Home Business News Open letter to Truss challenges the lack of government support for 6m small businesses which accounts for 50% of UK GDP

Open letter to Truss challenges the lack of government support for 6m small businesses which accounts for 50% of UK GDP

by LLB Finance Reporter
18th Oct 22 2:12 pm

Business Support organisations from across the country have written to the Prime Minister in an open letter pointing out that the Government’s current strategy towards supporting small and micro businesses is failing.

The letter signed by the National Enterprise Network and its members from all regions of the country reminds the Prime Minister of the importance of the small business sector to the health of the country’s economy, pointing out that it comprises 6 million entrepreneurs accounting for 50% of the country’s GDP.

The letter followed the news that the Prime Minister failed to reappoint a dedicated Small Business Minister in her latest round of ministerial appointments and chosen instead to include small businesses as one of sixteen responsibilities allocated to a junior minister. The Small Business Minister had previously been in place for over 12 years and has previously sat at the Cabinet Table.

Chairman of the National Enterprise Network, Alex Till, said, “Support for the Small Business sector has largely been ignored by the Prime Minister. Small businesses account for over 50% of the county’s GDP, and nearly half of the country’s employment.

“If the Government is serious about a growth agenda then it needs to address the issues we have all raised in the open letter. Namely the appointment of a dedicated minister with influence, clarity of the funding scheduled to replace the previous European funding pre-Brexit, and a strategy that delivers a level playing field across the four nations of the UK.

“We all stand ready to support the UK’s small businesses by providing critical face to face business support but can only do so if the Government is equally committed.”

The text of the Open Letter is as follows:

“Dear Prime Minister

We are writing to you today as the collective representative of entrepreneurs, micro-businesses and start-up enterprises across the country, asking you to prioritise small business as one of the key foundations for your growth strategy.

At the very time that the country’s small and micro businesses need the Government’s backing most, it is with concern that our Business Support Sector, representing the 6 million small firm entrepreneurs that contribute over 50% of the country’s GDP, find it necessary to engage directly with you so early in your tenure.

In recent weeks, the UK chancellor Kwasi Kwarteng has introduced a number of tax cuts aimed at boosting economic growth with new ‘Investments zones’ and an ‘Energy Bill Relief Scheme’ as key features of the offer to businesses. There was also a promise to review the government’s business case process to speed up decision making. These measures, however, do not support entrepreneurs, micros and small businesses as many operate from home or shared office space.

We have also viewed with great disappointment your choice to not appoint a Minister to the singular role of Small Business Minister. You will be aware that in the past the Small Business Minister had a direct Cabinet responsibility. The simple inclusion of Small Businesses now alongside fifteen other responsibilities in the role of a newly appointed junior minister suggests that the Government’s commitment to small businesses is now of materially less importance to the country’s economy and employment.

SMEs accounted for 52% of private sector turnover in 2020 and 54% of all private sector jobs in the UK. Micro businesses, a proportion of which function in the high-performing innovation sectors, represent 90% of all businesses in England. They account for 33% of employment equalling nine million employees. This is large part of the economy to overlook.

As the representative of a great many areas of business across the country, and supporting the owner managers that run them, we would like to raise with you, in open debate, the following.

• Your personal commitment to Levelling Up is commendable and timely. But this can only be done on a level playing field across the four nations of the UK, if we are to avoid investment and competitive distortions. The support being provided for example in Northern Ireland is notably more business friendly than that which we see in England.

• Unlike larger enterprises, micro and small businesses often lack key skills and resources simply because of their size and have no option to seek advice externally. Statistics show that early advice and support enables many small businesses to thrive and grow. While the average failure rate of a small business is 60% in the first three years, enterprise agencies can record a survival rate of up around 90% for the first year of businesses they support, creating employment and valuable tax revenue and GDP contributions. One example is the North East Enterprise Agency (NEEAL) which helped generate £141m in its local economy over 2019-21 period. Their return on investment was reported to be £3.45 for every £1 spent.

Our Members give 100% coverage throughout England with the option of face to face, online and telephone support provided. However, many of the agencies and support bodies up and down the country providing this local, and frequently face to face lifeline have relied upon European funding, through for instance the ERDF scheme, both to fund their own delivery and to provide liquidity and business support to businesses.

The replacement of European funding post Brexit remains extremely unclear, and the survival of the agencies and support organisations, many run on a not for profit basis, is under severe strain. Some are downsizing and some threatened with imminent closure.

The impact on local business communities cannot be understated.

Seeking to move business support to purely a private sector model, if this is indeed the policy you are driving to, is heavily flawed. Private sector engagement inevitably is delivered for commercial gain and fails to recognise the underlying needs of start-ups, and micro and small businesses, where soft loans (as provided through the British Business Bank), grants and free advice underpin the survival of many.

Building and maintaining a sustainable SME economy in the UK requires both public and private sector engagement if we are to not just retain the sizeable GDP and employment they already deliver for the UK, but to reach their potential as significant contributors to the government’s growth agenda.

Representing the extensive business support and SME growth network we are calling on you to:

1. Appoint a dedicated Small Business Minister, with direct Cabinet responsibility and a mandate to ensure that the nation’s small businesses continue to be the envy of the world, contributing to the health not just of the economy but also to the social wellbeing of our communities. Giving university and school leavers the opportunity to create and develop their own ventures, in all regions across the UK.

2. Formalise the arrangements for post European funding as a matter of urgency so that the support organisations through which funding will be provided are able to plan functionally for the coming period.

All signatories to this letter, along with many other like organisations, stand ready to support your government in rebuilding the economy after what have been three very turbulent years.

But we equally call on you to address the issues that we have set out in this open letter so that we are able to provide that support.”

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