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Perkins tells Institute of Chartered Accountants: “Labour are backing business”

This morning (Tuesday 26 June) Toby delivered a key note speech to the Institute of Chartered Accountants’ best practice conference.

As Shadow Small Business Minister, Toby speaks to a huge range of small businesses on a regular basis.  He used his speech to highlight how important this sector is to the UK economy, saying: “I don’t need to tell you how important the 4.5 million small businesses are to the UK, after all these account for 99 per cent of all British enterprises. SMEs employ an estimated 13.8 million people and have an estimated combined annual turnover of £1,500 billion.”

Toby also reflected how Ed Miliband used his very first conference speech as Labour Leader to express his determination to make Labour the party of small business and one of the first steps he took was to set up the Small Business Task Force to investigate how we could ‘fulfil the promise of British enterprise’.

Toby then addressed three key issues: what the current challenges for small businesses are, how Labour is working to overcome them – particularly through our Small Business Taskforce – and the vital role that chartered accountants can play in helping businesses achieve their goals.

In particular Toby focussed on how Labour are formulating plans to:

  • help small business to access finance from a variety of sources, not just the traditional banking model
  • use the power of government to best help British firms – when £1 in every £7 of GDP is spent by the government it is the largest lever available to government to support UK firms
  • reform and improve how Government makes business policy, by recruiting people with business experience to the Civil Service and establishing a small business agency at the heart of Whitehall to be run by an entrepreneur

The full text of the speech is below:

The role of the accountancy profession in stimulating business growth

Thank you Martin and Howard, and firstly may I thank the ICAEW for asking me to speak here today, and say what a great pleasure it is to be asked to speak about how I think we can stimulate small business growth in Britain. 

As someone who worked in small and growing businesses my entire working life prior to entering parliament I salute the work that the ICAEW are doing to promote the added value that the accountancy profession can add to support SME growth through the Business Advice Service.

I also know from conversations with so many businesses how they value the help, expertise and support your profession offers to entrepreneurs and small businesses across the country.

It is traditional to start a speech of this kind with an amusing anecdote or two to lighten the mood.

And I have previously made an accountant laugh…

But it wasn’t a particularly positive memory for me..

I’d spent a lot of time on that business plan.

So instead …

And this week of all weeks when the ICAEW are promoting a campaign that pushes and illustrates the importance of work that many will have seen as their role for a long time seems a good time too reflect how sometimes the more things change, the more they stay the same.

Its summer, worries about climate change are increasing and you can tell something’s wrong.. the rain’s warmer….

The Liberal Democrats are revolting..

Over Beecroft’s plans for “no fault” dismissal, and they will no doubt express that outrage by voting for his proposals.

And England have a new Manager, new players but we still lose on penalties.

Today, I’d like to reflect on three key things: the current challenges for small businesses, how they can be overcome and what role government can play in that and of course the vital role that chartered accountants can play in helping businesses achieve their goals.

As you can see, I am a very big small business shadow minister.

And in a similar vein whilst the businesses I work with are small, their collective footprint is huge. 

I don’t need to tell you how important the 4.5 million small businesses are to the UK, after all these account for 99 per cent of all British enterprises.

SMEs employ an estimated 13.8 million people and have an estimated combined annual turnover of £1,500 billion.

Small businesses are the life blood of the British economy.

One of the best things about my job is that I get the chance to meet and listen to a huge variety of small businesses in a diverse range of sectors and regions.  Their stories often sound familiar to me, and that is because I’ve seen much of what they experienced in my own life.

Working in one of the fastest growing mid-sized businesses in the country and subsequently as the owner of sports clothing internet retailer, I have faced many of the obstacles that we are now working to ease for Britain’s small firms.

Several issues are repeatedly brought to my attention, and I believe we are now developing a practical and imaginative set of policies to answer them.

When I entered Parliament in 2010 I did so at an interesting time. Having being elected to parliament on the Thursday, the then Prime Minister resigned on the Tuesday (I dont think it was my fault!)

And whilst I was obviously delighted to have won my seat, the only Labour gain the country, there was no denying it was a bad night for my party as a whole.

Regardless of the failure of the Tory Party to win the election, there was no question that we lost it.

Under Ed Miliband we are working to rebuild our relationship with the business sector and to explore how government and business can work together to deliver growth in our economy.

And Chuka Umunna as the new Shadow secretary of state for BIS is hearing businesses across the spectrum of the business community. 

Indeed, Ed Miliband used his very first conference speech to express his determination to make Labour the party of small business and one of the first steps he took was to set up the Small Business Task Force to investigate how we could ‘fulfil the promise of British enterprise’.

That taskforce is a key part of Labour’s move to develop the policies that we think can deliver growth.

Started under the stewardship of Nigel Doughty, a successful Venture capitalist, co-founder of Doughty Hanson. Following  Nigel’s tragic death this year, it is being taken forward by Bill Thomas, the former Senior Vice President of Hewlett Packard and the driving force behind the launch of the International Centre for Programme Management at Cranfield University.

The taskforce has heard from a variety of experts from across business and finance, with incredibly valuable contributions from business groups like the ICAEW and the FSB. It has also explored how governments across the world from Singapore to Germany and from Israel to the United States have supported business in their countries.

The core members of the taskforce have a fantastic range of experience and expertise from across the world of business, academic research and beyond.

Following the publication of the interim report outlining the initial thinking of the taskforce, the group is now focused on four specific pieces of work.

Firstly, we believe that access to finance is the most immediate issue facing small businesses in the wake of the financial crisis. The government’s ‘Project Merlin’ agreement with the banks has not worked in expanding access to credit to business. British businesses are finding it harder to access credit than their peers in Germany and the US.

These issues are at least partly due to an insufficiently competitive banking system. The US has 10,500 banks compared to around 450 in the UK. But reform of the banking sector alone won’t make the difference. There is also much greater availability of debt finance from institutional funders rather than banks in the US than here in the UK.

We recognise the importance of a panoply of funding options to give SMEs real choice but like our key competitors, in countries like the US and Germany, recognise the inherent market failure that exists in the small business credit market and have for decades used state guarantees to catalyse access to finance for small businesses on a much bigger scale than in the UK.

Credit easing is doing little to tackle long‐term issues in the access of SMEs to long‐term finance, and though it is useful that businesses that were previously able to access finance can now do so a little more cheaply, it does nothing about the raft of firms unable to get access to finance at all.

The Taskforce is therefore recommending that the Labour Party consider as part of its policy review developing a suite of state‐catalysed finance schemes for SMEs. This should include:

  • Government-guaranteed lending programmes for small businesses that are more ambitious than existing small-scale schemes, channelled through the banks.
  • A quasi‐banking vehicle like the Small Business Investment Company programme in the US. This would supplement private capital with government-guaranteed leverage, which would 6 invest in British SMEs via private investment funds through a mixture of debt and equity finance, as determined by the market.
  • We are also investigating the setting up of a British Investment bank which enjoys widespread support from organisations such as British Chamber of Commerce.

Pursuing these sort of ideas could make it possible to increase the amount of finance available to SMEs by a factor of more than three.

We are also looking at how the current system of Insolvency in this country works. My sense is that there is currently too great a penalty on individuals who suffer honest failure but that the current system of pre-packs and the way that the Insolvency Service operates allows some directors responsible for the failure of their own businesses to walk away from their responsibilities and re-start with impunity leaving creditors, customers and staff out of pocket.

We are investigating how the government can provide support to small businesses through Procurement, Innovation & Exports. How can we use the huge spending power of government to better deliver for British business? When 1 in every 7 pounds of GDP is spent by the government it is the largest lever available to government to support UK firms.

We are therefore considering a new approach to using procurement to support SMEs. This would include:

  • Reforming procurement to make it easier to hold government departments accountable for how they use procurement to support SMEs.
  • Hugely expanding the SBRI programme for innovative, hi‐tech SMEs. The US equivalent programme is fifteen times larger than in the UK.
  • Taking advantage of EU law allowing procurement criteria to include a consideration of impact on jobs. A consequence of this should be increasing the amount of procurement that goes to small businesses.

On Exports; as the owner of a small firm that tentatively dipped our toe in Importing and exporting, I know how reluctant many small firms are to get into exporting. We are looking at how we can remove some of those barriers to support more small firms.

When we compare government’s role on innovation research and development funding with the United States it makes for stark reading. Of all technology firms in the US 14% receive government support for innovation funding, in the UK 25% do. But the amount of support those businesses receive is on average 6 times less than their US competitors. The message is clear, in the UK we have a world class research sector but it is being held back by the lack of funding for development of those ideas. Success in the future won’t come from a one paced focus on austerity but from an ambitious thrust to be the best.

We are also investigating how we can put the needs of business at the heart of government. Moving beyond the simple need for the department of Business to be the voice of business in government but a complete culture change where every single government department recognises their responsibility to look out for the needs of British business in the work that they do.

Government in the US and Singapore has a small business ‘champion’ agency at its heart: the Small Business Administration in the US, and SPRING in Singapore. The Singaporean government is one of the most successful in the world at understanding the needs of business, in part due to the fact that it has a porous civil service with more people moving in and out of working for government from the private sector.

As part of our future work, the taskforce will be considering how a similar agency could be replicated in Whitehall, with responsibility for running the state-­‐catalysed finance schemes I have outlined, and coordinating procurement policy relating to SMEs across Whitehall. We want many staff and the head of this agency to have significant entrepreneurial and private sector experience.

The final ongoing piece of work is around the development of skills. We are listening to businesses about the skills they need our young people to pick up during their journey through our education system.

We want to re-look at enterprise teaching within school and do more to push the excitement of a career in business and the importance of sales skills particularly to ensure that children leave our education system job ready.

The Shadow Eucation secretary Stephen Twigg is also developing his ideas around getting better speaking skills amongst our young people.

We are analysing the obstacles on the road from unemployment to self employment. How can we make sure the benefit system is an incentive, not an obstacle, to moving from unemployment to self employment.  

An active government strategy recognises that we are living through a period of seismic, rapid, global and technological change. With the government taking us back into recession people worry about where demand in our economy will come from. That’s what lay behind Labour’s immediate five point plan for jobs and growth. To get the economy moving again and – through growth as well as fiscal discipline – to bring the nation’s finances back into balance.

But taking a longer term, global perspective, the Government’s exclusive focus on deficit reduction as an end in itself, looks increasingly short term and narrow. Within the next two decades, the size of the global middle class will almost triple in size to 5 billion people. That’s a whole lot of new demand we should now be preparing our economy to meet.

Success in the global economy won’t come from being quite good at lots of things. There is a premium on being the best. So we must develop our areas of existing strength – sectors, technologies, services – where we are already world class. Like advanced manufacturing, aerospace and automotive. Like business services, the creative industries, and higher education. And, yes of course, financial services.

This must be our national mission. As Ed Miliband, the Leader of the Labour Party, laid out in his “Made in Britain” speech – a more productive, more responsible capitalism, underpinning a more inclusive and cohesive society. We should celebrate, take pride in and back the best of British business, products and services.

This is not about protectionism but using all the means at government’s disposal to give competitive British firms every chance to succeed.

I also would like to touch on the importance of trusted professional advice to small businesses in helping this sector to grow.

Now this might come as a shock but outside of the business community the stereotype of accountants can be less than flattering! And I’m a politician!

I know the reality is very different, rather than simply offering number crunching or dutifully compiled tax returns, Chartered Accountants across Britain offer businesses vital advice and expertise in key areas.

Accountants are there helping businesses to access finance. Sometimes through the bank route, getting bank ready business plans, but also through venture capital or new innovative online crowd sourced lenders.

You also help businesses get the best advice when

This advice and expertise is now more necessary than ever before.  Make no mistake, whilst government provided business advice has traditionally had a patchy reputation, the Government has now completely exited the field and ICAEW members are attempting to fill the void.

The issue of interest rate swap products is a key example of the vital importance of access to expert advice. I have met over fifty businesses that claim that they have been mis-sold products that they believed were in their best interests.

The stories that some of them have told are shocking and it seems likely that businesses were sold complex products they didn’t understand under the belief that their relationship manager was acting in their best interest.

So it is clear how important the role of members is in providing that advice in the area of access to finance, but alongside this, ICAEW members are ‘the’ trusted business adviser on a range of issues from start-up advice to export; from bidding for new contracts or government grants; to buying or selling a business or planning an exit strategy.

But the valuable work of members doesn’t obscure the fact that business needs a government that isn’t an absent onlooker, but a helpful participant supporting the best of British to be the very best in the world.

The wind at your backs not the rain in your face.

Labour are exploring the very best examples of active government across the globe, ensuring the machinery of government is there to back Britain’s businesses, making sure that government cash leads to British business success. With that combination of active government and the very best that British businesses have to offer we can finally deliver on the promise of Britain.

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Welcome

I am Toby Perkins, Labour's Member of Parliament for Chesterfield. If you would like to get in touch with me, my office is open and can be reached by phone on 01246 386 286. I also hold regular surgeries so that constituents can meet me and I can take up their concerns. If you would like to make an appointment then please do contact my office. Thank you for visiting.

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