9:01am Tuesday 25th November 2008
By Deborah Johnson
THE North-East economy could benefit from hundreds of millions of pounds of investments after yesterday’s Pre-Budget Report (PBR) backed calls for local authorities to contract more work to small businesses.
Chancellor Alistair Darling – as part of a raft of measures to support small and mediumsized enterprises (SMEs) – yesterday accepted all the recommendations on public sector procurement made after this year’s budget as a means to increase the amount of work going to small local firms.
The announcement came as a major boost to the Buy North-East campaign, run by The Northern Echo and the North-East Chamber of Commerce (NECC) which has, for the past year, pushed for greater co-operation between local authorities in contracting work to SMEs, which Mr Darling described as being the “engine” of the UK economy.
NECC research found that the regional economy would grow by £1.35bn and an extra 6,000 direct jobs would be created if the public sector spent an additional one per cent each year to 2016 contracting services within the North- East rather than from outside.
Last night, Ross Smith, head of policy and research at NECC, said: “This is a really positive move and if it is implemented efficiently, it could ensure SMEs win more public sector contracts and bring hundreds of millions of pounds of extra investment in the North-East.”
The PBR also unveiled a £7bn package aimed at helping smaller firms through the current economic downturn, including access to loans and deferring tax rises.
Amid increasingly dire warnings from business groups about the scale of the damage being caused to industry as the UK heads towards recession, the Chancellor pledged “real help” to SMEs, which employ 60 per cent of the private sector workforce, by means of improving access to credit, easing cash flow and reducing burdens. Some relief was offered on the widely-condemned empty property rates (EPR) by allowing businesses to spread payments. A similar policy was adopted towards VAT and National Insurance.
The Chancellor announced a £4bn deal with the European Investment Bank to provide money to UK banks to pass on to SMEs, and about £1bn will be available to their customers by the end of the year, said Mr Darling, adding that credit will also be offered through a temporary Small Business Finance Scheme, worth another £1bn.
Last night, the region’s business organisations welcomed the help made available for SMEs, although the NECC said it was disappointed EPR relief did not go further, and that National Insurance contributions were raised.
Colin Stratton, North-East chairman of the Federation of Small Businesses (FSB), said he “cautiously welcomed” the PBR.
“We are delighted that the chancellor has taken note of the small business community and has promised £1bn for a temporary Small Business Finance Scheme, something that is very much down to the lobbying power of the FSB and its 215,000 members nationwide, and we will be very keen to see details of this fund,” he said.
“We are also happy to see a temporary increase in the tax relief thresholds for empty properties because this is of crucial importance for many SMEs.
“It will certainly be of great assistance to small businesses in the North-East.
“We were also pleased to hear Mr Darling refer to small businesses as the engine room of our UK economy.
A longer period to pay VAT, corporation tax, income tax, and National Insurance, can only ease cash flow which will boost the North-East economy and SMEs within the region.”
Alan Clarke, chief executive of regional development agency One NorthEast, said the PRB came as another boost to North-East businesses on top of the agency’s £10m credit crunch package, £1.8m extra investment into Business Link and establishment of a new £125m venture capital fund with the European Union and European Investment Bank.
“The Government has unveiled a major funding package to support businesses which I certainly very much welcome,” he said.
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