Reignite SME Growth Scheme
The UK in recovery after the Covid-19 pandemic
Battered by Covid-19 the UK government is trying its best to protect its people. Throwing everything except for the kitchen sink at resolving this pandemic and it’s affect on our world and our Islands, much is being reported about where the funds will come from to pay for the various costs incurred to date.
Having run my own small business group, I always approach things from a perspective as to what I would do next if I were in charge. Like all good businesses in the private sector, your future success relies heavily on the support of your customers and this process is much the same for our politicians whom far from being handed cash by the electorate are being handed support via their X on the ballot paper. So keeping customers happy for business is the same as it is for politics.
So where is the money coming from? The £623Bn or so that keeps this country or UK PLC on the rails is generated from various taxes collected by the Exchequer. The money is invariably generated by profitable organisations whom, add a small percentage to their cost prices to create a fund that pays for their overhead costs and leaves a small amount called net profit from trading activities to invest in the future of their business.
From these operations a number of taxes are stimulated. First there is the PAYE of £181Bn, Employers and Employees National Insurance of £131Bn collected from the pay awarded by companies to their employees. Next there is the VAT of £132Bn added to the sale of goods. These taxes are all administered locally by every business that provides goods and services and employs people on PAYE.
If the Company is an importer, then there are the taxes paid as Duties on imports from around the world which may also soon apply to purchases from the EU. Finally, there are the Taxes paid in the form of Rates to the local authority for simply hosting a business in their locality as the companies contribution, to providing local services. At the very end of all of these transactions are those profits made by the Company to reinvest in the future which are then met with Corporation Tax of £54Bn in 2018/19.
Source for the values quoted can be found here: https://www.statista.com/statistics/284298/total-united-kingdom-hmrc-tax-receipts >>
Now we have all heard how unjust the taxation process is, but this is not the time to herald a major change whilst the country is at war with the virus and Brexit is just around the corner. But it is wrong that large multi-nationals can simply offshore their tax liabilities and trade online reducing their exposure to high street rates and at the same time undermine Air Quality with their operations. This conversation is for another day as we are all guilty of partaking in home deliveries especially during the height of the Covid lockdown, but the fact remains that it is the hard work and diligence of the SME sector that produces the significant part of the UK PLC tax revenue annually.
So now we have 1000’s of the same SMEs reeling from the effects of a state-imposed lockdown to protect the health of the people who will thank the Government come the next general election. What happens to the SME sector and how do we protect, preserve and improve this engine of growth? Clearly making available Bank Loans in various guises enables businesses to borrow their way out of the current problem, but what do we do to ensure that the company can meet the repayments and avoid foreclosure by the lender?
All SMEs are driven by individuals whom have invariably decided to use their skill-set to provide goods or services in a sector that they have experience with and likely enjoy. My own experience was to demonstrate how I would run a company supplying industrial equipment better than my previous employer to the extent that after the first 20 years we would become a supplier to them. We all have our reasons for starting a small company and some of us are more driven than others, but the plight of SMEs rests solely on the enthusiasm and drive of the entrepreneurs running those companies and being confronted with a pandemic is definitely not in the usual playbook for them.
The Government has created dining opportunities and may soon create incentives to enjoy the arts, but how do we help every SME that wants to survive and thrive? SMEs are a vital part of the economy, accounting for 60 per cent of all private sector jobs and 47 per cent of revenue in 2016. Source https://esrc.ukri.org/news-events-and-publications/evidence-briefings/boosting-uk-productivity-with-sme-growth
We now must look at preserving these vast employment zones and valued tax collectors and tax generators and from my experience of dealing with many recessions and my first pandemic over my 40-year business life, it has to be focus, focus, focus whilst we build, build, build. It is time as in any war, to bring together the vast resources of the state mechanisms that exist and create a single-minded attempt at making things happen both to solve our immediate issues and create opportunity in the future. This is the time to “Reignite SME Growth and Competitiveness” and bring together this Army of SME’s to work towards a happy and prosperous future.
The scheme delivers the opportunity to bring together the proven business support mechanism of Cranfield Business School with the work of other independent Universities nationally in a franchise model providing SME’s the support they require as a critical friend and to enable them to focus on developing their business activities. At a local level and on a one-to-one basis, Action Coach or similar organisations would provide a similar level of training.
The Government would provide a grant of £5,000 per SME to support the scheme.
- This could be a scheme where certain members of the LEP Network could assist with the delivery of a longer-term scheme, but for Hertfordshire to run the pilot.
- The LEP via their Growth Hubs will identify SMEs with CBILS and BBLS loans to assist these as a priority*
- Cranfield have a scheme which will be “franchised” to Universities across the UK to ensure continued use of Government assets. Cranfield are recognised as the masters of this format and course delivery.
- The University scheme runs for 52 weeks starting with 12 weeks online and the balance monitoring and mentoring.
- The scheme will provide £5,000 to SME’s to access the mentoring.
- We want to run a pilot for at least 50 companies in Hertfordshire which will cost £250k working with Herts LEP, Herts Growth Hub, Herts University, Cranfield University and Action Coach.
- We could also involve Action Coach with those SMEs that require face to face mentoring on a more local basis at lower cost than the Universities under the scheme.
We believe this scheme can achieve:
- Clear improvements to the manner in which an SME views their business.
- We will require all parties to provide clear outputs and feedback on improvements achieved. It will therefore be quantifiable.
- The scheme is successfully delivered by Cranfield currently and there is a continuous record of proven success.
- The scheme is all about mentoring and coaching businesses to improve rather than teaching business studies as per the recent grant of £20m to the Small Business Charter group. It is vastly different.
- The long-term outcome will be, better prepared SME’s who will be mindful of aspects related to business cost control and margin maintenance and therefore profit and cash generation improvements.
- The intention is to raise the spirits of each entrepreneur driving their SME at this difficult time and demonstrate that there is support for them and guide them to building stronger more profitable businesses.
- The net result is that we have an SME sector that survives and delivers more jobs, a stronger economy and better profitability with potential improvements in corporation taxes paid making the investment in the scheme cost neutral for the state.
The Reignite SME Growth scheme is a starting point to delivering a stronger economy and providing clear support for SMEs to help them repay their COVID loans and overcome this shock to their business.
If BEIS could award the cost of the pilot, we will set out to prove that it works by providing key indicators of success.
About the author
Adrian Hawkins OBE
biz4Biz Chairman, Chairman of the Stevenage Development Board, Managing Director of Welding World, and Herts LEP Skills and Employment Board Chairman.