Government plans to help SMEs get through credit crunch

The Government has today outlined a package it hopes will help small and medium sized firms navigate through the current choppy conditions in the economy.

The Government has today outlined a package it hopes will help small and medium sized firms navigate through the current choppy conditions in the economy.

The multi-departmental measures are based around three areas that Labour has identified as priorities for SMEs in the UK; cash flow, access to finance and training for staff.

Peter Mandelson, Secretary of State for Business sympathised with the plight of the small business community.

"We are on the side of the small and medium sized businesses and understand that they re facing tough times. The Government has taken steps to ensure that banks can start lending to them again," he said.

The recapitalisation of banks was done on the proviso they agreed to maintain lending to SMEs at 2007 levels, the Government said.

But it has also smoothed communications between the European Investment Banks (EIB) and UK banks to make sure that part of the £24bn facility recently announced by EIB is made available to the UK. It said four UK banks have expressed an interest in negotiating loans of around £1bn.

Mandelson revealed that Regional Development Agencies in England, which spend £750m a year with suppliers, have committed to them within ten days and this plan would be taken to other departments.

"We're urgently speaking to the wider public sector to extend this commitment. We want everyone in the supply chain to pay their bills more quickly," he said.

The Government said it was also "overhauling the training system" to ensure that SMEs can train staff with the minimum of bureaucracy and get advice on maximising cash flow, marketing and business planning.

Federation of Small Businesses national chairman John Wright said the Government's plans to pay SME suppliers more promptly would be a much needed fillip.

"To this end we have also written to local authorities urging them to undertake similar measures and to pay their small business suppliers as early as possible," he added.

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