Drop 25% SME contract target says EEF

The manufacturer's organisation EEF has called for the Government to drop its aspiration of granting SMEs 25% of Government contracts.

The goal was outlined by the Minister for the Cabinet Office, Francis Maude last month.

EEF called for the goal to be scrapped as part of its three part proposal to the Government which it believes will help break down barriers to the growth of the manufacturing sector (full details below).

EEF chief executive, Terry Scuoler, said: “While the current attention on young businesses and start ups is helpful we must not ignore the wider benefits to the economy that larger companies bring. The UK doesn't just need a handful of larger companies over the next decade; we need hundreds of them with the scale and muscle to tackle our economic challenges. Otherwise we risk placing a speed limit on our growth potential.”

The EEF is concerned that, according to its figures, Germany has more than twice as many manufacturers with 250 or more employees. In addition, firms employing 500 or more people account for 0.6% of manufacturing companies in the UK compared with 2.9% in the USA.

EEF's three part approach
1) Manufacturers need to promote themselves and their sector at every opportunity to customers and help address skills shortages. EEF will front an industry-led campaign designed to bolster the image of manufacturing in the run up to the 2012 Olympics.

2) EEF recommends government should provide an internationally competitive and stable framework on tax, regulation and skills which includes the following:
- Deliver on its commitment to reduce red tape. In addition to its 'one in one out' policy it should introduce seven year sun-setting reviews with business on regulatory burdens.
- Provide clarity on which environmental, business and personal tax reforms it will seek over the next five years.
- Improving access to finance through greater competition between banks, alternatives to equity finance and a restructuring of government backed scheme.
- Ensure that any changes to the takeover rules strike a balance between minimising barriers to investment which is the lifeblood of the sector and ensuring M&A activity works in the best interests of the UK economy.
- Continue in the encouraging direction it is currently heading to implement a simpler and demand-led skills training system.

3) Government should target and co-ordinate support to catalyse growth:
- Ensure that the new powers that Local Enterprise Partnerships have to borrow against future revenues (Tax Increment Finance) are used to grow and attract to compete for businesses in their area.
- Target support at high growth sectors and to build on industry strengths. The recent investment in port infrastructure was a good example which produced resulting private sector investment in low carbon technologies. New nuclear, electric cars and high speed rail are other examples of where support should be targeted.
- Scrap the target for 25% of public sector contracts to go to SMEs and focus on making these contracts more accessible by improving the skills of government procurers.
- Ensure that the proposed Growth Hubs provide a single source of access to support that helps high growth companies realise their potential.