THEY may not grab the headlines or feature in the ad break at half time but small and medium enterprises (SMEs) are crucial to the UK’s prospects. They are the lifeblood of our economy; employing millions and generating billions of pounds while providing a huge array of services across Sussex from construction to chocolate making.
SMEs are at the cutting edge in fields from fashion to IT and their fast paced innovation and creative thinking will be vital if we are to secure the return to growth and prosperity the UK needs. In the South East we have 745,000 (second only to London) small and medium enterprises; they are the driving force behind the region’s success.
But the Government’s flagship schemes are failing them. The economy is back in recession and bank lending to SMEs has fallen off a cliff. The Bank of England’s latest report stated lending has been falling since late 2009. The market is dysfunctional and this is the time when Government should step in, plug the gap and support small business.
But they are not doing it. The long standing Enterprise Finance Guarantee scheme has stalled with the value of loans offered dropping from £218m in July-September 2009 to £78m in October-December 2012.
George Osborne is now trumpeting a new project; the National Loan Guarantee Scheme. But before it’s even got off the ground serious questions are being asked about whether or not it will be able to deliver.
Steve Hughes of the British Chambers of Commerce even went so far as to say that the scheme would have “little impact” and not be of “material benefit” with the primary outcome being cheaper loans for businesses that could already access finance.
A Treasury committee report said that the National Loan Guarantee Scheme “was not designed to solve the problem that many SMEs who may be reasonable credit risks are unable to access bank funding at all in the current unusual market conditions.”
In short it does little to address the fundamental problems that beset small business. The new support is to be welcomed but unless the Government smooths access and gets to grip with the dysfunctions of the market then its impact will be limited.
Existing finance schemes and new ones alike must be made more flexible and speedier. A huge strength of the SME sector is its variety and fleet footedness - that must be reflected in lending programmes.
If the UK recovers from its current economic slump it will be because small businesses in Sussex and beyond are leading the charge. From political support to accessible finance we must do everything we can to give them the best possible chance.