The Institute’s Patron, His Royal Highness Prince Michael of Kent, inaugurated the Global Economic Summit on Trade and Investment, on 20 January in Mumbai. He was speaking in his capacity as Patron of the Genesis Initiative. Genesis, a cross-party parliamentary group that represents small business owners, was established to promote small business policy development in the United Kingdom but is now represented at the European Parliament and across the world. In the UK it is comprised of more than one hundred professional bodies and trade associations, which between them represent in excess of one million small businesses. Institute chief executive, Garry Carter, is chairman of the Genesis Policy Senate, which debates small business issues and, through lobbying members of parliament and other key influencers, attempts to ensure that future legislation does not overlook the needs of small businesses.
“I warmly welcome you to the Global Economic Summit on Trade and Investment in Mumbai. The Summit is taking place at a time of intense uncertainty about the global economy’s tentative recovery, following one of the most challenging periods for both the developed and developing world since the Great Depression.
“My message today is that small businesses – whilst facing uncertainty and harsh trading conditions themselves - can do a great deal to create a more stable economic climate.
“I am talking at this important Summit in my capacity as the Founding Patron of The Genesis Initiative - Perhaps its main achievement is the collaborate ethos built up between parliamentarians and small business owners, working together to create sound SME legislative measures.
“Its success quickly spread to Europe where we have created a Pan-European Genesis Initiative. But the core characteristics remain the same: entrepreneurs need to be recognised and supported by governments, funding agencies, banks and trade bodies as the economic players that not only preserve jobs, but also create new ones – a laudable task, I am sure you will agree, in these volatile times.
“Late last year, I endorsed the Genesis Initiative is first ever SME Manifesto, which brought stakeholders together to identify the key strategic challenges facing SMEs in the United Kingdom, from company law to labour policy, and from access to finance to the adoption of the best European Union SME-stimulus practices.
“I am proud of the successes The Genesis Initiative has enjoyed over the last ten years. When we talk about SME policy development, we need to put the British experience situation in perspective. The United Kingdom is, of course, an integral part of the European Union – a point not lost on the Genesis Initiative membership in seeking to influence SME policy: some 80% of national legislation originates from the European Union. Increasingly, our stance in SME policy development has to take account of the wider EU political, economic, financial and social policy framework initiated by the EU institutions.
“We have had a taste of the European legislative influence during the recent financial crisis with a massive overhaul of banking, insurance and securities regulation.
“On the SME front, there is a growing consensus by national and European parliamentarians that SMEs are fundamental to EU economic growth. The statistics reveal much about the rationale behind this renewed emphasis; simply put, Europe’s 23m SMEs represent two-thirds of private employment in Europe - that is, 75 million jobs, and they generate one-half of all corporate turnover in the EU, and constitute 60% of Europe’s gross national product.
“But for an industry sector so critical to Europe’s economic stability, challenges still remain.
“The European governments have backed a series of measures to allow entrepreneurs to tap into the advice and ideas available at every level to help them develop their activities.
“The first really comprehensive SME policy framework for the EU and its Member States, the EU Small Business Act, was initiated last year - aimed at addressing some of the obstacles universally faced by European entrepreneurs.
“The Act encapsulated many of the concerns and measures that the Genesis Initiative has lobbied on, and, indeed, which I have relentlessly urged European legislators to adopt.
“Central to the EU Small Business Act is the introduction of a “Think Small First” philosophy, applicable at all legislative levels in each Member State, from national parliaments right down to regional and even municipal level. The message to MPs and public authorities is simple: “Less and Better Regulation” should be the primary, guiding principle to be kept in mind when devising or amending legislation affecting SMEs.
“The EU Commission is also empowering national states to cut red tape to the benefit of SME’s, by :
“Encouraging Economic Impact Assessments for all major new draft legislation. Introducing simplified customs reporting requirements for SME’s involved in cross-border activities, which besides reducing red tape will also facilitate cross-border trade.
“Streamlining EU Company Law, and specifically financial disclosure and publication requirements, resulting in the exemption for micro-enterprises to prepare annual financial reports.
“State aids rules are being revised to make it easier for SMEs to benefit from public funding for such things as training, research and development and environmental protection. New legislation has been proposed to tackle the perennial problem for many small businesses of late payments, imposed by public administrations and business clients.
“And lastly, a helpful new statute for a European Private Company enabling SMEs to start up and operate according to the same company law provisions throughout Europe.
“One central factor that still remains a challenge for SMEs in Europe is access to finance – rated by entrepreneurs as being the second most important obstacle. Inevitably, the availability of debt finance has been disrupted by the financial crisis.
“Still, surveys in Europe show that over 70% of SME's received all, or part of, the bank loan they wanted; only about 15% were fully rejected.
“Now, in Europe, we are getting better at targeting those categories of small businesses that fail to obtain adequate financing from banks and we are developing specific, tailor-made solutions with the help of the European Investment Bank.
“For instance, we know that access to finance is difficult for the likes of • Micro-enterprises without business or personal assets to offer as security. • Young, fast-growing, innovative SME’s. • SME’s undergoing a succession exercise, and, • SMEs with no track record
“These categories of SME’s cannot be ignored; they are the ones that tend to contribute most to growth and jobs in the EU, once they reach cruising speed as a going concern.
“In broad terms, we have much left to do in working constructively with:
“In the present environment, particularly for large banks, business credit cards or overdraft facilities are now becoming low-cost ways to provide small businesses with credit compared with traditional lending. “Some of these finance issues will, no doubt, be familiar to the small business owner in India. “The task of mobilising small business expansion in this country is hampered by limited long-term finance, a shallow bond market and constraints on external commercial borrowing. But like Europe, SME trade bodies in India must work with the government in promoting faster financial reform to remove obstacles to the free movement of capital, attract investors such as mutual and pension funds and overseas infrastructure funds, and introduce mechanisms to facilitate investment across the region.
“Compared to Europe, India excels in what might be called as ‘higher level professional expertise entrepreneurship’ - at a level of activity that leaves one breathless. As part of Asia’s third largest economy, a combination of proficiency in the English language, technical skills and low cost has helped Indian companies over the past decade plug into the global economy and earn the reputation as the “World’s back office”. Today India has about 50% of the global for offshore IT and business services.
“I cannot help but notice that India’s abundant entrepreneurial human capital is moving up the value chain. Business processing is set to overtake outsourcing in terms of revenue as Indian professionals diversify into services such as human resources, payroll, management, accounting and legal services. And there are promising new areas including research and development capabilities in biotech and pharmaceuticals. Europe should take note!
“But this transformation – in both Europe and India - requires that entrepreneurs, governments, financial institutions and regional agencies work together in building the appropriate legislative environment for small businesses to flourish. Developing and implementing the right policy framework is critical. And it has to be done quickly.
“Going back to my Genesis Initiative experience, I continue to believe that the United Kingdom and India are the ideal environments to cultivate a multi-stakeholder approach to SME policy development, in a collective effort to put SMEs at the centre of trade strategy, thereby boosting long-term prosperity.
“Both countries start from a compelling base. The strong small business economic and cultural presence in both the UK and India is an enormous asset for both countries; In addition, the United Kingdom, thanks to its historic Indian Diaspora and investment by Indian-based companies, is the logical choice for facilitating two-way trade flows and inward investment between India and the larger European Union.
“So in conclusion, we must work together to encourage more small business set-ups in India and the UK through appropriate financing vehicles and venture capital and reduced red tape, boosting two-way trade and investment between the United Kingdom and India, and finally, exploiting the unique cultural and business links by establishing UK as India’s gateway to Europe.
“Thank you”.