The Rt. Hon. Patricia Hewitt

Fair Deal For Small Businesses

One of the best things about being Secretary of State for Trade and Industry, and before that Minister for Small Business, is getting round the country and meeting entrepreneurs and owner-managers …

People like Dave Stevens and his team at Cooke Optics in Leicestershire who developed the high definition film lenses used in the brilliant film, Chicago. They did it with the help of a £140,000 DTI Smart Award and now they say “it is now our responsibility to return to the UK (through 95% export) some revenue from this investment”.

Irene and Arthur Allen of Listawood in rural Norfolk. They started their company from their kitchen table fifteen years ago, with a £40 a week Enterprise Allowance. Now they’re a flourishing manufacturing company making PC products, with a turnover of £8 million and 100 employees, and by giving their people family-friendly working, they’ve built up an absolutely dedicated and loyal workforce.

Stefan Olsberg and his colleagues at Voice Connect in Groby in Leicestershire. I visited them a few weeks ago and saw the great software they’ve developed to help schools cut truancy through text message, e-mails and voice-mails. Now they’re franchising the business to other parts of the country.

Or one of the many entrepreneurs in my own constituency, Atul Lakhani whose new restaurant, Sanjay’s Curry Pot, my Rt Hon Friend for Leicester East and I had the pleasure of opening last Friday.

Whether it’s Indian food or new technologies, our entrepreneurs are leading the way. I’m delighted to say that a few weeks ago, Surrey Satellites Technology Ltd, a company spun off from the University of Surrey won a 30 million euro contract to lead the development of Europe’s first satellite navigation system, Galileo.

These are the heroes and heroines of our economy, the entrepreneurs who work incredibly hard, who invest their savings and even put their home at risk in order to build up a team of people, create a great product and grow a business.

If someone goes into a shop buy a scratch card and wins a million, they receive public adulation. Whereas if someone uses hard work and commitment to set up a business from scratch, and makes a million, they’ll receive no credit whatsoever. I want to pay a huge tribute to our millions of small businesses who

• provide twelve million jobs for our economy;
• create more than half our national output.
• generate 9 in 10 of all new business ideas.

They’ve always been important. But today, as the world becomes even more competitive, and technology changes faster than ever before, small firms matter even more. They can move faster, they’re more likely to innovate and they’re closer to their customers.

By the end of this decade, the forecast is that the 3.7 million smaller businesses we have today will grow to over 4.5 million. A million more businesses, and between them, two million new jobs.

We celebrate our entrepreneurs. And we know that it’s our responsibility in government to help them succeed. First and foremost, every business needs economic stability and that’s what we’ve delivered. The lowest inflation for thirty years, the lowest interest rates in forty years and employment at record levels. And of course it’s tough for business with the world economic slowdown. But thanks to the tough decisions we took in our first term, we continued to grow while others went into recession.

Second, we need to make sure small firms get the finance they need. We created the Regional Venture Capital Funds, providing over £300 million extra capital. And we extended the Small Firms Loan Guarantee Scheme. Now we’re looking at whether we should replicate the Small Business Investment Companies in the US, which helped Apple Computers, Compaq and AOL grow from start-ups into world-beaters.

Third, we need to make sure the tax environment is right. We already have the lowest small firms tax rate in Europe. And the Budget contained a raft of further measures to help small firms, including

• extending small firms capital allowances;
• simplifying VAT;
• extending the R&D tax credit; and
• cutting the small companies tax rate.

Fourth, we need to make sure business gets the practical support it needs. Last year, British Trade International helped 28,000 companies to export; Business Link helped over 310,000 businesses to start and grow; and we gave 1,000 SMART awards amounting to more than £40 million.

We listened to our business customers. They told us to simplify our business support schemes and that’s exactly what we’re doing. And we’re bringing together information and support for business, not just from DTI but also from right across government, in one simple and easy-to-use format.

Fifth, we need to make sure that business is operating in the right regulatory framework and that markets are open and competitive. The Enterprise Act has made our competition regime the best in the world. But we need to keep addressing the burden of regulation.

We’ve cut form filling and red tape for 700,000 small businesses with our new flat rate VAT scheme. We’ve abolished automatic late penalties for VAT late payers. We’ve saved 150,000 businesses £180million a year by raising the statutory audit threshold to £1million. And, before the summer recess, I will be consulting on whether we should raise this threshold further.

It’s because of these steps that we’ve taken that the OECD says we’re at the forefront of regulatory reform, we’re number 1 destination for foreign investment into Europe and the World Economic Forum said that the UK has “leapt” from 7th to 3rd place in international competitiveness. Of course we’re still not satisfied though. Of course there’s more we can do. And that’s what we’re doing with the Regulatory Reform Programme. But still, in mainland Europe it takes around 4 weeks and an average £600 in costs to set up a business. In Britain, you can do it in a day for £20.

And, as Digby Jones recently said “I would much rather be doing business in Britain than anywhere else in Europe…. We are still the most successful economy in Europe”. So much success. But much still to do.

We need to make sure that everyone has an opportunity to start and grow a business. Start-up rates in our poorest regions are one sixth those in our most prosperous. GDP a head in the North East is half what it is in London. Business R&D in the North East is almost one tenth what it is in the South East.

Men start twice as many businesses as women. If women started businesses at the same rate as men, there’d be a further 100,000 businesses a year.

And of course whilst start-up rates are high amongst our Asian communities, they remain low amongst Afro-Caribbean communities. Too many still find they can’t get the finance they need on the terms they can afford.

We’re making sure everyone has the opportunity to start a business. Business Link Operators and the Learning and Skills Councils are working closely with the RDAs to strengthen the economic strategies in their regions. We’ve published a Strategic Framework for Women’s Enterprise to make sure the support networks are right, and to ensure policy makers take into account the needs of women entrepreneurs when developing policy.

The Ethnic Minority Business Forum is widening support for ethnic minorities. And we’re also working with the Forum to pilot new approaches to procurement policy for Government contracts. Making sure that small businesses, including ethnic minority businesses, can win a share of this £12 billion Government pie.

So much has been done, but there is still much to do. But let’s not understate our achievements. I’m proud of the 1.6m new businesses that have started since 1997. I’m proud of the 107,000 businesses that started in the first quarter of this year, 12% up on the same period last year. I’m proud that we have the best survival rates, the best economy and the best regulatory framework for small businesses.

Small businesses provide almost half the jobs and prosperity in all our constituencies. So we need to make sure we continue to support them. With stability, support and strategies for success. So small firms don’t just survive, but thrive, as we look to provide jobs, prosperity and opportunity for all.