UK small firms want to stay in Europe

When UKIP’s chairman Nigel Farage appeared on the BBC’s Question Time this week, the topics ranged from Scottish independence to internet surveillance and Syria. But the only reason this man was on at all is because of the influence he now wields in European policy. Influence that’s now forced an “In-Out” referendum pledge from David Cameron. So it was strange that David Dimbleby, trying to justify Farage’s presence and the absence of two Holyrood parties during a by-election in Aberdeen, failed to find a question about Europe from the 16-17 year-olds.

Which is a pity, because two thirds of small firms want to stay in Europe, whatever the UKIP leader thinks about leaving. The figure comes from a Daily Telegraph report of a survey of 1,600 small firms by the networking group BNI (motto: Local Business – Global Network?). The Torygraph quoted BNI’s finding that entrepreneurs liked familiar business methods in Europe and its proximity. The survey also found that, of Scottish small businesses, an even higher proportion, 70 per cent wanted to remain in the UK, presumably for similar reasons. (We don’t know how many of the 1,600 were Scottish though, so the stats are not too robust.)

BNI’s Charlie Lawson said it’s not what trading bloc they are or aren?t part of, that really concerns small firms, but access to adequate funding to expand and innovate. Two bits of news last week were germane to this debate: the failure of banks to pass on the government’s Funding for Lending cash; and the government’s agreement of a £5.6m payoff for its tarnished hero, Stephen Hester, late of Royal Bank of Scotland’s plush chairman’s chair.

To be fair, as I’ve argued before in these pages, the banks are in an impossible position: governments everywhere chastise them for betting customers” money on risky investments, give them more of their customers” money (tax receipts) and then insist they use it to restore their balance sheets so they don’t generate ?moral hazard again when they (inevitably) invest in more dodgy schemes.

So there was still no money for small businesses to invest in expanding and employing more staff, and that’s why Funding for Lending was introduced. But even that hasn’t worked, as most of it went into their mortgage books, where another government wheeze, Help to Buy, has allowed banks to feed another inflationary boom in house prices. And anyway, to paraphrase Mandy Rice Davies, they would do that, wouldn?t they” I mean, if your bank suddenly lent you more money, would you reduce your overdraft or invest it” Exactly: although interest rates are affordably low most of us wouldn?t be savvy enough to invest it instead of paying off loans, so we d reduce our debts. And our banks can’t really be described as savvy any more, can they?

What the government needs to do is to attach strings to FFL cash: they could forbid banks to put any of it in the mortgage book, and insist that it goes on risky small ventures with high employment potential. Although, unemployment hasn’t been that bad at all; it’s withstood the recession/s remarkably well.

What we really need investing in is a new structure for our economy, so that we lend money to innovative small firms like in Germany and California, which can build the industrial sectors that will provide steady growth out of the recession. Sectors providing valuable well-paid and skilled jobs that will pay enough salary for people’s homes, and an infrastructure that will reduce environmental damage and give Britain an edge in global markets. Instead of which we throw good money after bad and cement our reputation as the has-been of Europe. And pay for pointless referendums.

Bruce Whitehead‘s column on Real Business explores the latest political developments and their effects on UK businesses.

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