Memorandum from the Confederation of British
1. All businesses look to the Government
to provide a competitive tax regime, a stable economy, a highly
skilled pool of labour and a sound infrastructure. However, growing
businesses also look to the Government to provide an environment
which encourages and enables them to grow.
2. In particular, funding needs to be readily
available and affordable. Without access to appropriate finance
small businesses will be unable to develop the opportunities for
innovation and growth. Ultimately over 40 per cent of GDP in the
UK is from the SME sector and future economic growth is dependent
on their success. A growth in the availability of risk capital
will increase entrepreneurial activity and enable more businesses
to fund growth strategies.
3. SMALL FIRMS
The Small Firms Loan Guarantee Scheme (SFLGS)
guarantees loans from the banks and other financial institutions
for small firms that have viable business proposals but who have
tried and failed to get a conventional loan because of a lack
Loans are available for periods between two
and 10 years on sums up to £250,000.
The scheme coverage has recently expanded by
removing sector exclusions for Retailing, Catering, Coal, Hairdressing
and Beauty Parlours, House and Estate Agents, Libraries, Museums
and Cultural Activities, Motor Vehicle Repair and Servicing, Steel
and Travel Agents. The maximum turnover level for non-manufacturing
businesses was also increased from £1.5 million to £3
The CBI is a strong supporter of the SFLGS.
It continues to plug a funding gap for many new and smaller businesses
and has successfully facilitated growth and created jobs where
no other financing alternative has been available.
Recently, the CBI has put together a number
of recommendations that we believe would further improve the Scheme:
(i) increasing the £5 million turnover
limit for manufacturers;
(ii) changing the maximum loan attributed
to an individual from £250,000 over 10 years, to a maximum
loan outstanding at any one time of £250,000which
builds the government's efforts in the Enterprise Bill to foster
a "serial entrepreneur" culture;
(iii) being imaginative in the review of
"approved lenders" to include lenders such as those
offering invoice discounting who could put together integrated
4. REGIONAL VENTURE
In partnership with the European Investment
Fund and other private sector investors, the Government has set
up funds in each of the nine English Regions to provide venture
capital of up to £500,000.
These funds specialise in the provision of small
scale equity to businesses with growth potential. They are intended
to increase the provision of equity of smaller amounts to SMEs.
Although relatively new, the CBI believes that
these funds will help to bridge the equity gap often faced by
local smaller firms.
5. NATIONAL BUSINESS
National Business Angels Network (NBAN) is a
not-for-profit company, which is sponsored by major financial
institutions and supported by the DTI.
NBAN offers a service sourcing risk capital
for small and medium businesses, which is supplied by private
investors in return for shares in the business.
The network helps companies with growth potential
looking for capital to grow.
6. VENTURE CAPITAL
The Venture Capital Trust scheme started in
1995, and is designed to encourage individuals to invest indirectly
in a range of small higher-risk trading companies whose shares
and securities are not listed on a recognised stock exchange.
The trusts have become established as important
sources of finance for many growing firms.
7. PHOENIX FUND
The Phoenix Fund is designed to encourage entrepreneurship
in disadvantaged areas. It helps new businesses by providing assistance
to business support providers and finance to Community Development
The Phoenix Fund currently includes a development
fund to promote innovative ways of supporting enterprise in deprived
It also provides capital, revenue and loan guarantee
support for Community Development Finance Institutions (CDFIs).
CDFIs create venture capital funds for SMEs
in disadvantaged communities.
8. FUNDING GAP
The CBI believes that the various products outlined
above play an important role in providing smaller growing companies
with the finance that they require.
However, despite the growth of formal and informal
venture capital, not all businesses with growth potential can
access the risk capital they need.
This "funding gap" continues to increase
in size as traditional venture capital firms look for bigger deals
and in the current economic climate Banks are cautious of new
The CBI has identified this gap in funding to
be for finance within the range of £250,000 to £3 million.
The UK government wants all adults to have the
opportunity to gain a qualification equivalent to five GCSEs (NVQ
level 2) and sees a key role for businesses in offering such training
or in providing time off for training.
It is seeking ways of encouraging small businesses
to train their staff formally and to provide them with opportunities
to gain qualifications.
Current initiatives being piloted include company
learning accounts, regional pilots drawing together business support
services and employer training pilots testing the effects of compensating
employers for offering time off for training.
Support for gaining Investors in People is now
available for small firms across the country.
The government must recognise that motivation
to train comes from owner-managers recognising its business benefits.
Informal learning methods can be more relevant, effective and
cost-efficient and so should not be ignored. Help with diagnosing
training needs, a one-stop-shop for information on the availability
of training and effective support through business networks and
mentoring is crucial. High quality, tailored and affordable training
must also become the norm for all colleges.
Raising productivity in the UK is a key aim
of the UK Government and management capability is rising up their
The UK Government has accepted that informal
learning is valuable for managers and that business relevant support
is needed, particularly for small firms. But it has not explained
how proposals for benchmarking the UK's management and leadership
internationally will add value.
High quality management is essential for a business
to maximise its performance. But there are many other factors
that combine to influence productivity levels, such as the regulatory
environment, workforce skills, transport infrastructure, planning,
innovation and macroeconomic stability. National studies of productivity
suggest a UK productivity gap, but businesses with plants in the
UK and in competitor countries do not find that productivity in
the UK is lower.
The CBI is lobbying the Government to take forward
many of the Council for Excellence in Management's (CEML) recommendations,
but will seek to ensure that the current focus on management qualifications
and on formal uptake of initiatives is replaced with an emphasis
The Business Improvement Tool for Entrepreneurs
produced by the CEML encourages owner-managers to think about
the broader problems their business faces and new ways these could
be tackled. This approach coupled with effective information and
support is the way forward.