Small business applauds government manufacturing report focus on SMEs

Small business has welcomed the Federal Government’s report into the manufacturing sector, which recommends an industry-specific stimulus program and a suite of updates just for smaller companies.

But the optimism is tempered with wariness about how many of the recommendations will be adopted.

Prime Minister Julia Gillard said yesterday while the government supports most of the recommendations “in principle”, it won’t release a statement until later in the year. Some of the 41 recommendations may be ignored altogether.

Peter Strong, chief executive of the Council of Small Businesses of Australia, told SmartCompany it’s “about time” a report specifically mention SMEs.

“We’ve seen too many reports that don’t mention us at all, so this is a great development,” he says.

Richard Reilly, chief executive of the Federation of Automotive Products Manufacturers, a sector hit badly by the recent downturn in manufacturing, also welcomed the report in principle and said its recommendations were “encouraging”.

The report recommends four specific initiatives for SMEs:

• An upgrade of Enterprise Connect, which would be given more autonomy to act as a “one front door” for support through integration with other programs such as the Industry Capability Network, and Austrade.
• Establishing Innovation Vouchers to encourage more researchers to assist SMEs directly.
• Creating a Small Business Innovation or Smart SMEs-style procurement initiative, and help state governments develop similar programs.
• Assistance for ways to help SMEs access finance.

These come alongside more general industry recommendations, including a stimulus package that could bring forward infrastructure investment, reduce tax burdens, investigate research impact measures linked to funding, and even provide easier access to better prices for natural gas.

The recommendations also come with a warning of what is at stake – the report says 85,000 jobs could be lost unless productivity and competitiveness are given a boost.

Some of the biggest and most significant recommendations include investigating the merits of a Sovereign Wealth Fund, and the creation of a stimulus package for the sector.

The government, however, has rejected the wealth fund idea.

“There is also a need for these short-term measures to focus on smoothing the peaks and troughs in defence procurement,” their report says.

It identifies the Australian dollar as the sector’s biggest threat, not the carbon tax, as some industry players had expected.

A large focus is the reorganisation of research and development. One recommendation includes a credit for academics to claim on innovation instead of being reviewed solely on peer reviewed material.

Strong said the mention of Enterprise Connect specifically is to be congratulated.

“There are tens of thousands of small manufacturers out there, and they’re struggling,” he says.

“The impact on the sector due to the economy has always been high, and with plenty of changes coming in the automotive sector, the focus on the small end is to be congratulated.”

Richard Reilly agreed, saying “any policy that is encouraging of the sector is very positive and welcome”. He did point out, however, that the automotive manufacturing sector contains a mixture of both SMEs and large multinational corporations.

The Australian Industry Group also said the report was a “vote of confidence”. The organisation’s regular manufacturing surveys show the industry has been in decline for more than a year, with consecutive monthly retractions.

“While the sector faces a unique coincidence of global, structural and cyclical pressures, the report proposes that Australia capitalises on its considerable strengths and builds new sources of strength to position the sector to take advantage of emerging opportunities,” chief executive Innes Willox said in a statement.

It particularly welcomed the government’s move to create a “Leaders Group”, which will help it in creating a response to the report, due in the last quarter of the year.

It will also provide an ongoing collaborative forum to share and develop new ideas, particularly in improving manufacturing workplaces,” Willox said.

The AIG Group was a part of the taskforce which created the report.

The report has also been welcomed by unions, which claim more than 100,000 jobs have disappeared from the sector since the GFC.

The past few years have seen tough negotiations between car manufacturers and the government, which has continued to provide support for the largest companies at the expense of support for SMEs.

Smaller companies have complained the government is propping up larger business while providing little for smaller players.

Several manufacturing companies have collapsed this year due to a range of conditions, including the higher dollar, labour costs and rising materials prices.

Last month, weapons manufacturer Metal Storm collapsed into administration, although it had experienced years of financial difficulty.

Kitchen designer and manufacturing group Kitchen Industries collapsed in July. It has 20 stores across the country with 200 staff.

Fabric and carpet manufacturer Melded Products Group was put up for sale in June. At the time, ASIC revealed collapses had reached a record high and that manufacturing, construction and retail industries made up the bulk of the affected businesses.

Prime Minister Julia Gillard said the government would release a response that would support the industry.