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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