The Prime Minister’s recent visit to Tech City underlines the growing sense of optimism that surrounds this cluster of technology companies scattered around City Road roundabout in London. While many commentators have dismissed the visit as little more than a publicity stunt, this seems an overreaction.

While it would be unrealistic to think that these small startups will power the economic recovery that this country needs, it is also wrong to dismiss this government support entirely.

This sort of public recognition will encourage this entrepreneurial community that its efforts will be supported in the long run. At the same time, it’s good that government is supporting an industry that, with the right support, will aid economic diversification.

Public endorsements of this kind need to be backed up with meaningful policies too and the ‘Tech City Launchpad’ competition, which Funding Options has already benefited from, shows the government is willing to complement its warm words with financial commitments.

However, the government must not forget its obligations to the wider small business community as well. Encouraging a small group of businesses in a small area of East London, will not help the vast number of SMEs across the country which are struggling.

To be clear, the issue of small business loans should be the government’s top priority.

For this reason, it was encouraging to see the government’s announcement in the Autumn Statement that it would make cheap loans available to small businesses within months.

Although the full details are yet to be released, it sounds like the government will use its triple A rating to allow banks to borrow on its behalf and then pass this beneficial borrowing rate (at least some of it) on to small business.

For anyone with any knowledge of supply chain finance, this is not a revolutionary idea. Many corporations resorted to exactly this model in order to help their small suppliers when the financial crisis first hit and it is surprising the government has taken so long to catch on. However, with an aim of targeting businesses with up to 50m turnover, it should be commended for trying to help those businesses that have been hit hardest.

Only time will tell whether this seemingly sensible new approach has the desired effect.

About joe_carstairs

Joe Carstairs has written 7 post in this blog.

Joe Carstairs (@JWCWords) provides commentary on accounting and finance industry issues; Joe was formerly a market reporter for EuroWeek, and currently blogs for a number of leading finance and small business publications.

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