Economy: Enterprise and Innovation — Debate

Part of the debate – in the House of Lords at 12:46 pm on 4 February 2010.

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Photo of Lord Sugar Lord Sugar Labour 12:46, 4 February 2010

My Lords, I thank the noble Lord, Lord Sanderson, for initiating the debate, and I appreciate the opportunity to have an input. Enterprise and innovation are hugely important to creating growth in the economy. In June of last year, the Prime Minister asked me to assist small to medium-sized businesses and encourage enterprise among the young. This is something that I have been doing for the past 12 years. I have visited schools, universities and colleges of further education, and have spoken to hundreds if not thousands of small businesses across the country. Since June, as an adviser to the Government, I have been up and down the country meeting small businesses. I have also reviewed the advice available to the businesses through the Business Link centres. I have held question and answer sessions attended by thousands of small businesses. At these sessions, I have made myself available to the audience, to draw down on my 45 years of experience in running businesses of all sizes. The noble Lord, Lord Hunt of Wirral, quoted in this House something that I did not in fact say but that he got from a national newspaper, as an example of how busy I have been.

In this relatively short period as an adviser to the Government, I have concluded that the Government should create an environment where business can start up and flourish. They should intervene where there is failure in the market, and where barriers to growth exist: but having created those conditions, they should not interfere any further.

Rolling up your sleeves to turn an idea into a business is one of the most rewarding things anyone can do. The past 18 months have been challenging for many businesses. However, having been through more than one recession in my business career, the climate is not new to me. Survival is all about realism; tightening one's belt and constantly reviewing the day-to-day activities of one's business. One thing I have learnt is that these times can provide new opportunities. In speaking to the SMEs, I have made it clear that, in the face of a downturn, they have a choice of either complaining about things not being as good as they would like them to be or getting on with things and viewing this as a wake-up call and a chance to take a fresh look and to think about where they are going next.

I have seen businesses where entrepreneurial spirit has kicked in-where business owners have taken stock and gone out and found new markets and sectors in which to operate. I recall that when as a young man in 1967 I started my business-not in a garage, as the noble Baroness, Lady Byford, put it in relation to my colleagues at Apple, but in similar circumstances-there was no question of going to a bank to get finance. The reality then, and now going forward, was that banks wanted to do business but expected sound business cases to be put in front of them. It is unrealistic and, more to the point, undesirable to expect banks to lend as freely as they have done over the past 10 years. Some might join me in saying that that was irresponsible.

Small businesses need to be proactive. If they are not happy with the response from their bank, they need to shop around. However, if five or six banks say no, there is a distinct message there: it is time to re-evaluate their business or business idea. When I found that a bank would not lend me any money, I went back to my proposal, took account of what the bank had said and reworked my plan either to get some finance or to delay until I could meet the bank's criteria. I am not saying that banks always get it right. In the past six months, I have repeatedly asked to see evidence of bad practice. There are a few examples, for sure, but the situation is not as bad as some would like us to think.

During most of my career, I have found that banks practise a thorough and professional approach, and in my case they were a good barometer. They made me think more than once about many of the ideas that I put forward. I have met people with unrealistic expectations and no track record, and I have also come across businesses with poor or disastrous balance sheets. It is highly unlikely that any ordinary bank will provide money unless the person with the proposition puts in some equity themselves or provides some security. That is the harsh reality. People cannot simply jump out of bed on a Monday morning and say, "Today I'm going to start a new business enterprise", especially if they have no experience in it but just think that it is a good idea. In fact, not everyone is cut out to run a business. Regretfully, I have to say that the disappointment expressed by some people who have been turned down by banks should, in many cases, be translated as an excuse for their own failings and inadequacy. I have met many innovators enthused by their ideas but they have no experience of the realities of sales, marketing or commerce in general. I encourage these people to consider getting the idea off the ground by collaborating with partners who share the enthusiasm of the idea but have different skills. Banks, venture capitalists and other investors will be interested in propositions where all aspects of an idea have been covered. I tell those starting new businesses that it is better to have 50 per cent of a business that is going somewhere than 100 per cent of a business going nowhere.

I am grateful to the noble Lord, Lord Fowler, who has already raised this issue, and I am sorry to bring it up, but I can assure your Lordships that this is not an advert but a fact. My involvement in the TV show "The Apprentice" has gone according to my plan. I can confidently say that millions of young people have been inspired by this programme; they have been made aware of business and enterprise; and they are ready and eager to enter the exciting world of business. Your Lordships should be encouraged by this. There is certainly no lack of desire out there and it would be wrong to think that there was.

The noble Lord, Lord Sanderson, should note that this week is Apprenticeship Week. This time last year, I helped in a campaign to encourage enterprise and apprenticeships for the DCSF. Over that month, there was a 10 per cent rise in employers taking on apprentices. The website got 100,000 hits per week, compared with 50,000 before the campaign started. The noble Lord should note that his colleagues who sit on the Green Benches have unfortunately prevented me assisting further under the guise that that would have some conflict with my current role as an adviser to the Government. This is a classic example of political heckling-getting in the way of progress. To prevent my use as an asset is counterproductive, to say the least.

Getting back to business, there are always hurdles or obstacles to overcome but a determined individual will overcome them. Too often, a lack of finance is used as an excuse, but we need to make it clear that there are no free lunches out there; people have to put up some of their own assets or cash. That is how it was in the past and that is how it should be in the future.

The Government have rightly stepped in with temporary schemes, such as the enterprise finance guarantee scheme, to support lending. That scheme was created to support loans of up to £1 million to businesses that have propositions on the border-line-between those that the banks are willing to finance and those that are simply not viable. In my opinion, it is unreasonable to rely on government alone to instil confidence and create an atmosphere that encourages people to take the leap and start a business. It would, I dare say, be very helpful and encouraging if the media in general and certain business representative organisations took a more positive stance and reported the successes more. In my short time as a government adviser, I have been disappointed by negative comments and moaning, particularly from those who purport to represent small businesses. Such talk is hardly helpful, to say the least, and certainly does not send out encouragement to those who are considering entering the world of business.