Small firms represent a large amount of employment, especially when it comes to employing people in the local area. They also account for a large proportion of training in our community colleges and apprenticeships. More than this there is the more qualitative reasons for small businesses, they add to the character of an area, promoting growth in their own right to drive forwards local retail and business districts.
Small firms are essential to the community in Merton and Wandsworth, but successive governments have done them acted in favour of much larger businesses and with the Credit Crisis in 2008 small local businesses have struggled more than ever to continue trading and keep afloat.
Project Merlin was set up to get the 4 big banks in the UK lending more money to small businesses in 2011, specifically £76bn. However, all banks look like they are on target to miss this level. There are a few reasons for this, the main one of which is that the cost of borrowing for the banks has increased, so they have less available to lend. Add to this the increases on capital requirements put in place by the Vicker’s commission and you have two effects which both means there is less money to lend to the more “risky” small businesses.
But this isn’t good enough, the banks borrowed from the people in 2008 and now when communities need money to keep their local businesses in operation the source of funding has dried up.
However, this is not the only problem. Council’s have a source of funding which can be made available to small businesses, but as I found out when talking to some of our local business leaders in Merton and Wandsworth this is not always made available to all. One shop owner on Northcote Rd said that he found that the council gave money to businesses around Clapham Junction, the big national businesses to make the area look pretty, but for other businesses less that ten minutes walk away there just wasn’t the same amount of funding available, and they were struggling in the current environment to keep trading.
There are a few solutions that we can set up to help small and local businesses thrive and keep our community in Merton and Wandsworth.
- Encourage large businesses to work with small businesses
- Ensure councils lend to where the money is most needed
- Get local businesses to provide opportunities in the community
- Get new sources of funding for local businesses
One of the positives that came out of the riots was the support that came from the local community including large and small businesses helping each other to get reestablished. Debenham’s for one offered some of its staff to small shops so that they could help get themselves back on their feet. This is the kind of behaviour we can encourage, most large companies do have “corporate responsibility” written into their business plans, sometimes they just need to be given a nudge for them to know ways they can help out.
I will petition the local councils on behalf of the under represented smaller companies who are not getting the same access to funding from the council as they should, and I will make publically available the results of the councils so that we as a community know if they fail.
We need local businesses to take responsibility for the community they are in if they expect to get something out, this means taking on students from local colleges to offer training and apprenticeships. Offering work experience. The more we can get the entire community involved with the business the more chance they will have of succeeding.
Finally we need to make new sources of funding available to local businesses. The banks funding has dried up, and until the banks have a greater access to capital this may not be rectified, unless SME (Small and Medium Enterprises) lending was a less risky option. If there was a securitisation on SME loans this would allow councils, governments and banks to buy a SME bond which due to the diversification of risks* would allow a less risky asset to be bought. This would therefore increase the amount that could be lent by banks. Further to this, this could be made available to the wider public – who wouldn’t want to be a “Dragon” if they could collectively invest in their local businesses.
In the Lib Dem manifesto there was talk of regional stock exchanges for SMEs. This is another area that could be revisted. It is a method to get funding to small businesses where the need for capital is so great at the moment.
I would conclude in saying that smaller firms are the lifeblood of our local community, but at the moment they are being sucked dry by the lack of funding. It doesn’t matter how great your entrepreneurial skills, or how innovative your ideas if you don’t have the funding to get it off the ground you will be much less likely to succeed. I have proposed a few methods that we should look at as a region. Even locally to help suppoort our small local businesses and in the process help support our community in Merton and Wandsworth.
*this would of course need clever portfolio management to ensure there is true diversification of the underlying assets.
We are currently living in a two tiered society with those who own their homes and those who do not. This situation was initially fueled in the 80′s with Thatcher’s right to buy, which led to the inevitable housing boom leaving many people in negative equity. Then in the 2000′s it had a resurgence as the availability of credit became increasingly accesible.
The problem is that as more people bought more homes, and saw a property as not just a store of wealth but also an investment, we saw a rise in the number of landlords, which in turn led to less homes being available to buy. Add to this the deminishing stock of social housing (thanks to the aforementioned right-to-buy), increasing population and a decrease in home building (lowest number of new homes built last year since 1923 in peace time) and you have a proplem of ever increasing demand and decreasing supply. This has led to a predicted forecast of house price rises of 21% over the next five years.
However, this is just the start of the problem. If rental was affordable compared to buying there would not necessarily be a problem, other than the “Englishman’s home is his castle” mentality that everyone must own their home. But that is not the case. Rents far exceed what is affordable and are set to continue on the skyward trajectory with a similar projection as for house prices with a 20% predicted rise over the next five years according to Oxford Economics.
This double whammy hits the population in two ways. The people who can afford to buy a house, to put down the average 25% deposit will buy a house, they then have the ability to let that house knowing that rental yields will increase as will the value of their house.
While those on the other side, those who cannot afford to buy a house will see their proportion of income spent on rent increase (already the vast majority are paying well over 50% of their take home income on property) which means they have little chance to save for a deposit.
We should also look at the affordability of homes in the two boroughs we are concerned with. The average bank mortgage lends 4 times the pre-tax salary. Some mortgages go to 6 times. If we look at the average wage in the boroughs the median in Merton has been reported as around £25,000 and the Wandsworth median as £31,000 (the average salary is extremely difficult to calculate). The average house price in Merton is around £422,000 and Wandsworth £507,000. This means for the average person to buy the average house they would need a mortgage of over 16 times their salary. Even if the average wage was twice the figures uncovered the average person could not afford to buy the average house in Merton and Wandsworth.
Avereage person cannot afford the average house in Merton and Wandsworth
There are 1.5m people on the waiting list for social housing, but at the moment the government is talking about selling off social housing. The right-to-buy may help alleviate some of the problem in the housing market, but any money made from the sale should then be used to replenish the social housing stock. However, in Wandsworth the council have announced they will not be doing this, they will be replacing social housing with new affordable housing. This is not the same thing and will leave many on the waiting list for social housing with no hope of finding somewhere to live.
So there are two parts to the solution that should be explored,
- building more houses, increasing the supply
- making it easier to buy homes and borrow money
For building new homes we have a number of brownfield sites already owned by GLA which could be recommisioned. We have targets for affordable housing which are not being met! In Wandsworth the target is much lower than the 40% target in Merton, but even then these targets are not being met. Finally we need to make sure that any social housing that is sold off under right-to-buy or for any other reason are replaced so that the stock of social housing should be increasing, not decreasing. The government have already announced a £250bn scheme to help 10,000 people buy their first home by helping with their deposit which does go some of the way towards a solution.
In terms of making it easier to buy homes, this could mean affordable homes, shared home ownership, and other schemes that allow people who are first time buyers to easily get on the housing ladder. One of the other problems is the initial cost associated with buying a house, you do not just have to save for a deposit you have to find 3% of the entire property value, which for the average value in Merton and Wandsworth is £465k, so the average person to buy an average house would require £14,000. Then there is home surveys, solicitors fees, mortgage arrangements, add another couple of grand there. This is a problem that central government needs to look at and address.
One of the solutions that may help in this situation (illiberal as it may be) would be rental controls. Even if for a short time. These could help people save money for a deposit and stop people being emnslaved in poverty purely to keep a roof over their head.
I have attempted to highlight some potential solutions. But the main purpose of this article is to represent the fact that in Merton and Wandsworth the average person cannot afford the average house and this situation is only going to get worse and for those at the bottom end of the scale the current councils seem to be dead set against helping you.
At a time when Merton Council should be promoting recycling and sustainable living they are sending out completely the opposite message. Earlier this year Labour and Merton Park Resident Association councilors votes to close Weir Road Recycling Centre, meanwhile the Lib Dem councilors were opposed to the proposals speaking in favour of the facility which has been a huge success since it opened.
The site opened in 2005 to ‘serve residents to the North of the borough and increase recycling’, since this time the site has successfully met these aims with a 98% recycling rate. But now it is closed residents will have to travel to Garth Road centre, at the other end of Merton, a site which is congested and has a poor recycling record. It is likely that many residents will be unable or even unwilling to make this 8 mile round trip. The inevitable consequence of which will be increased landfill and fly tipping.
The Weir Road Recycling Centre was closed due to a cost cutting exercise, which will save a reported £170,000 per year. However, this is a false economy, the closure could increase costs due to:
- higher landfill taxes as people recycle less
- paying to clear the inevitable fly tipping
- increased staffing/infrastructure at the already over burdened Garth Road site
Closing Weir Road will likely increase costs and will definitely increase the amount of landfill waste. If you are against Merton Council’s proposals please sign our petition here.
Recently in Boris Johnson’s “newspapers” the Mayor made some wildly inaccurate claims that the level of crime was falling on London’s buses. However, following a more in-depth review of the statistics by Lib Dems in City Hall this picture swept over the shocking truth that in over a third of London Boroughs crime on buses had actually increased.
It is time that the truth came out, the Conservative leaflets claiming that Merton’s buses were among the “safest in Europe” were based on out of date statistics. This was particularly alarming for local residents as Merton actually saw the third highest increase in London with a 9% increase in bus crime between April 2010 and March 2011 This was just behind Barking and Dagenham (17.8%) and Tower Hamlets (11.5%).
Caroline Pidgeon, leader of the Lib Dem group on London Assembly said
“The mayor must stop spinning dubious claims and get on with the job of making Londoners safer on public transport throughout London.”
Bus crime is a major problem in a number of London Boroughs, but in those where bus crime is increasing, such as Merton, the attitude being shown by the Tory group is extremely worrying. To report crime figures as falling when they are in fact rising shows the complacent nature of the Tory group to what is a real problem to many local people. A problem that is increasing. It is time for them to pull their heads out of the sand and acknowledge the issues so that we can work on solutions so local people can justifiably feel safe once again on Merton’s buses.