A scheme to encourage small business growth and emulate Germany’s thriving Mittelstand was announced by David Cameron at the British Chambers of Commerce (BCC) annual conference on Tuesday.
A future Conservative government would help 500 of the UK’s fastest-growing firms to expand further through the Help to Grow scheme, the prime minister said.
The 500 businesses would receive support from the British Business Bank, which estimates there is an annual £1bn funding gap to be plugged, Cameron said. A pilot scheme will be launched in the budget in March. Cameron said £100m will be set aside to run it.
“We will plug this billion-pound gap by using the government’s balance sheet to guarantee loans by private lenders or by co-investing public money alongside private money,” he said.
He added: “I want Britain to have its own version of Germany’s Mittelstand, a backbone of medium-sized firms which export, innovate and generate new jobs.
“We need to think strategically about helping those small firms over the ‘valley of death’ funding gap so they can become medium firms.”
Speaking earlier at the conference, John Longworth, director general of the BCC, described small and medium-sized firms as the “engine room” for jobs and exports, but issued a stark warning that our “inadequate system of business finance” is standing in their way.
Longworth said business investment in the UK has been behind Germany’s since as far back as 1870.
“Only if we fix our business finance system will we have a British, home-grown Microsoft, Google, Samsung, Miele, Siemens, L’Oreal or Tata in the years ahead,” he said.
“Businesses need to be confident that finance is available in order to grow – and crucially, to export. They need to be confident that working capital is available if they are to take on new orders, fulfil them and grow – and not fear going bust at the very moment of expansion.
“Long-term, patient, loan capital is what makes fast-growing small companies into the home-grown, mid-sized champions of the future. Without it, too many are forced to sell out and lose control eventually and all too often to disappear into the clutches of multinationals.”
Commenting on the Help to Grow scheme, Stephen Ibbotson, director of business at ICAEW, said that although it could “boost business growth across the country”, provision must be made to give firms the “right kind of advice to ensure that those businesses are finance-ready”.
“The fear for any fast-growing company is losing control. The right kind of advice will dispel the notion that giving up equity means giving up control, and it is imperative that the Help to Grow pilot recognises this,” said Ibbotson.
Cameron was joined at the conference, held in London, by Ed Balls, Nick Clegg and Vince Cable, who each set out their plans for enterprise and industry.
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