Memorandum from the Federation of Small
Businesses (NE 13)
SUMMARY
— There needs to be greater focus on achieving
high value added impacts at the regional level focussing on North
East sectoral strengths.
— One North East, and the wider public
sector, should help to facilitate economic growth and not compete
against the private sector.
— FSB members welcome the pro-active approach
taken by One North East in dealing with the current economic downturn.
— There is a need for greater regional
coherence and leadership to help small businesses.
— Funding for small businesses needs to
be better communicated to its target audience.
— Manufacturing is an important sector
of the regional economy and will remain so with the move to a
low carbon economy.
— Training and skills are critically important
to continued economic growth and will help steer the North East
economy to recovery.
— Changes to Train to Gain have helped
small businesses, but there are fears that too much focus is placed
on Level 2 qualifications.
— Renewables and the low carbon agenda
represent a significant opportunity to the North East economy.
— There needs to be a focus on provision
of skills to hit the renewables challenge.
— Funding for small businesses in the low
carbon agenda needs to be better communicated.
1. Introduction to the Federation of Small
Businesses
1.1 The Federation of Small Businesses (FSB)
is the UK's leading non-party political lobbying group for UK
small businesses. It exists to promote and protect the interests
of all who own or manage their own business. With over 215,000
members, the FSB is the largest organisation representing small
and medium sized businesses in the UK. The FSB has approximately
4,000 members within the North East region.
2. The role of One North East and the Government
Office in supporting industry and innovation in the current economic
climate
2.1 Given the high dependence on the public
sector in the North East the future spending slowdown will have
a big impact on the North East economy. There needs to be a greater
focus on achieving value added impacts at the regional level.
This should mean focussing RDA spending on areas where regions
can be world class in the strengths that they have rather than
seeking to implement a one size fits all approach.
2.2 Business and job creation will be achieved
through a strong private sector and the public sector should seek
to be facilitators for the private sector to lead on economic
development and growth. This should mean leading on big investment
decisions in areas like transport, facilitating faster planning
decisions and reducing the barriers to economic growth.
2.3 One North East should be enabled to focus
on key sectoral strengths in the North East including low carbon
technologies, healthcare and the process industries. This will
mean central government having the confidence to allow this flexibility
to foster regional economic growth.
2.4 The current economic downturn has made a
significant impact on the North East economy and particularly
to small and micro businesses. For example recent FSB data shows
that approximately 45% of members have seen trade decrease over
the past two months. This has been coupled with the increased
cost of finance alongside the diminishment of supply.
2.5 One North East was established to help
further economic development in the North East and improve business
efficiency, investment and competitiveness in the region. There
is also a role to promote unemployment and develop skills relevant
to employment in the area.
2.6 Given the nature of the economic crisis
it is entirely appropriate for a region the size of the North
East that the response is co-ordinated at the regional level led
through One North East. It is crucial that there is a co-ordinated
approach take with the Learning and Skills Council and Business
Link North East. There is some concern from FSB members that the
response to the crisis has been fragmented and disparate. This
has meant that the penetration of support to small and micro businesses
has been hampered due to the complexities of applying for funding.
2.7 Since the start of the economic downturn
One North East has sought ways to provide help for businesses
from November 2008. Whilst this was guided by central government
One NorthEast announced an extra £10 million of funding to
help businesses through improved resource efficiency and increased
funding for Selective Finance for Investment.
2.8 There is some concern from FSB members
that the RDA funding streams are the first targeted by central
government when new initiatives are announced. A clear example
of this is the housing proposals announced last year by the Government
which were funded from RDA funding streams. This does not help
businesses in the North East with their survival and reduces the
impact that One North East can have.
2.9 One North East has taken the lead on
submitting an application for JEREMIE funding to help small and
micro enterprise in the North East which is expected to be available
from the end of 2009. There has been some consternation that English
regions were not able to apply for ERDF funding to help support
small businesses. In the North East, across a range of European
funding areas the North East has missed out on a potential £120
million of investment. FSB members have reported difficulties
in accessing finance from their banks and would have liked the
English regions be able to apply for extra European funding in
line with Scotland, Wales and Northern Ireland.
2.10 Funding for small businesses needs
to be better communicated to the target audience. There is a tendency
for Government at all levels to announce a number of funding initiatives
without having any substance to support this. Small businesses
do not care about grabbing headlines but require suitable information
where to access funding. FSB members also question if there is
anything done by regional agencies to ask what support small businesses
need before announcing new initiatives. Currently there appears
to only be the Business Link adviser visits which have been questioned
for their effectiveness by many FSB members.
2.11 Innovation has been identified as one
of the key drivers of productivity with approximately 60% of all
innovation happening in small businesses. Moving to more innovative
services and products will help the North East recover from the
current economic downturn. The North East has a long history of
being at the forefront of innovation which remains strong today
across a number of sectors.
2.12 As with other funding streams small
businesses are unsure who should be approached for help. For example
in the North East One North East provides Grants for Research
and Development but does not advertise this widely which limits
the penetration into the small business community. Her Majesty
Revenue and Customs also administer the R&D tax credits which
can help small businesses. However, without a regional breakdown
on claims it is difficult to assess whether this has been successful
in the North East.
2.13 There appears to be a lot of emphasis
on supply side solutions for innovation but little on the demand
side. Indeed more effective support could be given with an improved
diagnostic process to help determine what small businesses actually
need other than funding.
2.14 Whilst Government Office does not have
a formal role in helping businesses in line with One North East,
there has been regular contact with the FSB to outline our members'
problems. Government Office have helped to establish regular meetings
with the Regional Minister for the North East and helped establish
key sectoral meetings with the Regional Minister. The FSB would
like to see these meetings and discussions continue to help support
our members in these difficult economic times.
2.15 The Association of North East Councils
has an important role in responding to this crisis as the lead
representation body for local authorities in the North East. As
the Sub National Review recommendations are implemented through
the Local Democracy, Construction etc Bill it is crucial that
local authority support for small and micro businesses is part
of the co-ordinated regional effort.
3. Place of manufacturing industry in the
region
3.1 Despite the decline in manufacturing
across the UK the manufacturing sector plays a significant role
in the North East economy. Statistically manufacturing accounts
for 19% of the North East economy output which is higher than
the national average of 14%.
3.2 Manufacturers have faced considerable
pressures over the past year with reduced demand and increased
costs. Many of the increased costs including increased fuel prices,
increased material costs and a fluctuating exchange rate have
been absorbed by manufacturers as consumer and business demand
has dropped. These challenges have been supplemented by the increased
challenges on labour costs and move to higher value manufacturing
led by China, India, Brazil and Russia.
3.3 The test to the manufacturing sector
has most recently manifested itself through the challenges to
the automotive industry. This has had an impact on the North East
through Nissan and the impact it has had on the supply chain including
FSB members. The response that One North East and others have
taken has been welcomed by some FSB members for its swiftness.
It is crucial that manufacturing industries are supported due
to the important contribution they make to the North East economy.
3.4 The importance of manufacturing to the
North East economy is unlikely to diminish over the next decade
as the challenges to move to a low carbon economy represents a
significant growth opportunity. The North East is ideally placed
to respond to this challenge with a number of innovative companies
and organisations such as New and Renewable Energy Centre (NaREC).
The Budget 2009 has further highlighted the significant opportunities
in the low carbon agenda and it is important that One North East
responds to this.
4. Training and skills across industry in
the region
4.1 The importance of a skilled workforce
cannot be underestimated and remains one of the primary concerns
for small businesses in the North East. Despite the importance
of skills many small businesses find the area of skills to be
confusing and complex. Given the proposals in the SNR this will
become even more so following the transfer of power from the Learning
and Skills Council to the Skills Funding Agency and local authorities.
4.2 In the current economic climate it is
vital for government, employers and employees to invest in skills
to help support the recovery of the economy. FSB members have
concerns about the basic skills deficiencies in numeracy and literacy
and the impact this has in their business. This is having an impact
on the competitiveness of many small businesses in the North East
which must be addressed. The FSB would like to see a policy focus
on the needs of smaller businesses which recognises the importance
of informal and unaccredited methods of training. Further to this
the FSB would like to see training that is accessible through
short, local and affordable courses.
4.3 The recent changes to the Train to Gain
funding have been widely welcomed in providing more support to
small businesses in the region with the North East recognised
to be one of the leading regions. However, there is some concern
from some FSB members that Train to Gain focuses on level two
qualifications and is not aimed at the micro businesses in the
North East.
5. Role of renewables in North East economy
5.1 Climate change has been described as
the greatest challenge to mankind and the role of renewables in
meeting this cannot be understated. The goals and aspirations
of the Climate Change Commission and Department for Energy and
Climate Change, including providing 20% of all energy from renewables,
will be met by providing support for renewable technologies.
5.2 In responding to the current economic
downturn the move to the low carbon agenda represents one of the
significant growth areas for the North East economy. Indeed, there
is a perception that there is no greater opportunity for the regional
economy and if it is not grasped now it never will be.
5.3 The role of renewables in the North
East economy is one of the key elements of the current Regional
Economic Strategy. As outlined above the North East is ideally
placed to respond to this agenda due to the expertise that exists
in the region. This is one of the sectors that the North East
has the chance to become world-class in through bodies such as
NaREC in Northumberland. This was demonstrated by the decision
of Clipper Windpower to invest and locate its European R&D
centre within the North East. It is hoped that this will act as
a driver for other global and national companies to locate their
research in the North East.
5.4 The move to developing electric cars
can be led by the North East as demonstrated by Nissan. A recent
memorandum of understanding between One North East and Nissan
should help this development. Further to this, the European Investment
Bank has to some extent recognised that through Nissan the North
East has the potential to lead the way in developing low carbon
cars through its recent loan to Nissan.
5.5 There are a number of other areas that
the North East can take the lead on in helping the UK achieve
its low carbon goals. For example, the North East has the potential
to be at the forefront of the wind power developments. This could
lead to the creation of approximately 30,000 jobs and lead to
millions of pounds of investment for the North East economy.
5.6 It is crucial that for the North East
to take full advantage of these opportunities that there is a
more immediate focus placed on this by national government. This
should mean that planning applications are made easier especially
for small scale projects developed by small businesses. Nearly
60% of all innovation takes place in small businesses and more
encouragement needs to be given to ensure that these innovations
can come to market and be deployed.
5.7 The future role of local authorities
aspired to under the Local Democracy, Economic Development and
Construction Bill will have an impact on this agenda. This will
especially be important with local authorities taking control
of the 14-19 skills agenda. To fulfil the opportunities presented
by the renewables agenda the skills needs within the engineering
and manufacturing sector will need to be realised. This will mean
engaging young people and highlighting the potential career paths
available.
5.8 Small businesses who wish to engage
in this agenda find it difficult to access funding that is available.
There are a wide range of funding possibilities for businesses
but little signposting as to what is most appropriate for businesses.
This is compounded by the duplication of some funding streams
provided by the Carbon Trust and the Energy Saving Trust. One
North East as the current lead sponsor for many of the cluster
bodies involved in this agenda could provide a more coherent mapping
of what funding is available and appropriate for small businesses.
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