Small Businesses

Part of Prayers – in the House of Commons at 10:35 am on 15th May 1987.

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Photo of Mr Roger King Mr Roger King , Birmingham, Northfield 10:35 am, 15th May 1987

I agree with my hon. Friend the Member for Luton, South (Mr. Bright) that it is essential that our education system furnishes aspiring entrepreneurs with the basic qualifications to make decisions and understand the workings of the industrial and manufacturing business sectors.

Nothing concentrates the mind like the commitment that one must put into an enterprise. No matter how much education people receive, it is sometimes difficult for some to understand the relevance of a cash flow chart and production manufacturing methods. Such knowledge comes from knife and fork experience. It is not easy to educate young people to understand these things, and much more can be done. I am aware that, in many schools, business studies takes on the form of creating a business within the school environment. Such schools exist in Birmingham, and I am sure that there are more elsewhere in the country. I commend those schools, but we must step up our efforts to extend that practice.

Although some youngsters may not readily appear to be the sort of material capable of running their own businesses, those who have difficulty mastering the three Rs, they should not be written off, because nothing succeeds like experience. Although when some youngsters leave school they may not be ready to start their own business, within a few years, having undertaken a YTS and the opportunities of training, they may eventually move on to start up their own business. They will remember that, at school, they were taught to have broader horizons than the present narrower ones that pupils all too often receive.

After a meeting I had had in a youth club in my constituency the youth officer asked me to meet some of my constituents. I went into the side room of the club and met eight youngsters. I introduced myself and asked them how old they were. They were 16 and were about to leave school. I asked how many of them had got jobs. One of the youngsters put up his hand and said that he had an apprenticeship. I said that I could not believe that the rest of them had not got jobs and the others replied, "We are on YTS, you know, slave labour." I am sure that most of us remember that when we left school many of us took up jobs at slave labour rates. I remember taking up an apprenticeship in the motor industry and the pay was absurd. Indeed, before I started previous apprentices had paid the company for the privelege of receiving training.

I asked the youngsters who were to start on the YTS what training they were to receive. One said that he was to be trained as a brickie and another said that he was to be trained as a plumber. I said that they should consider the training that they will receive not as slave labour or as a dead-end job. I said that they should try to become the best brickie or the best plumber in the area. I told them that they should keep their eyes open and their ears to the ground and that once they had trained themselves to become the best they should consider starting up on their own as a self-employed brickie or plumber. Indeed bricklayers are much in demand. I told them that they should aim higher instead of believing that after YTS they were washed up and finished. That is not the ease. The YTS furnishes people with ability and enables them to go out into the market place to use those skills working for someone or perhaps working for themselves.

The efforts that the Government have made to make young people more aware of the challenges of small business and widening their horizons at school is essential if we are to continue to create the number of new businesses that are currently being established.

Earlier I mentioned that I, too, was a small business man. I remember, way back in October 1974, starting a business manufacturing alloy road wheels. I had had some experience because, prior to that I had been selling the same type of product for another company. I realised that there was a gap in the market place. That is the key to success, one must have an idea on where one's product will go. I had identified a gap in the market place and together with two other colleagues I started up a small business. If one has an idea starting up in business is not difficult. I had the necessary capital from a house that I could sell—I had bought it on anticipation of getting married, but I had not done so—and my two colleagues already ran a small business and had the necessary investment stake to put into the business.

The problems occur for small businesses perhaps 12 months or two years later. By that time the business has established its product in the market place. The small business man's hunch has been correct, but the demand for the product is so great that he is facing an increasing order book, but a lack of capacity to meet those orders. Suppliers are rather reluctant to continue to extend credit because they do not want to suddenly find themselves with an insolvent company and to lose their money.

Our company experienced similar difficulties, but we got round it by introducing new money into the business. That money came from my family and from the existing business run by my colleagues. We got over that obstacle, but many people fall at that first hurdle when developing their business from the knife and fork stage into something more sophisticated.

In those days, 1974–76, it was difficult to find new premises for businesses to develop. We were based in Warwick and there was nowhere between the areas of Coventry, Birmingham, Walsall and Wolverhampton in which to develop. That seems incredible now. The only space that we could find was on the second and third floors of a derelict industrial unit. Indeed, that is one of the problems faced in many inner-city areas. Because of the constraints on land space many factories have been built on the vertical rather than on the flat. It is no good passing products up and down a factory using a lift because it is inadequate and causes bottle necks in production. Factories need to spread out, but many of the factories built in the pre-war and immediate post-war period were built on the vertical. However, such buildings soon lay derelict, ready to be knocked down while the manufacturing industries moved away to one-storey buildings.

I did not want to be located on the second and third floors of a factory block in the middle of Birmingham so we moved to Telford new town. There was an adequate supply of factory premises on one level. One of the other advantages of moving to that area was that we were able to introduce more capital into the business.

I mentioned previously that, to start the business, I had sold my house and as a result I had been living with my parents. When we moved the firm to Telford I had nowhere to live and I certainly could not commute from Birmingham. However, in Telford there was plenty of good rented accommodation and my accommodation was very close to my factory. As a small businessman I found myself working all hours. It was not unusual to load up a lorry coming in from Holland at midnight to enable that lorry to get down to the docks first thing in the morning for shipment across to Europe. We were able to undertake such work because we lived virtually next door to the factory. Certainly, if the factory had been located in the centre of Birmingham or London it would have been extremely socially inconvenient to commute for 40 miles to carry out such loading, especially at about midnight. However, Telford offered marvellous opportunities for the business man located close to his factory. It offered a short commuting distance between one's place of work and rest.

We should build upon the opportunities that are available in such places as Telford. When one looks around one can readily identify the problems in the southeast. There are constraints upon development because of land space and property values are high. A modest detached house in the south-east may be worth £100,000—in the centre of London it may be worth a good deal more. That modest detached house, perhaps bought seven years ago, has probably made a capital gain of £50,000.

There are wonderful opportunities for the entrepreneur in the south-east to up sticks and move to the midlands, the north-east or the north-west. He can go there clutching £50,000 to put into a small business. Of course he must have somewhere to live, but the property that cost him £100,000 in the south-east would cost him only £45,000 in my constituency. If we offered decent rented accommodation to the entrepreneur, he could go to the midlands with a substantial sum to introduce into his business. If he has a friendly bank and a partner in a similar position to himself, there is no reason why he should not be able to put £100,000 into the business plus another £100,000 by way of an overdraft. Such pound-for-pound arrangements are not unusual.

It is a good idea for entrepreneurs in the south-east to give up the congestion and overcrowding, to sell up and go to the midlands—to Birmingham in particular where their capital appreciation would go a long way to realising their dreams of having a business. Life in Birmingham is pretty good. We might criticise the Labour authority there, but it is defined as Right-wing and recognises business opportunities, although some of its high rating policies make one wonder how important they consider businesses.

The countryside in the area is wonderful. The city is open with leafy-laned housing estates and a symphony orchestra. Birmingham is not that big that it is impossible to get to know us well. We have an opportunity to attract the entrepreneur who is anxious to start his own business. The entrepreneur from the south-east can widen his horizons by moving north.

Some small business development estates could do with a major refit. There is no reason why industrial units should not have living accommodation built in. Why do starter factories not have living accommodation so that a family can live alongside the business? That happens in the garage industry, in pubs and the retail trade. Why should it not occur in the manufacturing sector? Why, historically, must people live up to 40 miles from their place of work? If we brought together work and living we could realise far more the resources and abilities of the young would-be entrepreneur. I am sure that we can do more for the small business man and I am confident that the next Conservative Government will build on all that has been achieved.

Nursery factory units with living accommodation could be one way forward, as could professional on-site assistance. In privately developed manufacturing estates it would be a good idea to house an on-site accountant and secretarial facilities. Initial assistance with typed letters, simple accounting and advice would be welcome to those starting up in business.

The retail sector is important. We have enterprise zones throughout the country. After a shaky start some are proving outstandingly successful. The Telford enterprise zone is successful and the Dudley enterprise zone is coming on well, albeit on a retail platform which was not originally envisaged. Vast numbers of jobs and opportunities are being provided.

Why cannot we establish enterprise shopping areas in the cities? Most cities have run down areas which could he turned into enterprise shopping areas where small businesses can thrive.