John Denham describes the DIUS offer to SMEs and announces a review of FE colleges' and universities' support for potential new and small businesses, and what more support they are able to offer people entering self-employment from education or unemployment.
Celtic Manor Resort, Newport
20 March 2009
Chairman, thank you very much indeed for that introduction, and I’m very grateful to you for making the adjustment to your programme. It will mean that I have a much better chance of getting back to my constituency to meet the small businesses who’ll be coming to my advice surgery later on this afternoon. Can I thank your national chairman, John Wright, in particular, personally, but also the FSB as a whole for the contribution that you have made in helping to shape the policies in my relatively new department over the past couple of years and particularly over the past few months.
The lifeblood of new small businesses is the entrepreneurial spirit, the well judged risk that can let a business idea flourish. And we know that it’s true that in tougher economic times often a combination of personal circumstances and business realities mean that many people decide to embark on a new career running their own business. The qualities of entrepreneurship and individual initiative that they represent are essential for our national prosperity, and I believe, like your national chairman, that they’re even more important when times are tough. I do believe that small businesses can help us not only come through our current economic problems but also to emerge from them stronger, and that’s why this Government is doing everything possible to support people with the drive and imagination to set up a business on their own.
Last October, the Government acted to prevent the collapse of the banking system by investing in the banks. We acted decisively to stabilise the system and similar action followed in countries around the World, and this was vital. The consequences of the collapse of the banking system would have been devastating. Now we’re working with the banks to clean up their balance sheets and get the financial system working properly again. But things will not return to normal overnight. The global economy has suffered an enormous shock, and that’s why we’re working with our G20 partners to ensure that international action is taken to get credit flowing and the world economy moving and growing strongly once more.
But I know that in the meantime life can be especially hard for entrepreneurs and the small companies they create. You don’t face precisely the same problems as big businesses in keeping going but the problems can be equally serious, and of course money is often the main concern. For example, we know that many small businesses are finding it especially difficult to raise the credit they need to start up, to expand or simply to survive. We know too you’re more likely than big business to suffer from the cashflow problems that late payment can bring.
And that’s why we’ve introduced a package of measures designed to try to address the particular cashflow, credit and investment needs of small and medium sized enterprises; ranging from the Government’s own commitment on prompt payment to the Enterprise Finance Guarantee that enables banks to provide additional lending to SMEs with viable business plans but can’t access normal commercial lending as a result of the current economic conditions. And about £30 million a week of Government guaranteed loans are now being signed off. More than 30,000 businesses have received free advice through Business Link on how access the full range of Government help. The Real Help for Business campaign webpage has received more than 70,000 hits and about 80,000 firms have received assistance from the HMRC on payment. I know that my colleague, Paul Murphy, will have more to say about this when he speaks later on.
But all of us here know that it takes more thank just liquidity and advice to get SMEs through the tough times, and that all of us in Government need to get involved in supporting small businesses and our four million self-employed entrepreneurs. Research carried out by the Tenon Forum shows that 45% of UK owner managers are concerned about skills shortages - small business certainly need the right skills now. A campaign led by the employers’ organisations represented on the UK Commission for Employment and Skills is telling us all that now is the time to invest in skills and reminding employers of the Government’s support that’s available to help them do so, and I’m pleased that your honorary national chairman, John Wright, has signed that campaign on behalf of the FSB.
It’s one reason why I announced towards the end of last year that SMEs will be the top priority for the growing support that’s available for staff development through our flagship skills funding scheme in England, Train to Gain, including the planned £350 million growth in the programme over the next two years. We’ve also made Train to Gain more flexible for small business in ways that are designed to meet your particular needs. For example, you can now access funding for employees who already have qualifications, and for short courses, in business skills and enterprise proven to raise productivity.
For businesses with between five and 250 staff, funding to help with leadership and management training is also now available. And I hope that this is something that you will particularly welcome. Since I know that many self-employed people are often so busy that the last members of staff they can find time to think of training are themselves. For businesses with fewer than 50 employees my Department’s also offering, through Train to Gain, a contribution towards the wage costs of releasing staff for training, and that too is something that’s been widely welcomed. Train to Gain is not the only real help available now.
Apprenticeships offer a way to businesses of all sizes to develop their own future workforce. Small business can benefit to this same extent as large ones from the fact that we’re funding four times more apprenticeship places now as in 1997. And I want to acknowledge in particular the work that Group Training Associations are doing to ensure that SMEs are not prevented from taking on apprentices by their size. And if anyone here is in any doubt about the sorts of skills and entrepreneurial drive that apprentices can bring to a business, they could do worse than listen to what Sir Alan Sugar has to say on that subject in the televised ads that are currently running.
All the help I’ve mentioned is available now, and I hope the Federation will join me, as I know you are, in urging small business to take full advantage of it. The schemes that I’ve been talking about and most of my own Department’s responsibilities for skills apply only in England. But of course the need for skills is UK-wide, indeed it’s global, and sometimes that requires us to act as a single country. So Jobcentre Plus’ work with training providers to increase skills among jobseekers and employers is a good example of doing that.
But it would be wrong for me to move on without first acknowledging the flexibility that devolution offers the Welsh Assembly Government, the Scottish Parliament and the Northern Ireland Assembly to respond to the specific skills needs of those countries. The Sector Skills Councils bring together employers and Government at UK level. But at the same time the Skills for Business network is allowing their work here to be given a specific Welsh dimension.
I know my own determination to get more people doing work based training by promoting apprenticeships in England is mirrored by the Welsh Assembly’s Government approach to Modern Apprenticeships and Foundation Modern Apprenticeships. The aims of my Department’s work to get more high level skills into business are very similar to those of Graduate Opportunities Wales which, among many other things, offers financial support for the training and development of graduate level staff in Welsh SMEs. And while we in England have been developing Train to Gain, the Welsh Assembly has been developing ProAct.
Chairman, I’ve talked already about how essential it is for us to act, whether at national, regional or local level, to help small businesses prosper now. In 2007, 99.9% of all businesses in this country were SMEs, employing almost 14 million people, about 60% of all staff in the private sector, and they turned over almost £1.5 trillion, which is more than half of all private sector turnover. But I think it’s not enough just to help small businesses to get by or even to help them prepare to take advantage of the recovery when it comes. I think we’ve got to help prepare the entrepreneurs who will create the next generation of small businesses.
The experience of the 1980s shows how SMEs actually help lead our economy out of recession. Between 1980 and 1990, the number of self-employed people in Britain nearly trebled. So we must build to the future, as well as coping with the present, if we’re to come out of recession stronger than we went in, ready to create businesses and new jobs. I believe that if you want self-employment as small business growth to contribute all it can to recovery, we’ve got to act now to make sure the necessary skills are in place.
The new activism I want to inspire around skills requires us to look to future skills needs as well as current ones. A lot of that work will require us to mobilise skills providers and employers to identify and develop job specific skills for the future. But it also impels us to foster the qualities of successful entrepreneurship, as well as the business skills needed to put them to use. We should be looking now to give people with fresh ideas the skills they’ll need to establish new businesses as we start to emerge from the downturn.
So in future every Jobcentre Plus office will have a specialist personal adviser to help with people who might wish to consider self employment. They’ll be able to offer help and support right through to starting a new business up. I know the further education colleges in particular should be able to offer skills support to people who want to establish new businesses in their areas, and the money for them to do so is already there in the form of an adult skills budget worth about £5 billion a year. But we must encourage more colleges to find more ways to use it. There’s already a lot of good practice on which colleges can draw. Some already offer courses about how to start up a business. And many of those ensure that training is delivered by people who’ve actually been self-employed and have direct experience of the practical problems that can arise.
Some colleges are going further and doing really innovative and interesting things. Park Lane College in Leeds and its business incubation centre is a purpose built facility for startup businesses that offers office accommodation and mailing address, intensive business support, training, networking opportunities and a supportive environment for about 25 in-house and virtual businesses. I want to see all our further education colleges taking this sort of lead in building entrepreneurship in their local communities.
I think we all understand how essential it is for the support that’s on offer to existing and prospective businesses to be made available more simply. The more complicated we make things for people, who just want to know what help they can get, the less likely it is that they’ll be able to take advantage of it. And that’s why I welcome the fact that the Federation of Small Business itself is playing an active role in this area, for example, through its work with Group Training Associations and its involvement with the Talent Map portal.
Higher as well as further education has its part to play. Many of our most innovative and profitable small businesses operate in high tech fields, like IT and bioscience, where very advanced skills are required. The Prime Minister reminded us, only a couple of weeks ago, of the premium which high level skills in science and technology command. But I know some smaller employers can still find it hard to engage with the universities that can offer them skills at that level.
So to help existing companies, my Department and the Regional Development Agencies fund around 1,400 Knowledge Transfer Partnerships. They’re intended to link small businesses with universities by placing an associate, usually a postgraduate, with the company for two to three years, to work on an innovation project. And I know that many associates end up working permanently in the companies where they’re placed. We’re currently looking to increase the number of partnerships and to introduce shorter associate placements of around three to six months. And since the partnerships are UK-wide, I hope this will be of benefit to firms here in Wales as well as in England.
I also think it’s important that we equip as many as possible of our brightest young people with the business skills they’d need to establish businesses of their own successfully. It’s in pursuit of that aim that public money supports two centres of excellence in the teaching and learning of entrepreneurship at university level, as well as the National Council for Graduate Entrepreneurship, which promotes the development of enterprise and the business skills and attitudes amongst students.
The National Council’s Flying Start programme, in particular, has already helped many graduates to turn innovative ideas into going concerns. People like Fatima Al-Bawa, whose visit to a Flying Start event in Cambridge has led to a new and more patient-friendly design of hospital gown, or Nin Castle, who established her Goodone clothing business after visiting a similar event in Manchester. We’ve got to build on work like that. So, from this spring, University Enterprise Networks will be established to bring together universities, private companies and RDAs in equipping students with the right skills for employment, including self-employment.
Chairman, I said earlier that we in Government need to keep on looking for new ways in which we can help small business and promote entrepreneurship and self-employment. We’re not alone in that. The Dragon’s Den entrepreneur and innovator, Peter Jones, is nurturing young entrepreneurial talents as well. His new national skills academy proposal received Government backing last autumn. And I can tell you today that I’ve invited Peter to lead a review, to identify the extent to which FE colleges and universities are able to support potential new and small businesses, and what more support they’re able to offer people entering self-employment from education or unemployment.
The review will highlight strong or innovative practice in further and higher education, like at the University of Plymouth, where the Faculty of Art helped Bigbury Mint, a local firm making bespoke medals, to develop new digital techniques, or in Warwick, where the Science Park not only brings together technology businesses in a creative hub but helps them raise startup and development capital. Peter’s review will look at models like these and make recommendations to me about how the offer to small businesses could be improved and involve a wide range of public, private and third sector organisations, and a report by the end of May, and I’m very grateful to Peter Jones for giving his time to this important work to help strengthen small businesses and entrepreneurship in this country.
So Chairman, small businesses, together with the people who have the ambition and foresight to create them, are essential to this country’s current and future wellbeing. By acting to support their skills needs, not just for today but also for the longer term, the Government is showing its commitment to building a more entrepreneurial, more innovative and more prosperous Britain.
