Supporting small and medium enterprises

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Supporting small and

medium enterprises

The role of councils

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This paper is an independent discussion paper produced for the Local Government Association (LGA) by Shared Intelligence and provides evidence of what can be achieved if the services provided by councils to SMEs are tailored to their needs and the needs of the local area.

Small and medium sized enterprises (SMEs) make up the majority of businesses in the UK and their creation, survival and expansion is key to restoring the UK to growth.

Up and down the country, councils are developing growth partnerships. The advent of local economic partnerships (LEPs), city deals and place-based public service budgets have all meant that that councils and partners are already working closely together on growth. In light of recent announcements by the Government, agreeing to introduce Local Growth Deals and a single local growth fund, it will be necessary for all partners to be involved in developing local strategies and action plans for growth. Many of these already include plans for business support services.

This discussion paper aims to explore and identify what councils can do to support small businesses to grow and help local authorities to consider how they can use lessons learned from elsewhere to improve their own SME support offer. This paper firstly sets out why SMEs are important to the national economy and explores the role of councils in economic development.

The second part of the paper discusses the challenges facing SMEs and includes case studies of local authority schemes that are aimed at supporting SMEs, exploring the lessons learned and the impact of these interventions. The final part helps participants to consider how councils can improve their SME support provision.

We hope this can help you to persuade others of the importance to your area of the promotion of economic development and in particular see value in assisting SMEs to prosper. Driving growth through SMEs will help to create a more resilient economy – providing greater opportunities for

businesses and employment. With the new business rate retention scheme councils will be able to keep a proportion of the business rates revenue as well as growth on the revenue that is generated in their area. This should provide further financial incentive for councils to promote economic growth.

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Supporting small and medium enterprises – the role of councils

Small and medium sized enterprises (SMEs1_{) play a critical role in national and}

local economies. In all parts of the country, small businesses make up the vast majority, some 86.9 per cent of England’s business base and are an important source of local employment, growth and innovation. At a time of economic uncertainty, the ability of the small business sector to be flexible and innovative in responding to shocks and grasping opportunities can help in the process of rebuilding and growing local economies. In this context, the local government sector has an important role to play in supporting the growth and resilience of the SME base. Across the country, there are already good examples of the role that individual councils are playing and there are clear and transferable lessons from some of the good practice that already exists.

It is also clear that, in the face of on-going resource pressures, councils will need to target and prioritise their investments and work in partnership with their stakeholders, including local enterprise partnerships, to do the same. While economic development remains a discretionary service, councils continue to actively invest in economic growth and many see it as being at the heart of their role.

1 Small and medium sized enterprises (SMEs) are defined as those which have fewer than 250 employees and have a turnover of less than £25 million.

This role has become even more critical in response to the reduction in nationally available support and the dismantling of the regional development agencies (RDAs). This discussion paper highlights the important contribution councils are making to driving local economic growth, suggests lessons and good practice and asks what else needs to be done. This discussion paper aims to explore and identify what councils can do to support small businesses to grow and help councils to consider how they can use lessons learned from elsewhere to improve their own SME support offer.

SMEs in the economy

As of 2012, there were an estimated 4.8 million businesses in the UK which employed 23.9 million people, and had a combined turnover of £3,100 billion. Of those figures SMEs employed 14.1 million people and had a combined turnover of £1,500 billion.

Approximately 880,000 (83 per cent) of SMEs employ fewer than ten employees and overall small businesses account for some 8.7 million jobs, or 59.1 per cent of all private sector jobs2_{. As a whole, SMEs}

account for £1.1 trillion in business turnover, or 48.8 per cent of total private sector

turnover in England.

2 This excludes self-employment.

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Statistics from the Federation of Small Businesses ‘Voice of Small Business’ member survey 2012 70 per cent used finance to support their business in the last 12 months 58 per cent of businesses are looking to grow in the next year

29 per cent would like improved

support and advice from their

local authority

Role of councils in

economic development

Economic development is a discretionary part of councils’ operations. Faced with significant cuts to overall council budgets there has therefore been pressure for many councils to reduce spending on economic development as part of protecting statutory services and services with a higher public profile. The irony of this, of course, is that support for economic development is under pressure at a time when it is needed the most to help kick-start local economies and support our local businesses and jobseekers. Research by the LGA estimates that funding pressures will create a £14 billion gap

annually in council finances by 2019 / 20203_.

In light of these funding pressures and changes to the way economic development is delivered nationally, many councils are considering new ways of delivering support for their local economies, looking at using

3 LGA (2012) Funding outlook for councils from 2010/11 to

partnerships to pool funding and deliver

services, working more closely with the private sector, and considering how other council services can contribute to economic growth. Councils are ambitious to do more. One area in which councils are looking to improve their services is in SME support, recognising that local small and medium sized businesses will be the key source of growth in an era of public sector cuts. The abolition of the RDAs and regional Business Link services in 2011 has left a significant gap in SME support provision. However, there were concerns in some areas about the effectiveness of Business Link and some councils were already looking for and implementing business support programmes that can be more effective and more supportive of long term growth.

At the same time there is a national

recognition that SMEs are crucial to restoring economic growth, and the Government has implemented a raft of new policy measures aimed at helping SMEs, a list of these can be found in annex 1.

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How councils can

support SMEs

The recession has created significant

challenges for businesses in the UK and other advanced economies. SMEs face many of the challenges that large firms face in terms of general lack of demand. Research by BDRC Continental finds that 35 per cent of all SMEs rate the economic climate as a major obstacle to growth4_{and research by the Federation}

of Small Businessses (FSB) suggests that fewer businesses expect to grow this year – down from 56 per cent in Q1 2012 to 54 per cent in Q1 2013.5_{However, SMEs also face}

additional challenges due to lack of capacity to effect change within their organisations in response to changed circumstances. This section looks at a number of key challenges facing SMEs at present.

Access to finance

Access to finance has long been an issue for SMEs. The 2004 Graham Review of the Small Firms’ Loan Guarantee found that ‘some start-up businesses, businesses with nonstandard characteristics and those businesses seeking to expand beyond their current asset base may continue to face difficulties accessing finance.’ In 2009 the Rowlands Review identified a gap in the provision of growth capital for SMEs and estimated that up to 3,000 viable SMEs per year might be prevented from accessing needed growth finance

4 BDRC Continental (2012) SME Finance Monitor Q3 2012 5 FSB (2013) Voice of Small Business Index – Quarter 1, 2013

A number of challenges contribute to make financing more complicated for some SMEs. SMEs typically are able to offer less in the way of collateral, which reduces their ability to borrow, especially in the case of young firms or companies whose main assets are intangible. Equally, banks may perceive SMEs as being riskier than larger firms, and therefore reduce lending to SMEs to minimise risk. These challenges in turn contribute to many SMEs, up to 40 per cent according to Department for Business, Innovation and Skills (BIS) research, failing to seek finance because they believe the barriers to be too great. According to research carried out by the FSB,

approximately 20 per cent of SMEs state that access to finance is preventing them from achieving growth. If these firms were able to access finance and achieve even modest growth this could add significantly to the national economy.

A growing number of councils are now providing some kind of financial support option to local firms. Delivery methods vary but examples range from Finance Birmingham, delivered through a specially established organisation, to Lancashire County Council’s Local Business Lending Partnership, which will be delivered in partnership with online peer-to-peer lender, Funding Circle.

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Case study

Birmingham City Council: Finance Birmingham

Description

• The council wanted to set up a recyclable fund to help SMEs with growth potential that were struggling to access finance.

• An initial pot of £10 million has expanded to £25 million of which £5 million is focussed specifically on creative businesses. All funding has been provided by Birmingham City Council.

• Equity and loan finance is available at market rates. Loans of between £100,000 and £1m per firm are available. Equity funding of between £250,000 and £1 million is available. • Finance Birmingham also helps firms

access business expertise and tap into wider networks to support growth.

Challenges

• Assembling the right team with suitable expertise to administer and manager the fund.

Impacts

• Finance Birmingham has loaned £8.5 million to 28 firms so far. This is estimated to have created or safeguarded 1,170 jobs.

• Now looking to support wider LEP area. Already administering £1 million Business Loan Fund on behalf of Solihull Metropolitan Borough Council and looking for opportunities to support

other authorities in the LEP area and nationally. Also looking to leverage in more private sector finance.

Transferable lessons

• Political backing is vital. Finance Birmingham has cross-party support. • It is difficult to get the right skillset

within a council. Councils need to look to experts to make this kind of initiative work.

• Birmingham is fortunate in being able to raise so much capital, but there are opportunities for smaller authorities to collaborate or contribute to existing schemes. No need to reinvent the

wheel, Finance Birmingham can provide expertise or back-office support to other schemes.

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7 Supporting small and medium enterprises – the role of councils

Finding the right people

Recruitment is a key issue for any business, but for SMEs the need to find the right

people is essential. In many cases SMEs do not have a dedicated specialist for recruiting new personnel, so they lack the time and expertise to conduct their own recruitment campaigns. For more specialist roles and skills SMEs used to rely on recruitment agencies, which can charge up to 30 per cent the employee’s annual salary in fees. More and more SMEs are now moving away from using recruitment agencies, because they lack the resources to afford the high commission costs that this entails. However, the result for SMEs can be that either the job vacancy remains unfilled for a long time or that companies struggle to find adequately qualified or experienced staff for the

advertised posts. Recruiting the right people isn’t the only challenge for SMEs. Ensuring that staff continue to have the right skills remains a particular challenge, especially as firms grow and develop.

Apprenticeships can be a significant problem for SMEs. Despite making up over 99 per cent of businesses, only 10 per cent of SMEs offer apprenticeships. The Holt Review6

found that the main problems for SMEs were lack of awareness, lack of sufficiently tailored training options, and a more

coherent supporting environment. Therefore council seeking to support greater take-up of apprenticeships in their local economy have an opportunity to help SMEs overcome some of these issues.

There is a clear role for councils in assisting local businesses in meeting their skills

6 Making apprenticeships more accessible to small and medium-sized enterprises. A review by Jason Holt, Holts Group of Companies (May 2012)

and recruitment needs. Relevant activities could range from the promotion of local support services, or providing practical help and support to encourage and support the uptake of apprenticeships, through to closer collaboration with local further education providers to ensure that their courses reflect the needs of local businesses. Also, as the role and remit of LEPs in skills and employment expands, councils will have an increasingly important role to play in shaping local skills strategies.

Finding customers

Finding customers for their goods and services is the number one issue for most businesses, especially new entrants. Presently. the domestic economy is a significant barrier to this, with depressed investment and consumer spending. In this environment, there is still a great deal councils can do to help promote the local economy and therefore the services of local SMEs. This includes, for example: marketing the strengths of the local and sub-regional economy, which is often led by the LEP; promoting local purchasing and supply chain development and brokering business-to-business

opportunities; and ensuring local procurement spending is a viable market for local SMEs. Despite actions taken both at the national and European level to facilitate access to public procurement for SMEs, there are still a number of obstacles constraining their inclusion in the procurement process. First of all, there is often a tendency for public sector procurement processes to favour the largest suppliers, assuming that they will offer more security in the deliverability of services. Secondly, long or difficult government contracting processes further complicate

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Case study

Sheffield City Council: supporting growth

Description

• Sheffield City Council’s economic development activities used to

predominantly focus on start-ups and enterprise education for young people. Now the council is trying to shift more to focus on helping existing SMEs to achieve growth.

• The council spends approximately £1.25 million on SME support – which includes European Regional Development Fund (ERDF) match funding. SME growth support consists of three key programmes: supporting high growth firms (HGFs), supporting access to finance and sector support. • The economic development team

supports up to 40 HGFs at any one time via a team of six advisers. Aim is to take firms with £100,000 annual turnover up to £250,000 – £500,000 turnover per year. The Council contracts in specialist support where needed – eg sales technicians or transformational IT. • Since 2009 have funded a small

team to help support SMEs with £1 million turnover to access finance. Team consists of corporate finance experts able to support firms in their conversations with banks. The council also provides sector support to key sectors – eg advanced manufacturing, healthcare and creative and digital.

Challenges

• Key challenge is maintaining council investment in a period of spending cuts.

Council support at the highest level is vital, but also need to continue to show the value of the service.

• The business services market has become much more confused which has led to multiple providers chasing the same few growth businesses. There is a need for joined-up co-operation in local areas to ensure that it is clear to businesses where they can go for support.

Impacts

• The council has worked with 300+ firms to support growth over the last few years.

• 120 firms have received access to finance support. Feedback from

companies has been extremely positive. • The council is on track to achieve its

target of supporting 240 firms with sector-specific issues.

• Important to provide a ‘one-stop-shop.’ Sheffield City Council have a single phone number that is staffed by a knowledgeable team that can respond to business concerns.

• Councils need to utilise available intelligence. Sheffield are using

business data to identify firms that have the potential to grow that otherwise might not be on the council’s radar. www.welcometosheffield.co.uk/business

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the possibility for small firms to win public contracts. Thirdly, the size of contracts may prohibit SMEs from bidding for opportunities. According to research by the FSB,

significantly more small companies do business with local councils than with central government departments. Councils spend approximately £68 billion on revenue activities together with a further £20 billion procuring capital projects. There is therefore a significant opportunity to use this spending to support local firms and the local economy. Furthermore, councils can support firms by not only procuring in a manner which is SME aware, but also through ensuring that they pay contractors in a timely manner and ensuring that contractual processes are as straightforward as possible.

A number of councils are now exploring ways in which they can support their local economies through better public procurement. Cornwall County Council is currently working to improve its procurement processes. One of the council’s planned policies is to ensure that large contractors pass on favourable payment mechanisms (i.e. payment within 30 days) to any SME subcontractors.

Regulation – business

friendly council services

Councils have a large number of services which impact upon local firms. These include environmental health, trading standards, parking, licensing, waste management, housing, planning and transport.

Fundamentally, councils need to comply with the regulators compliance code which requires that all regulation should be risk-based, proportionate and targeted. In many cases a visit by a regulator is welcomed

by SMEs who are able to utilise the advice they receive from the local authority officer to improve their workplace activities. Well-enforced regulation is also key to ensuring a level playing field for businesses and ensuring that local markets do not create unnecessary burdens for local residents and communities. However, there is a growing recognition amongst councils that services which are responsive and consider the needs of firms can help support improved local competitiveness and encourage investment. This is particularly the case in terms of planning, which plays a pivotal role in local business and investment. A number of councils are now adopting business-friendly charters and concordats to improve the way services are delivered. Increasingly, this involves councils working together and with other partners to do more in this area. For example, in North Lincolnshire, a number of authorities are working together to provide an informal primary authority function for local sub-regional business with the hope of the benefits contributing to their expansion to regional or even national level.

A number of LEPs have also identified regulatory burdens as an important priority. Examples include Greater Birmingham and Solihull LEP and Leicester and Leicestershire LEP, both of which have joined with the Better Regulation Delivery Office to explore initiatives to improve the local trading

environment. Under the banner of Better Business for All, businesses in Birmingham and Solihull now have a single point of contact for local regulation via a web portal that has been developed and branded ‘Talk to Reg7_{’ by Lichfield District Council.}

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Clearly, there is a role for councils to work with partners and with each other to consider how best to reduce the regulatory burden on local business and continue to improve local service delivery.

Case study

East Riding of Yorkshire District Council:

Business support services

Description

• Goal of the service is to help local firms to achieve growth.

• A free-to-access Business Support Service which operates from the six business centres spread throughout the borough.

• Aims to be self-supporting. Annual operating budget of £580,000 covered by rental income from the business centres, some ERDF funding and some funding secured from Job Centre Plus. Have been cost neutral to the council almost every year since 1996.

• 1,200 enquiries per year from businesses, leading to around 450 face-to-face meetings per year. Advice is provided by experienced business people, with specialists brought in where possible to address specific needs.

Challenges

• Rural district means that there is not one convenient urban centre from which to support businesses in the borough. Vast majority of businesses no more than 10 miles away from a business centre. The Business Support Service

works creatively to reach customers, using video conferencing and even library buses as outreach tools. All the Service’s business advisors are mobile and able to visit clients.

Impacts

• Businesses spoken to about the service were very positive about the support they had received. One firm reported that hands-on support had helped their construction firm achieve planning permission for a historic pub building, allowing it to be developed as an 11-room, five star hotel, creating 50 new jobs as well as an important tourism asset.

• Stability of the service crucial for gaining long-term trust of businesses. • The best business advisors are

individuals with experience of

business, who are able to draw on their experience and contacts to support clients.

• As well as hiring the right staff, another key lesson is to invest in staff so that they have up-to-date skills to draw upon.

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Reducing business costs and

achieving energy efficiency

Reducing costs is one of the key challenges SMEs face. Of particular importance for SMEs is achieving energy efficiency.

Approximately 56 per cent of SMEs surveyed by the FSB reported that fuel and utilities were ‘main causes’ of cost increases. Investments in energy efficient equipment may result in significant long-term gains for small businesses. However, SMEs often find it difficult to finance energy-saving investments for a number of reasons, perhaps because they lack the liquidity needed for the investments and they are reluctant to borrow resources for non-core business purposes. SMEs may also find it hard to prioritise investments that make them save only few hundreds of pounds.

Moreover, SMEs may have little knowledge of energy efficiency practices and may lack specialised staff to advise them on where best to direct their resources. Small companies will need to spend considerable amount of time learning about energy and energy efficiency, which again discourages investment. There is a role for councils either individually or in partnership to support local firms to review their business practices. This support need not require significant investment and councils can do much to advise businesses on energy efficient matters through their regular interactions with local businesses. Support may also be available through the Government’s Green Deal programme. Where funding can be found, there are significant opportunities to leverage in other sources of funding, especially European funding. This can help councils increase the impact of their investments and generate major savings for local businesses.

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Case study

Suffolk County Council:

Sustainable Business Advisor Service

Description

• Suffolk County Council in partnership with the district councils established a Sustainable Business Advisor Service providing guidance to SMEs on energy efficiency. Delivered by Groundwork East of England. Goal of the service was to support the county’s green economy agenda.

• Suffolk County Council and each of the district councils contribute £12,500 each with a further contribution of £10,000 by Groundwork. Suffolk also pay for a partnership manager to manage the scheme.

• Qualified energy experts visit each SME and produce a report for each firm, setting out the current carbon footprint, recommending practical measures to increase energy efficiency and discussing indicative payback times for investments (in eg boiler replacement, installation of LED lighting, etc).

Challenges

• Difficult to get firms to see the value of a free service. Needed careful

marketing to show businesses the value of this advice in terms of cost savings. • Took a long time to generate the data

which demonstrate the benefits of the scheme, though this is now well-established.

• The large number of partners means that a vital part of the partnership manager’s role is continuing to make the case for investment by the districts.

Impacts

• 400 firms in Suffolk supported since 2008.

• Estimated energy savings of approximately £1.8 million for beneficiary firms.

• The council now has a much better understanding of business needs, which has led to the establishment of the Suffolk Carbon Charter – a ‘kite mark’ for energy efficient goods and services.

Core funding is an investment that can and must be leveraged. The scheme’s core funding has enabled Suffolk to match fund £84,000 of ERDF funding to support renewable energy and £300,000 through the Low Carbon Champions programme. A trusted delivery partner is important for success. Suffolk County Council could not have rolled this programme out without Groundwork East of England.

www.greensuffolk.org/greener-business/ business-advisor

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Exports

Improving the trading capacity of SMEs is recognised as a crucial element to give a spur to growth in the UK economy. UK Trade and Investment (UKTI) launched the ‘Exporting for Growth’ project in 2011, with the aim of increasing the number of British companies who export from 20 per cent to 25 per cent or more. UKTI have suggested that by increasing the number of companies who export by roughly a quarter, about £36 billion could be added to the UK economy. In the first instance, UKTI have been given £13 million to support 10,000 more SMEs to export. Five export events will be held nationally to support this agenda and help firms to consider new markets. UKTI intends to double the number of companies it helps to 50,000 by 2015, which will mainly involve dramatically increasing support to SMEs. A major obstacle to export for SMEs is a lack of connections to networks and local partners. Accessing people who understand

the complexity of the export market in question is a significant challenge for SMEs seeking to expand abroad. In order to set up successful trading linkages, small firms need practical advice to understand overseas risks. If isolated and without the right guidance, small firms may decide that exporting is not worth the risk. Finally, it must be noted that having access to finance becomes more complicated when dealing with non-domestic markets, so this further reduces incentives for firms to look abroad for their business.

Councils and LEPs can play an important role in providing information to SMEs to support their export efforts. This includes signposting businesses to appropriate support, helping to set up export networks or clubs, and working with partners to highlight the benefits of

exporting to non-exporters using case studies, workshops and road shows.

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Case study

Wakefield Council: supporting SME performance

Description

• Wakefield’s economic development team run a number of SME support programmes including: high growth firm (HGF) support programe, export support and an ongoing programme of targeted events.

• The council works with 30 HGFs on issues such as: funding, expansion, skills / apprenticeships and intellectual property. The economic development team uses data and partnership with Leeds Metropolitan University to proactively identify potential HGFs. • Export support is a developing area of

focus. The council works in partnership with local banks that have connections to key markets, including: HSBC, Santander and Handelsbanken. The council also works with UKTI and appropriate sector bodies to provide support.

• The council has a programme of 80 events over the next three years. This will include large conferences, export events and business engagement events. The economic development team also runs regular briefings on key SME issues such as: R&D tax credits, Patent Box, environmental regulations and employment law, in collaboration with relevent public and private sector partners.

Challenges

• Funding is a key challenge as firms and the council have limited resource. The economic development team has needed to be inventive and look

for match-funding to stretch council resources.

Impacts

• Have supported local firms to expand and find new premises and so achieve growth.

• Have run well received events on key SME topics such as R&D tax credits.

• Councils need to commit to economic development. This means adopting a ‘can do’ attitude across the whole of the council rather than ‘we’ve always done it this way.’ In Wakefield, this extends to companies being able to speak with senior council leaders and the chief executive.

• Firms are interested in specific issues so staff need to be able to respond to these. All of the economic development team are briefed on key issues before meeting with businesses. This enables them to have serious conversations with firms and to be taken seriously by business.

• Trust is vital. Key account management data from firms is securely stored within the council and only available to the economic development team. At times the team has turned down requests from senior managers for information. This dedication to confidentiality has been decisive in winning and keeping the trust of businesses.

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How well are you doing?

Many councils are driving growth through support for local businesses, support for local economies, through the partnerships that are developing via LEPs and City Deals, through investing in infrastructure and determining the right skills offer for each area.

It might be useful to review your plan for growth in light of the following areas to see where you might improve your SME offer.

Political support

Political leadership for economic

development is vital. Without real political support it can be very difficult to maintain budgets and effectiveness in a time of public funding cuts. Support is also necessary to empower staff in service departments to act on their initiatives and to make necessary improvements to the way they conduct their business. It is easy for a council to say that it supports economic development but much more difficult to stick to this in practice when faced with other competing demands. The councils that perform best are those where it is understood that economic development matters are of the highest priority to leaders and members.

• Is economic growth a priority for your council?

• Does your council demonstrate this in practice?

Working in partnership

Councils have a clear role to play in creating conditions for growth and the right conditions cannot be achieved by councils alone.

Growth depends on all partners working together. Partnerships might take the form of budget pooling to fund an initiative that would be impossible for a single authority, or working with LEPs to match-fund

investments and draw in funding. Councils should also look for partnerships to address business needs. For example, working with banks to open up finance or export opportunities, or working with venture capital funds to establish SME investment vehicles. Councils should also consider how their support fits within the wider business support ‘landscape’ and how they can complement other organisations, and work with partners to present a coherent and accessible service to businesses.

• Is there more that your council could do to work with partnerships to maximise support for SMEs?

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Funding streams

There is funding available to councils who want to provide business support. The European Regional Development Fund (ERDF) is one possible source of match-funding and while the resources currently available through LEPs is more limited, the Growing Places Fund (GPF) is an option in some areas. LEPs now have an element of core funding to support the delivery of their economic growth plans. Nationally, the Regional Growth Fund (RGF), of which there have been three rounds to date, can also be a potential source of funding for individual businesses or for wider programme approaches. Pooled funding with partners will enable an individual council’s funding to go further and new opportunities such as business rate retention offer new streams of funding for councils to tap into.

• Is your council making the most of available funding opportunities? • Could your current investments be

leveraged further?

Finance

In the current climate, access to finance is a key issue for SMEs and a key barrier to growth. In many instances companies may best be supported to ensure they are investment ready and that they have clear business plans in place in order to attract finance, but where it is clear that there is a finance gap, so councils have chosen to support local firms with loan finance, and can even make a commercial return doing so. Councils should consider whether they could play a more direct role in supporting innovative growth firms through strategic loan or equity funding. Many councils have already set-up special arm’s length organisations or ‘vehicles’ that can manage these investments and there are lessons to be learnt from this experience. It is important that such schemes have sufficient scale to ensure that they are operationally viable and it is essential that schemes draw upon commercial experience and expertise. However, when they are successfully introduced they can play an important role in the local finance market and small investments from councils, but councils should not feel as though they need to reinvent the wheel, there are already a number of vehicles out there that can manage small investments.

• Are there ways you can provide financial support for SMEs?

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Quality business support

The credibility of business support services with local companies rests largely on the competence of the staff employed. Businesses respond best when they are supported by experienced business people who can talk with confidence about the specific issues faced by the firms they deal with. Training is important to achieve on-going high performance. Staff must also be given some freedom in how they do their job in order to meet the needs of businesses, develop good relationships and have

credibility with businesses. Equally, economic development staff must be given sufficient support across the council to respond to key business issues, eg planning and development management. Business support teams should also be able to call upon key specialists when necessary.

• Does your council have the right team in place to support businesses?

• Do the team receive the necessary support from other council departments?

Promotion and marketing

Business support needs to be effectively communicated to local firms to be effective. Working with partners such as the local chamber of commerce, FSB, and other sector bodies is important. However, the council can also use other cost-effective ways to communicate policy and promote initiatives and events directly to firms. These include websites, social media, email shots, webcasts and teleconferencing. Providing a single point of contact, such as a single phone number staffed by experienced business advisors, is also an important way of being available to local firms.

• Does your council communicate effectively with businesses?

• Are there other cost-effective ways of ensuring that businesses are aware of what you do and other opportunities (eg procurement opportunities, events, etc.)?

Making good schemes pay

A number of economic development teams and individual schemes are looking at ways to make business support services more sustainable in future. One way is to consider how services currently provided for free could be charged for. Often this is very difficult, but if a service has good recognition then it is possible. An example is Suffolk’s Carbon Charter. Firms receive support in reducing their carbon emissions and then pay to be certified as low carbon. A sliding scale ensures that firms are able to contribute something and the fact that the Carbon Charter must be renewed every two years helps build a reliable income stream to support the energy efficiency advisors.

• Could your council charge for some services?

• Are there any add-on services which you could sell to core clients?

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Annex 1

Recent government

measures to assist SMEs

• Government will invest £13 million through UK Trade and Investment to help SMEs access export markets.

• The new Funding for Lending Scheme (FLS) will provide nearly £80bn to banks to allow lower interest rates to support both mortgage lending and SME loans, saving SMEs around £4,000 on an average loan. • The Government will also simplify the R&D

tax credit for SMEs to encourage greater R&D expenditure.

• BIS is investing nearly £200m in a new Growth Accelerator programme, which will provide 10,000 SMEs a year with coaches to help develop growth strategies, introduce businesses to potential backers and finance, and connect businesses to support.

• BIS is also investing an additional £75 million in a package to support SME innovation and research.

• The third round of RGF will include at least £300 million specifically for LEP projects that support SMEs. For example, the

Greater Manchester LEP will get £35 million for a business support package. Lancashire LEP will receive £4 million to support

their Lancashire Business Enterprise Programme.

As announced in the Autumn Statement, • Providing £683 million through capital

grants and financial transactions to support both housing and commercial development and support growth and jobs

• Investing £474 million, on a recoverable basis, in local infrastructure projects including around £60 million to support infrastructure in a limited number of Enterprise Zones

• Extending the temporary doubling of the Small Business Rate Relief scheme for a further 12 months from 1 April 2013 • Providing a further £350 million towards

the Regional Growth Fund, to provide support for jobs and growth across England

As announced in the Budget 2013

• April 2014, give businesses and charities an entitlement to a £2,000 Employment Allowance per year towards their employer National Insurance contributions (NICs) bill. This will particularly help small businesses who want to hire their first employee or expand their workforce • Business Bank – the Government will:

◦ Publish the Business Bank’s first business strategy on 22 March 2013. This will set out an accelerated timetable for how the Business Bank will deploy £1 billion of new capital to improve existing access to small

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and medium-sized enterprise (SME) support schemes and develop a lasting new institution by the end of 2014 that will expand and diversify UK finance markets so that they serve the needs of SMEs

◦ Launch a £300 million investment scheme in spring 2013 to help diversify and expand the supply of lending to SMEs and mid-sized businesses

◦ Provide an additional £50 million for the Business Angel Co-investment Fund for SMEs

◦ Extend the Enterprise Capital Fund programme to include a £25 million venture capital Catalyst Fund for investment in SMEs

◦ Maintain the lenders’ guarantee cap at 20 per cent for Enterprise Finance Guarantee loan portfolios for 2013/14. • Start Up Loans – As announced in January

2013, £30 million additional funding has been given to expand the Start Up Loans scheme in England and increase the age limit to 30, up from 24.

• Card payments for SMEs – The

Government has secured a commitment from the payment card industry to reduce the time it takes for credit and debit card payments to reach SMEs’ bank accounts by up to three days, by using the Faster Payments System to process payments. • Growth Vouchers – The Government will

provide £30 million for an SME Growth Vouchers programme in England to test a variety of approaches to help SMEs overcome barriers to achieving growth. • SME credit database – The Government

will investigate options for improving access to SME credit data to make it

easier for newer lenders to assess loans to smaller businesses.

Recent government policy

• Following the Holt Review, Government is seeking to help SMEs to take on

apprentices and make the apprenticeship system more responsive to SME needs. • In the first round of City Deals, Bristol and

Manchester were granted funding to set up Business Growth Hubs to bring together support services and Nottingham will create a venture capital fund. Many City Deals have also included help for SMEs to influence training programmes or access apprenticeships.

• The Heseltine Review8_{emphasised the}

need for a renewed support infrastructure for SMEs, to address problems such as low export rates and problems accessing finance – and fill the void left by previous initiatives such as Business Link.

• LEPs have prioritised support for SMEs in their areas, both through being a channel for business representation and through bidding for and administering growth funding directed at SME support.

8 Lord Heseltine’s review ‘No stone unturned: in pursuit of growth’, 2012

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Local Government Association

Local Government House Smith Square London SW1P 3HZ Telephone 020 7664 3000 Fax 020 7664 3030 Email info@local.gov.uk www.local.gov.uk

Supporting small and medium enterprises