Here are 5 of the most important ways in which the UK government is supporting SME growth around the country. A vast majority of businesses in the UK fall into the small to medium-sized enterprise (SME) category and few people would doubt the extent to which their prospects are linked to the potential for growth in the wider economy. Without a vibrant and optimistic SME sector, any economy will struggle to sustain any measure of expansion and to continue creating jobs.
Here are 5 of the most important ways in which the UK government aims to support and encourage SME growth around the country:
1 – Opening up SME access to public procurementPerhaps the most direct way in which the government seeks to support SMEs is through the procurement system, which has been reformed in recent years in an effort to make it much more accessible to smaller companies. The government procures roughly £230 billion worth of services from third party vendors every year and until recently it was very difficult indeed for SMEs to access any part of that or to compete with large companies in that context.
Key reforms aimed at opening up more SME access to public service contracts have included the elimination of pre-qualification questionnaires for deals worth less than £100,000 and the insistence upon greater transparency around advertising and the allocation of all public contracts. Individual government departments also now have to reveal just how many of the contracts they sign with service providers involve SMEs.
2 – Employment allowancesIn an effort to encourage small businesses to take on new employees and pursue growth, the government announced in April 2014 that every company in the UK would be entitled to a £2,000 Employment Allowance. The allowance enables mostly small businesses to reduce their National Insurance Contributions and in many cases avoid having to pay any at all for the year. According to the government’s own estimates, over a million companies with fewer than 250 employees will benefit from the allowance in 2014-15 tax year.
3 – Support, advice and resourcesA key aspect of the government’s strategy around encouraging start-up and SME growth is its provision of support, advice and online resources. The website Great Business is one such resource, which is designed to give entrepreneurs and SME bosses access to information, guides and case studies that might help them pursue their ambitions. The site is officially backed by the government, as is its Business Support Helpline, which allows business men and women around the country to speak directly to an expert advisor on issues relevant to SMEs and their development.
4 – Creation of a ‘prompt payment code’Anyone who has every created a company or operated as a small scale service provider in any industry will understand the importance of being paid on time and as promptly as possible. Indeed, failing to maintain cash flows can be the difference between survival and insolvency as far as many SMEs in the UK and around the world are concerned. With this in mind and in collaboration with a variety of business groups, the government has drawn up and invited signatories to the Prompt Payment Code, which is now administered by the Institute of Credit Management. The code is designed to encourage organisations of all kinds to pay SME service providers on time and in line with pre-agreed terms, and also to encourage SMEs themselves to become more aware of their rights when their invoices go unpaid.
5 – Alternative finance proposalsFew, if any, issues more greatly concern SMEs than access to finance. Traditionally, funding and finance have typically only been sought by applying for loans or other lines of credit from familiar banking institutions. However, in the future, more and more SMEs will be funded in alternative ways and through processes such as invoice factoring, peer-to-peer lending and asset refinancing.
It’s no secret that traditional lenders have retreated from the SME sector in large part in recent years, much to the frustration of the government, which has long been seeking to encourage banks to lend more readily to viable small businesses. The government’s latest efforts to improve matters in this context recently saw legislation drafted that will oblige banks to point their rejected SME loan customers in the direction of alternative funding options and information on finance providers available outside the mainstream.
A thriving SME sector is what virtually every government would want and certainly the UK’s coalition is no exception. Making sure small companies can access finance and find a way to flourish is not easy but it is vitally important to our economy that efforts to that end should continue to be made. Above are 5 important ways the government is aiming to support SME growth around the country but hopefully this list will be added to and expanded upon considerably in years to come.
Conrad Ford is the founder of Funding Options, which provides a range of online tools to help firms and their trusted advisers to manage funding and cash flow.