Business support faces axe

Concern is mounting that the government's £1 billion 'regional growth fund' is a smokescreen for crippling cuts in much needed support and funding for entrepreneurs and start-up companies in the UK.

The fund, announced by chancellor George Osborne in the emergency Budget and recently launched by deputy prime minister Nick Clegg, amounts to much less than the funds previously made available through regional development agencies (RDAs), which had around £1.7 billion to spend this year and which the government plans to phase out by 2012.

Paul King, founder of software company 1DayLater, says, ‘I’m devastated by the decision. When we first started the company we went on a lot of business courses that were funded through our RDA. Without that support it would have taken us a lot longer to get to where we are now. I think it’s a real shame that the next batch of start-ups may not have those sorts of things available to them.’

Mark Bertolini, CEO of technology company Metalysis, agrees. ‘Through our RDA, Yorkshire Forward, we secured a £1.5 million grant in October 2009 to scale up our technology, and employ and train people, many of whom live in the region.

‘We understand that RDAs won’t be replaced until March 2012 and we urge the government to consult closely with businesses like ours over the next steps. The government must support enterprise and not rush into removing expertise from regions at a time when it is looking towards [businesses like ours] to kick-start the manufacturing sector.’

A report by the Treasury published last year found that RDAs were among the 25 per cent most efficient of all government agencies. Similarly, a 2009 study by professional services firm PricewaterhouseCoopers found that for every £1 invested by RDAs, regional economies saw a return of £4.50. Osborne’s reforms also mean it’s highly likely that Business Link, the agency for start-ups and small businesses that falls under the remit of the country’s nine RDAs, will be heavily cut or scrapped altogether.

The government has indicated that RDAs will be replaced by local enterprise partnerships (LEPs). However, these bodies will address issues such as planning and housing as well as enterprise and supporting business start-ups, while other roles currently carried out by the RDAs will be centralised, such as inward investment, sector leadership, business support, innovation and access to finance. It is not yet clear how these centralised functions will be funded.

The Department for Business, Innovation and Skills (BIS) says that LEPs and other public-private organisations will submit proposals for particular projects and bid for funding from the regional growth fund. An applicant will need to demonstrate that the project will attract private sector co-investment and create sustainable private sector growth and jobs. However, a spokesperson for BIS says other government funding may be available to local enterprise partnerships besides the growth fund.

Sam Turvey of the British Chambers of Commerce is confident that there is still time for the government to get the reforms right: ‘We are concerned about this move, but it doesn’t have to be a disaster as everything will rest on the fleshing out of the details. The number one priority has to be business; the government needs to be listening to private companies in terms of how the LEPs are going to work.’

David Hall, MD of YFM Private Equity, agrees and suggests that centralisation could be a positive move. ‘For the moment, it may be better to reserve judgement as we don’t know the full details,’ he says.

More information is expected to follow in a white paper this summer.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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