Cross-party inquiries welcomed as MPs look to avoid repeat of Carillion collapse

Protecting SMEs from the “rife culture” of bullying from big corporations should be the main focus for new cross-party inquiries, according to the Federation of Small Businesses (FSB).

The statement from the lobby group comes as MPs launch a joint inquiry into supply chain bullying and small business productivity. The Department for Business, Energy & Industrial Strategy (BEIS) and a Treasury select committee will be looking into how SMEs access finance and what role big companies play. SMEs make up 99% of private businesses in the UK and account for more than half of all turnover and employment with many left out of pocket as a result of Carillion’s demise in January.

FSB chairman Mike Cherry has come out in support of the joint inquiry and claims its recommendation to end a late payment crisis should be the top priority moving forward. “It’s great to see parliament announcing new cross-party investigations to tackle the many issues facing small firms today,” he said. “The collapse of Carillion provides a mere glimpse of the pernicious supply chain bullying culture which is sadly rife among big corporations. Taking forward FSB recommendations for ending a late payment crisis that causes 50,000 business deaths a year should be the BEIS inquiry’s top priority. What we can’t have is another Carillion scenario in future.”

The committees will focus on whether there is enough regulation to protect SMEs when they borrow with corporate lending broadly unregulated, MPs will analyse the various sources of funding available to small businesses. 

Rachel Reeves, head of the BEIS committee, said: “Often our small businesses lag behind their overseas competitors in terms of innovation and productivity and we want to explore what more the government could be doing to help this. Small businesses, whether they are aware of it or not, have a vital role in helping to tackle the UK’s wider productivity problem.”

The latest inquiry is in addition to the business and the work and pensions select committees who will be taking a number of former Carillion bosses to task next week over the role they played in the company’s eventual liquidation which led to £900m of debt and a £587m pension deficit.

Moving forward, the FSB chairman thinks SME’s need to be fully aware of the financing options available to them before heading to the bank for a loan.

“Only one in ten small firms currently applies for external finance,” Cherry added. “The majority of small businesses rely on traditional loan or overdraft facilities from banks, even though they may well not be the right products for them. We need to get more small firms thinking about all of their options while breaking down misconceptions around equity finance. We look forward to working with the Treasury Committee to scrutinise these issues in the weeks ahead.”  

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