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National Enterprise Network Annual Conference

On Friday 5 December 2014, Toby attend the National Enterprise Network’s Annual Conference which this year was held at the British Library.  You can read the remarks he gave below:

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Many thanks for that kind introduction.  It’s fantastic to be here today to be with people who do so much to support entrepreneurs at all stages of their journey.

I know of the great work that National Enterprise Network members do in providing independent and impartial advice, training and mentoring to new and emerging businesses.  Your impressive work has undoubtedly saved many businesses and jobs and your collective contribution to the economy is huge.  So I wanted to first say a big THANK YOU for the difference you make.

I am particularly appreciative of this vital support you provide because in many ways I still think of myself as more of a businessman than a politician.  Before 2010 I could even have been described as a human being.

NEN SpeechAfter leaving behind a less than auspicious academic career, I took on a telesales job and continued to work in the private sector for my entire career up to 2010.  I eventually set up the third of my own small businesses in the Sportswear business, supplying and importing bespoke Rugby kit to Clubs, universities and schools and through an internet business, Club Rugby.

Alongside this work I was also involved in a social enterprise.  Based in the area of Chesterfield I previously represented as a Borough Councillor, the Families First Children’s Nursery was a cooperative formed with investment from the last Labour Government.  Serving an area with significant deprivation, the nursery has overseen a dramatic improvement in Early Years Education.

So supporting and promoting entrepreneurs and small businesses is always at the heart of my approach to politics … and I can assure everyone here that entrepreneurs are central to the vision of One Nation Labour too.

Labour is clear that we want to see more people starting, leading and working in business across all parts of Britain, spurring private sector growth – and we have been energetically pursuing this goal: we’ve set up an entrepreneurs’ network – NG: Next Generation – to support and showcase the best of British innovation, new business ideas and inspirational business leaders. We helped establish Small Business Saturday, which saw £500m of spending driven into the pockets of small firms last year. Through our future candidates programme, we’ve actively encouraged those with business backgrounds to stand for election. We have entrepreneurs standing for Labour in key seats such as Victoria Groulef in Reading, James Frifth in Bury, and Kate Godfrey in Stafford.

Key planks of Labour’s policy development process have been led by business people such as our Small Business Taskforce; Jaguar Land Rover’s Executive Director Mike Wright leading a review on strengthening manufacturing supply chains; and Sir George Cox’s on tackling short termism. And we’ve engaged with thousands of businesses and business organisations across the country on our policies.

So we are clear that in order to tackle the economic problems our country still faces we need a private sector led recovery for all.

Business support has a vital role to play.  Strong support is crucial at every stage of an entrepreneur’s lifecycle – from helping them to set up, to giving them the tools to succeed, or at a more basic level letting them know early if their business plan is simply not viable.

The approach of the current government is to leave business support to the market.  This has an advantage, in allowing some excellent practice to develop.  However, it also has a major disadvantage in that the extent of this practice is far from universal.  This in effect leads to a situation where those regions and industries which are already the best networked and integrated are then able to access the best support, and those which most need an additional helping hand cannot find the support they need.

For example, on business lending, data published jointly by the British Bankers’ Association and the Council for Mortgage Lenders has revealed the unequal nature of bank lending in each region.

As ever, London and the South faired best.  £2,647 was lent to businesses per head of population in London, the most successful region, closely followed by the South West were £2,082 was lent per head of population.  This is double what was lent to business per head of population in the North East region (£1,182) and East Midlands (£1,211).

Now, I would argue that it is the responsibility of a One Nation government to address this imbalance, but unfortunately government lending schemes have only exacerbated the problem.

The first £50m lent under the government’s flagship “Start-up Loans” scheme benefited 10,000 companies.  However, this money was not distributed evenly.  44% of this went to London and the South East whilst just 5% went to the North East.

Entrepreneurs in areas with a huge potential for growth are crying out for support but are finding that unless you live in an area which is already coping with the recession better than most the government’s door is shut to them.

The same pattern can be seen in the case of business mentoring.  The government’s MentorsMe programme was designed to overcome the abolition of Business Links by matching a generation of mentors to burgeoning businesses.

But demand has lagged far behind supply.  Just 17% of those contacting MentorsMe do so in order to find a mentor, while 67% wanted to become a mentor.  Those who are already connected to government and to other businesses are more likely to take part in these schemes.  This was not helped by the fact that the first meeting of mentors was held not in Middlesborough, Milton Keynes or Margate, but in BIS HQ in Whitehall.

So I do believe there is a role to ensure access to high quality support.  This does not mean for a moment that government should be producing all of this support and that civil servants should be telling business people how to operate in the private sector.  But government has a real responsibility to deliver quality and universal business support in the same way it would health or education.

This is one of the motivations behind Labour’s commitment to create a British Small Business Administration.  Currently, none of the fifteen civil servants reporting directly to the BIS permanent secretary is responsible for small businesses and entrepreneurs.

By contrast, the head of the US Small Business Administration – a team at the heart of the US government that promotes the interests of small businesses across government – reports directly to the President and 45% of US Federal procurement spend is mandated to go to US small businesses.

To catch up with our competitors and to ensure that the next Labour government is the best customer it can be to our small businesses we will establish our own Small Business Administration at the heart of government, something organisations like the Federation of Small Businesses have long campaigned for.

But we know that support alone is not enough.  The money also needs to be there to back it up.  Entrepreneurs who want to start out, or to grow their small business consistently tell me that their biggest barrier is the reluctance of banks to lend.  Recent figures from the Bank of England show that in the last quarter lending to small business has fallen by £900m

Rather than continuing to tinker around the edges of this problem, Labour’s solution is truly transformative.  Around 90% of the UK’s five million small businesses are locked into just five big banks, who lend on roughly the same criteria. It’s not uncommon to hear about entrepreneurs rejected by each of these in turn.

By contrast, our prime European competitor, Germany, actually increased lending during the global downturn.

They achieved this because of the existence of Sparkassen.  These are commercial banks, but they are also established with state backing.  They return a profit to shareholders but are confined to a specified region and have a legal responsibility to promote local economic growth.

When I visited Germany I was struck by the pride and faith ordinary savers, businesses and entrepreneurs have in their Sparkassen.  They talk about these banks in the same terms a British person might talk about the NHS or the BBC.

It was also apparent as soon as you step into a local branch that these are banks run on a different basis from many closer to home.  I met local bank managers who are intimately attuned to their local economies and have the autonomy and the authority to lend significant sums to entrepreneurs whom they feel will succeed in their town, community or region.

Of course the Sparkassen have a long tradition in Germany and are ingrained into its federal structure.  It would be impossible to exactly replicate the model in this country.

But its key principles – permanency through state backing; a core duty to support growth and innovation within a defined geographic area; and professionalism with real banking experts that understand their local customers and communities – could be transferred to a British context.  Examples such as the Bank of Salford, which lends to businesses and consumers within the City of Salford, highlight the potential of this transformative model.

A working group, dominated not by politicians, but by those with real experience in the field, are currently taking this forward on our behalf.

Likewise, the next Labour government has a clear plan to tackle the scourge of later payments, which are a barrier to business survival and growth.  The latest figures published by BACs reveal how big a problem late payments have become:

  • Britain’s small businesses now carry a burden of £39.4 billion in overdue payment they are owed;
  • Sixty per cent of Britain’s small businesses report that late payment is a problem with the average small business waiting for £38,186 in overdue payments;
  • One in four companies spend over 10 hours a week chasing late payments.
  • Over 2,500 firms a year go bust simply because they have not received monies owed to them.

A series of voluntary initiatives have failed to bring about the culture change required so Labour’s new approach will lift the onus on small firms to pursue large business customers to pay interest and create a reporting regime that will force late payers to self report and automatically pay interest to their suppliers in the event of late payments.

We would ensure that the largest companies in Britain complete a quarterly report – in the same manner as a VAT return – listing all of their late payments to smaller suppliers.  Where companies have paid late they will be required to pay interest of 8% APR above the Bank of England base rate to the supplier or face fines of up to £10,000.  Small business currently have the right to claim interest, but just 10% of businesses report even considering taking this option despite 22% of businesses having ended a business relationship with a customer because of continued late payment.

Unfortunately small businesses are often reluctant to report issues of late payment as they rely on the custom of the large businesses for their very existence.  Our approach crucially shifted this balance so that large businesses will pay on time or face automatic sanctions.

This plan is ready to go.  I tabled an amendment to the Small Business Bill last month to deliver the change now.  Unfortunately the government voted it but I am more determined than ever to get into government to see it through.

These ideas sit alongside Labour’s plans to cut business rates for small businesses and freeze energy prices to put money back into small business coffers.  But such measures can only help those who have already been bitten by the enterprise bug.

I believe it is also a crucial task for government to create an environment where an entrepreneurial career path is accessible and normal.  Previous efforts to improve social mobility have perhaps overly focused on the professions, when entrepreneurialism can also be a great path to prosperity.

This is why Labour’s Waltham Forest Council is pioneering a scheme which places an entrepreneur or business owner on the board of governors at each local school.  These aren’t just another governor but have a specific entrepreneurial remit to ensure that pupils are exposed to this exciting career path early in life.  The national Labour Party is encouraging more Councils to roll out such a scheme across the country and our commitment to give parents of primary school children guaranteed access to childcare from 8am-6pm is partly aimed at helping people from all backgrounds to find the space to pursue entrepreneurial projects.

I hope the broad overview I have just provided has been helpful and you can see that we have a suite of active policies to support small businesses at every stage of their development.

As innovators and challengers of tired orthodoxies I see entrepreneurs as Labour’s natural allies.  I hope the broad overview I have just provided has been helpful and you can see that we have a suite of active policies to support small businesses at every stage of their development.

I have no doubt Labour is fulfilling Ed Miliband’s vision to become the Party of enterprise and small business and would be delighted to discuss any of the ideas I have just touched upon in greater detail.  Thank you very much for listening.

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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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