Open for business?

By Chuka Umunna MP

The BBC’s Dragons’ Den programme burst on to our screens in 2005. The programme is a serious international brand with versions airing in more than 20 countries. The concept involves budding entrepreneurs pitching business ideas to secure start up finance from a panel of successful business people, the so-called “dragons”. Dragons’ Den success stories include Levi Roots of “Reggae Reggae Sauce” fame, a resident of my borough.

More and more people want to follow Levi’s example, working for themselves, setting up and growing their own businesses. Many realised this dream under Labour in government. According to the World Bank, during our time in power the British economy topped Europe for “ease of doing business” and the OECD found that barriers to entrepreneurship were lower here than in any other member country. Consequently from 1997 to 2010, 1.1 million new enterprises were created and the turnover of small and medium enterprises grew by over a third.

SMEs are crucial to securing the recovery because they are the backbone of the British economy. They are responsible for six out of ten private sector jobs and over £1.5 trillion of private sector turnover. They are the motor that can drive down the deficit by creating jobs, reducing the benefits bill and boosting the income tax-take. Get SMEs wrong and you’re in trouble. Get them right and you’re on the right track.

For SMEs to flourish, first a country must foster and promote an enterprise culture and a dynamic start up market. Second, it must improve SMEs’ capacity to grow and identify new markets. Third, it must improve the range of support government provides to business. Finally, it should look at the regulatory burden on business in a sensible way that isn’t simply about reducing the rights of people who work for SMEs (compromising workers’ safety and putting consumers at risk) but is about adopting a “smarter” approach to the implementation of rules (something so many SMEs complain about).

This requires active, intelligent government helping to create the conditions for business to flourish. We made a good start in government, particularly under Lord Mandelson. The Tory led government has failed to build on our legacy.

Business people must be able to access the finance they need to help with cash flow and starting and growing their businesses at reasonable cost and on reasonable terms. Because they cannot look to capital markets for finance in the way big business does, SMEs rely on our banks to step up, yet they are being short changed. Project Merlin, the government’s toothless lending deal with the banks, is already failing to deliver – first quarter lending to SMEs fell £2.2 billion short of the agreement target. Even the Business Secretary Vince Cable admits this is a “serious problem”.

Removing obstacles to SMEs also means a zero tolerance approach to anti-competitive behaviour by large companies that dominate the market and try to squeeze out others – we’ve heard little on what action the government will take to give SMEs more power in this regard. It means constantly reviewing the extent and implementation of regulation but, in the first two-and-a-half months of this year alone, the government introduced 244 new statutory instruments which calls into question their rhetoric on red tape.

In addition it means government should support business when it can. We did so through Regional Development Agencies and Business Link advisors – the government is kicking away this support with their decision to scrap them. We then suggested the government work with the regions and local authorities to see how former RDA assets could be used for growth, instead it is doing a fire sale of those assets. We sought to address skill shortages where they existed too. By axing Labour’s Future Jobs Fund and Train to Gain, the new government has done precisely the opposite.

So it is unsurprising that a Populus poll published last week in The Times found that a year into this Parliament, on a range of measures Britain is now considered a less desirable place to start an enterprise than competitors like Germany and the U.S. This will not change unless the government sets out a proper strategic vision for British business – empty promises and a poorly coordinated rag bag of small measures in their Plan for Growth are not up to the scale of the task.

Labour understands that “no business is an island” – businesses, especially SMEs, do not exist in isolation but inhabit an interdependent ecosystem of actors. An active government, accessible finance, a skilled workforce, a strong competition regime and smart regulation all play their part in making that ecosystem function – this is what we are campaigning for.

Since becoming leader, Ed Miliband set out Labour’s mission: addressing the fall in living standards; restoring the British Promise; and, strengthening our communities. We want to see more people setting up businesses, leading businesses and working in them because Britain’s SMEs are absolutely key to meeting this challenge.