Government Support for Business - Business, Innovation and Skills Contents

Conclusions and recommendations

Traditional finance markets

1.  We have heard varying evidence about the availability of finance for SMEs. Given the importance of such access in supporting business, the Government should ensure it is drawing on the British Business Bank's expertise to maintain an overview of how the financial environment for SMEs is developing so that this information can be fed into policy development. The Government should work with the British Business Bank to establish whether regulation or funding is required to address the obstacles that businesses face when trying to access traditional finance. The Government should review and develop a comprehensive understanding of how these traditional finance markets are operating and, if necessary, it should develop new lending policies or models. (Paragraph 11)

Alternative finance

2.  The British Business Bank may not be able to change the culture of the traditional banking sector, but it has had success in growing the market for alternative finance. The British Business Bank has a clear role to play in improving the coordination and administration of support for businesses to access alternative finance. The Government should work with the British Business Bank to improve signposting of available support as a matter of priority, developing a menu of alternative finance providers for each different area of financial support. (Paragraph 17)

Enterprise Finance Guarantee

3.  While we heard a lot of positive feedback about the Enterprise Finance Guarantee scheme, we were concerned to hear that it included incentives for banks to use the loans as a tool for their liquidity, rather than to help businesses grow. We recommend that the Government takes note of the evidence that we received on this issue and reviews whether the scheme can be improved to prevent such perverse incentives that might see a bank choosing to foreclose a loan, rather than seeking solutions to keep the business concerned afloat. In its response to this Report, the Government should outline what actions it will take to address this issue.
(Paragraph 21)

Green Investment Bank

4.  The Green Investment Bank has an important role in supporting the businesses that will drive the UK's transition to a low carbon economy. In order to ensure the continued effectiveness of its work, and to help bridge the current gap in overall levels of green investment, the Green Investment Bank will need borrowing powers. It is welcome that the Government recognises the potential utility of such additional powers. But the delay in coming to a decision on their introduction has been unhelpful. (Paragraph 29)

5.  We recommend that the Government sets out plans to create borrowing powers for the Green Investment Bank in 2015-16. In its response to this Report, the Government should set out the steps necessary to introduce these powers, with an assessment of how long each step would take, so that action can be taken on this issue early in the next Parliament. (Paragraph 29)

UK Trade and Investment

6.  The performance of the UKTI should be judged against impact as well as awareness, with the long-term benefit to the UK economy being a fundamental driver for this organisation. (Paragraph 37)

7.  We welcome the Government's ambition for UK exports to reach £1 trillion by 2020. However, we are not convinced that this is a target the Government expects to meet. The Government should provide clarity about whether this is an "energising aspiration" or a serious objective. If the latter, it should provide projections for how we should expect exports to grow over the next six years, given current predictions for the broader economy. It should then report progress against these projections each year in its annual review. (Paragraph 37)

UK Export Finance

8.  There is no doubt that UKEF's activity is increasing. However, this increase is measured from a low baseline. In 2013-14 only 94 SMEs were supported through this scheme, out of a population of 4.9 million. There is a risk that SMEs, the very businesses that the support of UKEF could be most beneficial to, may be those which are excluded by the apparently complex nature of its products. (Paragraph 43)

9.  There is potential for UKEF to engage more effectively with SMEs. We recommend the Government undertakes an assessment of potential demand and review how this scheme is marketed to SMEs, which should include consideration of the role of trade associations in raising awareness of this facility. In addition, we would expect the support offered via the UKEF to be included in a menu of financial services developed by the British Business Bank and Growth Hubs. (Paragraph 43)

Manufacturing Advisory Service

10.  We agree with the Minister that reducing organisational barriers between business support organisations such as the Manufacturing Advisory Service, GrowthAccelerator and UKTI would help manufacturers access a better quality advice offer. In the response to this report, the Minster should set out the practical measures he is undertaking to achieve this, alongside an explanation of how progress bringing these two organisations together will be monitored. This merger should be carried out in a manner that ensures continuity of service to the businesses using UKTI and MAS. (Paragraph 49)

Advanced manufacturing supply chain initiative

11.  The Minister should report back to us with the results of his evaluation of the Advanced Manufacturing Supply Chain initiative when it is published in March 2015. This evaluation should pay particular attention to the extent to which the programme has supported SMEs. Lessons learned as a result of this process should be fed into the design of forthcoming supply chain initiatives. The Minister should write to us with an action plan when the review is published. (Paragraph 52)

Local and national business support systems: the role of LEPs and Growth Hubs

12.  The Government has a role in supporting LEPs to ensure they operate to a high standard across the board. (Paragraph 60)

13.  The Government should step up its work in coordinating best practice amongst LEPs and Growth Hubs in order to make the most out of this system. We therefore recommend that Government makes specific commitment to raise standards across the LEP system, by undertaking an audit of both LEP's and Growth Hub's best practice, which should include an assessment of the extent to which limitations on available Government funding are responsible for poor performance. We further recommend that, where funding is an issue, and there are potential alternative sources available, the Government should encourage LEPs to be innovative in their efforts to secure further funding. The performance of Growth Hubs also needs to be monitored and assessed to ensure they are meeting the needs of businesses in their local area. (Paragraph 60)

A single point of contact

14.  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. The Government has an obligation to make this new service valuable and effective. (Paragraph 63)

15.  In its response to this Report, the Government should outline the steps it has taken, or will take, to ensure businesses are aware of, and make use of, the Business Growth Service. (Paragraph 63)

Complexity and policy design

16.  Despite the Government's desire to create a simple and effective business support offer, the support landscape remains complex and difficult to navigate. This hinders its overall effectiveness. It also dilutes the Government's ability to track the efficacy and value for money of each new initiative and to measure their performance. If the Government had a better handle on what each scheme was aiming for, the results it should bring about and where the gaps in business need were, then it would be able to make its overall offer more effective. A more robust understanding of desired outcomes and value for money would support the development of this policy area. (Paragraph 68)

17.  The Government should undertake a regular needs analysis to ensure its support offer is genuinely addressing areas of market failure and business need. We therefore recommend that the Government ask the NAO to audit the value for money of the schemes it offers at present. (Paragraph 68)

Long-term stability in business support

18.  The Government should seek to establish cross-party consensus to ensure that its offer of support for businesses reflects business need. This means that points of information about or access to the support available should remain consistent. The Government should strive to improve the schemes in place and make them flexible enough to meet business needs, rather than engage in continuous revolution of the system. (Paragraph 70)

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Prepared 24 February 2015