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Thanks to the jaded approach to economic policy of the two main political parties we have no balanced, imaginative and focused ideas to provide hope for pulling us out of recession and rebuilding the economy. At ArchOver, we believe that an economic policy focused on small companies is the ‘big idea’ that is needed.
Small businesses are the lifeblood of our economy. They dominate employment and vital innovation. There are five million such businesses giving direct employment to at least 11 million people. A further circa four million aspire to work for themselves.
We recognise good ideas when we see them and the right wing but independent think tank, The Centre for Policy Studies, has produced a paper ‘The Road From Serfdom’ which brilliantly outlines the importance of small companies to the economy.
The paper was written by Lord Saatchi, a former chairman of the Conservative Party and a Thatcherite to his bootstraps. Margaret Thatcher was excited by the idea of popular capitalism and, in the context of attracting secured and insured capital to fund small companies, so are we.
In a closely reasoned paper, Lord Saatchi suggests that if all corporation and capital gains taxes were removed from small companies, the £11 billion cost to the Treasury would be eradicated in the life of one Parliament and then we would have the annuity benefit of small companies to lift and revitalise the economy for the future.
We are sceptical about the political appeal to our jaded leaders of the £11 billion cost, in these straightened times, but we like the imaginative approach.
Small companies are about economic growth but they are also about social well-being. People who run small companies are able to follow their own instincts and ideas. They avoid the frustrations revealed in a study of 1,000 young employees by the financial services firm EY. It has found that fewer than a third believe that the companies they work for are sufficiently innovative and 82 per cent claim they have ideas that might have been used to create new opportunities for their organisations had they been not ignored. As a result, a stonking 70 per cent of these young people would rather set up on their own than work for somebody else.
The two major parties have paid lip service to helping small businesses and credit must be given to Government initiatives to make it easier to register patents and making it less onerous to set up companies. There is also the support that’s been given to small businesses and, in particular, to the alternative finance, crowd-lending sector, through the Business Bank. These are worthy initiatives but they are tinkering at the edges of the issue. Now, radical policies are needed to rebalance the whole UK economy in favour of small companies.
The fact that the banks have been put in a straight jacket by European Union Basel III agreements, which stop them from lending, is killing small business. The Bank of England has pointed to the fact that just four banks control more than 80 per cent of all lending to companies. It identifies a £14 billion annual shortfall in lending to those vital engines of our economy.
The alternative finance sector can be a major source of finance for these small companies. It is growing at a fantastic rate partly because low interest rates attract investors who are seeking higher returns and also because both lenders and borrowers are sick of dealing with the banks and other large financial institutions. The brand new sector shows every prospect of being able to fill that £14 billion gap and more.
