Set to grow: could this be year of the regional SME?

The North East's business community share their views on proposed Government measures to help SMEs

James Ramsbotham, chief executive, NECC
James Ramsbotham, chief executive, NECC

If the Government is to be believed – and who would have reason to doubt politicians? – 2014 is the year it pays to run an SME.

As far back as the Autumn Statement in December, the Chancellor was setting out his stall as friend to the small business and foe to that long-loathed bureaucracy.

Last month, Prime Minister David Cameron reinforced the message, addressing the Federation of Small Businesses on the importance of its members to the economy, and outlining measures to make their lives easier.

To FSB North East regional chairman Ted Salmon it was a “historic moment”.

“Small businesses point to the burden of complying with regulation as a major barrier to growth and the work done to cut red tape will help,” he said.

“Importantly, Government should ensure when changes are made, they are done properly and with North East small businesses in mind.”

On the face of it, it’s hard to see how the region could not benefit.

Among the initiatives being proposed is a £1.1bn package of business rates measures, with extra relief available for small firms through the extended doubling of the Small Business Rate Relief.

A further £30m programme, then, will see 20,000 small businesses receiving up to £2,000 each to help them access specialist support on hiring, financial management and marketing. Other measures include reductions in National Insurance Contributions, the cancellation of the fuel duty rise, broadband vouchers and help for firms looking to export.

Since 2011, the Government has also identified more than 3,000 regulations for either scrapping or improvement through its Red Tape Challenge.

“Small businesses are responsible for nearly half the job creation in the UK,” said Enterprise and Skills Minister Matthew Hancock.

“That’s why we must continue our drive to provide the support they need to scale up, move into new markets and hire more staff so that they can compete in the global race.”

As many small business owners will attest, though, being the little guy is rarely plain sailing.

It seems only reasonable to ask, therefore: will the Government’s approach have a notable impact on the five-man tech start-up in Newcastle, or the country pub in Northumberland?

Or is it a matter of looking good on paper, but falling short when put to the test?

To Dr Lee Pugalis, head of the Entrepreneurship Research Group at Northumbria University, the latter seems more likely.

“As with most ministerial policy pledges, rhetoric tends to far exceed reality,” he said.

“This latest raft of measures is likely to have only a tangential impact on the growth of enterprise and business.”

Chief executive of the North East Chamber of Commerce James Ramsbotham, meanwhile, welcomed the spirit of the Prime Minister’s approach, but suggested more needed to be done.

“SMEs are not only the lifeblood of the economy as it is, but are crucial for the economy’s future,” he said.

“They are incredibly important and a major part of everyone’s supply chains. There are still too many policies that only work well for big businesses, not small ones.”

He gave the example of Employer Ownership of Skills, an initiative that means employers – rather than the college involved – receive money directly to fund apprentices through their courses.

“The Government did a pilot of this,” Ramsbotham said.

Founders of Dinedout.co.uk, Andrew Charlton, left, and Liam Charlton
Founders of Dinedout.co.uk, Andrew Charlton, left, and Liam Charlton
 

“But they did it with two of the biggest employers in the region – two multinationals – before suggesting it would work for small businesses.

“Those small businesses would say it’s far too difficult and as a result, they won’t take on apprentices at all.”

Initiatives designed for parents to split maternity and paternity leave to their own liking, and a measure to enable employees take time off to contribute to the reserve forces, were similarly problematic when implemented in a blanket fashion.

Amanda Vigar, managing partner of chartered accountants and tax advisers V&A Vigar (Darlington) LLP likewise suggested the proposed minimum wage rise could do more harm than good if not carefully implemented.

“Only recently has the Chancellor George Osborne called for a hike in the national minimum wage to £7 to ‘compensate low-income workers for the economic crisis’,”she said.

“Of course, I’d love for everyone to be paid a living wage, but now is certainly not the time to be saddling SMEs with unrealistic additional costs. Smaller businesses should be supported and encouraged to grow while still giving lower-paid earners more in their pockets.

“I’d recommend taking more earners out of tax and National Insurance contributions, particularly employers.”

It’s familiar territory for Vigar, who pens the irreverent Business Battle-axe blog, taking on bureaucracy with a no-holds-barred style that radiates passion for region’s business community.

North East SMEs, she says, feel like a “forgotten army, powering the economy, creating jobs and prosperity, but remaining ‘unthanked’ for that vital job”.

While pleased the Prime Minister has created a task force to help SMEs, Vigar believes the measures do not go far enough. Every day, she says, she hears from “disgruntled and hugely frustrated” small business owners fed up with “HMRC ineptitude” and a clunky, overly-complicated tax system.

“The Government should listen to what businesses actually want and need,” Vigar added.

“Its Prompt Payment plan failed because it didn’t have any teeth.

“What’s needed to tackle late payment is a register naming and shaming persistent late payers.”

Indeed, a director at one North East manufacturing firm told The Journal that, despite numerous pledges from Government to tackle the issue, her business was still regularly hit by lengthy delays in payments from main contractors.

The same businesswoman was likewise critical of the “excessively high” interest rates charged by fund management companies.

According to 21-year-old Liam Charlton, who recently set up Dinedout.co.uk – a comparison and booking website for restaurant offers – with his cousin Andrew Charlton, part of the problem lies with a London-centric approach to growing the economy.

While even a small grant would have helped the business get off the ground, the young entrepreneurs found themselves going it alone, until receiving valuable help from Northumbria University, where they both studied, and eventually from mentor and venture capitalist John Tait, who has been a “fantastic” help.

Which is more than can be said about the banks.

“They’re terrible,” said Elaine Warburton OBE, chief executive of Newcastle biotech firm, QuantuMDx, which is currently trialling a ‘handheld laboratory’ that could have huge implications for the eradication of malaria and other diseases.

“The banks do not support SMEs in any shape or form and only want to take money from them. This is a global disgrace as far I’m concerned.”

Warburton, however, accepts that both this government and the one before it have introduced some reforms that have proved genuinely useful.

Changes in the tax system, the availability of major grant funding, incentives for angel investors and an apparent deep level of understanding at HMRC when it came to the odd hiccup in cashflow had all made a positive difference.

“I don’t mind saying that Cameron has got it right,” she added.

“And my sense is that things are on the up. The SMEs I speak to in the biotech world are feeling a lot more buoyant and positive about the future.

“There’s a sense of excitement – it’s not this dark, awful place – and when you speak to people in Government, you realise they see SMEs as the only way to really kickstart the economy.”

Chairman of the Entrepreneurs’ Forum, Nigel Mills, agreed, pointing out that the organisation’s most recent quarterly survey had shown its members – most of which are SMEs – were “extremely optimistic” at the moment, with around 70% seeing business growth.

And while the banks may not be co-operating, there were now all kinds of funding sources available in the North East, with companies embracing everything from crowd funding to the £30m Let’s Grow pot, supported by The Journal, the Evening Gazette, BE Group and UNW.

“Anything that paves the way for making life easier for SMEs is welcome,” Mills said.

“Whether the Government’s measures will achieve that, of course, is another matter.

“It’s not one single measure that will make a difference, but a combination, and, for me, the most important thing is that we keep the message positive.”

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