7 September 2010
George Freeman highlights the potential of the technology and science sectors to drive small business growth. He calls for incentives to allow centres of excellence to grow and flourish and calls for the promotion of direct credit unions and smaller new banks to help small businesses get access to the finance they need.
George Freeman (Mid Norfolk) (Con): I shall try to be brief. I welcome this debate and I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for initiating it. I welcome my hon. Friend the Minister; I know that the small business community will be delighted that we have a Front-Bench spokesman with experience of building a small business. I also welcome the Government's commitment to this vital area, both in the Chancellor's statement and in the centrality of their open-for-business commitment. I welcome the role of the Foreign and Commonwealth Office in driving trade around the world and the excellent July paper, and I support the comments of colleagues about microfinance.
Like a number of Members I came to the House after a career in small business. In my case, it was a rather specialist field. I spent 14 years in biotechnology venture capital, so rather than echo the excellent comments of others about general small business finance, I shall concentrate on the particular needs of technology companies, and the technology sector. Before doing so, I declare an interest in my business, 4D Biomedical, and in directorships of the Iceni fund at the Norwich research park and Elsoms seeds.
I shall make three principal comments. The first is about the potential of the UK technology and science sectors to drive SME growth, national economic growth and international competitiveness. There are three key exploding markets around the world. Some may wonder where growth in the UK economy might come from, but I suggest that we do not have far to look. They are food, biomedicine and the technologies that drive sustainable living. Given the world population and the rate of growth, those three markets are all set to explode over the next 10, 20 or 30 years.
We have the science and research base to lead in the technical solutions required to make that population growth sustainable. In my area of Cambridge and Norwich, but sadly not yet in my constituency, we have genuinely global world-class centres of excellence in biomedicine and food science and clean tech, of which the Minister is aware. My plea is that when considering the financing of small businesses in those sectors we do not overlook the importance of core research. We must ensure, in the forthcoming review of departmental spending, that we do what we can to protect the core research spending of our excellent world-class centres of science research, such as the John Innes centre at the Institute of Food Research.
My second point is about how the Government can encourage those important technology sectors. I know that the Minister has given a lot of thought to the subject. To their credit, the previous Government recognised the importance of the sector, but their approach was essentially flawed. It was that the Government know best; we had one initiative after another and we had the regional development agencies, and they created well-intentioned pots of money and schemes suggesting that everyone had it in them to be a biotech entrepreneur and that every region had potential, but we wasted a lot of money. I know that the Minister, when in Opposition, considered the matter closely. I suggest that our approach should be based on incentives, not initiatives. If we create the incentives that allow centres of excellence to grow and flourish, in which companies can invest, we will not need initiatives.
My third point-I accelerate rapidly to leave my hon. Friend the Member for Bedford (Richard Fuller) some time-is about specific financing difficulties. A number of colleagues have spoken of the banks, and I echo those comments. We clearly have a problem with bank regulation, the banks anticipating regulatory pressures to repair their balance sheets to the cost of small businesses. The latest figures show that bank lending to small businesses this year is again down by 6%. The big companies, of course, are fine, as they play in the international bond markets and have other options open to them.
We have a huge problem with the banks. My plea is that, as with the green investment bank, we consider all sorts of ways of promoting direct credit unions and smaller new banks. I am aware of an initiative in Cambridge-I believe it is known as the boring bank of Cambridge. It is not intended to be an investment bank but will do straightforward borrowing and lending for good local businesses. There is a huge appetite locally, and many people would put their money into a local bank that supported local businesses. It could be a fiscal element to the big society.
I come now to the financing of the food chain in the technology sector. In my 14 years' experience, the banks are largely irrelevant to the financing of high-technology companies. It tends to be a cycle, with entrepreneurs taking a risk and putting their personal and family assets on the line, then high-risk angel investors putting in their expertise and often their money, and then specialist venture capital, corporate venture funds and sovereign wealth funds becoming involved. My plea is that we should recognise the importance of reinvesting personal and corporate wealth. I wonder whether we can do something through the tax regime to encourage such reinvestment. I was interested to note that the latest FSB survey of its members showed that only 28% of those who were borrowing rely on bank loans; 31% use their own savings and credit cards, and 24% retain profits, the latter two being the bigger element.
My last comment, which is for the Minister, is about the global potential of the Foreign and Commonwealth Office mission to unlock some strategic national partnerships. I cannot help but wonder about the potential of this country, in partnership with India, to drive a great innovation in agricultural productivity in India, using our historic strengths in agriculture and our links, not least the English language, with the Indian Government. Although my party believes principally in incentives rather than big government initiatives, there are some instances when only the Government can act. The Government could help to facilitate some interesting partnerships between British research institutes, British companies and overseas markets.
With that I shall close, leaving my hon. Friend the Member for Bedford and the Minister time to reply.
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George Freeman (Mid Norfolk) (Con): I shall try to be brief. I welcome this debate and I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for initiating it. I welcome my hon. Friend the Minister; I know that the small business community will be delighted that we have a Front-Bench spokesman with experience of building a small business. I also welcome the Government's commitment to this vital area, both in the Chancellor's statement and in the centrality of their open-for-business commitment. I welcome the role of the Foreign and Commonwealth Office in driving trade around the world and the excellent July paper, and I support the comments of colleagues about microfinance.
Like a number of Members I came to the House after a career in small business. In my case, it was a rather specialist field. I spent 14 years in biotechnology venture capital, so rather than echo the excellent comments of others about general small business finance, I shall concentrate on the particular needs of technology companies, and the technology sector. Before doing so, I declare an interest in my business, 4D Biomedical, and in directorships of the Iceni fund at the Norwich research park and Elsoms seeds.
I shall make three principal comments. The first is about the potential of the UK technology and science sectors to drive SME growth, national economic growth and international competitiveness. There are three key exploding markets around the world. Some may wonder where growth in the UK economy might come from, but I suggest that we do not have far to look. They are food, biomedicine and the technologies that drive sustainable living. Given the world population and the rate of growth, those three markets are all set to explode over the next 10, 20 or 30 years.
We have the science and research base to lead in the technical solutions required to make that population growth sustainable. In my area of Cambridge and Norwich, but sadly not yet in my constituency, we have genuinely global world-class centres of excellence in biomedicine and food science and clean tech, of which the Minister is aware. My plea is that when considering the financing of small businesses in those sectors we do not overlook the importance of core research. We must ensure, in the forthcoming review of departmental spending, that we do what we can to protect the core research spending of our excellent world-class centres of science research, such as the John Innes centre at the Institute of Food Research.
My second point is about how the Government can encourage those important technology sectors. I know that the Minister has given a lot of thought to the subject. To their credit, the previous Government recognised the importance of the sector, but their approach was essentially flawed. It was that the Government know best; we had one initiative after another and we had the regional development agencies, and they created well-intentioned pots of money and schemes suggesting that everyone had it in them to be a biotech entrepreneur and that every region had potential, but we wasted a lot of money. I know that the Minister, when in Opposition, considered the matter closely. I suggest that our approach should be based on incentives, not initiatives. If we create the incentives that allow centres of excellence to grow and flourish, in which companies can invest, we will not need initiatives.
My third point-I accelerate rapidly to leave my hon. Friend the Member for Bedford (Richard Fuller) some time-is about specific financing difficulties. A number of colleagues have spoken of the banks, and I echo those comments. We clearly have a problem with bank regulation, the banks anticipating regulatory pressures to repair their balance sheets to the cost of small businesses. The latest figures show that bank lending to small businesses this year is again down by 6%. The big companies, of course, are fine, as they play in the international bond markets and have other options open to them.
We have a huge problem with the banks. My plea is that, as with the green investment bank, we consider all sorts of ways of promoting direct credit unions and smaller new banks. I am aware of an initiative in Cambridge-I believe it is known as the boring bank of Cambridge. It is not intended to be an investment bank but will do straightforward borrowing and lending for good local businesses. There is a huge appetite locally, and many people would put their money into a local bank that supported local businesses. It could be a fiscal element to the big society.
I come now to the financing of the food chain in the technology sector. In my 14 years' experience, the banks are largely irrelevant to the financing of high-technology companies. It tends to be a cycle, with entrepreneurs taking a risk and putting their personal and family assets on the line, then high-risk angel investors putting in their expertise and often their money, and then specialist venture capital, corporate venture funds and sovereign wealth funds becoming involved. My plea is that we should recognise the importance of reinvesting personal and corporate wealth. I wonder whether we can do something through the tax regime to encourage such reinvestment. I was interested to note that the latest FSB survey of its members showed that only 28% of those who were borrowing rely on bank loans; 31% use their own savings and credit cards, and 24% retain profits, the latter two being the bigger element.
My last comment, which is for the Minister, is about the global potential of the Foreign and Commonwealth Office mission to unlock some strategic national partnerships. I cannot help but wonder about the potential of this country, in partnership with India, to drive a great innovation in agricultural productivity in India, using our historic strengths in agriculture and our links, not least the English language, with the Indian Government. Although my party believes principally in incentives rather than big government initiatives, there are some instances when only the Government can act. The Government could help to facilitate some interesting partnerships between British research institutes, British companies and overseas markets.
With that I shall close, leaving my hon. Friend the Member for Bedford and the Minister time to reply.
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