Schools must play a bigger part in creating entrepreneurs, says leading business organisation

That was one of the key messages from the Forum of Private Business in a submission to the All-party Parliamentary Small Business Group’s entrepreneurship inquiry, which opened last month.

The inquiry was set up to consider the role of entrepreneurs in driving economic growth, examine the barriers small firms face, and identify ways in which the UK can increase the number of motivated self-starters capable of running a profitable business.

The not-for-profit Forum also made a number of other suggestions to the inquiry on matters such as tax breaks for lenders, NI holidays, access to finance, prompt payment and the new enterprise allowance scheme.

The Forum began its submission by outlining the importance of the education system and how it should be better used to foster growth in numbers of young entrepreneurs.

Jane Bennett, the Forum’s Head of Campaigns, said: “Schools are vitally important because they are essentially where young minds are honed and appetites for working life whetted.

“They have a vital role to play in encouraging entrepreneurial spirit – we recognise that and so do our members – which is why we are calling for a greater focus by government on making sure schools are given the tools for the job. That includes a more appropriate curriculum and closer collaboration between schools and local business.

“We think there should be more work experience too – not less as the Government is currently considering. We recognise there’s room for improvement with the current system, and ideally we would like to see more pupils placed with smaller firms rather than big, multi-nationals. In smaller businesses pupils have a better chance of working alongside more senior, experienced members of staff who actually have something useful to pass on. It beats working in a mail room at town hall or large corporate organisation,” she added.

The Forum also raised the issue of tax breaks for private lenders as well as equity investors in its submission. In research carried out by the Forum, 45% of business said they would not consider equity finance, and none indicated it as a preferred option.

By offering complete tax relief on the interest received in lending to small businesses would work effectively to stimulate lending to small businesses at a relatively low cost to the Government, says the Forum, which estimates that the cost to the Treasury of removing tax on interest completely would be just £3.6 million in every billion invested via private lending initiatives.

A National Insurance contributions holiday for new start-ups is also something the Forum supports, but says the system in its present state is not working as well as it could.

“This scheme, offering a one-year tax break for new firms taking on staff in their first year, is a step in the right direction,” said Miss Bennett. However, the Forum finds that it has been too restrictive. Very few new businesses employ lots of people in their first year of trading and therefore many firms would be unable to take full advantage of the tax breaks.

“In addition, small businesses in the South East, London, and the East of England were excluded from the scheme and the Government took little action to promote it widely enough and raise awareness among business owners of the tax breaks on offer.

“The Forum would like to see the scheme extended to all small businesses taking on new staff. The level of unemployment we are currently seeing in the UK requires the Government to take decisive action to help small businesses take on new recruits and as such we feel that exempting all small firms taking on new staff from National Insurance Contributions would be extremely positive.”

Access to credit formed the conclusion of the Forum’s submission, the issue which it says has remained as one of the UK’s single most significant barriers for SMEs. Forum research, while showing that amounts of finance being accessed between November 2010 and November 2011 have remained the same, reveals the amount of money expected to come from external sources has dropped from 60% last year to 40% in 2012.

“This demonstrates that businesses are expecting restrictions in accessing finance to continue well into 2012,” added Miss Bennett.

“More than a third of our members quizzed in December 2011 said that they were being prevented from seizing growth opportunities due to restrictions in accessing finance.

“Traditional banks can and should be doing more to help small businesses. We are campaigning for banks to continuously assess industry and economic developments and to appraise businesses on a case-by-case basis. Bank managers also need to use greater discretion locally and should be able to take into account all evidence from businesses to help them access finance – for example recent orders.

“There’s also a need for greater transparency so that businesses can fully understand the costs and charges associated with the services of their bank and compare them to competitors’, enabling them to switch banks and access the best deals.

“These are all points we’ve made before in our Get Britain Trading campaign.”