Stephen Timms MP

Entrepreneurship in the UK

• First, on effectively promoting enterprise through education programmes and through the National Competitiveness Network;
• Second, on CMI's "Praxis" technology-transfer training programme which my Department has just awarded a grant of £350,000 for it to expand to meet the training demand from university technology transfer specialists and thirdly
• For organising this summit and bringing together so many people from such diverse backgrounds to address this important topic of entrepreneurship.

I want to set out this morning my views on the importance of entrepreneurship to the economy; and to describe what Government is doing to support entrepreneurship and to create an environment that fosters enterprise and growth.

And then I want to focus on one of the topics in my brief as e-commerce Minister - the availability of broadband communications as one of the keys to the competitiveness of small businesses.

Raising our game on competitiveness and productivity is at the heart of the DTI's programme. Our jobs and prosperity depend on the well being of our small firms.

• 99% of the 3.8 million private sector businesses in the UK have less than 50 employees. Fewer than 30,000 employ more than 50 employees
• SMEs provide over 12.5 million jobs in the economy -well over half of all private sector jobs
• They account for more than half of private sector turnover, and nearly 40% of net capital expenditure.

But, beyond those figures, we know that an enterprising small business sector is key in narrowing the productivity gap with our major competitors. International studies have demonstrated the positive correlation between entrepreneurship on the one hand and Gross Domestic Product on the other.

Research by this institute and others has helped us to understand why this is the case. It has shown us that small firms are dynamic 'agents of change' within the economy. The creation and growth of small firms helps to drive productivity through a competitive spur to other businesses, to improve their efficiency and seek quality improvements. Small firms drive innovation by flexibility and the willingness to experiment. Nearly half of small firms with between 10 and 50 staff are active innovators. They are a crucial source of new products and processes in the economy.

So we want to help businesses succeed and prosper, and to reduce the barriers that prevent enterprising individuals who want to start in business take those important first steps. In some parts of the country, many people used to think that - realistically - they could never get a job, any more than their parents did before them. But in the future, even in areas like that - perhaps especially in areas like that - we want to build on the new stability in the economy so that people will be able to be confident about setting up in business for themselves, and being able to succeed. That will be great news for them and for their families - but also for their communities and in reality therefore for all of us.

We have made good progress. We have a degree of economic stability envied by many of our international competitors. We are in the longest period of sustained low inflation since the 1960's. Interest rates were seen by small firms as the biggest obstacle to success in the late 80's and early 90's, but today they are at their lowest level since 1955.

We have built on that stability with initiatives to tackle the barriers businesses face as they grow. We're developing actions to help particular groups overcome the specific problems they face as they attempt to turn their dreams of starting up a business into a reality.

Business Link helped over 310,000 businesses in the last financial year, including on average 33,000 pre-starts per quarter. In the 1st quarter of this Financial Year, over 140,000 businesses and almost 45,000 pre-starts have been helped - a 40% increase on a year earlier. And the latest Business Link client satisfaction survey of over 15,000 businesses found overall satisfaction running at roughly 85%.

For over 20 years there have been loan guarantees to businesses with viable business propositions, but unable to borrow due to lack of track record or collateral. The first quarter of this year saw a 36 % increase on the last. That's 1,247 loans guaranteed to small businesses, the highest in one quarter for years.

We've set up Regional Venture Capital Funds in each of the 9 English Regions, providing small-scale equity (less than half a million pounds) to smaller businesses, and reducing the barriers small firms face in accessing finance. This is crucial because for SMEs looking for capital of between £250,000 and £1 million, there is evidence of an equity gap that prevents them from realising their full growth potential.

We're also:

• Encouraging enterprise in disadvantaged areas through the Phoenix Fund;
• Improving the tax environment, for example through the R&D tax credit; and
• Improving the regulatory framework in which small firms operate.

And it is all starting to make a difference. Productivity growth in small businesses has now exceeded all firm growth for two successive years. The gap in VAT registrations between the least and most deprived wards (our main measure of success in stimulating enterprise in disadvantage areas) narrowed in the last year for which figures are available. The OECD reports that the UK has lower administration costs and fewer regulations for those wishing to create a business than any other OECD member country. All those are important gains that we need to maintain and to build on.

The challenges of globalisation and new technology mean that all UK businesses have to become more efficient and more innovative, more productive and more competitive. The ability to move and share information rapidly is worth a lot today. Information and communication technologies are key to companies' ability to handle this information, and broadband is key to sharing information quickly with suppliers and customers.

According to a recent report by London Economics, ICT investment was responsible for 25% of total output growth in the UK in 1992 - 2000, and 47% of labour productivity growth. Broadband is the next key step in driving productivity further.

Visiting the ACT NOW project in Cornwall, which has delivered broadband through a partnership to rural areas, two businesses illustrated tellingly for me how important broadband is to the competitiveness of our economy. One was a chain of print shops, and by replacing with broadband a daily van run conveying artwork between two of the shops, the turn round for printing jobs had been cut from three days to one day. The other was a husband-and-wife web marketing company which had relocated from London to rural Cornwall because they knew that broadband would be available there, and had found that they could expand faster in Cornwall than they would have been able to in London, taking on new local staff. Those two small examples, repeated on a national scale, would represent a giant boost to national competitiveness.

There is hard evidence from a survey for the British Chambers of Commerce. It showed that 46 % of SMEs using broadband thought that they had benefited from improved productivity; 45% from reduced costs; and 13% from increased sales.

Between ADSL and cable, broadband is now available to 80% of UK households, and that proportion will rise to at least 90% next year. I congratulate BT on the success of its demand registration scheme, and on the imaginative and creative way it has worked to extend availability of ADSL into new areas.

But we need to do more. To truly realise the benefits of broadband it needs to become ubiquitous so that every company has the ability to access it.

Our goal is to have the most competitive and extensive broadband market in the G7. I believe we are ready now for the next big step on broadband. We need the benefits those companies have gained in Cornwall to be available not just to some companies but to every company. We need every community in the country to have the advantages that some rural communities already have and which others are still campaigning for.

So I am calling today for a new and deeper partnership between the broadband industry, Government, the regions, local government and local communities. I want us all to work together more closely over the next two years, to do all that we can for the goal of a Britain in which broadband is available - not in 90% of communities, not in 95% of communities, but in every single community by the end of 2005, so delivering a huge boost to the competitiveness of the UK economy.

There will undoubtedly be hurdles to be overcome. We will need to do more to build partnerships to serve sparsely populated rural areas. There will be very big challenges in the remoter parts of the UK. We will need to be more creative in how we manage the wireless spectrum and we will have to foster continuing innovation and competition at both the infrastructure and retail levels without distorting the competitive market. We may need to look again at how we target the limited public funding that is available to achieve the maximum impact. We will all need to work more closely with small businesses to show them the opportunities that broadband offers - and the risk of not being part of Broadband Britain. We will have to attract more and more people to use Government services online.

The public sector is committed to exploiting broadband for the good of all. During this year and the following two years, public services will be spending a billion pounds on broadband connectivity - making a big contribution to raising standards in schools, improving the services at our GP surgeries and making our public libraries into community information hubs. At DTI, we are working with key public sector customers to aggregate demand, to use our buying power to extend the reach of broadband into new areas. This work will start to bear fruit early next year through the network of Regional Aggregation Bodies that we are establishing in the English Regions. The Regional Development Agencies have taken up the challenge and have spent or committed, we estimate, something like £235 million to broadband development over the period from 2000 to 2006. We will look for more opportunities to catalyse the sort of partnerships that have already borne fruit in Cornwall and elsewhere. The devolved administrations have also been imaginative and creative on broadband in Scotland, Northern Ireland and Wales - including in Northern Ireland already identifying the 100% target and in Wales a fibre backbone for schools.

If we work together, we can overcome the challenges, and deliver the prize of a more competitive and productive UK. A country in which the benefits of broadband are available to all who want them.

Harnessing the new applications that broadband make possible will be very important. I can announce this morning the achievement of legal incorporation for CODEWORKS, the North East region's centre of excellence in digital technology and media. Broadband networks require drivers for take-up and usage. CODEWORKS is already working with the region's universities and private sector bodies in identifying and developing digital content and applications that will drive the adoption of broadband. CODEWORKS has sponsored construction of a GRID computing test bed at the North East E-Science Research Centre; it helped facilitate the formation of a Scandinavian - North East of England Framework Six research consortium around fibre optic broadband and is also working with the University of Teesside in developing its Digital City regeneration strategy.

We see improved knowledge transfer, between business and universities, and from business to business, as the key to improved innovation performance. We have in the UK a world-class science and technology base that provides a rich source of new projects. We have made real progress in the last few years, witnessing a remarkable transformation in our universities, rising to the challenge of the new knowledge economy. I've seen a number of examples where universities in this region have done particularly well.

The Science Enterprise Challenge Centres are a shining example. They act as catalysts of cultural change in UK universities to make them more relevant to business and able to contribute more to employment and productivity. They have encouraged strategic changes in structures and processes, enabling universities to change more rapidly.

Building on the universities' excellence in teaching and research by adding enterprise and business relevance. Embedding enterprise in teaching and research, raising awareness, changing attitudes and enhancing skills and competencies.

We need to raise the level of scientific excellence to build a high value added economy. In 1997, the Science budget was £1.3 billion. It is now growing by 10% a year and will reach £2.9 billion by 2006. The step change in funding is to develop and retain high quality science skills and to ensure that the UK's Science base matches world-class standards and is properly equipped to foster and support dynamic new companies.

We simply cannot compete on the basis of low labour costs and cheap materials. Those days are gone. We need to compete instead on the basis of our knowledge, our skills and our creativity.

And we are one of the most creative nations for scientific research in the world. British patents filed were, up 26% between 1999 and 2001. Last year there were 248 companies spinning out of universities, an increase of over 20% on the year before, and a substantial increase on the 70-a-year average for the five years before that. That rate compares very favourably with the United States. UK Universities identify one spin-off business for every £12 million of research funding in the UK, compared with one spin-off for every $60 million of research funding in the United States.

Of course, there is still more to do to increase the rate of innovation in UK companies. That is why our DTI team is looking at all the Government policies which impact on Innovation, and it will report soon. A key issue we are looking at is how we attract more high-tech, high value-added companies to locate their facilities in this country, to help speed up our rate of innovation.

We need your help in:

• Assessing what more needs to be done to help businesses to succeed;
• Identifying and filling the gaps in our knowledge about business and attitudes to entrepreneurship;
• Increasing innovation in UK companies - including improving the rate of inventiveness and entrepreneurial spirit in larger companies.

We track, record, and review carefully what businesses themselves, their advisers and representative groups, and academics are telling us. We have a much more extensive programme of high quality research and evaluation than ever before. There are many people in this audience who work closely with DTI and SBS analysts and policy makers in designing and implementing that programme.

You have a key in helping identify what works and why and what new policy initiatives are required in our aim of making the UK the best place to start and grow a business.

Events like this one are very important. They help us to share knowledge, develop ideas and spread best practice. They are crucial if we are to realise our ambition of making the UK the best place in the world to set up and grow a business. Not only for those starting-up, but also for effective dialogue and exchange between universities and industry, including those existing mature businesses whose competitiveness we wish to build up.

And CMI is playing its part through the wider educational process of combining scientific and managerial skills in specialised teaching programmes. Your research, - your ideas - and your experience are of great value.

I hope that you will leave this summit with new thoughts on how businesses can succeed. I hope that many will be enthused by what you have heard, to begin new research to fill the gaps in our knowledge about entrepreneurship and competitiveness.

And I hope we will all work together in the months ahead, to make the most of the opportunities which stand ahead of us now in the British economy, boosting entrepreneurship to build the strength of our entire economy.

Have a great day, and thank you for the chance to be with you.