Small Talk: It's not just the start-ups that are in need of a helping hand

  • @davidprosserind

In an economy where the Government talks loud and long about how it wants small companies to power the recovery, what precisely does it mean by small? All too often, for small companies, read start-up businesses, new ventures founded by entrepreneurs from scratch.

Some of these firms will no doubt play a part in generating the growth of the future, but the focus on start-ups – whether in Whitehall or the media – does a disservice to existing businesses that have already proved their worth. After all, small but already growing businesses stand much more chance of creating large numbers of jobs than a company launching on the basis of an untested entrepreneurial dream.

Banks and equity investors know this, which is why SMEs that were already standing on their own two feet used to be able, when markets were functioning normally, to raise money. That may no longer be so true, but it is clear that many in the private sector still know well on which side their bread is likely to be buttered.

It was interesting, for example, to see WH Ireland's launch this week of the UK EIS Growth Fund, a product that aims to capitalise on the new tax breaks associated with the enterprise investment scheme. Unlike other EIS providers, WH Ireland intends to invest only in established businesses – and only quoted companies at that – because it thinks this will be both less risky and more rewarding.

Ministers, however, don't always seem to get the message, preferring to concentrate on the sexy end of the SME market or on much larger businesses. A report just out from the London School of Economics provides a good example of Government short-sightedness. It says the decision last year to abolish the Grants for Business Investment scheme was a mistake.

The scheme, offering growing small companies financial help with projects set to create jobs, was a cheap measure, particularly in the context of the cost of unemployment benefits. Its partial replacement, a scheme offering grants only to bigger companies, is nowhere near such good value, the LSE concluded.

Adam Posen, pictured, the Bank of England Monetary Policy Committee member, also wants to see more help given to SMEs. He told a TUC conference last week that the US is bouncing back from recession more quickly than the UK precisely because it offers so much support to established SMEs. And he complained that all the talk from the Chancellor in the autumn of credit easing had so far come to little. Over to you, Mr Osborne.

LPA sees the light with Siemens' LED order

Bright news from Alternative Investment Market-listed manufacturing company LPA: it's just picked up a £600,000 order from Siemens for its LED lighting products, which the German industrial giant will install on new trains for the Warsaw metro, pictured.

LPA has already won a similar contract for the Heathrow Express, and its latest win augurs well for a pitch to the Munich Metro. What's pleasing, says house broker XCap, is that LED lighting is a key contributor to LPA's profitability. Though its LED products made only £2.4m of the company's £17.3m sales in the year to last September, XCap thinks they accounted for a "substantial element" of group operating profit. That element is about to become even more substantial, says XCap, which is now reviewing its 50p price target for the stock.

Clean Air Power is running smoothly

Who'd be the owner of a fleet of heavy trucks? With fuel prices grinding ever higher, powering such a fleet is becoming ever more expensive. Higher taxes on carbon emissions only add to the pressure.

Enter Clean Air Power, an Alternative Investment Market-listed manufacturer of a new type of combustion technology that enables heavy-duty diesel engines to run on a combination of diesel and natural gas. That cuts both fuel costs and emissions. After a lacklustre 18 months on Aim, which saw the company's shares fall from above 20p to just 3p before Christmas, the stock last week, climbed from 7p to 13p in two days. Behind the rise was a £700,000 order for 27 of Clean Air Power's units from an unnamed logistics company.

Small Businessman of the Week: Emerging markets are a key factor

Steve Good is chief executive of Low & Bonar

"Leveraging your business expertise in domestic markets and focusing that on emerging markets, deploying it in the areas with potential for growth, that is going to be the key to driving your business in the coming years.

"It is up to the market and to private enterprise to drive those [export] opportunities and to capitalise on those opportunities: government can support that but it can't drive or create, they're the facilitators not the drivers.

"That said, some countries have been more supportive of manufacturers than in the UK – in Belgium and Holland, for example, labour market flexibility during the recession enabled employers to keep on staff for whom there was no work, retaining their skills base when business picked up again."

Low & Bonar manufactures and supplies performance materials including yarns, fabrics and fibres to industrial clients from a range of sectors. Its annual results are published tomorrow.