Economic Secretary to the Treasury and Business, Enterprise and Regulatory Reform (BERR) Minister Ian Pearson has outlined the help the Government will give to small firms as a result of the credit crunch.
He highlighted the importance of SMEs to the economy, saying that they contributed as much as larger business to UK output, as well as employing 60 per cent of the private sector workforce.
The Government is holding meetings with business organisations and individual businesses to discuss the problems they face - especially access to finance.
He said that the first priority had been to restore financial stability, but believed that there must also be work to build on these measures. Consequently the has Government introduced the following new measures with immediate effect:-
Central government would pay suppliers within ten days at the latest. Adding to this, he stated that the regional development agencies (RDAs) had committed to meeting the same obligation. The NHS has been asked to make this commitment as well.
The Government is working with leading finance organisations to provide the best advice and support prompt payment.
The re-capitalisation package would support banking, a move that would also support the small business sectors. Ian Pearson stressed that the deal ensured that competitive loans would be available at 2007 levels.
The Government expects the other banks to follow the approach taken by the three nationalised banks. Mr Pearson called for responsible lending that was not unduly risk averse and did not pass on costs to small businesses. The Prime Minister and the Business Secretary – Peter Mandleson - will meet the banks this week to ensure that there was progress on this.
The British Chambers of Commerce (BCC) said that firms were finding it increasingly difficult to access funding. The BCC's director general David Frost said "The cost of money is undoubtedly higher than it was and we see no evidence of it coming down. Banks are charging for services that were previously parts of the deal," he added. "And the idea of relationship banking is breaking down. Everything is going through regional offices and it is taking much longer to get the OK on a loan or an overdraft."
The government is also offering a free health-check that would be provided for all small businesses by Business Link (although this is already freely available).
The Innovation, Universities and Skills Secretary John Denham announced on Wednesday that small businesses would benefit from £350m of funding to improve training largely through Train To Gain
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