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SEEDA Regional Lending Roadshow

Gareth Thomas MP,  Former Minister for Trade, Development and Consumer Affairs (jointly with DFID)
Milton Keynes,  21 April 2009

I know that a lot of people in business are dealing with really tough conditions at the moment as cash flow has become tighter and access to credit has been squeezed.

The world’s economy is seeing the most difficult economic conditions for generations and all countries have been hit. By way of a response we have been focused on unlocking new lending to companies, and ensuring the right support and advice is available for firms that are viable but are struggling.

The Government is following a four-step strategy for recovery. It is about getting Britain through this worldwide recession in a way that protects businesses and jobs as far as we possibly can. That helps companies like yours to compete for a larger share of global markets when the upturn comes.

First, we acted to stabilise the banks. Government intervention prevented the collapse of the banking system – and, in return, we are imposing conditions to ensure lending to small businesses is maintained. In the banks where we took shares, we changed the bonus culture so that there can no longer be rewards for failure. We have taken further action recently to increase bank lending in the economy, as I will explain in a moment.

Our second step is to get direct help to businesses and their employees. Companies with cash flow problems are able to reach agreement with Revenue and Customs to defer payments of VAT and other taxes – which is giving them a vital breathing space. Since November more than 100,000 firms have taken advantage of the scheme, rescheduling nearly 1.8 billion pounds in taxes. That includes more than 16,770 companies here in the South East, who have been allowed to delay tax payments worth 300 million pounds.

You can delay paying this year’s increase on your Business Rates, as well. Three weeks ago the Chancellor announced that firms have the option to delay part of this year’s increase and spread it over the next three years. Up to 3 per cent of this year’s planned 5 per cent increase can be delayed in this way.

Thirdly – and this is what’s making a crucial difference – we have acted decisively to get lending moving again. We understand small businesses are the backbone of Britain’s economy and central to our future prosperity. That’s why we have focused so much of our attention on the banks - because businesses need a banking system that works. And getting credit flowing again is the key to making the recession as short and as shallow as possible.

The banks where the Government has taken shares have had to sign legally-binding agreements to increase their lending for the period up to March 2010.

One major problem we have faced is the withdrawal from lending by many foreign banks who used to lend to British businesses who now either aren’t lending at all or have significantly reduced their lending.

Under the agreements RBS and NatWest are committed to an extra £16 billion in lending for business. Lloyds has signed up to make an extra £11 billion available, and they have all agreed that they will make similar commitments for the following year.
I’m not going to pretend to you that the credit squeeze of the last 6 months has suddenly eased. Or the banks have started lending as they were pre-crunch. Our checks are showing that bank staff who deal with loan applications are getting better every week at explaining how they can help. Whilst it is still harder then it was twelve months ago the difficulties many businesses faced 4/5 months ago in terms of access to credit are beginning to ease.

The Real Help for Business package is there to help businesses of all sizes open the doors to lending. You can identify what will be best for you by arranging a free ‘business health check’ from your local Business Link. So far nearly 40,000 companies have taken advantage of this service since October – including over 7,348 businesses in the South East region.

When you ask for a Business Health Check a business link adviser will help you draw up a strategy to get your firm through the downturn, and help you access the financial support you need.

This could be a bank loan backed by the Government’s Enterprise Finance Guarantee. As you know, nearly all lending to business is still happening through the normal route of banks offering commercial loans. But - if a business doesn’t have enough security for a commercial loan, the Enterprise Finance Guarantee is there to support bank lending to viable small businesses which are struggling to secure the working capital and investment finance they need.

The 26 approved lenders who have joined up have received over 2,350 applications – with a loan value of almost £270 million.

As awareness has grown – and the network of lenders has got bigger – the value of eligible loans has increased ten-fold from less than £3 million in week one, to around £30 million a week last month.

Support is also available from the Capital for Enterprise fund, which is a £75 million fund for small and medium sized businesses looking for equity investment rather than debt. Two fund managers, Aberdeen Assets and Octopus Investments are in discussions and conducting due diligence on companies from whom they have received serious proposals seeking a total of £49m of investment.

Business Link will be able to advise you which scheme is best for your company, and direct you to the banks offering loans under them.

But this is not just about supporting business in the short-term - we are also taking steps to help prepare for recovery. We can’t cut our way out of recession. We have to grow our way out.

So the fourth element of our strategy is to direct investment to those areas of the economy with the brightest prospects for growth – high-tech, high value added industries; low-carbon products and services; and digital and creative industries.

So that our people can develop the skills and expertise that will be needed to exploit these markets, we are investing in training, with a quarter of a million Government-funded apprentices.

Businesses can now get up to £2,500 for recruitment and ‘on the job’ training subsidies if they take on people who’ve been looking for work for more than six months. The recruitment subsidy is worth £1000 and depending on their location, companies can access up to £1500 worth of in-work training.

The government has taken steps both internationally as part of the G20 and domestically. There will be further announcements tomorrow as part of the budget.

I’m keen to hear your experience on the ground and will happily try to answer your questions. If I can’t give you an immediate answer I will be happy to take your details and get answers to you.

Now I’m please to introduce Isobel Thompson. Isobel’s company Morrck benefited from Business Link. She’s here to share her experience.

Thank you for your time.