We need support from the very top
October 14, 2008
During these extraordinary times of economic difficulty many analysts and commentators have been fixated with stories coming from the City of London, but it is the real economy, the backbone of the country made up of small businesses in towns like Reading, which will help us pull out of it.
As such, the FSB has been busy talking to senior ministers and MPs, along with national and local media, about how small businesses are being affected by the difficult situation the country finds itself in.
John Wright, FSB national chairman, has been busy with national media to ensure this message gets across.
Research conducted by the FSB shows concerns from small business owners that operating costs have gone up in the past 12 months and that small businesses are being treated unfairly by large businesses who are withholding payments for an excessive period of time.
Small businesses are the driving force behind the UK economy. They employ 58 per cent of the private sector workforce and turnover nearly £2.5trillion. It is the work, innovation and sustained growth of the small business sector that will help revive the UK economy and this is the message the FSB has been giving in all corners of the UK.
Not only are small businesses vital to the UK economy, they are also vital to local communities. Without local businesses our communities will not thrive.
Regular readers will know of the FSB Keep Trade Local campaign which calls for a level playing field for small businesses on issues such as public procurement.
During these difficult times it is even more important that local authorities review their procurement policies to ensure they remove barriers that stop small businesses winning contracts.
The FSB also wants to ensure that small businesses do not suffer from a lack of affordable finance, poor regulation and late payments – particularly as the small business sector does not access finance in the same way as large businesses.
Small businesses must be able to tap into many different forms of finance. They have been suffering from excessive operating costs in the past 12 months and have not been given the generous tax reliefs that small businesses in America enjoyed as part of the much publicised bailout plan.
The FSB has found that:
- 55 per cent of small firms use banks (in either loans or overdrafts) as a source of finance.
During these difficult times they will look at using existing overdrafts which are increasing in cost and becoming less flexible. Some small firms have seen their overdraft costs increase from 11.8 per cent to 15.8 per cent.
- 51 per cent of small firms have seen an increase in payment times from invoicing to full payment which is impacting on the daily cash flow of small businesses.
The FSB is urging the government to address these issues.
The announcement by the Government in making available £50 billion to the UK’s top eight banks should be coupled with reassurances from these very same banks that they will extend loans to small business on a normal financial basis.
Small businesses need to be paid on time.
A massive £18.6 billion is the figure put on outstanding payments owed to Britain’s small-to-medium-sized enterprises (SMEs) – a leap of £2.6 billion in the last year.
Government can help by getting all public institutions to pay SMEs on time, not just government departments.
The Government needs to strengthen, promote and increase funding to schemes such as the Small Firms Loan Guarantee scheme and the Enterprise Investment Scheme.
The FSB welcomed the decision to cut interest rates by half of one per cent from five per cent to 4.5 per cent but warned that the cut will only have an effect if the banks follow through and reduce their charges to businesses.
We would also like to see a more flexible approach to lending for small businesses, many of which are facing cash flow difficulties as larger businesses take longer to pay their bills.
Brian Eastman, FSB Reading & West Berkshire chairman, said: “The Government needs to recognise the impact the financial crisis is having on the small businesses that produce or deliver products and services in our communities.
“SMEs employ over half of the private workforce and contribute over 50 per cent of the GDP.
“If the Government is serious about getting out of this crisis, they have to give proper consideration to the needs of the majority of businesses, not just the financial institutions.
“Local authorities also have a role to play. They should be giving consideration to how they can play a part in helping to secure the future of local businesses.”