Serviced offices can be key in helping to build a firm foundation for the growth of small and medium sized enterprises (SMEs) in the UK, leading economist Justin Urquhart Stewart told the annual conference of the Business Centre Association in London earlier this week.
The other two elements essential to the healthy development of SMEs, he said, are bank lending and tax incentives. “If these elements can be sorted out, SMEs can grow and prosper but to create seedlings, we need seedbeds.”
Justin pointed out that SMEs were the second biggest group of employers in the UK, after the public sector, and while the number of employees in individual companies might be small, “half a million businesses employing four people actually represents a lot of people”, he said.
Justin argued that this group needed government support if it is to develop, including the rationalisation of tax breaks. “Enterprise investment schemes and venture capital trusts are perfectly OK but they have been around for years and we need a fresh approach,” he said. “In relation to capital gains tax, risk takers should get a fair reward for putting capital up, and there should also be a suspension of the administrative burden associated with tax, which is preventing spending in new markets.”
The lack of liquidity in the market was a recurring theme in Justin’s presentation. He said bank lending currently was like pumping blood round your body and then hitting a clot – the bank manager – when lending is not available. He welcomed the wave of new banks entering the UK market from the Middle East, Brazil and China, as well as those being set up by indigenous companies such as Tesco and Virgin, which he believes will create sufficient competition to spur on the more established British banks.
“London still has the most international market in the world but we need greater liquidity if we are to maintain this,” he added. In summing up, Justin told the 200-strong audience: “We live in a damaged but recovering world. The UK needs to get lending again to get the blood running and we need to have access to the flexible facilities that the business centre sector provides.”
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