Shadow business minister: 'we have to stay in the single market'

It goes without saying that the shadow minister for business, energy and industrial strategy is concerned about the ramifications of Brexit, which he says are affecting SMEs already.

“Small businesses are telling me they are already losing contracts, they’ve already stopped recruitment,” Bill Esterson says. “That’s an early sign – small firms will catch a cold before the rest of the economy. We have to stay a member of the single market. Anything less than that will just be, if not impossible, then almost impossible, for many small firms to cope with.”

The minister has been campaigning for more government support for small business owners, particularly around issues of late payment. Small firms wait an average of 72 days to be paid and are typically owed £12,000 each. In comparison, large corporations only wait 47 days.

To tackle the problem, the government stated its intention to appoint a small business commissioner as part of the small enterprise bill in September 2015. The consultation is still open to decide how the office will operate, which small businesses will fall under its jurisdiction and how it will address complaints.

Esterson says the original vision of the role, based on the Australian system that was set up in 2003, has been watered down.

“The small business commissioner will only be able to look at late payment in the private sector [rather than including the public sector too], and they would only be able to signpost to mediation services – they won’t be able to insist on mediation,” he adds. “The lessons from Australia are pretty clear – having some teeth makes all the difference ... We asked the government to do all of those things and they refused.”

In lieu of a robust small business commissioner at a national level, Esterson is now looking at the possibility of creating small business administrators in the UK’s regions. Working in partnership with the deputy mayor of London, Rajesh Agrawal, Andy Burnham in Manchester and Steve Rotheram in Liverpool, he has taken much of his inspiration from the US Small Business Administration (SBA), which dates back to 1953.

Tomorrow, Esterson will appear on a panel with the current SBA administrator, Maria Contreras-Sweet, to explore the success of the agency and how the UK can emulate its approach post-Brexit. The SBA has offices in every state and guarantees small business loans up to 90% of their value. It also offers free counselling and mentoring and has programmes specifically designed for female entrepreneurs, those from disadvantaged communities and veterans.

“It’s a $900m organisation with cross-party support and the largest network of retired entrepreneurs acting as mentors to small firms,” he says, adding that the high profile of the SBA is embodied by the fact that Contreras-Sweet has sat in President Obama’s cabinet since 2014. “They see small business as crucial to the success of the American economy.”

In the UK, he argues that more needs to be done to help small businesses to grow and export. Recent FSB figures show that only 20% of small firms export, although another 20% would like to one day. This he says, is evidence of a “massive underperformance in trade” in the UK that the government isn’t working to address. He also points to the closure of the successful British Growth Service in 2015 as evidence that Whitehall isn’t working with small business owners in mind. Following the announcement, the government said it was investing £12m per year into the country’s 39 Local Enterprise Partnerships. Esterson says that and other schemes don’t go far enough.

“The experience of this government and support schemes has been there’s been very little take up and they’ve been far too small scale … And with the [expected] loss of European funding – the government has to be clear how it’s going to replace that,” he adds.

“The problem in this country is we’re short of firms that grow … there’s a culture that you get to a certain level and you sell. If you’ve got somebody [like an administrator] looking after those smaller firms who don’t have internal capacity or the ability to buy in expertise, then you’ve got a much better chance of success. Labour is the party of government in [many of the regions] and we have an opportunity to develop [that] off the back of the devolution agenda.”

The support that does already exist, he adds, is primarily run by private enterprise such as Google, or are networks organised by entrepreneurs themselves.

“There’s really good practice in this country … but you can’t leave these sorts of things just to the market. What we need is a strategic approach across all sectors to support small business, otherwise you’re just scratching the surface. And great though those projects are, there’s only one organisation that can really do this, and that’s government.”

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