Labour plans to help small firms

THE LABOUR Party has presented itself as the friend of small business with a refurbishing of proposals for a bank to help firms raise money to expand and a right to interest on the late payment of debts.

Derek Fatchett, shadow industry minister, said a Labour government would need a strong small firms sector as a source of future jobs.

He was launching a consultation document, Going for Growth, that focuses on the problems small businesses face in raising investment and protecting their cash flow. Britain has nearly 3 million small firms employing a third of the workforce.

The document says small businesses are too often locked into short-term, expensive finance, involving a high degree of personal risk. Another handicap is the bias of banks towards lending to businesses based on property rather than technology.

Labour is suggesting a business development bank for small businesses, using private sector management to raise money and giving priority to small and medium- sized firms.

After talks with venture capitalists, banks and businesses, Mr Fatchett is confident that private sector money is available. A network of regional development agencies is also proposed to help firms and councils to revitalise local economies.

On debts, the document decries a culture in British business whereby late payment is regarded as a 'legitimate management of credit rather than a reprehensible default on debt'. Overdue credit is estimated to be running at a record pounds 50bn.

The document reiterates Labour's plan for a statutory right to interest above a minimum threshold. No figure is proposed.