The Small Business Service will shortly be publishing a Framework for Government Policy towards small business to ensure that service standards for SMEs are improved across Government.In addition the Government announced a number of measures to help new and growing businesses. The Government will: Extend eligibility for the Small Firms Loan Guarantee Scheme from April 2003. The changes will mean that even more small businesses can benefit from the scheme, making a real difference to those that find it difficult to obtain bank finance. The move will especially help businesses within ethnic minority groups who tend to operate many businesses in the new participating sectors.
Dedicate 75 million over 3 years to promoting enterprise education in secondary schools and colleges, following the Davies Report. Help small businesses and intermediaries understand and access different finance options. 'Investment Readiness' demonstration projects are currently being piloted around England. This form of support will be evaluated and, if successful, will be made more widely across England.
Introduce a single web portal built around business customer needs, which will bring together information on government services and requirements, and allow businesses to carry out some transactions with the Government online. Introduce tailored enterprise shows, developed with the RDAs and private sector partners, to encourage potential and existing entrepreneurs by bringing together under one roof information on how to start a business.
Bring out a new Start-Up Guide, to be launched in Spring next year, which will set out clearly what the legal requirements are for starting a business and give details of resources for support and advice that are available. Work with RDAs in the North West, East Midlands and West Midlands to develop pilots of RDA management and co-ordination of business support services.
The role of small firms in creating the entrepreneurial economy It is now widely acknowledged small firms are a source of dynamism, wealth creation and employment. As such, they have not only made a significant and direct contribution to UK growth in the last 10 years but also to the development of a more flexible labour market, and the introduction of new technology and ideas.
Market failures in the provision of finance to small firms could potentially, therefore, have far reaching consequences for economic performance. All firms need to work hard to overcome the information asymmetry which is inherent in any bank lending relationship, but which is especially challenging perhaps for the small company sector. While market failures in provision of small company finance will never wholly be removed, there is very little evidence to show that at least in the United Kingdom they are important in practice today. Nonetheless, it can only be helpful to improve the flow of information between business owners and finance providers, thereby ensuring a better appreciation by both of the relevant risks and rewards attached to particular business plans.
The Bank has long been interested in the financing needs of small and medium sized enterprises. Going back some way, an example of the Bank's early involvement was our instrumental role following the Second World War in the formation of the Industrial and Commercial Finance Corporation – which evolved into 3i. We would not have described that then as seeking to promote the entrepreneurial economy, but that is precisely what it was. Our role has, of course, evolved since then, in particular highlighting the importance of information sharing and increased understanding between the relevant parties.
The Governor has, since 1993, hosted an annual meeting bringing together some of the key players in the SME market. Finance providers, policy makers, business representatives and advisers join together to discuss the key issues relating to the financing of small firms. The main themes to arise from these meetings are published, under the editorship of Adrian Piper and his team, in our annual reports on 'Finance for Small Firms'. The seventh such report was published in January this year. One of the most encouraging trends we have been able to report during these seven years has been the improved relationship between banks and their small business customers.
Research by the Forum Of Private Business shows that the performance of the banks had improved significantly since 1992. The improvement is the result of a number of factors, for instance the implementation by the banks of codes of practice and the increased emphasis on training relationship managers to understand the specific challenges faced by small businesses. There is, of course, always room for improvement, but the increased degree of information sharing and trust has been notable. The reports have mapped other positive developments – for instance, a changed balance between term lending and overdrafts.
BT recognises that SMEs play a vital role in eBusiness but need guidance and encouragement to understand the issues and adopt the technology. Larger organisations, whilst having the resource to evaluate and adopt eBusiness technologies, find themselves hampered by the difficulty of linking together major computer systems and changing traditional organisational or marketing practices rapidly.
SMEs, on the other hand, can combine entrepreneurial flair with commercial agility and remain unhampered by major systems integration issues. The US experience has also shown that whilst large corporates 'downsize' and outsource business functions in response to eBusiness, this can be more than compensated for by growth in employment in SMEs, particularly in the business services and hi-tech sectors. SMEs have been the lead eBusiness adopters and the engine for sustained economic and employment growth.
In the UK, whilst the economic conditions appear ripe for eBusiness adoption with relatively open markets, start-up incentives and healthy competition, one major factor continues to disadvantage us – attitude. Successive research amongst UK businesses has uncovered low awareness of the likely risks and rewards presented by eBusiness and a 'wait and see' attitude towards adoption – a stark contrast to the more informed and positive attitudes in most other European countries. If unchanged, the UK's refusal to recognise how eBusiness could boost our prospects could seriously harm our global competitiveness.
BT shares the desire of the UK Government that British companies, and in particular SMEs, understand and benefit from the opportunities created by eBusiness. BT's vision for eBusiness is: "To lead the development of a flourishing networked economy in which organisations and people communicate, interact and transact electronically, and to guide businesses to grow and benefit from eBusiness"