Government response
On 24 July 2009, the Business and Enterprise Committee
(now known as the Business, Innovation and Skills Committee) published
its report on its enquiry into the Enterprise Finance Guarantee
scheme. The Government, via a press release of 24 July, welcomed
the Committee's report. The report had three recommendations/conclusions
which the Government is pleased to briefly respond on.
It is important we recognise when the Government
does get it right. Although it is
limited in scope and cannot help all struggling businesses, the
Enterprise Finance
Guarantee scheme now appears to be working well, after a relatively
slow start. We
are delighted and we pay tribute to the civil servants who have
made this work. The
experience shows the value of having a Department which takes
the needs of
business into account. We are sure the Government will come forward
with
proposals in due course for what will happen when the EFG runs
out in March 2010;
we look forward to studying them (Paragraph 14)
1. The Government is grateful to the Committee
for its recognition that the Enterprise Finance Guarantee (EFG)
is helping viable small businesses through this difficult economic
time. As at 13 January there had been nearly £1.1 billion
of eligible applications from over 9,700 firms. Over 7,500 businesses
have been offered loans totalling £763m, of which 6,213 businesses
have drawn loans totalling £622.27m. Officials will continue
to monitor the uptake and performance of the banks to ensure EFG
plays its part in getting access to finance for small and medium
businesses.
2. At pre-budget report in December 2009, the
Government announced a 12 month extension to the EFG (from April
2010 to end March 2011) at a facility of £500m. This announcement
was supported by a majority of small business organisations and
lenders.
3. Of course, EFG is only designed to help those
as that margins of normal commercial lending decisions, and the
Government continues to encourage lending to viable under normal
commercial terms.
Members of the Committee have
been made aware of cases where banks are not
offering companies a choice of support but are offering single
measures, such as
factoring, to businesses which would be eligible to benefit from
this scheme. To
coincide with the publication of this Report, we are releasing
an invitation to
companies to submit evidence to us if they feel they have evidence
of this happening.
(Paragraph 16)
4. The Government welcomes the Committee's continuing
interest in the experiences which businesses, SMEs in particular,
have with their banks. Ministers and officials would be interested
to receive any findings or views the Committee has received from
businesses to help us in our role of monitoring update of the
EFG and the performance of the banks.
We will be keeping the evidence as to whether
the Enterprise Finance Guarantee
scheme is being offered appropriately under review, and will return
to this issue in
the autumn if we feel it is necessary. (Paragraph 17)
5. The Government welcomes the Committee's continuing
interest in the Enterprise Finance Guarantee. If the Committee
would find it helpful, the Government can provide quarterly reports
on the uptake of the EFG. Additionally, the Committee may be interested
in the Early Stage Assessment of the Impact of EFG on Recipient
firms, published in December 2009. The key findings from this
research are:
- Overall satisfaction with
EFG is high: Two-thirds
of businesses were fairly or very satisfied and satisfaction has
increased further for more recent EFG loans. Respondents were
particularly satisfied with the ease of the application process
(62 per cent), repayment schedules (64 per cent) and the information
supplied by lenders (60 per cent).
- Specific areas of EFG where respondents were
less satisfied were the administrative fees charged by the lenders
and, to a lesser degree, the interest rate applied. Despite this,
26 per cent and 36 per cent of respondents still rated their satisfaction
with these elements of EFG respectively as good or very good.
- The majority of businesses report positive
business outcomes: 94 per cent of respondents
indicated that their business prospects had improved as a result
of EFG, 84 per cent reported EFG had helped their prospects of
survival and 84 per cent of businesses reported that EFG would
serve as a platform for future growth. Other benefits stated included
improved cash flow and the introduction of new products or processes.
- EFG has had a significant impact on employment:
Approximately 60 per cent of firms reported the creation of jobs,
either already or anticipated in the future, and 57 per cent of
respondents reported that they had saved jobs, as a result of
EFG. In the 385 respondent businesses, some 1,870 jobs have been
saved, 350 jobs have already been created and a further 550 new
jobs are expected in the future, due to receiving EFG backed lending.
- Scaling up the sample to the entire population
of firms offered EFG loans up to the start of October, estimates
suggest that EFG could have already been responsible for saving
and creating around 31,600 jobs, with potentially a further 8,400
expected to be saved or mainly created in the future.
6. The full text of the Early Stage Assessment
of the Impact of EFG on Recipient firms is available at http://www.berr.gov.uk/files/file54076.doc.
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