% off the administrative burdens placed on business by 2010. That’s a saving of £3.5 billion per annum. We have already achieved £800 million of this. But in the Enterprise Strategy we have gone further.

• Regulatory budgets – we need a different approach to regulation. That treats the cost to you as a real cost to government. I know from my time at the treasury what governments respond to – budgets. And you know that from running your businesses better than anyone else. So two days ago we announced we will consult on the introduction of a new system of regulatory budgets for departments that would limit the cost that can be imposed on you from new regulations. This will be a world first
• Regulatory exemptions – secondly, we also need to recognise the disproportionate cost on small businesses. So we said departments must, wherever possible, look to exempt simplify or enforce differently regulations on small businesses. And this approach towards sme’s must be outlined before legislation is laid before parliament.
• Regulatory guidance – thirdly we announced an independent review led by sarah anderson, CEO of the Mayday Group, into how we can give small businesses greater certainty around guidance. What I want to see is simple guidance that you can follow and know you will be complying with the regulation without having to rely on expensive lawyers or grapple with legislation yourselves.

Access to finance is a second enabler of enterprise. We want to ensure there are no market failures that prevent you from accessing finance to grow. It is particularly important that we remain vigilant on your behalf to ensure liquidity and credit problems in the global markets do not percolate down to small and medium enterprises.

• So we said in the enterprise strategy, we will increase the amount of bank lending available through the small firms loan guarantee by £60 million to a total of £360 million for next year
• We will also make the scheme available to all firms, not just those less than five years old

On Tuesday I met with all the six leading banks and they signed a joint statement with us committing to promote the use of the small firm loan guarantee and to develop innovative financial solutions to meet the needs of growing companies. The next time you hear of a small firm refused credit because they don’t have enough collateral, tell them to print the statement of our website and take it to their bank and hold them to their word.

For those firms that need finance to expand, and for whom debt is not appropriate but they do wish to sell their equity, we have also committed to deliver a £30 million mezzanine fund.

John mentioned at the start the issue of women entrepreneurs. This is an economic issue not just an equality issue. We have an enterprise gap with the US, there are 20% more people in enterprise in the US than in Britain. And a majority of that gap is down to the number of women entrepreneurs. If we were to match US levels of women enterprise, there would be 900,000 new businesses in this country creating wealth and jobs.

So we have announced a £25 million fund, to which we will contribute half, that will target women-led businesses. And we will start a number of initiatives to help women with mentoring, networking and skills so more of them can gain the confidence to think about starting and growing businesses.

We also want to help more small and medium firms to win business from the public sector. So Ann Glover, CEO of Amadeus will advise on the barriers to SME’s winning more public contracts. And will consider the practicality of setting a goal for SMEs to win 30% of all public sector business in the next five years.

I was at a meeting with John and Stephen at which it was pointed out that a clause in all public procurement contracts prevents the use of factoring and invoice discounting. We recognise these are important sources of finance for SME’s so we will remove the clause immediately.

A third enabler which I think is vital for the competitiveness of Britain is improving our skills and knowledge. We need to have more people like you who have the skills to run businesses. We want to firmly establish enterprise education right the way through our school and college system and into the workplace.

So:

• We have committed an additional £30 million to have enterprise education delivered seamlessly throughout a school career from primary schools, to secondary to tertiary
• With entrepreneur Peter Jones, we will establish the first national enterprise academy for 16 to 19 year olds. We want this to be the first of a network of enterprise academies across the country. Discussions are already underway in Manchester for the next one.
• I am also conscious that we need to help you access the skills you need and train the people you employ and so are rolling out train to gain nationally.
• A fourth enabler is business innovation. Britain is a world leader in innovation. I’m not talking about test tubes and labs but innovation in the way you deliver your services and products across the economy. This is and must remain our competitive advantage over low cost producers and providers. Yesterday DIUS and BERR with the Prime Minister and secretaries of state published our innovation strategy that sets out proposals to make this an innovation nation.

The last enabler is the most difficult – creating a culture of enterprise, risk taking and ambition. People inspired and not afraid to turn their ideas into wealth. People like you.

This starts in our schools and stretches right through our communities from classroom to boardroom. While government can help – for example by removing certain stigma’s in insolvency law – this is something we all need to do together.

This morning, John Hutton is announcing how we will work with the English premier league football clubs, using their strong links in communities and their popularity among young people to deliver enterprise education.

We are the government that put enterprise, innovation and growth at the heart of our economic agenda for the last 10 years. We made the key decisions to secure the underlying stability of the economy that has given UK businesses the confidence to grow and invest.

• It’s no accident that we have had the longest period of low and stable inflation since the Second World War
• It’s no accident we have a record 4.5 mn businesses registered
• It’s no accident that we are the only G7 economy to grow continuously throughout the last decade - sixty-two consecutive quarters of GDP growth and counting
• I know there is no room for complacency. These are testing times. And competition in a global market has never been so fierce. And I hear you: I know we need to do more to maintain and improve our competitive position.

We will continue to listen to you. And I want you to see my department as your voice in the heart of government.

Thank you.