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Let’s not lose sight of the small stuff

21st Jul 2016
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Whether or not we are part of the European Union, and irrespective of who is Prime Minister (well almost, you have to question the business environment under a Corbyn government), one thing that has not changed is the fundamental importance of the small business community to the economy as a whole.

Representing, as they do, approximately half of GDP and employment, growth in this sector is absolutely vital if we wish to both continue to repair the recent damage and possibly stave off any negative effects that Brexit might bring with it. In fairness the coalition government recognised this, and Vince Cable was exceptionally effective as a champion of small business with a programme of genuinely pragmatic policies which really did deliver on the ground.

His successor, Sajid Javid was slightly less high profile and seemed happy to let his junior ministers make most of the running, although it would be reasonable to accept that he wasn’t long enough in the post to deliver any real initiatives.

Worryingly we do seem to be sliding down the priority pole recently. Javid, as I said just now, was OK, but no Vince. The advent of the May government has, however, seen a departmental reorganisation and the appointment of a new minister who, if I’m to be completely honest, I have never heard of. In itself that doesn’t matter, of course, as I’m not massively politically engaged, and I’m sure that Greg Clark is a talented and able operator. It just concerns me slightly that in a very short space of time we have travelled from the oversight of one of the country’s highest profile and influential politicians to a relative unknown. I hope this isn’t a sign of how our new PM views the importance of the small business community.

My doubts about ministerial priorities notwithstanding the programme of policies designed to improve access to finance for small business continues to be delivered. The central plank of this, the mandatory bank referrals legislation, is progressing and should go live in its first phase towards the end of this year. Interestingly the British Business Bank has already called for expressions of interest from more platforms who wish to be part of this process, suggesting that they feel that more referral models are needed to ensure that it is a genuinely robust and whole of market ecosystem.

I do feel that the fact of the act (if I can put it that way) continues to be more important than the act itself, with the mood music between banks and alternative or complimentary funders turning ever more collaborative, this change in mind-set can be traced directly back to the work that the good Dr. Cable did. I can’t really overstate the importance of keeping the pressure on the banks to continue moving in the direction of placing successful funding outcomes at the top of their priority list, and ensuring that they cooperate with their non-bank funding colleagues to achieve this. If the new minister does nothing more than to steward and support this access to SME finance revolution, and to accelerate its momentum he will have done the economy and the country a great service.

Of course, the willingness of politicians to associate their political ‘brand’ with commercial activities does logically depend on how they view the associated reputational risk. In the heady and revolutionary days of 2014 the really big players, most notably George Osborne, were falling over themselves to herald the new dawn of Fintec, with Crowdfunding and peer to peer entrepreneurs being feted like rockstars. That kind of shine couldn’t last, however, and various high profile failures and scandals in both sectors has definitely dented their image of democratised finance for all, no risk associated. This is a shame. Equity crowdfunding really does have some way to go in getting its house in order in terms of transparency and investor protection, but the P2P models are, by and large, delivering some really good outcomes, both in terms of volume and investor confidence. Damage to the reputation of the alternative finance sector as a whole simply because of the failings of one of its constituent parts would be unfortunate, and I think that commentators, particularly journalists, have a real responsibility to be factually accurate and well briefed when using phrases like ‘crowdfunding’.

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