Plea for £1bn to keep small businesses afloat

Oct 27 2008 by Karen Dent, The Journal

DEMANDS have been made for an emergency £1bn fund to keep small firms afloat during the economic downturn.

The Federation of Small Businesses said the Government must create a Small Business Survival Fund as a six-month stop-gap to give smaller companies a place where they can turn for support.

The business lobby group made its case in a detailed blueprint, suggesting that its proposal should be funded by scrapping the Small Firms Loan Guarantee scheme and obtaining additional funding from the European Investment bank.

Colin Stratton, the FSB’s North East regional chairman, said: “A lot has been made of the rescue package for big banks, but small businesses are at the heart of our economy, employing just under 60% of the private sector workforce.

“A rescue package for small businesses is crucial to shortening the economic downturn and saving jobs. Small businesses need innovative and decisive action now.”

The Government announced a package of measures last week that were designed to help small businesses weather the economic storm. One of the main features was a pledge from the Government and a number of public sector organisations to pay their bills within 10 days.

The FSB is demanding that those that those that fail to do so should be publicly named, shamed and fined. It pointed out that small firms are owed an average of £30,000 each by larger companies.

It also called on the Government to scrap the subscription fee demanded to use the Supply2.gov.uk website, which advertises smaller public contracts going out to tender. The Government’s own small business rescue package, announced by new Business Secretary Peter Mandelson, also included a £350m for training and other measures to improve cashflow and access to credit.

Lord Mandelson and the Chancellor Alistair Darling also met the chief executives of leading banks at the Treasury last week in an effort to ensure lending and support for small businesses continued despite the credit crunch.

Colin Stratton from the FSB said that the Government was not doing enough to help but the region’s entrepreneurs were managing to survive despite the difficulties they were facing.

“SMEs are fighting hard in the North East and are thriving against all the odds. This shows what a productive region we are part of and exactly how much SMEs bring to the area,” he said.

“The proposed Small Business Survival Fund will, if the Government takes it up, be another boost to small businesses and can only serve to make our sound North East economy, even stronger still.”