Suddenly the big business idea is to be thinking small: Everyone agrees its time has come, but no one is quite sure how to define it. Roger Trapp reports

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The Independent Online
AFTER years in the wilderness, most groups would be delighted to find themselves the centre of attention. Take small businesses, which now find themselves courted by everyone from big corporations to political parties of every complexion.

Yet Stan Mendham, chief executive of the Forum of Private Business, is less than enthusiastic. 'All these people are out to make money out of us,' he says.

Banks, lawyers, consultants, the Government and most recently the Labour Party are all turning their attention to a sector of the economy that until recently had been sorely neglected. And there is hardly an accountancy firm in the land that does not claim a special affinity with the small business sector.

Though the likes of Grant Thornton and smaller firms might protest otherwise, Coopers & Lybrand, for instance, claims it has always been as interested in the small company sector as in the larger corporations.

Meanwhile the banks are tripping over each other to introduce fresh services or products.

The desire of such groups to catch the eye of small businesses has produced a rash of surveys, revealing such horrors as 'credit gaps', ever-lengthening payment periods and lack of training among managers. Unfortunately, many of the surveys are of doubtful value.

As David Storey, director of the centre for small and medium-sized enterprises at Warwick University's business school, points out, there is a shortage of hard information about these businesses. The resulting reports are often little more than marketing tools.

Organisations have clambered on to the bandwagon, too. Anthea Rose, chief executive of the Chartered Association of Certified Accountants, said at the recent launch of her organisation's Manifesto for Small Business that it had 'a long history of involvement in - and much experience of - small business issues'.

The association opposed the change in the rules on small company audits that are to come into operation later this month on the grounds that the audit was inextricably linked with limited liability. (Critics suggested that the threat to the livelihood of its members working mainly in small firms was more important.)

Yet there is uncertainty about just what a small business is. As Professor Storey says in Understanding the Small Business Sector, 'there is no single, uniformly acceptable definition of a small firm'.

A 'small' petrochemical firm, say, is likely to have much higher levels of capitalisation, sales and possibly employment, than a 'small' car repair firm.

The failure of various attempts to reach a formula has led to the adoption of the rather clumsy European label 'small and medium enterprise' (SME). This in turn is divided into micro-enterprises, for firms with fewer than 10 employees; small enterprises, for those with between 10 and 99 staff; and medium enterprises, for those employing between 100 and 499.

Even this does not solve the problem. When Mr Mendham talks about his membership of 22,588 he is 'generally speaking about companies with less than 20 people'.

But when National Westminster Bank, which through accounting for a third of all small business customers claims to be the market leader, talks about the sector it tends to mean companies with turnover of less than pounds 1m.

Larger entities are termed 'mid-corporates'. In the same way, Coopers & Lybrand, Britain's largest firm of accountants, is likely to think of a business with turnover of pounds 20m as a growing business. Other firms divide companies according to whether they have stock market listings.

With so many different approaches, it is hardly surprising that there is no coherent policy for the sector. But those involved are at least agreed that it is time this situation changed.

To Mr Mendham, the figures tell the story. Noting that his own membership has grown from 5,000 in 1988, Mr Mendham says official statistics show that in the 1980s small firms created 2.5 million net new jobs while big business lost 250,000. This year alone the sector has created 100,000 new jobs.

What is more, he claims, tax and rates are unfairly levied on the lower end of the business league. And he accuses banks of using his members to subsidise personal and big business customers.

Mr Mendham and his colleagues want more help from ministers in such areas as late payment of debt. And although originally susceptible to the idea of reducing red tape, they now see the easing of the statutory audit burden as largely irrelevant, since accountants will still be required to check the financial statements and compile reports for banks and others doing business with the firms.

Having been in his position since 1977, Mr Mendham could perhaps be forgiven for not rushing to see Earl Ferrers the new small firms minister. But it is still surprising to see him welcoming the Labour Party.

Approaches from representatives of the Opposition in the wake of the publication of the party's small business inititative, Into the Growth Corridor, shortly before John Smith's death have convinced him that a Labour government might deliver 'some of the things small business needs'. He is particularly impressed by promises to act swiftly in such areas as dealing with late payment and establishing financing schemes especially for the sector.

But although the policy is still being developed with the aid of consultations of the kind Mr Mendham has enjoyed, other observers are more likely to press for longer-term plans to build a cohesive small business policy.

The document produced by the shadow industry team led by Robin Cook called for small firms to no longer be viewed 'simply in terms of short-term job creation, but as a key part of the UK's potential competitive advantage in both manufacturing and services'.

But the certified accountants, for example, have taken this a stage further and called in their manifesto for the small firms minister to have cabinet rank, possibly including responsibility for agriculture on the basis that most farms are small businesses.

(Photograph omitted)

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