Member Article

Government support for SME’s: Fact or fiction?

Government initiatives to aid regional SME’s were highlighted this week during Deputy Prime Minister Nick Clegg’s visits to Leeds businesses who had received funding from the RGF.

The Regional Growth Fund has been a point of contention between Westminster and regional small businesses and their organisations since its conception.

According to the Department for Business, Innovation and Skills, SMEs account for 99.9% of of all private sector businesses in the UK, 59.3% of private sector employment and 48.1% of private sector turnover.

Bdaily asked Nick Clegg (below, with David Cameron), at his recent appearance at Moments Coffee in Leeds, what would he say to critics of the RGF and government initiatives for small businesses, whether it really made an effective impact on the growth of SME’s, and were merely rehashes of previous government initiatives.

He said: “The Regional Growth Fund and other government initiatives are designed to help create jobs in areas going through a difficult economic time.

“The problem has always been, with things like the Future Jobs Fund for instance (a 2009 government initiative to help the long-term unemployed back into work) is that they are successful in the short term in finding people placements but not successful in actually giving people jobs that last.

“We’re helping to give people jobs that last. That’s the big difference. The Regional Growth Fund has turned that short term philosophy on its head.

“Instead of simply getting handouts from London which are provided one minute and then withdrawn the next, we only give Regional Growth Fund money to those companies that can show they have created jobs that will last.

“We are therefore building on the success of the companies themselves. That’s the big change compared to previous initiatives.

“There were a few teething problems at the beginning, but that’s been more or less ironed out. The key thing is that we’re seeing, of the £3.2bn, just over £2.5 bn going to projects across the country.

“By most fair estimates now it’s calculated we’ll either protect or create half a million new jobs in those areas where the reliance in the past has always been on public sector employment, which is what this fund is all about.

“As we go through this transition, particularly in places like Yorkshire and the Humber, where, and I’m saying this as a Yorkshire MP, we wait on the beck and call of civil servants and ministers in London, to sign off on handouts, I think we have to make our own luck in this region.

“We have to provide help to those businesses that are successful and that is what the Regional Growth Fund does.”

Chris Glen, Chairman of the West Yorkshire FSB also spoke to Bdaily and said: “I think it shows a lack of understanding of the business community if Mr Clegg thinks SME’s will be drawing from the RGF.

“In terms of employment being sustainable 88% of the unemployed who enter the private sector workforce either start their own business or work for an SME.

“The smallest amount you can ask for is £1m and then you have to leverage it so you are looking at projects in the multi millions pounds bracket which are often out of the reach of most SME’s.

“Unfortunately Mr Clegg seems to be of the opinion that if you put “this is for small business” on something it makes it suitable for small business.

“There is a lack of small business friendly support in the Leeds City Region, most items with the line “this is for small business” are far from suitable for the majority of small business.

“The council controlled Local Enterprise Partnership (LEP) seem more concerned at providing funding for Leeds City College and the Universities than supporting small business.

“European funding which should be aimed at SME’s is being hijacked to provide funding for the Universities and is not going to provide the boost to the economy the region deserves.

“Localism has it’s benefits but it shouldn’t be used to avoid the Governments responsibilities to the region. The City Deal with Leeds City Region was a disaster for the local area and Mr Clegg should carry some responsibility for agreeing to it.

“The Government is doing some great things nationally for SME’s but as usual the regions are being let down, lets have some proper support for SME’s in the region and show you really care about us Mr Clegg.”

The National Audit Office has also been a long term critic of the RGF and Local Enterprise Partnerships and reiterated this in their December 2013 report.

Amyas Morse, head of the National Audit Office said in this report: “Three years on from the 2010 White Paper, the new local Enterprise Partnerships are taking shape and jobs are being created.

“But the transition from the old to the new schemes has not been orderly and there has been a significant dip in growth spending.

“To secure value for money from both the existing schemes and the new £2 billion Growth Deals, central government needs to make sure that there is enough capacity centrally and locally to oversee initiatives, that timescales are realistic and that there is clear accountability.”

In a previous report in March 2012 the NAO concluded “The Fund has not optimised value for money because a significant proportion of the £1.4 billion was allocated to projects that offer relatively few jobs for the money invested.

“The expected cost per job varies considerably between projects, from under £4,000 per job to over £200,000 per job.

“Applying tighter controls over the value for money offered by individual bids and then allocating funding across more bidding rounds could have created thousands more jobs from the same resources.”

This was posted in Bdaily's Members' News section by Clare Burnett .