Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 60 - 79)



Mr Butterfill

  60. On this point, some of the most daunting things for businesses in regulatory terms are not the ones that affect their own business, but their external relations and where Government is involved. We are talking here about export licences, import licences. In the case of language schools which I have a lot of in my constituency, we are talking about getting permission for people like the Chinese coming here to carry on a course. There are all sorts of government agencies involved which they find it very difficult to deal with, because they are not used to that sort of activity. Are you being a sort of proactive champion of those causes as well?
  (Mr Irwin) I think it is probably fair to say that we are not spending as much time as I would like going out to look at the existing regulations of which you speak. Indeed, I have been targeting all the business representative organisations to look at a particular piece of regulation and then, as they often do, to tell us they do not like it at all, but also to tell us where there is some wider issue about the regulation that "If you were to do it in this way, to simplify it, then it would make our life much easier." We are still not getting as many of those proposals as we would like.

  61. Should you be a conduit, therefore?
  (Mr Irwin) Absolutely.

  62. Should I be telling my people, "If you've got a problem with this, go to the SBS and they'll try and sort it out for you"?
  (Mr Irwin) Essentially, we do not want to get into the position of sorting out individual businesses' individual problems with their Chinese staff seeking work permits, but if there is a generic problem like that, then of course we should be aiming to sort it out.

  63. This is not work permits, this is visas.
  (Mr Irwin) If there is an individual problem, then that is one we should be referring to our local Business Link, because they should be able to help sort that out.
  (Mr Waller) It is worth mentioning as an example of the sort of things that we do on the less glamorous side, that there is a concept, Local Business Partnerships, whereby all the regulators within a local authority, will form together in a partnership with local businesses to talk about the way in which regulations are enforced by the local authority with the business community. We actually have taken over responsibility in Whitehall from the Cabinet Office, and we have carried out an audit of the current partnerships and are promoting more, with a new one starting in Essex. So I think the principle of getting engaged with the regulators to make things more effective in enforcement terms and in exactly how it is administered is very much part of our remit, and I think it is probably fair to say that it is one which we would like to see develop as we move forward.

Helen Southworth

  64. The Small Business Research Initiative is going to be launched this month. How optimistic are you that it is going to be successful?
  (Mr Irwin) I think that "hopeful" is probably the best word. There is always a difficulty with this sort of initiative. I would like to encourage many more government departments to look far more closely at how any of their expenditure could potentially be directed towards small businesses. Of course, going back to our Call Centre say, that could not be delivered by a small business, but there are other things that actually could easily be delivered by small businesses, and often there are savings to be had. So we have been talking already to the Office of Government Commerce, the OGC, about ways in which we can look at how we can encourage all departments to look at the way in which they procure business services, to consider what more could be bought from small businesses, and to try to put in place something like that which actually encourages people to do that, rather than always doing things in the way that they have been done in the past.

  65. We have got to watch this space and see whether it happens?
  (Mr Irwin) Yes. What I do not support is the sort of affirmative action type of programme that they have in the US where typically what happens is that businesses do quite well whilst they have that sort of action, and then considerable numbers go belly up afterwards because they suddenly have to compete in the real market. I was reading some figures yesterday which showed one of the particular programmes run in the United States where there were 30 per cent went bust within days of the affirmative action ending and 58 per cent of those that remained went downhill rapidly.

  66. In 2000, last year, you carried out a survey of 1500 small businesses to identify priorities for their work. Are the findings of that survey available to us?
  (Mr Irwin) I do not have them here with me, but I am sure that we can make them available.

  67. Have you got some key points from them that you might be able to share with us?
  (Mr Irwin) Yes. To a large extent, what they did was reflect what we already thought were the needs of business. They were a foundation. In that respect, given my background with small businesses, we have spent a lot of time listening to communities, businesses, enquiring of Business Links and asking them to demonstrate to us how they were going to be talking to business both during the contract and on a continuing basis. We have been setting up ourselves, particularly in relation to regulatory work, significant numbers of focus groups. Peter has already mentioned work we have been doing with Local Business Partnerships. As I have been going round the country I have been talking to small businesses. So there is all of this together. Then I shall be doing more research looking at an omnibus panel to continue to get that good feedback from businesses about their needs. The number one need at the moment is finance—raising finance, credit control, cashflow, being paid by your customers and debtors. The number two issue at the moment on the whole is labour and skills—difficulty in finding people to work for you at all, and certainly difficulty in finding people with the right skills.


  68. Can I come in here? We have had representations in this Committee from the organisation of the Federation of Small Businesses who maybe would have a slightly different agenda from the first two items that you have identified. To what extent do you find yourself in a kind of confusing position as the mouthpiece of small business carrying out these surveys? You may find that what the surveys are saying are at variance to the agendas being presented by the bodies which claim to be representative of the small businesses.
  (Mr Irwin) I do not think the FSB survey necessarily varies from the FSB's policies, but there are ways of writing questions. What I think is different—this actually only came to me a few days ago—in a lot of the surveys people like the FSB do is the way they are written, and they say, "Are any of these a problem to you?" You look at the list of pay, hours, regulations, and you say, "Oh yes" and you tick them all, whereas I have been going round and saying, "Tell me about the issues and problems." It is not unusual to be in a room, often with 15 or 20 businesses, and not mention regulation at all, nobody mentions regulation. I say, "Is regulation an issue?" and they say, "Oh yes, it is an issue", then they begin to tell me some of the problems of regulation. In general, though, I would say it is not the one that is on the tip of their tongue. Of course, if something has just happened it will be on the tip of their tongue, but it is not their day-to-day big issue. The day-to-day big issue is finding customers, making the business work, getting finance and staying in business to prosper.

Helen Southworth

  69. I spend quite a lot of my time meeting members of the business community in my constituency at business breakfasts, business lunches and those sorts of things. Something that continually comes up is the culture—not the culture of business, but the culture of business service, the support system, the Small Business Service in effect. I am a bit unnerved, in a way, that you have had a survey, then you have not told people what the outcome of it is. I think that demonstrates the sort of culture that I think we need to tackle, that small businesses will only continue to spend time raising issues and feeding into the governmental processes, which is what we want them to do, if they can see that it has an effect, if there is some reason for it. That is probably quite short-term feedback. It is not 12 months, 18 months, two years later that it comes about. It does need to be faster than that, because the world is faster than that. The Civil Service is not, but the world is. How are you going to make sure that you are more transparent, that these communications with businesses are actually fed back to businesses in some way? Are they going to be on your web pages? How are you going to get these things back to people?
  (Mr Irwin) Yes, they certainly are. I shall go back and check that. I was not aware that we had not actually published that survey, so we will check up on that. Yes, we will be providing feedback, and I think it is important that we do that. Going back to your question, I have also been doing quite a lot to try to change the culture within the Small Business Service. For example, we have been requiring that every member of staff gets out to meet with small businesses, no matter what their role is within the Small Business Service, so they have a chance to meet with small businesses. We have been going further than that and encouraging staff to go and spend a week's placement in small businesses, so they get a chance really to get under the skin of the individual entrepreneur and find out what makes them tick. Wherever possible, we are sending staff out with a business adviser, a fund manager, to meet four or five businesses in a day, so they get a feel for the elements of small businesses; and certainly, as I have been doing, meeting chambers of commerce,trade associations or whatever it may be, so that we are all the time trying to get feedback from them. Certainly I find that I feed back to them as well. Yes, we will be doing a lot more in terms of feedback through that. Perhaps we can broaden that out a little more, because I actually think that changing society's attitude is very important to enterprise. I believe that as a society we do not value enterprise and entrepreneurs in the same way as, say, we value footballers and popstars. I think we need to be doing a lot more to encourage society to respect success, not to stigmatise failure. We need to be helping people who, for whatever reason, have either ceased to trade or have failed, to learn from their experience so that they can set up again. We need to encourage, and society needs to encourage, people to want to start in business. There was some very interesting work done recently by Andersens when they were looking at the best cities around the world in which to do business, where again they went out and asked people what were the factors. One of the most important factors was actually a positive attitude to business. I think that if we do that, then that means we can potentially get through a virtuous circle.

  Helen Southworth: One of the things that I find extremely good about my own Small Business Service transfer from Business Link is the fact that I meet them consistently when I am going round to business lunches, business breakfasts, business associations, exhibitions and those sorts of things, and they cannot be picked out from the crowd, they look like business people. I hope that is a link we are actually going to see consistently existing across the country.

Mr Butterfill

  70. On the SMART (Small Firms Merit Award for Research and Technology), we have heard some sort of rumours that the grants may be ended and they may be replaced with either loans or with some sort of royalty arrangements. When we were going round the country recently talking to an awful lot of people in the regions, a number of them said, "Well, these SMART awards are very good, they're worth having, we like having the plaque on the wall, it adds a bit of prestige to us to have won a SMART award, but frankly the cost, both in financial terms and in management time, of applying for them, means it is relatively marginal; it is helpful, but it's not massively helpful." If they were then to be converted into loans or some sort of royalty scheme, I get the impression that they would fall away altogether. Would you like to comment on that?
  (Mr Irwin) Firstly, can I say that we are still engaged in a five-year evaluation of the SMART programme, and we do not yet have the final results from that. Secondly, I have certainly been asking some questions about whether we should give the money away as grant aid, or whether there are alternatives which are worth at least exploring. One specific suggestion I have made, although absolutely no decisions have been taken, is the concept of non-recourse loans. The reason we have been looking at that is because clearly we have a limited budget, the focus is relatively narrow. I would like to broaden the focus and be able to help many, many more businesses than we do currently, but we have to be able to do that within a fixed budget. I would also like to see SMART as being part of a total package where debt finance is a key stage of a business development, so that if, for example, we give—which we do—SMART grants to good projects, then why should we not share in a little bit of the return from those SMART projects so that we can help many, many more businesses?

  71. Would your loan be easier to obtain than the SMART award? Would there be less management time?
  (Mr Irwin) As I say, we have taken no decisions, but if it were done as a non-recourse loan, then we would do it quicker than we currently do it. If the project fails, then there is no recourse, we do not get our money back. If the project goes ahead, then in due course we get the money back and can recycle it.

  72. Your loan would be subordinate to the bank, would it?
  (Ms Merrifield) Yes.
  (Mr Irwin) It depends on the success.

  73. Depending on the success of the project?
  (Mr Irwin) Yes, entirely. As I say, we have taken no decisions on that, but those questions are being asked at the moment.

  74. Are you consulting with the firms on that?
  (Mr Irwin) I was going to say that interestingly the research that is being done for us is asking firms about it. Certainly, as I have been going round talking both to SMART award winners and to people who have not got SMART awards, asking them how they would feel about the possiblity of loans, as you would expect, those who have not got SMART grants say yes, but interestingly those who have got them have also said yes.

Mr Baldry

  75. I am a director of a company which was fortuitous enough to win two SMART awards. It was enormously helpful to us, and I think we are now probably one of the most successful companies on the exchange, if not the most successful company on the exchange. I cannot see any justification for why, in those circumstances, one should not make some return on that SMART award, not least as I think it is also particularly helpful as an anchor investment to other venture capitalists, because you have done some value judgement on the technology. Can I just ask, going on from that, about the Queen's Awards? The very large majority of companies are small businesses. If you look at those who are given awards, it is always the BAE Systems, it is the big companies. Do you not think it is time that more Queen's Awards for enterprise, export, innovation were given to small businesses?
  (Mr Irwin) Actually I do. It was not really until the announcement towards the end of last month—because the previous year I had not been in the role more than a few weeks and was not into it—looking at the winners this time around, and particularly coming from the north-east where I do not think there was a single enterprise that won there, that it struck me that there is a need at the very least to promote to business the importance of the cachet that a Queen's Award can give, because there is no doubt about that. Almost certainly there is a role there. I am not saying there should necessarily be more awards given, but certainly I think we should have a role too in encouraging businesses to apply for them.

  76. The criterion for the Queen's Award, the way it is structured, makes it very difficult for small business both to apply and to win, does it not?
  (Mr Irwin) We can have a look at the criterion. It is not our gift, but we can encourage them.
  (Mr Waller) I was at a reception ten days ago for the current round of Queen's Award winners. It may have been coincidence, but the companies I ended up talking to all seemed to be small companies. There is clearly a recognition in the Queen's Award Office of the need to improve the marketing, to improve the niche. It is now generally accepted, that we could do with many more small companies engaged in the awards. They have got the detailed plans to promote and to encourage as well. So that is in hand, but it is something we will certainly want to keep an eye on to see whether that marketing is working.

Mr Butterfill

  77. If we could just come back to SMART awards for a moment, I understand the logic that says we might be able to give more money to more companies if there were some element of clawback. It would have to be conditional upon a very successful outcome so that it was something rather more than just a marginal improvement for the company concerned, and obviously, as my colleague has said, if it has been enormously successful partly as a result of the award, then there may be a case for it. In general, though, do you not think that we already spend too little on research and technology in this country compared with most other countries? Is there not a need, therefore, to encourage more activity of this nature as a general principle? Will you be pressing for that?
  (Mr Irwin) Yes, as a country I think we should be spending more on research and development. We certainly could not meet the need through the limited resource that we have on SMART, for example. There is no doubt that there are many more firms which need to be thinking more. It is not just about spending more on R&D, it is also, it seems to me, about how should one commercialise the R&D that already exists, so how can we build better links, for example, between universities and small businesses? That does not necessarily require hard commitment, but it does require some effort. That is why I have been talking to some of the universities, I have been talking to some of the people who are responsible for the development programmes, I have been talking to staff within Business Links, about how we can encourage better links between academia and business so that we get better technology transfer, more spinoffs from universities, for example. I think that almost certainly there is a lot more that we can do to help businesses commercialise.

  78. We have been looking at exactly that in the course of our present inquiry. We also probably need—and perhaps this is where you can give some advice—to persuade people of the need to protect their RDT. They do not always do that. Sometimes they spend the money, get it all right, and somebody else says, "Thank you very much" and walks away with it. Will you be giving that sort of advice at all?
  (Mr Irwin) Yes, and I would hope that every business adviser is already giving that sort of advice. Certainly I have been in the position in the past where I have been talking to people about that and they have not even been aware of the need to do a patent pending, let alone the full patent. On one occasion I almost gave them the money from my own pocket in order that they should be protected. Yes, we need to be ensuring that advisers are in a position to do that. We have been having some discussions with people in the Patent Office about the link-up of IPR awards. We have been having further discussions about what more we can do in that regard so that people are actually in the process, they are actually protecting the IPR at every stage. We have been talking to the Patent Office too about what further work we can do together to help businesses in that regard.

  79. That is encouraging, because clearly it does not always happen at the moment, does it?
  (Mr Irwin) It does not, I agree.

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