Small and Medium-sized Enterprises: Great Yarmouth
(10 months, 4 weeks ago)
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Brandon Lewis (Great Yarmouth) (Con)
First, I direct the House’s attention to my entry in the Register of Members’ Financial Interests. I do so specifically, not least because I feel passionately about small and medium-sized enterprises. I worked in them and ran them before I came to Parliament, and now I am again working with family businesses. A constituency such as Great Yarmouth is absolutely reliant on those SMEs—in fact, it is not so well known that our whole economy is. I will explain that in a moment.
My father ran a business, and I have always had a strong relationship with Great Yarmouth because his business—an SME that employed people—had a factory there. Because of how SMEs integrate into the community, even today, some 30 or 40 years since my father left that business, people who worked for him are still running a part of that business in Great Yarmouth. They are employing people who will go on eventually to run that business, and maybe they will set up their own businesses to form part of the Great Yarmouth business community.
Some 37,000 people in my constituency—roughly half of my voting constituency—work in SMEs. There are some 3,000 SMEs in Great Yarmouth. That sounds like a lot, but it is no surprise because across the country something like 99% of businesses qualify as SMEs. More than 50% of our working population work for SMEs. That is a huge number, and that is important, because these businesses drive our economy.
I have a strong interest in the housing industry. I was the Housing Minister, and I remember working with great house builders and household names, and some of the great multinational companies that we see started as sole traders and grew to be the big names that we know today. In sectors across our economy, there are big-name brands and companies employing people globally who started as family businesses. Some of them still are family businesses.
We need today’s S’s to become the M’s of tomorrow and then to become the big companies that grow our economy. We get very focused on the big names, and they play a hugely important part, but for constituencies such as Great Yarmouth—particularly coastal communities where the tourism and hospitality industry plays such a key role—SMEs are at their heart.
SMEs play a part for the big companies as well. The oil and gas and renewable energy industry has a huge presence in Great Yarmouth, particularly in servicing. Companies such as Seajacks, which work around the world, are from and based in Great Yarmouth. They are there because an entrepreneur from the oil and gas industry had an idea, took the risk and developed it in Great Yarmouth. Now, he is employing people from across Great Yarmouth. When clients come to companies like Seajacks and others in the energy industry, they often take their clients, visitors and customers for lunch in places like the Imperial Hotel in Great Yarmouth, and restaurants like the Waterside, or Planet Spice in Ormesby. Those businesses are integral to big and medium-sized businesses. It is a symbiotic relationship. Our economies work because of all of those layers.
Small businesses are generally family-owned businesses. If not, they are at the very least locally owned or locally run. That means they have a very keen interest in the community, which they show by sponsoring local sports teams or cub scouts, or just by being involved in the community and knowing their staff who are a part of the community. The businesses are an important part of it. We have spoken in this Chamber a lot, and in my roles in government I have spoken a lot, about the pub industry and why pubs are so important to our communities. They are SMEs and a hugely important part of the community. Like many other businesses, if they have a regular customer who has not been in the pub that day, they may be the first in the community to realise there is a problem.
An SME owner or manager will generally know all their staff. In my business, before I came into Parliament, I knew all our staff by name. That does not happen in a conglomerate, but it happens in small and medium-sized businesses because their owners and managers are a part of that business and community. They also respect the local community in a different way—not to say that big companies do not respect their communities—because they are so reliant on it for their customers and their staff. They are much more integral to the local community, and much more focused on how they can work for it and support it. That matters, because that is what binds our communities together. It also ensures we can deliver social mobility. People can move and work in businesses in different sectors across the country, knowing that wherever they need to move to and wherever they want to work, there is a community they can be a part of; not just a housing estate or a business but a community, and the business will be a key part of that.
SMEs, particularly in hospitality which is so vital to constituencies like Great Yarmouth, have had a really tough time. As we came through the covid pandemic, they arguably had some of the toughest situations to deal with. In many ways, it was one of the fastest industries to recover, because we all wanted to get out and about and do things while we had the opportunity to do so, but those businesses still need help. VAT has been an issue for them since it has come back up, particularly compared to some of our competitors around the world. They also have to deal with business rates. SMEs find business rates to be a challenge, as they have to deal with high street values and prices, while competing with conglomerates that have out-of-town business rate values and prices. Any business we talk to will say there is a need for us, at some stage, to ensure that we are cognisant of the challenge of business rates, seasonal worker schemes across hospitality—and agriculture in a constituency like mine—and the wider basis of regulation and tax.
We all want things to be safe and regulated, but we have to remember that big companies can deal with that more easily. They can put teams together to manage it. It will be a cost to them, but they can manage it. SMEs often do not have the resource to do that. They need flexibility to be able to work with their workforce. They often have very small margins and need to be focused on their customers, rather than on what is sometimes seen to be unnecessary regulation and red tape, so we all have a duty to focus on that.
The Minister will be absolutely cognisant of that. From conversations we have had over the years, before either of us were in government, I know how successful he was in the business sector and I know how well connected he is with the SMEs in his constituency, so I know we will be singing from the same hymn sheet. He has a reputation across the sector as someone who understands the sector and wants to deliver for it—something we all want to do. I just want to take this opportunity to be very clear about its value and importance, and to put on the record what we all know, which is why these businesses matter so much to our communities.
Robin Millar (Aberconwy) (Con)
My right hon. Friend is making a really interesting speech. There are many different points I would like to pick up on, not least the similarity with my own constituency, which is also a coastal community that is highly dependent on tourism for its economy. He made a very interesting point about pubs being close to the people and often being the first to detect when things are wrong—when people are missing. Does he agree that pubs and all hospitality businesses are very often the first to indicate when there are problems? Just today, I was with a group of colleagues talking about the impact of energy pricing on the pubs and hotels in their constituencies. The phrase, “They are the canary in the coalmine,” was used. Does he agree that that is the case, and that energy pricing is proving to be a real problem for them at the moment?
Brandon Lewis
My hon. Friend is spot-on. That challenge has been fed into me recently by a number of businesses: they have asked what more the Government can do to ensure there is collaboration between the Government and industry to deal with energy pricing. The rise in energy prices is one of the big challenges coming out of the problems of covid and particularly the abhorrent invasion of Ukraine by Putin. The Government have rightly put protection in place for households, and I congratulate them on that, but many businesses are still struggling with rate rises of up to 400%. They are often businesses working on small, single-figure margins—often of 1% or 2%.
The pub industry is tough: it is hard work making sure the client and customer is happy and has a good experience. We need to make sure that we have the support in place to not lose more pubs. We all know we are losing pubs and that lifestyles are changing. It is not necessarily the Government’s responsibility to fix all those issues, but we do need to be cognisant of what more we can do to work with the energy industry to ensure that we have the biggest possible impact for businesses, as some of their rising costs through inflation go back to the challenges from rising energy prices.
My hon. Friend is right, too, that the hospitality industry is one of the first to see any warning light for our economy, as, indeed, is the housing sector. If we want more houses to be built across our country, we need SME house building businesses to be building. I know some of the chief executives of our big house builders. One of them, who sadly has passed away now, always said to me when I had responsibility for the sector in government that one of the challenges today is that the regulation and the restrictions on housing make it very difficult for people to do what he and some of his competitors did in the past—those big house builders that started as sole traders—which was to borrow money and get through the planning process in order to build even one or two homes.
If we were able to invigorate SMEs in the housing sector to build those small numbers of homes in our villages and towns across the country—wherever we need them; in the right places and of the right quality—that would make a huge difference to our economy, because it has a knock-on effect. It is not just about the house, which itself improves social mobility; it is about everybody who is employed in building the house, and about the person who moves into it going to buy some paint or whatever else to decorate it. That all adds to the economic boost and growth for our country, and it is why we benefit by about 1% of GDP for every 100,000 homes built in this country.
Our hospitality industry is a canary in the mine showing what condition the economy is in, as my hon. Friend said. Those businesses I was talking about earlier—the larger and the medium-sized businesses—entertain clients and customers, and hospitality notices first if there are fewer of them, if those businesses are taking less time to entertain because they have fewer customers and visitors, and if we as individuals are spending less money in hospitality.
It plays an important part in the economy. People think of hospitality in places like Great Yarmouth as being just there for visitors, but it is there for business as well. In Northern Ireland, I spoke regularly to businesses who would use the hospitality pull of Northern Ireland as part of the sales pitch for their business in the engineering sector. It is a very important sector for our economy, and it thrives and relies on those SMEs.
The majority of that sector is SMEs. Big companies like Haven Holidays have a huge presence in constituencies like mine, but it is the small businesses that knit things together and support people across the villages and the coastal towns. I have seen that at first hand in Hemsby in Great Yarmouth, where almost all the businesses are independent or family-owned. They have come together to protect the coastline and literally defend the homes of people, and they have helped people who have lost their homes when they have fallen into the sea because of the coastal erosion we have had over the last few years. There have been some very dramatic circumstances. The businesses with a sense of passion for their community —the publicans and business owners in Hembsy—have come together to drive the campaign to make sure we get the support for the residents who need it, as much as for the businesses themselves and the visitors who come to enjoy the beach that we want to protect.
I have seen time and again the importance of SMEs across the whole of the UK economy, as I have outlined. Many people—the majority in our country—are employed in SMEs. I know the Minister is cognisant of this, but in everything we do we should always be thinking about what more we can do to help today’s sole trader become a small business, and today’s small business become a medium-sized enterprise, with a view to how they grow into the big plc of the future; because without doubt for me in Great Yarmouth, our small and medium-sized, predominantly family-owned, businesses are the heartbeat of the constituency, and they end up being the heartbeat of our country.
Mr Deputy Speaker (Mr Nigel Evans)
Before calling the Minister, I must say that it is rare and impressive to hear a content-packed speech delivered without notes, so congratulations.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
I am sorry that I cannot emulate my right hon. Friend the Member for Great Yarmouth (Brandon Lewis) by speaking without notes, but I will do my best to ad lib a little. I thank him for securing this important debate. I love his words that SMEs drive the whole economy. It brought back the words of Winston Churchill about the private sector; he said that some people see private enterprise as a predatory tiger that needs to be shot. Some people see it as a cow that needs to be milked. Few people see it for what it really is: the strong horse that pulls the whole cart. That is exactly right. Everything we see in the public sector and in this House is paid for by the private sector, the taxes it raises and the jobs it creates.
I totally agree with my right hon. Friend on the title and the primary content of this debate—SMEs are the most important part of the sector. As he said, I started a very small business and grew it over time, but the pressure we were always under as our business grew was from smaller businesses starting up and putting pressure on our market share. I listened carefully to his points about his father’s business and the legacy effect it has had on Great Yarmouth. That is my experience. Many people go into business for the potential financial reward, but also for the legacy: the jobs they can create and the business that they leave behind. That has a long-lasting effect on towns such as Great Yarmouth.
The Department for Business and Trade is seeking to make the UK the best place to do business in the world. We want to make it easier to do business every single day. My ministerial colleagues and I, as well as many others including my right hon. Friend, the Chancellor and the Prime Minister, are for business because we are from business. We understand how this works.
My right hon. Friend made the point about smaller businesses that start up and grow to become larger businesses. That is the fundamental basis of our strategy to scale up Britain. We want the start-ups to become scale-ups. That is one of our areas for development. We are No. 1 in the OECD for start-ups per capita, but in a survey of 14 OECD nations, we were 13th for scale-ups—businesses that have 10 employees or more after three years. That is our focus, and there are three key focus areas underneath that: access to finance, support and advice, and removing barriers and red tape. Those are critical issues for the SMEs I speak to.
When we speak about business, it is important to speak about the entire world of businesses in all sectors. Hospitality is very important in Great Yarmouth, where 23% of all jobs are in the tourism industry. In his intervention, my hon. Friend the Member for Aberconwy (Robin Millar) rightly said that the hospitality business feels that cold wind first, but also sees the benefit of the improvement in the economy first, too. It is truly the canary in the coalmine, as he put it.
In Great Yarmouth there are some fantastic opportunities for the future, not least in green energy. My right hon. Friend pointed out the businesses that are benefiting from that. I am aware of ASCO, which employs more than 100 people, providing services to the North sea opportunity that is green energy—30 wind turbines on the Scroby sandbank. There are many more opportunities in that sector.
In the Lowestoft and Great Yarmouth enterprise zone in his constituency, South Denes energy park and Beacon Park are boosting innovation and growth in the region. More recently, investment through the Great Yarmouth town deal and the future high street funds, building on previous support from the local growth fund, is helping the local area by supporting jobs and growth in that region.
I will go into some specifics about the three areas of focus I referred to earlier. First, access to finance is one of the primary concerns for small businesses as they open their doors and grow. We work closely with the British Business Bank to improve access to finance. I am pleased that as of March 2022, the British Business Bank programme has supported over 96,000 small and medium-sized businesses nationally with over £12.2 billion of finance. The programme is designed to bring benefits to start-up businesses, businesses with high-growth potential looking to scale up and businesses looking to stay ahead in the market.
I know my right hon. Friend the Member for Great Yarmouth has supported many initiatives in his time in this place, such as the important start-up loan scheme, which has delivered around £1 billion of finance to 100,000 companies. Those unsecured loans are vital to many people who cannot access finance to start a business. In his constituency, 95 loans have been provided, to a value of almost £800,000.
Inclusion is a priority of this Government, so I am pleased that in terms of all the start-up loans issued up until April 2023, 40% went to women, 20% went to people from a black, Asian or minority background and 32% went to people who were previously unemployed. Those are all disproportionately high numbers, which we should welcome.
Within the space of access to finance, we are also undertaking the payment and cash flow review. We know that is an issue for SMEs and we want to make it easier for them to be paid, as that is another source of finance. We have improved our equity finance offering through schemes such as the regional angels programme, supported by the British Business Bank, and the enterprise investment scheme, the remit of which has been extended.
We are looking at potential new opportunities on the back of open banking. Open banking was a huge success in this country and has been emulated around the world. There are now 7 billion API calls every month for open banking, connecting one banking app with another, and there are other fintech solutions. Open finance provides the opportunity to completely liberate opportunities for SMEs to access finance. Rather than going to their own bank and asking for a loan, they can ask many different providers for that finance, which will increase choice and opportunity.
Robin Millar
The Minister is following the speech given by my right hon. Friend the Member for Great Yarmouth (Brandon Lewis) with another very interesting and helpful speech about what SMEs need. He is describing the Government’s role in creating an environment in which SMEs can flourish. Will he comment on the importance of the regulation to which he referred, not just to say that there should be as little of it as possible but to set out what regulation is effective? Will he comment on whether it is right for the Government to intervene when the market is failing?
Kevin Hollinrake
My hon. Friend raises an important point, which I will come to shortly. He is right to say that we should intervene only where there is an exceptional circumstance, such as covid or a cost of living crisis, or where there is market failure, which is where we want to focus. For example, with SMEs working in the hospitality and house building industries, which he and my right hon. Friend the Member for Great Yarmouth both referred to, we know there is market failure and a need for them to access finance. We need to focus on those areas and ensure those sectors are provided with finance, when they cannot get it elsewhere.
The Government provide extensive business support, which is another key focus area, including through the business support helpline, the Help To Grow management scheme and a network of 38 growth hubs across the UK. The Help To Grow management scheme was launched in June 2021, to help close the productivity gap and lay the foundations for growth by providing SMEs with key skills in financial management, marketing and innovation. Our evaluation showed that approximately 90% of SME leaders surveyed reported that the scheme helped and Help To Grow management contributed to improved leadership and management of their business. I encourage my right hon. Friend, and all Members of the House, to share information about the scheme with local SMEs that could benefit from the opportunities it offers.
We know that businesses have emerged from the covid-19 pandemic, only to be faced with rising costs and dampened demand. In the autumn statement, we announced £13.6 billion of support for businesses over the next five years, including through reducing the burden of business rates for SMEs by freezing the business rates multiplier for yet another year, to protect businesses from rising inflation.
Over the winter, the Government intervened in the energy crisis by providing unprecedented support, in the form of the energy bill relief scheme and, more recently, the energy ill discount scheme.
The Government are freezing fuel duty, maintaining the 5p cut for a further year, and reversing the national insurance rise, which will save small businesses an average of approximately £4,200. That is in addition to the support previously announced in the form of an increase in the employment allowance to £5,000, the introduction of a zero rate of VAT on energy-saving materials, and the exemption of small businesses and microbusinesses from regulations where possible. That was raised by my right hon. Friend in his speech. These interventions show that the Government are on the side of small businesses, and understand the unprecedented difficulties that many have faced.
The last key focus is on removing barriers and cutting red tape. We are doing that through many mechanisms, such as improving the processes for public procurement, trade deals with Australia and New Zealand, and the comprehensive and progressive agreement for trans-Pacific partnership. The working time directive recording requirements will potentially save businesses more than £1 billion a year. Landmark legislation in the form of the Digital Markets, Competition and Consumers Bill will make it easier for SMEs to access digital marketplaces.
The Government acknowledge that one of the significant barriers faced by SMEs across the country is late payments. We are determined to see those reduced to ensure that SMEs are given the best chance of succeeding and growing. That is why we are conducting a review of business-to-business payment policy, the prompt payment and cash flow review, which is scrutinising existing payment practices and measures. We need a stronger culture of responsibility in large businesses to support the smaller suppliers on which they rely. The Small Business Commissioner addresses small businesses’ complaints about payments and the payment practices reporting duty creates transparency by requiring large companies to report on their payment times, while the prompt payment code sets standards and best practice in payment culture.
We are making substantial investments in Great Yarmouth to help the area to thrive and succeed. The borough secured a £20.1 million towns deal in 2021 to help level up the town. One of the fantastic projects supported by this intervention is the operations and maintenance campus for the energy sector. The town has also secured £13.8 million of future high street funding to help revive the town centre as a vibrant economic, cultural and community hub. That will help the town centre to develop sustainably into the future, supporting footfall, further regeneration and investment.
Great Yarmouth bid successfully in the second round of the levelling-up fund, and the Great Yarmouth riverside gateway project received £20 million to regenerate the railway station and the North Quay area of the town. We recently agreed a landmark devolution deal with Norfolk County Council, which will bring a wide range of benefits to residents and businesses in Great Yarmouth. It includes a £600 million investment for a further 30 years, equating to £20 million per annum, and Norfolk County Council can borrow against that further funding. The Norfolk broadband programme was awarded £5 million through the local growth fund to extend superfast broadband in the county, and it is estimated that that will lead to a £2 billion growth in the local economy and the creation of 1,500 jobs within 15 years.
The Government recognise that this is a challenging time for all businesses and we have provided unprecedented levels of support to help businesses and workers through these difficult times. However, data for Great Yarmouth show a 4% positive difference between the birth and death rates of businesses in Great Yarmouth in 2021, an encouraging sign that businesses are flourishing in the local area and that the local Member of Parliament is being highly effective. Furthermore, 667 Great Yarmouth businesses have been supported by their local growth hub and other partners, and there are 3,585 SMEs in Great Yarmouth in total. Over the last six months, there has been a sharp rise in job postings—vacancies, in other words—in Great Yarmouth, from 1,004 job postings in November 2022 to 2,229 in May 2023. That is a 122% rise. These are the highest vacancy volumes since October 2012 and they illustrate the health of the Great Yarmouth economy and the excellent work and representation by its local Member of Parliament.
Question put and agreed to.