Give SMEs better access to £230bn public sector contracts, says Lord Young

Easier access to £230 billion worth of public sector contracts and removing the age cap on the Government's Start-Up loans are among a number of measures to boost micro-business growth put forward by the Prime Minister's Enterprise Adviser, Lord Young.

In his second report to David Cameron, the former cabinet minister and businessman highlights the increasing importance that companies which have less than 10 employees and make up 95% of businesses have on the success of the economy and their potential to transform the UK's outlook.

Lord Young recommends a £30m Growth Voucher programme to encourage more small firms to get specialist help on issues such as expanding their workforce; marketing a business; financial management and growing online.

And he proposes the UK's business schools should create stronger links with their local economies. This could take the form of a new national Supporting Small Business Charter and accompanying award scheme to incentivise business schools to help SMEs grow.

It will include advising small firms and increasing the flow of qualified students and graduates into SMEs and business schools becoming a key part of the referral process and provision of Start-Up Loans and Growth Vouchers.

The Report Growing Your Business says that the Start-Up loan scheme helps get business ideas off the ground with an average loan of around £4,500 and mentoring support.

However, It has exceeded expectations by 50% in its first year, with nearly 4,000 loans worth around £16m issued since its launch in the autumn.

He recommends removing the age cap - currently set at 30 - for the scheme, so that all entrepreneurs that would otherwise struggle to secure the necessary finance and support can benefit.

He also recommends legislation to abolish pre qualification questionnaires (PQQ) on contracts under €200k across the public sector, and setting single market principles which suppliers can expect when doing business with the public sector.

This would simplify and standardise the bidding, payment and advertising of contracts, and would remove the inconsistencies of dealing with more than one local authority or public sector body.

Better marketing of Government schemes to support new and developing businesses is needed by ensuring they are properly resourced and targeted at the small firms that need them most.

The Report says that once businesses have a better understanding of their needs, they should be looking for bespoke solutions to drive growth.

However, over 800,000 micro and small firms in the UK have not taken advice from the private sector in the last three years, despite 100,000 recognising a clear need for it.

This includes just 25% of SME employers who rate themselves as strong at accessing external finance and fewer than half (42%) who feel they are strong at introducing new products and services.

Lord Young says SMEs do not access access external help because small firms' awareness of the value of advice to their businesses is low making them reluctant to pay for it. Matters are not helped by the market for accessing advice being fragmented and difficult to navigate.

He notes that small businesses continue to complain that they are unable to access bank finance, but highlights the merger of Peoplefund.it and Crowdfunder to create a much bigger finance portal.

He says: As the popularity of this sector increases, I see many more opportunities for new and growing businesses looking to fund and test innovative new products."

"Growing our smallest businesses would transform our economy - they are the vital 95%" Lord Young says.

"If just half of the UK's micro businesses took on an additional member of staff, unemployment would be reduced to almost zero. We need to raise the aspirations and confidence of these businesses and give them the tools to grow."

Prime Minister David Cameron welcomed the Report saying: "It is very much true that Lord Young brings solutions to the table - his excellent report highlights the steps we can take to fire up business growth, helping to boost our competitiveness and ensuring the UK can get ahead in the fierce global race we are in."

Business Minister Michael Fallon added: "We are supporting ambitious small firms to grow, create jobs and achieve their goals. Whether that's by providing access to mentoring and advice, cutting red tape or through successful schemes like Start-Up Loans.

"But we are determined to go further and faster: Lord Young's important report sets out a series of practical steps that can make a real difference to entrepreneurs across the country."

Hayley Conboy, CBI principal policy adviser for enterprise, said Lord Young had rightly identified that the government "needs to earmark funding to effectively market existing finance and support schemes."

The British Chambers of Commerce said small firms needed support and encouragement. Dr Adam Marshall, director of policy at the BCC said: "Small and micro businesses will only be able to fulfill their full potential once measures are put in place to help them access the finance, skills and services they need to grow.

"Lord Young has identified a number of these measures in his report and we are pleased to see him address the problem of access to finance which is still hurting the growth potential of many firms.

"But the focus must now be on getting these proposals off the ground so they can actually make a real difference to the business community, and in turn, drive the economic recovery."

Read the report here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/198165/growing-your-business-lord-young.pdf

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