UK Business Support: Groundhog Day Again!

It is 2015, but it could be 1995 all over again, with the latest feedback on UK government support for small businesses highlighting the same old afflictions and problems which were apparent decades ago. As part of a series of articles reviewing policies for supporting local businesses and economies in the run up to the General Election on May 07, Glenn Athey takes a critical look at how support for small business has evolved over the past five years.

Introduction

This is the first in a series of short articles exploring the present government’s policy record on support for enterprise and exploring any learning points for policy and practice for whatever government is returned on 07 May.

Its very much ‘Groundhog Day’ in business support (again!) with the current crop of policy reviews and reports making the same recommendations that were knocking around 15 to 20 years ago

I felt like the character played by Bill Murray in the movie Groundhog Day earlier this week, on reading the latest reports from the House of Commons Business, Innovation and Skills Select Committee’s “Government Support for Business: Eighth Report of Session 2014–15” and the FSB/ICAEW’s latest report “A new design: making local support work for business”. Despite being a relatively spritely 40-something economic development professional, I seem to be locked in never ending cycle of repeating policy creation and destruction with regard to small business. This is something like the third time in my professional lifetime that this cycle has repeated itself, with the main criticisms being made against the current system of business support:

• Local enterprise support and the latest attempt to provide a focal point for businesses through the growth hubs suffers from insufficient financial support and inconsistent capabilities and service offers.
• Complexity. With 600 business support initiatives operated nationally alone, there is scope for confusion and duplication. Despite moves towards simplifying the support landscape, there remain a large number of schemes, each with different objectives, eligibility, funding and contact points
• Access to finance remains an issue despite various policies and attempts to resolve this with attempts to work with the financial services sector ending up with banks using government incentives to boost their own liquidity rather than help business grow
• The Green Investment Bank has an important role in supporting the businesses that will drive the UK’s transition to a low carbon economy, but it has still not been delivered
• Unrealistic targets for export sales (£1 trillion by 2020) – would mean doubling in 5 years. Low take up of financial incentives such as UK Export Finance – only 94 SMEs supported in 2013/14.
• Narrow specification of the support service by Whitehall available means the true growth potential cannot be realised – e.g. criticism that whilst the Manufacturing Advisory Service can help improve business productivity in the short-term, it lacked the capability to provide the type of strategic advice that could drive significant future growth in the manufacturing sector
• The government sews further seeds of confusion by its latest attempts at coordination and a single contact point for business. The BIS Select Committee reported that “There was clear demand in this inquiry for a single port of call that businesses could contact to be directed to the support that they required. The Government launched the Business Growth Service during the course of this inquiry, with the intention that this service would fulfil such a role. If the Business Growth Service can be developed into that single port of call, then it will be a valuable addition. If not, then it risks becoming another complication in an already intricate system. We have not seen evidence to suggest that there was an awareness amongst businesses that this service was being introduced.”

In sum, Mike Cherry, National Policy Chairman, Federation of Small Businesses giving evidence to the select committee summed it up nicely “This whole area is confusing at the moment. You have LEPs. You have City Deals. You have Growth Hubs. You have unitary authorities. You have district authorities. You have county councils. You have that plethora that is out there, without very much steerage or guidance. This is one of the problems that you have. Without some steerage and guidance, everybody is left with a free-for-fall, and nobody is undertaking a needs analysis, if you like, of what business needs and what support is already out there. Again, from our evidence, you are very clearly seeing duplication. You are seeing overlapping. You are seeing a waste of public sector finances.”
Not much has changed in 20 years it seems.

The policy position before May 2010

It is important to describe the policy context before 2010, and the main policies and programmes for enterprise, although as you will see it is difficult to encapsulate this within a few paragraphs! Fundamentally, the period from 2000 to 2010 involved a plethora of initiatives, programmes, and government departments. I’ll attempt to summarise this in a few pithy bullet points:

• Business Link was the main government – franchised brand and service for interaction with businesses at the local and individual level. The reasoning behind this was that, from experience with the Enterprise Initiative between 1988 and 1994, many small businesses were reluctant to plan for growth, and failed to plan ahead and invest in training. Introduced as a ‘one stop shop’ for business advice, information and support in 1992, the Business Link service transformed from a very local approach of 89 new business link partnerships (by 1996) which was then subsequently restructured into 9 regional business link operators (managed by Regional Development Agencies from 2005 to 2010). Although Business Link operators started out with a wide variety of information and advisory services, by 2005 the service had been changed to that of an IDBT (information, diagnostic, brokerage and transaction) model to advise businesses. Regional Business Links ran a variety of events and workshops on topical issues and general business skills and independently brokered businesses to other support providers.
• There were a number of other government-funded support services and programmes which were put under the “Solutions for Business” portfolio of about 40 business support ‘products’

business support – for whom?

There has always been an issue of the market segments according to growth ambitions, and how you service them. There has been tension between those who think that businesses with no or very modest growth ambitions should not get supported, and some who think there is some merit to improve information, management practice and survival rates.
The focus on growth business
There’s been a focus on growth business in recent years, with some claims that any other kind of business support is not worth the money spent on it. I think that this might be disingenuous. Ok, there are plenty of small businesses which might not be in rapid growth, but there was a lot of evidence around in the last recession that those small businesses using business link were better able to weather the storm, mostly due to being able to take effective plans and actions earlier, or having a better diagnosis of their finances and risks.
Also, the volume driven customer approach might not be such a bad idea if you can further sell on business support ideas that the business might not have otherwise heard of, or do some ‘big data’ work to target businesses more likely to hire an apprentice.

Is the issue of confusion, duplication: the sensible approach versus the nonsensical?

At various times, the government and other commentators have bemoaned the fact that business face an overwhelming array of different support services, providers, incentives and products.
My own perspective is sometimes – so what? Let the market thrive and create generic or specific solutions for businesses as needed. The heavy hand of government, who wants to end this evil duplication and proliferation of advice and support, can often be very clumsy in its methods – e.g. to achieve something like ‘50’ business support products, they will eliminate a lot of innovation or healthy alternatives for provision, as well as scope for local variation – this is fundamentally what happened when Gordon Brown announced the need to rationalise business support on offer in 2008. He bemoaned the 3,000 separate business support products on the Business Link National Website – but I was always amused that if he had looked at the local Business Links and local authority provision, he could maybe add another zero on to that!
There’s the nonsensical approach – say you’ll only fund/support 50 or so business support products, this quashing all sources of local customisation and innovation. As an example, in the East of England, there were two very successful support initiatives for proof of concept of new innovations and products, and support for prototyping. These were judged by a panel of established tech entrepreneurs. The BIS business support framework didn’t support these ‘products’. They were eventually cancelled. Thankfully the pilot NHS Small Business Innovation and Research programme to open up NHS procurement to small innovative solutions and firms was part of the NHS and not BIS, and so lay outside its ‘productisation’ process and was protected. Otherwise we’d have no Academic Health and Science Networks today in each region in England, which are aiming to realise commercial benefits for business and healthcare benefits for patients across the country.
Or the sensible approach – thankfully as advocated by FSB/ICEAW – which is some support for brokering businesses to the right support, helping them understand what they really need and navigating to the right solution – what we used to call “the no wrong door” to enterprise support.

Whitehall’s ambitions for enterprise support: you can have one of these as long as it is in blue or yellow

Whitehall can’t dance –is it ineffective at designing and improving business support products?

Lets think of the ‘streamlining’ from the customer’s (small business) point of view – they want access to the very best support for their budget, tailored as much as possible to their own needs. Squashing or pushing out all potential types of support or innovation in support (by centrally determining the nature, scope, and funding of support) actually undermines this.
This is the 21^st Century folks. I don’t buy a car and expect to be offered only 2 colours. I expect there to be thousands of options for colours. I don’t expect there just to be one broadband provider with one fixed high price and level of bandwidth and quality – I expect there to be many providers, with differing bandwidth and quality (and customer reviews).
Ok it’s a pain to navigate the market – but couldn’t that be the best assistance, the diagnostic and brokering role? Shouldn’t Business Growth Hubs be doing this? (I’m having another Groundhog Day moment here folks…)
Plus – social media and the web mean that services can be interactively reviewed – by the business customers. Wouldn’t that be a better way of weeding out the ineffective business support products (rather than civil servants)? And get this – I saw a model like this in operation in New York City in the USA in 2006. It can be done.

goodbye business link (2011)…. hello business growth hubs (2014)

Business Link was swiftly transformed into an ‘online only’ service within 24 months, with the Business Link brand eventually disappearing.
Did the long term goals get lost in the short term politics?
It is politically convenient to abolish things (such as the ‘bonfire of the quangos’), a bit more inconvenient (and brave) to say there is some merit in services like this, but lets look again at what we think the priorities are. What’s clear from the Select Committee and FSB/ICEAW reports is that the needs and rationale for some sort of government backed business support service remains:

• Business Link – a universal information and advisory service – had some sound principles. It aimed to increase the use of specialist advice and services amongst small businesses, recognising that many did not take advantage of business services (such as accountancy, legal, marketing) to improve performance, survival and growth. Most of the research conducted on skills deficiencies in the UK since 1997 has concluded that the bulk of the ‘difficulties’ lie with small businesses who do no planning or active management of their skills and workforce. It is interesting that the latest FSB/ICAEW report identifies the under-use of business support as still a fundamental issue and highlights the UK Government’s own findings – that 2011 research for BIS found that an estimated 28 per cent of SME employers had an unmet need for formal business support over the last three years.
• The continued lagging performance of UK businesses. The FSB/ICEAW report is a goldmine of evidence – showing that UK businesses score lower than US, Japan, German, Sweden and Canada on management capabilities; and compared to the US the UK has an ‘extended tail’ of UK companies with weak management practices.
• Establishment costs. The websites, branding, service contracts and reputation took years and lots of resources to establish. In 2010 it emerged that the Business Link website cost £35 million per year to build and operate (administered by private operator under contract). The plug was pulled on the website almost overnight. Since then, other initiatives such as HM Government and local Growth Hubs have recreated similar online resources and services.
• There is the fundamental economic issue of the UK’s long term productivity performance at stake. If many small businesses could undertake productivity-enhancing approaches to their work, then this may make a difference to productivity. Productivity gains are not necessarily the sole preserve of large, sophisticated businesses.

having a coherent policy agenda would help

Just who is business support for? Is it primarily to help growth business create GVA and jobs, and be the google of tomorrow, or is it to help a wider range of citizens participate in entrepreneurship, or is it to improve the productivity and performance of the UK economy writ large?
As the FSB/ICEAW put it in their recent report: “Business support at both the national and local level has been characterised over many years by confusion, duplication and a lack of a comprehensive overarching strategy to define what outcomes support is being designed to achieve, and how initiatives work together.”
I would argue that this is the main crux of why people get concerned about proliferation, schemes that don’t perform, or competition amongst providers.

FSB/ICEAW nail what LEPs and local partners need to do

I couldn’t put it any better myself – sensible ideas for LEPs to explore from FSB/ICEAW:

1. Review existing provision in relation to local growth objectives Take stock of the current provision, whether national or local, public or private sector, to avoid duplication.
2. Consider local economic conditions Ensure that support reflects the varying local economic dynamics, and local business need, and how that might change the mix of interventions required.
3. Consider the local economic ecosystem you are trying to impact Think about the local business support system and the other organisations that will be involved, so that interventions have a clear purpose and extent.
4. Develop co-ordination across the system Establish governance frameworks and delivery mechanisms to ensure aligned and consistent goals between key partners, and a coherent landscape.
5. Focus on a limited number of initiatives, and get the design right Concentrate on a small number of schemes to ensure things are easier for business to navigate, and it is easier to assess and get delivery right.
6. Check targeted programmes against key principles Targeted programmes aimed at developing small firms into growth businesses should follow key principles based on the evidence (See Figure 1).
7. Put evaluation mechanisms in place establish a baseline and assess over appropriate time periods to ensure that an intervention is working and represents value for money, and to build the evidence base.

MY OWN IDEAS

Information, diagnostic, brokerage – still a good idea
Firstly, it is obvious that the type of service that Business Link in its latter incarnation was meant to offer – an independent information, diagnostic and brokerage service to help business find the support they need – continues to seem appropriate. We might be able to do this at a lower cost, and in a better way – but it will require far more than a self-service website.
Franchise the growth hubs, make their performance contingent on business reviews and make it transparent and accountable to these views
I think something like the enterprise growth hubs would make an interesting franchise that local partnerships could competitively bid into to run. Ideas for scoring the bids:

• They would be asked what else they bring to the fold. If it is excellent business governance, pro-bono business advice and support and backing and integration with existing business representative and advisory bodies (FSB, BCC, IoD) then so much the better.
• They would have to demonstrate how their offer is attuned to local needs. Active consideration of sectors, types of business etc.
• They could focus on those businesses/sectors that offered greater economic returns if they wanted to.
• They would sign up to use a common CRM framework that is externally facing and would enable businesses to rate the support and advice received via the hub (i.e. a 360-degree style of review)
• If a hub franchisee started to get less than satisfactory reviews from businesses then there would be some capability procedures – a performance audit, more training, chance to submit transformation plan, and ultimately withdrawal of the franchise
• They would not be asked to rationalise support products or services down to a target number. They would instead be required to articulate how they would match a business to its support needs.
• The 360 degree performance appraisal – by customers – could include measures regarding how additional the benefits are and the business impacts of support.
• And we could measure their overall effectiveness and performance based on the yardsticks that FSB/ICEAW set out in its latest report.

Policy and delivery: more imagination
Whilst I commend the FSB/ICEAW and BIS Select Committee Reports, I do think we need to be a lot more imaginative and entrepreneurial about how we deliver support to businesses to help them succeed and grow.
For example, crowdsourcing would seem to offer a lot of potential in identifying business support needs amongst businesses – e.g. if enough businesses signal they want support for something, then perhaps solutions could be found that involve either/or the public and private sector?
Entrepreneurial skills: not just for the business directors
I think that there are entrepreneurial skills that we can teach people, which they can use throughout their career. They need not start a business, but will benefit from communications, finance, management, team building, and pitching skills. There have been quite a few programmes that have taken this approach, but maybe it should be mainstreamed?
Glenn Athey is Director of Athey Consulting