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Small Business Index

Volume 795: debated on Monday 18 February 2019


Asked by

To ask Her Majesty’s Government what assessment they have made of the findings of the Federation of Small Businesses’ Small Business Index, published on 21 January.

My Lords, the FSB report makes fascinating reading: more than half the businesses answering the survey expect to grow in the next 12 months; nine in 10 businesses do not see access to finance as a barrier to growth; seven out of 10 firms applying for finance got it; and twice as many firms expect to increase investment as those expecting it to decline. This Government’s policies are creating a positive environment for all businesses, large and small.

My Lords, I have been reading the wrong report. As I understand it, the FSB acknowledges that things have got worse, to the extent that it now complains, understandably, that the economy has declined in the last 10 years. Could the Minister address some of the domestic problems that confront small businesses, such as the late payment of commercial debt—which I have been standing here complaining about for so long—and access to finance and skilled workers? In what ways will the Government address the clear difficulties that will accrue from Brexit?

I pay tribute to the noble Lord for the work he has done on the late payment of commercial debt. As he will know, a year ago the Government set up the Small Business Commissioner. In the course of the year that Paul Uppal has been in place, he has managed to recoup £2.1 million in unpaid invoices for businesses, but there is so much more to be done. When I was the finance director of a medium-sized business, large businesses often used every trick in the book to avoid paying small businesses, which is unacceptable. We will work with the commissioner to find ways to develop systems to identify these large companies and make sure that they pay their bills on time.

Is my noble friend aware that there is concern among small businesses because their VAT and other returns have to be totally computerised by 4 April? Against that background, can she assure me and others who know these areas in some depth that there has been sufficient trialling of the software to ensure that it works, and that there is a back-up policy if it does not? The precedent of the rating appeals does not fill one with great confidence.

My noble friend refers to the Making Tax Digital initiative, which was announced in 2015, and he is right that it is due to become mandatory in April of this year. Ninety-eight per cent of businesses already file their VAT returns online; I certainly used to do so and it is by far the easiest way. We are working closely with software industry suppliers to develop sector-specific software to ensure that all businesses can comply. More than 100 products are now available, some of which are free, but I reassure noble Lords that nobody who is unable to go digital will be forced to do so.

My Lords, I have to agree with the noble Lord, Lord Harrison. The Small Business Index paints a dismal picture and late payment is a very big issue for the FSB, which is launching a campaign on it today. But even on government-procured projects, small businesses are still being let down. This could be addressed through project bank accounts, which stop tier 1 suppliers such as the Carillions of this world using smaller suppliers as a piggy bank to assist their own cash flow. The Chancellor promised action in the last Spring Statement. Will the Minister ask him whether this simple step could be implemented in the coming Spring Statement?

The noble Baroness raises a very important point and I will certainly write to her with any further information I have about whether we will set up project bank accounts. Working capital does indeed sometimes get sucked out of small businesses and into large companies, and it is unacceptable. She referred to the report as “dismal” and I have to disagree. I agree with her that it is mixed; however, the annual change in confidence is minus 7.4, compared with an average annual change of minus 8 over the last four years, so we are nowhere near the dreadful situation we were in a few years ago.

My Lords, I pay tribute to my noble friend Lord Harrison and say how good it is to see him back in his place. What message would the Government like to give to small traders in Swindon, who will be damaged incredibly by the Honda decision? Is this the Brexit dividend that the Government promised us?

My noble friend has already referred to the news that came out of Swindon shortly before we came into the Chamber today. From what I have seen to date, it looks as if the closure will happen over a three-year period. The Government will be working very closely with all the suppliers, be they large or small, and with all the employees who may need to find alternative employment over the next few years.

How are the Government getting on in ensuring that all their bills from small businesses are paid extremely promptly?

It is the ambition of government that we pay our bills as promptly, or more promptly, than some large companies do. If I can find any more information as to detailed stats, I will write to my noble friend.

My Lords, I was particularly worried when the noble Lord, Lord Callanan, said that he only knew about Honda as he walked into the Chamber. We also know that the Government were blindsided by Flybmi. It is really alarming that our Government do not seem to know what is happening in their own industries.

Mike Cherry of the FSB also mentioned part of the reason for the dismay. He asked how, two and a half years from Brexit, politicians could allow a situation whereby small businesses have no idea what environment they will be faced with on Brexit day, in less than 10 weeks’ time. We have already heard about the need to extend Article 50. That is not just so this House can consider the legislation; these companies need certainty in time to do the necessary planning.

My Lords, obviously, we are in contact with many of the large employers around the country. The news was breaking as we came into the Chamber. We have had discussions with many of the large employers as we go through this Brexit period. On the noble Baroness’s question about Brexit, there is a significant amount of guidance for businesses on GOV.UK around whether there is a no-deal Brexit. Companies can sign up for updates that are sector-specific. We engage regularly with all sorts of businesses. A business readiness forum, which was set up in January, meets every single week. Thirty organisations attend it, including the FSB.