1. Introduction to businesslink.gov.uk Recent developments in the SME sector in the UK focusing on how government and the private sector are addressing the developments relating to finance David Dinsdale Director – businesslink.gov.uk Chairman – Institute of Directors (Buckinghamshire Branch) email – david.dinsdale@businesslink.gsi.gov.uk

2. Changes in the structure of UK businesses Key trends Overall number of businesses slightly lower – 0.5% (2008 to 2009) Increase in lifestyle businesses in the recession – hairdressers at home etc. General move to incorporation from sole proprietors and partnerships. Sources Inter departmental business register - http://www.statistics.gov.uk/CCI/nugget.asp?ID=195http://www.statistics.gov.uk/CCI/nugget.asp?ID=195

3. Optimism of UK SMEs (Nov 09) Sources Confederation of British Industry - http://www.cbi.org.uk/pdf/20091102-cbi-sme-trends-survey.pdfhttp://www.cbi.org.uk/pdf/20091102-cbi-sme-trends-survey.pdf

4. Key principles for UK Government support Business support is provided by government in the UK based on several criteria. These are: Rationale – whether there is a market failure in provision or wider social or environmental justification for intervening Likely effectiveness – whether an intervention addresses objectives Business need – whether there is a genuine demand from business for the type of support offered Sources UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html

5. UK Government support for businesses In 2006, UK government initiated a simplification process to rationalise over 3000 schemes to 100 or less by 2010 Key schemes in the Finance area are: Understanding Finance for Business Small loans for business (up to £50k) Finance for Business including –Enterprise Finance Guarantee Scheme Sources UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html

6. Enterprise Finance Guarantee scheme The scheme was introduced on 14 th January 2009 to replace the Small Firms Loan Guarantee Scheme (SFLG) £1.3bn available in total Progress to date (Jan 2010) Compared to 08/09 (SFLG) Key criteria is the business must have a bankable proposition but insufficient assets to secure a traditional bank loan. Sources UK Government - http://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.htmlhttp://www.berr.gov.uk/whatwedo/enterprise/simplifyingbusinesssupport/page44804.html Small Firms Loan Guarantee Annual Review - http://www.berr.gov.uk/files/file52193.pdfhttp://www.berr.gov.uk/files/file52193.pdf No of Eligible Applications10,061Value of Eligible Applications£1.13 Billion No of Loans Offered7,792Value of Loans offered£795 Million No of Loans drawn6,456Value of Loans Drawn£648 Million No of Loans drawn2,368Value of Loans Drawn£178 Million

7. Emerging sources of finance other than banks

8. What is Zopa? Imagine you want to borrow £1000 from these people offering funds... whose money would you choose? By selecting the cheapest rates, you’d be able to assemble your £1000 loan at an average rate of 8.2%. Similarly, Zopa is a marketplace where lenders and borrowers get together to sidestep the banks for a better deal, with borrowers paying on average 20% less than they would from their bank, assuming of course their bank actually had the funds to lend. Zopa facilitates by: - Credit checking all the borrowers to minimise risk and keep lenders’ money as safe as possible - Assembling the cheapest loan available for each borrower - Administrating the loan; handling contracts, requesting and processing repayments and employing a collections agency where necessary - Spreading lenders’ money across many loans (typically over 50) so that their risk is diversified - Keeping everyone’s details secure and private

9. We’re about to celebrate our 5 th Birthday We launched in March 2005 and now: - We have more than 350,000 members; 8,800 currently have loans from more than 17,000 lenders - Our lenders have loaned out more than £66m in total so far and Zopa is currently enjoying growth of over 100% year on year - Our lenders have suffered just 0.7% bad debt to date. We only lend to credit-worthy borrowers who can afford their loan, and we steer well clear of anything that could be called near- or sub- prime - Our charges are low, transparent and up-front, so there are no sneaky fees or nasty surprises for any of our users - Zopa borrowers can also make over-payments or early repayment with no penalty or admin charge - Our borrowers tell us they prefer borrowing money from and paying interest to real people than banks -Dave from London told us, “Never has borrowing money been such a relaxed and "fun" experience. Next time I need a short to medium term loan I know exactly where to go to.”

10. How do businesses find support in the UK – by phone, face to face and online. 9 Regional Services

11. Slide 10 Key statistics about the services Business Link Phone / face to face England Only 250,000 590,000 209,000 90% Visits per month Businesses assisted p.a, Pre starts assisted Customer satisfaction Comprehensive Impartial/trusted Likelihood to recommend Helps understand/improves view of government Business Link online UK Wide ~2m 538,000 78% of start-ups 92% 86% 84% 83% 55%

13. Key areas of support sought by businesses From traffic to businesslink.gov.uk, the top 4 rarely change: ThemeVisits per month (ave) Employing people250,000 Taxes, returns and payroll200,000 Starting up150,000 Finance and grants120,000 These themes account for about 40% of all traffic to businesslink.gov.uk

14. Key recommendations for policy makers The principles of support in the UK (market failure, likely effectiveness and business need) are good principles for designing policy and interventions Schemes like the Enterprise Finance Guarantee fill a gap for many thousands of businesses A significant amount of business finance is offered by friends & family. Many people would like to see government alter the tax treatment of investments by friends and family in businesses, particularly re losses. Other innovative sources of finance are emerging and popular (e.g. zopa.com) Businesses prefer one place to go to find out information about all help available to them; finance, grants, other support Finance is often one of many areas of support that a business needs. Services like Business Link can help identify those needs. Finance alone may not help. Many people in the UK think that government SHOULD back their business. It is important to be clear when help is and is not available.