Small firms can have real punch

In the US they call it the small firms’ best friend. The Small Business Administration (SBA) is the US government agency that has successfully championed the interests of US entrepreneurs since the early 1950s. It has become one of the best partners any owner-manager could wish for a loan guarantor; a high-value, high-volume provider of […]

In the US they call it the small firms’ best friend. The Small Business Administration (SBA) is the US government agency that has successfully championed the interests of US entrepreneurs since the early 1950s.

It has become one of the best partners any owner-manager could wish for a loan guarantor; a high-value, high-volume provider of venture capital; a major source of management, technical and legal support; and, critically, the advocate for small and medium-sized companies in government with the profile, the power and the legal provision to battle the cause for US small firms.

So there it was, one of the tastier fruits of Gordon Brown’s recent Budget: the announcement that the UK government plans to create a new £100m Small Businesses Service (SBS), likely to be modelled on the US example and set to start by the autumn.

The British Chambers of Commerce (BCC) was the only business organisation to have called for such an agency in the swathe of Budget submissions sent to the Chancellor. It recognised the great need for a clear and accountable business support structure that roots the interests of small firms at the heart of government.

Trade and Industry Secretary Stephen Byers and Education and Employment Secretary David Blunkett each made statements on the SBS following the Chancellor’s speech. They underlined a growing commitment across government to give enterprise the priority it deserves, and to ‘think small first’ in any policy area that has impact on business. The SBS could provide an active focus for this.

The new service is intended to ‘act as a strong voice for small business’. But the devil, as ever, is in the detail. When the government consultation is launched in a few weeks’ time, the BCC will campaign vigorously for the SBS not just to be able to shout, but also to bite hard if it needs to.

Clout for the SBS demands courage from New Labour. To reap the dividends we all seek rapid business growth, job creation, a culture of enterprise rooted in the national identity the right investments must be made.

Governments often pay little more than lip service to the small firms’ role as the ‘engine of growth’ in the economy. It remains apparent that the words and the deeds continue to conflict. In the past two years alone, New Labour has introduced over 2,400 regulations, and cancelled just 20. The cumulative cost of compliance, hitting small firms hardest, amounts to around £5bn.

Excessive regulation stifles growth in the very businesses we need to stimulate. The government has so far announced that the SBS is expected to help in some ways a payroll service for smaller companies, use of the internet to file tax returns, and greater support from the Inland Revenue but these measures are paltry when judged against the power the new service could have to relieve red tape.

In the US, the SBA has the muscle to overturn decisions by US government agencies which impact adversely on small firms if they are judged to breach the Regulatory Flexibility Act. The National Regulatory Enforcement Ombudsman, under the auspices of the SBA, runs a programme called RegFair, which draws up league-tables for government agencies’ responsiveness to small business concerns.

Many questions remain as to how the SBS might evolve. Integration of the new service with the existing structures Training and Enterprise Councils, Business Links, the new Regional Development Agencies may have wide implications for the future of business support.

A previous head of the SBA in the US is reported to have said that even after 46 years of perpetual reinvention, the SBA is seeking to improve how it works and what it does. The BCC will have a key role to play in ensuring the SBS follows suit.