FSB has always been a supporter of levelling up.
Levelling up is what small business owners do when they start out on their own, take on their first employee, grow their business, and ultimately how they make a difference in their local community.
It is not always easy – and it can be particularly hard in the most economically challenging areas of the UK. There are not as many peers to ask, there is not the same ecosystem as in very prosperous places, and it is often difficult to know where to turn.
These are questions with answers, but too often small businesses cannot get access to them. This is where business support advice comes in. We have seen its value during the pandemic.
Thankfully, advice was accessible. Coming out of lockdown, I share the natural optimism of most small business owners that a strong recovery is possible. But that does not mean it will be easy. Especially not in the places where a strong, thriving private sector economy has been under pressure for far too long, and long before COVID-19.
We have an opportunity to make the current support better. Leaving the EU means we gain control of how money is spent. It is essential we continue to spend at least the same level of funds as the EU did. But we can also improve it so that businesses, especially in places where levelling up is most needed, can better access good, high quality advice.
The research in this report shows that business support helps businesses to comply with regulations and taxation, find financial assistance and business contracts, grow business, improve sales and even cope emotionally.
We also set out how Government should draw the right balance between streamlining existing support so it is easier to find, and not completely ripping up the old routes so that everyone who eventually found out how they worked before has to start again.
Together, we have the chance to get the business support landscape right and make levelling up a reality.
UK Government should simplify the English business support landscape, making it easier for businesses of different sizes to navigate, whilst maintaining a local connection to LEPs and Growth Hubs.
This can be achieved by establishing one business support brand across England, e.g. Business England, covering all LEPs (in a similar fashion to that achieved in Scotland). More broadly, the Government will play a critical role in providing coordination and stewardship to bring together the many actors involved in the complex business support landscape.
UK Government should ensure that the level of funding for business support via UK Shared Prosperity Fund matches, or exceeds, those funds previously received under European Structural and Investment (ESI) funding, and that it continues to outpace similar EU funding schemes.
This will help to capitalise on the opportunities associated with Brexit and ensure adequate funding for LEPs and devolved systems of business support in the future. As we seek to adapt and refine our business support options, they should be adequately resourced to serve the small business population.
UK Government should introduce regional programmes and business support schemes in England to rebalance the variation in take-up across the UK as part of its Levelling up plans.
Of all the regions in England, small businesses in the North East are least likely to use free sources of trade-based or private support. More businesses in the North West stated that they cannot find the right assistance for their business. Rural businesses were significantly more likely to report that they have doubts about the benefits and relative value of business support advice, and less likely to see business support advice as affordable. This could be addressed through regional schemes and would align with the government’s Levelling Up plans.
Governments in England, Scotland, Wales and Northern Ireland should continue to publish statistics on business support after the pandemic support ends.
Publishing data on business support would inform and improve the quality of business support provision across all nations. At the moment, there is not a comprehensive dataset assessing the business support landscape other than the statistics published about various coronavirus support schemes.
The UK Government should launch a second round of, or reopen, the Brexit Support Fund and expand the eligibility criteria to allow more businesses to benefit from the Fund.
There is still high demand from small firms for advice and support as they adapt to changes to the UK-EU trade relationship. FSB research from March 2021 shows that 45 per cent of businesses have sought professional advice on customs and 35 per cent on trade to deal with EU exitrelated issues since the end of the transition period.1 Reopening, or launching a second round of, the Brexit Support Fund would allow these firms to benefit from the government support and adapt to the new trade rules. The eligibility criteria for any future Support Fund should also be adjusted so that it is not just restricted to businesses that only trade with the EU. Previously,
businesses that derived more than 90 per cent of their export-derived revenue from trade with the EU were locked out because they had exported occasionally to non-EU markets. These businesses are still overwhelmed by the volume of changes to EU trade and need support.
UK Government should explore ways to target the smallest businesses that are often left out or forgotten, particularly self-employed sole traders.
Business owners with no employees are far more likely to say that the business support advice they received did not help their business, and most likely to say they did not need any support. The Government could ringfence business support advice for businesses with no employees given that they constitute the largest proportion of the UK’s businesses.
UK government should make it easier for microbusinesses to access business support and advice through targeted schemes providing subsidies and incentives.
Microbusinesses seek support advice from a variety of sources, including accountants, Growth Hubs, LEPs, Business Gateway and so on. Many say they are unable to dedicate the time or resource away from the core business to explore external support options. In the future, making tax digital and other technologies could play an important role in targeting small businesses with the appropriate information they need at the right time in their business lifecycle. However, until this technological revolution achieves critical mass, it is essential that the government introduces targeted support mechanisms providing subsidies and incentives to support microbusinesses.
Growth Hubs and LEPs in England should target microbusinesses who need business support more than other sizes of business but are too busy to seek it.
The business support advice received from ‘Growth Hubs’ (10%) and ‘Local Enterprise Partnerships’ (9%) is at the same level amongst businesses with no employees and 10-49 employees whilst it is lower among microbusinesses (6% & 4%). This reflects the notion that many microbusinesses are busy ‘firefighting’ and struggling to engage with businesses support advice. Growth Hubs and LEP should aim to support more microbusinesses who are likely to benefit the most from this support.
Governments in England, Scotland, Wales and Northern Ireland should encourage universities and colleges, e.g. through funding or local authorities in England, to collaborate with microbusinesses.
Businesses with 10-49 employees lead in the use of free business support advice from ‘universities’ (7%) and ‘local colleges and local educational establishments’ (3%). This is significantly higher than for the other size of business (7% vs. 2% for businesses with no employees and 1-9 employees). As there are more microbusinesses in the UK than other larger sizes of business, local economies would benefit from more colleges and universities engaging with microbusinesses. Similarly, College Business Centres announced in the Skills for Jobs: Lifelong Learning for Opportunity and Growth White Paper should aim to address the needs of microbusinesses which will vary from those of the larger businesses.
UK Government should provide targeted business support to ethnic minority and womenled businesses, e.g. through the Help to Grow: Management scheme.
Research shows that ethnic minority and women-led businesses have been disproportionately affected by the COVID-19 restrictions.2 They are also more likely to rely on business support and advice from informal networks when running their businesses. This suggests that many ethnic minority and women-led firms will need targeted attention and specific business support in the months ahead, especially as traditionally many have often had a low engagement with mainstream support and advice. In Scotland, the Government has committed to creating Women’s Business Centre to support women entrepreneurs.3 A similar centre could be created to help womenled businesses in England. The Government could also ring-fence a proportion of places for ethnic-minority - and women-led businesses on the Help to Grow: Management programme.
Research shows that driving increased female entrepreneurship and improving the productivity of women-led businesses by about 40 per cent could unlock around £50 billion of additional Gross Value Added (GVA) growth.4
The Government should expand the eligibility criteria for the Help to Grow: Management Scheme by removing the requirement to employ at least 5 employees and reduce the participation fee from £750 to £250.
Smaller firms are likely to employ fewer management practices and require managerial human capital to perform well.5 Many small businesses experienced cash-flow problems during the coronavirus pandemic. Allowing more smaller firms
to benefit from the Scheme and reducing the fee would help small businesses to recover from the impact of COVID-19 and boost the economy in the long-term.
The Government should expand the eligibility criteria for the Help to Grow: Digital Scheme by removing the requirement to employ at least 5 employees and increase the discount from 50 per cent to at least 90 per cent to claim up to £5000.
The criterion to have at least 5 employees will block many small businesses who need software the most from acquiring it via the Scheme. Many more small firms would be able to purchase software with more financial support. This is why the government should increase the Scheme discount up to 90 per cent to claim up to £5000. It should also expand the scope of eligible software in the future.
Similar to the Help to Grow Management and Digital Schemes, UK Government should create a “Help to Green” Scheme to help small businesses to decarbonise.
Many small businesses would like to become greener and reduce their waste. However, there are barriers that prevent small businesses from doing so. Such a scheme would allow businesses to find external sources of support or help them replace polluting equipment and materials through government vouchers.
Download the full report