£350m SMEs lifeline welcomed in North

Oct 22 2008 by Karen Dent, The Journal

SMALL business leaders in the North East have welcomed a £350m package of measures designed to help them weather the economic storm.

And chief executives of leading banks have been summoned to a meeting tomorrow with the Government in the latest move to help small firms cope with the economic downturn.

New Business Secretary Lord Mandelson said the meeting aimed to impress on bankers the importance of continuing to lend to smaller firms at “competitive” rates similar to those offered last year.

The Government said its package directly targeted issues small businesses had highlighted including access to credit, cashflow problems and staff training to boost productivity. The package pledged £350m to improve skills by making training simpler to access.

A free business health check will be available via Business Link to identify potential issues at an early stage.

The Government itself is taking a lead on the problem of late payments to suppliers by pledging to settle bills in 10 days.

This latest initiative also aims to help with cashflow by putting businesses in touch with the Institute of Credit Management to seek advice on financial issues.

Lord Mandelson, said: “We are on the side of small and medium-sized businesses and understand that they are facing tough times.

“We want to help smaller businesses to plan for the difficult times ahead. We want to ensure that they are healthy enough to survive and come out strongly at the other side.”

The action follows regional initiatives for SMEs including negotiations for a £125m European investment fund and an emergency £10m support package put together by One North East.

Last week’s public £37bn banking bailout came with conditions that banks restore lending to SMEs to 2007 levels and maintain the availability of competitively priced lending, aiming to free up access to credit.

ONE has also agreed to pay suppliers within the 10-day time frame. The Government wants NHS Trusts, local councils and public sector employers to follow suit.

The Federation of Small Businesses said it was delighted the Government was “finally starting to act”. Colin Stratton, FSB regional chairman, said: “We are particularly pleased with the Government’s proposal to pay bills to small businesses within 10 days. To this end we have also written to local authorities urging them to undertake similar measures and to pay their small business suppliers as early as possible.

“This is not to say that the Government cannot go further - plans for a VAT holiday would provide welcome relief to the UK’s 4.7 million small businesses who are struggling with rising costs.”

Andrew Sugden, policy and membership director at the NECC, said: “The Government is leading by example by the payment terms for small businesses. It’s even more important in the North East because we’ve got a bigger public sector than other areas.”

Case study

THE high level of public sector business in the North East makes the 10-day payment pledge a particularly important part of the package.

Although small firms may complain in private about late payments, many are afraid to speak out in case they lose out on future tenders.

Kate Partridge, director of North East networking organisation the Bridge Club Ltd, admits her business has not always received payments within the previous 30-day window.

She welcomed the 10-day promise but is unsure whether it will work in practice. “It will be brilliant if they stick to it. But based on previous experience and doing contracts saying invoices should be paid in 30 days, what is written on paper is very different to what happens in real life.”

Partridge said the Government’s offers of advice to hard-pressed firms may not be taken up because businesses are not keen to discuss financial problems with organisations they did not know.

“Things like that are still very much relationship and trust-based. We work with people we know, and we can call them any time,” she said.