Private Sector Backs Big Innovation Centre  
Small businesses are joining forces with universities and corporations and investing in a new “hub” that aims to improve the UK’s ability to commercialise innovation.

The Big Innovation Centre (BIC) is to be launched on Thursday by Business Secretary Vince Cable. BAE Systems, GSK, Unilever, Google and EDF Energy are among the 11 companies that have joined forces with Oxford University to invest in the latest Government scheme to boost innovation.

BIC has mostly been funded by its private sector backers, 80 percent of the initial £1.5 million fund for the project has come from private sector backers.

The innovation hub aims to boost investment in emerging sectors such as health science, virtual reality and cyber-security. BIC will act a bridge between universities and business to enable research to be commercialised.

The body of BIC will be part of the Work Foundation think-tank but will also make “evidence-based” policy recommendations.

BIC’s Director Birgitte Anderson said: “Just talking about tax cuts and R&D (research and development) tax credits is not going to do the job.”

“The UK has a fantastic history in innovation but that hasn’t been the case for the last decade. Radical action is needed if we’re to avoid another decade of stagnation.”

BIC is also hoping to encourage small businesses to participate in its projects, which will include establishing joint research projects and 'pilot-companies', Miss Anderson said.

According to research from IPPR, compared to 80 percent of German firms, only 46 percent of UK businesses are currently carrying out “innovation activity”.

And it could be that businesses are struggling to gain funding to help boost the much-needed innovation activity. Credit-scoring group Experian is helping BIC research the efficiency of bank lending in terms of financing innovation.

“Our preliminary research shows the banks have been lending to large companies in decline rather than growing businesses," Miss Anderson said.

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Bonuses Rise As Shares Fall 
New research has revealed that average bonuses for directors of FTSE 350 companies have risen by 187 percent since 2002.

The rise in bonuses, however, does not correspond with a rise in the value of companies as share prices continue to crash.

Back in 2002, average annual bonuses were worth 48 percent of salary but are now worth 90 percent, according to the High Pay Commission.

The Department for Business, Innovation and Skills has said that it would now study the “interesting” report.

A spokesman for Vince Cable's BIS department said: "This is an interesting report, which we will study further as part of our wider look into corporate governance."

According to Deborah Hargreaves, the High Pay Commission chairman, the view that bigger bonuses meant businesses were performing better was a “myth”.

Ms Hargreaves said: "The evidence exposes the myth that big bonuses and high salaries result in better company performances.

"There has been massive growth in what has been termed as performance-related pay yet no such corresponding leap forward in company performance."

"Corporate governance reforms attempting to link pay with performance appear to have done little more than add to the huge complexity of executive packages, reward schemes and bonuses that make up the pay of FTSE 100 directors," Ms Hargreaves added.

The report said that although the index had risen by only 21 percent, total wages for company executives in the wider FTSE 350 had gone up by 700 percent.

Whilst boss’ salaries have risen by 63 percent since 2002, pay levels for the average worker in Britain have risen by just 27 percent over the past decade, according to the report.

Ms Hargreaves said that the share prices and performance of companies had not come close to matching the rises in pay and salaries.

The report is due to be published in full in November and has been backed by Compass group and the Joseph Rowntree Trust.

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Financial Reporting Cuts for SMEs Criticised 
Credit management experts have warned plans to cut financial reporting requirements for SMEs “will seriously hamper” economic growth.

The proposals would see micro-businesses - with an annual turnover of less than £440,000, net assets of less than £220,000 and fewer than ten employees - exempt from filing accounts. However, Graydon, a credit referencing agency, and the Institute of Credit Management said the new measures would only damage economic recovery.

It is hoped by the Department for Business and the Financial Reporting Council that by cutting regulatory red tape, SMEs will be liberated from the burden of red tape.

In place of the current requirements to provide a full profit and loss account, the new proposals would see the smallest companies only needing to prepare a simplified trading statement, statement of position and annual return.

They foresee the new proposals would help up to five million companies save money and time that would normally be spent on filing accounts.

Consequently, a poll by ICM of 8000 members revealed that without SMEs’ accounts being available through Companies House or a credit agency, the majority would be hesitant before approving a relatively small order.

More than one-third would insist on money in advance, while 48 percent would ask for additional financial data and 15 percent would trade regardless.

Gordon Skaljak, marketing director at Graydon, said: "Few businesses would risk extending finance to another without first reviewing that business's financials, even in a benign economic environment. This is not the silver bullet the Government is looking for to reduce red tape for businesses."

Edward Davey, minister for corporate governance, said: “Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow - which ultimately benefits the entire economy and is absolutely central to the Coalition’s vision for Britain. A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits.

He added: “The financial reporting regime must also serve the users of the information published by companies — whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months”.

The consultation is being run alongside the Office of Tax Simplification’s discussion document on ways to simplify taxation for micro-businesses and the deadline for stakeholders to respond is October 30.

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Bleak Outlook for Economy  
For the third time this year, the British Chambers of Commerce (BCC) has downgraded its forecast for the growth of the UK’s economy, expecting it to expand by 1.1 percent in 2011.

The estimate has fallen from June’s prediction of 1.3 percent and 1.9 percent at the start of the year.

And the BCC is pointing the finger of blame towards the Government for its bleak forecast for economic growth. The BCC said the Government are not doing enough to meet their aim of getting the economy back on track through business investment and exports.

Businesses need more help from the Government to grow, David Frost, the BCC’s General Director said. He also said that they need to cut back on the regulation that is laid onto businesses and that a simplification of the planning system was needed as the "The present system is broken”.

"The Government is right to reduce the deficit, but these measures must be matched by policies to stimulate growth," he said.

"If we don't get these policies right, we risk any recovery being weak and short-lived."

Their forecast for economic growth in 2012 has also been cut, to 2.1 percent from 2.2 percent.

The BCC are the latest in a long line of organisations who have announced that its growth forecast for the UK economy has been downgraded.

The Bank of England cut its estimate for 2011 to 1.4 percent from 1.75 percent last month. Governor Mervyn King said the outlook for the global economy had “deteriorated”.

The UK economy expanded by just 0.2 percent in April to June, which was down from 0.5 percent between January and March, according to the latest official figures from the Office of National Statistics (ONS).

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Tories and Lib Dems Clash Over Bank Reforms 
An argument about the pace of the implementation of new bank reforms, which are aimed at avoiding another taxpayers' bailout in a future financial crisis, has erupted between Conservative and Liberal Democrat ministers.

Business Secretary Vince Cable announced that the proposals, which will see banks forced to ring-fence their high street and riskier investment arms, should be immediately introduced.

Adopting the so-called “subsidiarised” model would mean in the event of a future crisis the authorities would be able to seize the retail arm of a troubled institution, protecting ordinary consumers’ accounts from losses run up by City bankers.

However, the time given to implement the measures has caused disruption amongst Westminster.

Prime Minister David Cameron and the Chancellor George Osborne are backing the banks’ demand to be given several years to slowly implement the reforms.

Angela Knight, Chief executive of British Bankers' Association, said: "We are in for a very difficult autumn. This is, therefore, the time to concentrate on economic recovery and paying back the Government and taxpayers. By all means think about new regulation but now is not the time to add that as an overlay with respect to costs, uncertainty or whether it is going to do anything beneficial anyway."

However, Nick Clegg is fully backing Mr Cable’s views that the measures should be immediately implemented.

In an interview in The Times, Mr Cable said: “It is disingenuous in the extreme to use the current context to argue against reform. Banks are in a way trying to create a panic around something which they know has got to happen.”

Andrew Cave, spokesman for the Federation of Small Businesses, agreed that reforms should be implemented sooner rather than later.

"We need reform of the banking structure now more than ever, and we have a window in time to achieve this... We absolutely need this to ensure that there are more routes to finance and that the competition drives down the cost of lending,” he said.

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