SMEs are responsible for 60 per cent of Britain’s jobs and half of GDP. Sixty-six per cent of SMEs are ambitious to grow within two to three years but only 20 per cent expand their workforce each year.
Today’s Summit for Small Business in London, hosted by small business minister Mark Prisk, saw the government commit to the Enterprise Finance Guarantee (EFG) for the next four years, making around £2bn available to viable small companies without a credit history or collateral. It will also be easier for small and specialist lenders, such as Community Development Finance Institutions to lend under EFG.
Similarly, the government will commit a further £200m to Enterprise Capital Funds supporting equity investments in the highest growth-potential businesses over four years. The first of the new funds are expected to be invested early in the new year.
To encourage ‘business angel’ investments government has welcomed a joint bid of business angels and the government’s SME investment arm, Capital for Enterprise, for a co-investment fund as part of the Regional Growth Fund to support investments into early-stage SMEs.
In July a green paper entitled Financing a Private Sector Recovery was launched and received more than 180 submissions.
Chief executive officers and senior representatives of the six largest UK banks - Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander, and Standard Chartered - responded by creating the Business Finance Taskforce. Their recommendations, reiterated today, include the £1.5bn Business Growth Fund, mentoring and a new lending code.
Under today’s proposals a quarter of government contracts are to be awarded to SMEs.
From December 2010 the government will introduce a standardised Pre-Qualification Questionnaire, developed with SMEs through the Federation of Small Businesses and make its use mandatory across central government.
The government also reaffirmed a commitment that 80 per cent of prime contractors are paid within five working days. All government contractors will be required to pay their suppliers within 30 days. For central government construction contracts, the commitment to payment within 30 days has been made a contractual requirement and applies through the supply chain.