UK government needs to help small business grow, says FPB

A business support and lobby group has urged the UK government to help small firms grow when Britain’s economy begins to pick up.
 

A business support and lobby group has urged the UK government to help small firms grow when Britain’s economy begins to pick up.
 
The Forum of Private Business believes that struggling smaller businesses could be unable to expand and cope with an upturn in trading as the country heads out of recession.
 
As a result, it is arguing that the government needs to ensure both private and public funding is available to help small and medium-sized enterprises develop in the event of an economic upturn.
 
The FPB made the comments in a submission to the Rowlands Growth Capital Review, which is asking whether state intervention will be needed to help SMEs access the capital they need after the recession ends.
 
The Rowlands Review is being led by venture capital expert Christopher Rowlands and is investigating whether intervention, such as a modern version of the Industrial and Commercial Finance Corporation, could help to enhance long-term growth among smaller businesses in the near future.
 
A lack of finance has been one of the main problems facing FPB members during the recession, with many reporting that their banks are either unwilling to lend, or are doing so at prohibitive rates of interest.
 
The problem was this week highlighted by Chancellor Alistair Darling and is often compounded by late payment practices employed by larger organisations. The FPB is warning it could leave small businesses unable to cope with an increase in orders for their services or products as the economy improves.
 
Noel Guilford, the national chairman of the FPB, says: ‘Small firms are finding access to finance a huge problem and the smallest firms are finding it almost impossible to raise bank finance.
 
‘This is a problem that will get worse as the economy climbs out of recession. It is a fact that more small firms go out of business coming out of a recession that going in. Most small firms have cut costs, including owners’ remuneration, reduced their working capital needs and eliminated capital expenditure. There is no more they can cut.
 
"As demand increases they will take on more staff and sell more on credit, increasing their working capital needs. The demand for credit will increase but unless banks can respond, businesses will run out of cash to pay suppliers and staff.’
 
In its response to the Rowlands Review, the FPB said that there was a significant demand for longer-term finance to be provided to SMEs. The submission argued that the project should not rely on either public or private funds but that there should be a holistic approach to solving the problem.
 
The Rowlands Review is due to report back in the autumn and its recommendations are set to be included in the forthcoming Pre-Budget Report.