Financial support for small and medium-sized enterprises - Business and Enterprise Committee Contents

Examination of Witnesses (Questions 40-45)


16 DECEMBER 2008

  Q40  Roger Berry: Is there anything else government can do, apart from trying to encourage that and facilitate that, to address this credit insurance problem?

  Mr Cave: I do not think I have anything to add beyond what has been said on that.

  Mr Frost: No.

  Q41  Chairman: I would like to get from you a sense of the urgency you attach to this issue. We are having a very quiet and gentle discussion, but I met a manufacturer in my constituency on Thursday of last week who faces desperate difficulties because of this issue—a perfectly viable business. The credit insurers have decided that that type of structure of company they just will not insure any more, for no good reason, and it could be the end of the business. I just want to get a sense of the urgency attached to this issue.

  Mr Frost: I think the point is, Chairman, that it is an issue but it is only one part of the jigsaw, one part of the issues facing that business. As I said earlier, there are difficulties clearly with the relationships with the banks for many of these businesses—different on the credit insurance. Of course they are then being squeezed by both customers and suppliers and the cash is just draining out of the business. It is an important aspect. As I say, we at the moment are surveying exactly what is happening.

  Q42  Chairman: For each business its own particular challenge will be different. This particular business has a strong cash flow, it has no other problems. Its only problem is the loss of credit insurance. How widespread is that problem?

  Mr Frost: I cannot give you a response on the actual scale but it is a significant issue.

  Q43  Roger Berry: Should the Government step in and provide this facility? No doubt for a premium.

  Mr Frost: My understanding is the Government is examining this. If it is of a growing scale and magnitude then I think the Government will have a role. Someone will have to act as a guarantor, yes.

  Mr Izza: I would be more inclined to look to the market for solutions but if the market cannot find solutions, well, perhaps it is a legitimate thing for the Government to look at in these difficult times.

  Roger Berry: That seems a wonderful summary of where we are at the moment. The market has failed us in many areas quite significantly and we are left to pick up the pieces.

  Mr Binley: Except many might say regulation has failed, quite frankly.

  Q44  Chairman: We have run to the end of the questions we wanted to ask you and we have a little bit of time in hand. Is there anything you feel that you have not said at sufficient length or anything that you would like to qualify or add to the discussion?

  Mr Cave: There is one thing I would like to emphasise. We find ourselves in exceptional circumstances. We need quick actions to get cash flow moving and to get access to finance moving. The Government has responded to this. The £1 billion found that was in the PBR is a brilliant step in the right direction, but it needs to be available soon—not at the end of January, as we he have heard, it needs to be sooner. I would say, in response to what was said earlier, let us put party politics to one side and accept the fact that the principles around that £1 billion fund are good, but it is not enough, so let us broaden it out, and let us make sure that we help as many businesses, viable businesses, as possible. Anything we can do to put pressure on the Government to press for that would be wonderful.

  Q45  Roger Berry: I entirely agree with all of that. From your point of view, what is the obstacle to accessing this £1 billion a little more quickly? I am staggered at what seems to be the snail's pace of a lot of this, given the nature of the problem. From your point of view, though, why January? Why have things not happened already?

  Mr Cave: It has been a real education in how slowly government ministries and party organisations roll compared to businesses on the frontline. With the greatest will in the world—and certainly the officials we have spoken to about this do want to get it moving quickly—there is the Christmas period, et cetera, et cetera, and it all adds to the delay. There is not as much realisation in Westminster about how it is impacting in real time with our members on the ground. In comparison, things move in slow motion.

  Mr Frost: The point I would like to make, Chairman, is that if we had been sitting here 12 months ago it would have been a very different economic environment and discussion that we would have been having. I do not think you can discuss the relationship between banks and business without overlaying it with what is happening in not only the UK economy but the global economy fund as well. There is a marked downturn. I do not want to appear an apologist for the banks, but certainly lending decisions are going to be looked at in a very different way now from what they were 12 months ago. If we are to get through all of this, it is absolutely crucial that we maintain the good quality businesses, the businesses that have a good track record and that have potential, and then not let go. If that does not happen, then I just cannot see us getting out of this very fast.

  Mr Izza: Wherever you sit in UK plc today, whether it is at the large end or the micro end, the key issue is one of confidence. The solution is not in the hands of any one particular group—I mean, the Government, the banks, the insurers. Everybody has a role to play in bringing this back. But one group which I think does have an important role is the media. The media can often talk down the prospects of British business, and, as David said earlier on, British business is not a basket case across the board. There are some businesses that will do very well in the forthcoming year and it will be those who are the engines of growth for the future.

  Mr Hoyle: Would it be fair to say—and you have summed up quite well—that it is good that the Government has taken action. There may be more that needs to be done but it is a lot better than doing nothing.

  Chairman: That is a rather partisan observation from Mr Hoyle. No one is suggesting doing nothing. We are all discussing what is the right thing to do. On that note, I conclude the session.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 23 March 2009