CHANCELLOR George Osborne yesterday pledged to get credit flowing to Britain’s small businesses at a time when confidence has been rocked by the economic crisis in Europe.
In his Autumn Statement, Mr Osborne said he would press ahead with plans for 22 enterprise zones. The zones will have discounts on business rates, superfast broadband, and lower levels of planning control. Businesses based in the zones will have the potential to use enhanced capital allowances to help them to grow.
Apart from the initial “vanguard” of enterprise zones, which included Sheffield and Leeds city regions, Mr Osborne also revealed yesterday that two further zones would be established in the Humber region and Lancashire.
Mr Osborne said he was putting a further £1bn into the Regional Growth Fund during this Parliament. He added: “For if we don’t get the private sector to take a greater share of economic activity in the regions, then our country will become more and more unbalanced.”
In his statement, Mr Osborne said: “Last month the Bank of England’s Monetary Policy Committee decided to undertake further quantitative easing, and I have authorised an increase in the ceiling on their asset purchases to £275bn.
“This will support demand across the economy, but we must do more to help those small businesses who can’t get access to credit at an affordable price.
“We have already extended the last Government’s Enterprise Finance Guarantee scheme – and we are today expanding it to include businesses with annual turnovers of up to £44m and accrediting new lenders like Metro Bank.
“But this scheme is by itself not nearly ambitious enough – and never will be within the constraints of state aid rules. So the Government is launching a major programme of credit easing to help small business. We have set a ceiling of £40bn.
“At the same time, I have agreed with Mervyn King (the Bank of England governor) that we will reduce by £40bn the Asset Purchase Facility the previous Government gave the Bank to buy business loans. Only a small proportion of the facility was ever used.”
Mr Osborne said he was launching a National Loan Guarantee Scheme, which would work on the principle of using low interest rates that the Government can borrow at, to reduce the interest rates that small businesses can borrow at. Mr Osborne said he was using the credibility the Government had earned in the international markets to help the domestic economy.
He added: “New loans and overdrafts to businesses with a turnover of less than £50m will be eligible for the scheme – so it stays focused on smaller companies. We expect it will lead to reductions of one percentage point in the rate of interest being charged to these companies.”
The Chancellor signalled further reforms of employment law, including regulations covering the pay and conditions of workers when they switch from the public to the private sector.
Mr Osborne said he would call for evidence of further measures to make it easier to hire people, including changing the so-called Tupe regulations, which unions argue are vital to ensure that workers do not suffer cuts to pay or worse conditions when their jobs move to private firms.
The Chancellor said he also wanted to reduce “delay and uncertainty” in the collective redundancy process as well as introducing the idea of “compensated no-fault dismissal” for firms with fewer than 10 employees.
“We will cut the burden of health and safety rules on small firms because we have a regard for the health and safety of the British economy too,” he said.
“This Government has introduced flexible working practices and we are committed to fair rights for employees. But what about the right to get a job in the first place?
“Or the right to work all hours running a small business and not be sued out of existence by the costs of an employment tribunal?”
Jane Hannon, legal director in law firm DLA Piper’s Leeds employment team, said yesterday: “Reducing the influence of regulation on businesses, the proposals at first glance appear to have employers’ best interests at heart.
“However, as economic uncertainly rumbles on, the changes are going to be of little help to businesses who are having to consider their workforce options in the immediate future.
“They are unlikely to take effect before April 2013 following a period of public consultation. So the policy proposals on redundancy consultation obligations will not be in place in time for those employers who need to restructure and make redundancies early next year.”