Enterprise and Small Business Principles

A case study of advice and support schemes — Business Link

In most countries, government initiatives for small business in recent years have focused on providing advice and support to firms at various stages, from start-up, through early growth, to later innovation and strategic change processes. This is seen as one of the best ways of overcoming areas of market failure (e. g. unequal access to information) with least distortion to markets. This has been the main approach of the US Small Business Administration and is also now followed by most EU countries (EU SMEs Observatory, 1996). Within Britain, the provision of advice has been focused on a range of local agencies, called Business Link in England, Business Gateway in Scotland, and Business Connect in Wales. The case of Business Link is instructive since it provides a good example of the potential for government support to small business and also its limitations.

Before the 1970s there was no government advisory service for small firms in Britain; the focus, as we have seen, was on national policies, larger firms and nationalised industries. The Bolton Report in 1971, however, suggested the establishment of a single information and advice helpline. This became the Small Firms Service, which operated

Figure 4.3 Organisation of finance and department responsibility between central government, its agents, local government and small businesses

between 1973 and 1993. It was a centralised, telephone-based helpline, with civil ser­vice staff who referred callers to other specialist suppliers in the private and public sec­tor. All small firms were eligible. High volumes of enquiries were dealt with (250,000 per year) and high satisfaction was achieved (95% of customers). In addition, a more specialist Business Development Service responded to 20,000 requests a year for low - cost counselling, which was often provided by secondees from larger businesses on a semi-voluntary basis. The service was supplemented from 1988 to 93 by the Enterprise Initiative that provided higher levels of government grant support for consultancy and staffing. Again high take-up and satisfaction levels were achieved.

From 1993 this limited, but successful, approach was abolished and replaced by Business Link. This decentralised the management to local partnerships in 85 areas, with 200 even more local satellites. The aim was to use these local delivery points as a means to integrate a wide range of central government small business services: to integ­rate delivery. The full range of services is summarised in Table 4.3. The service was targeted on 10-200 employee firms ‘with growth potential’ and there were incentives

to provide intensive consultancy and advice services through a new group of employees called ‘personal business advisors’ (PBAs). There were financial targets for fee income (initially of 25% of the total budget for Business Link) with the intention that the Business Link would have an ongoing relationship with the small firm being advised and be partially self-financing. The result was a take-up of advice and more intensive counselling similar to the earlier Small Firms Services, but with much lower satisfaction levels (60% on average), and with high variability between areas (satisfaction varying from 20% to 90%).

From 2001 this system was reformed though a reduction in the number of geo­graphical areas covered to 45, removal of fee incentives and changed management structures. In the period 2001-03 take-up reduced as Business Link managers restruc­tured and refocused, but satisfaction was raised to about 85%, although variability between areas remained.

From 2005 direct control of Business Link passed from the central government DTI to the English RDAs. Each has followed different paths. In the South East, which has had limited government resources since it has fewer economic problems, the service is highly focused on signposting and referral to private sector advisors, with a limited group of businesses with growth potential selected for high levels of advisor and finan­cial support.

At the other extreme, in the North East and North West Regions, there are large public funds available, which derive from multiple British and EU initiatives. In these regions an attempt is being made to integrate small business support with urban regen­eration, neighbourhood renewal and industrial restructuring initiatives. Less referral and signposting is attempted and more small firms, in targeted areas, are able to gain grants or subsidies.

The evolution of Business Link provides a major internationally relevant case study of lessons in how government should, and should not, seek to support small busi­nesses. It has been extensively monitored and assessed. You can read these assessments in Bennett and Robson (1999c, 2000, 2003, 2004, 2005; Bennett et al., 2001) and Priest (1999), HoC (1996a, 1996b). The role of the advisor (PBA) has been given detailed assessment by Sear and Agar (1996), Tann and Laforet (1998), Mole (2002a, 2002b) (see also www. businesslink. gov. uk). The following summarises the main lessons learnt.

1 Integration of government central and local services, which was a major aim of decen­tralisation to local agencies, has only partially occurred. Government departments, local government and other ‘partners’ have remained jealous of their own areas, and ‘turf wars’ have occurred. There has been little real rationalisation of the number of government-financed agencies operating locally: policy termination remains rare.

2 Inter-related with ‘turf wars’, referral to non-public agents has been very limited. Referral was perhaps 5% of Business Link actions up to 2001, whilst under the Small Firms Service in the 1980s it was about 90%.

3 The model of intensive support through PBA consultancy has proved elusive to achieve. Most demand from government sources is in fact for simple information and advice, not for intensive specialisms. The hope to create long-term relationships with small firms ignored the market for advice, which is generally for one-offs (Riddle, 1986; Hill and Nealey, 1991; Clark, 1995). Encouraging small firms to come into long-term relationships furthermore risked ‘moral hazard’ problems, that they would take unwarranted risks and become dependent on public support. This is proving to be a continuing problem with regional approaches, where they are heavily funded, such as those in the North West and North East England.

4 The target of raising fee income proved both unrealistic (‘who wants to pay for gov­ernment services?’) and severely distorting of manager and advisor behaviour. This more than any other factor made referral less likely as advisors held on to small business enquirers in order to sell them a service and charge a fee. This in turn increased dissatisfaction levels.

Finally, the decentralisation to a wide range of local areas has proved difficult to qual­ity assure. Whilst the aim of bringing advisors and administrators closer to the small firm was laudable, in practice it has proved difficult to recruit sufficient advisors of high enough quality to make the system effective. Typical comments on advisors are: ‘poor quality’, ‘unprofessional’, ‘too bureaucratic’, ‘poor skill levels’ (Ramsden and Bennett, 2005). In effect, the policy was over-designed, producing a model for support that few businesses wanted and which was difficult to implement. High variability between areas resulted, which was the inevitable outcome of differences in manage­ment capacity of different local Business Links and differences in advisor competence within each area.