Two critical reasons why SME policy must involve consistent institutions
In some recent work on net zero support for SMEs carried out with the Federation of Small Businesses, we called for a new organisation to be set up called ‘Business England’. One key reason for this was to ensure that there would be a highly visible place for entrepreneurs in England to go to for business support on a range of issues, including the net zero journey. The announcement this month of the launch of a new Business Growth Service (BGS) that will make it simpler for businesses to get the help they need to grow is a welcome step forward.
On growth programmes run by universities, entrepreneurs often say that they do not know where to go for good advice. Some idea of a ‘one-stop-shop’ or ‘first-stop-shop’ has long been touted, and indeed, elsewhere in the UK outside of England, similar organisations already exist, with business support provided by, for example, Business Wales, Scottish Enterprise and Invest Northern Ireland. These organisations have some longevity, and this longevity is an important positive element of successful business support.
In England, business support has gone through a succession of changes from Business Link, Growth Accelerator, Local Enterprise Partnerships (LEPs) and Growth Hubs. These merry-go-rounds of changes might have shown some innovation, and you might expect that to have led to improvement. However, each change means that businesses must get to know a new institution or set of organisations. And in turn, each new institution must develop its marketing and its reputation.
There are hidden costs in making these changes. First, the marketing for the old schemes obviously becomes redundant. Any reputation that the institution had built up in the past becomes extraneous. Second, every time a new institution is developed, it must develop new capabilities amongst its staff, even if some of the people might move from one institution to another. New approaches and processes tend to be launched and developed.
By contrast, longevity enables marketing and reputation to build up over time. There is a second benefit from longevity too – because good policy might iterative.
As long ago as 1959, the social scientist Charles Lindblom (Lindblom, 1959) argued against a rational-comprehensive view of policy which takes a set of values and objectives and then ranks a set of solutions to achieve these objectives. Whilst this is superficially attractive, Lindblom argued that it was very difficult in reality to identify and rank values and objectives and nigh on impossible to distinguish means from ends. Instead, policy is actually developed through an iterative process. Governments develop policies through comparing policies, learning and refining them. In the case of business support policy, for example, advice might be offered to a wide population of businesses, but then through delivery of programmes, organisations learn that some businesses are more successful in taking advice on board, and so these types of businesses are later targeted. In other words, in learning from practice, the policy gets refined. You find out what works under what circumstances and then you can emphasise the more successful, you can investigate the less successful, and as a policy develops it gets refined.
In order to do this well, you have to have a consistent policy institution, because otherwise there is not an organisation with an interest in leading on undertaking the revisions. For example, the Green Investment Bank, now the UK Infrastructure Bank (UKIB) shows a consistency in the policy institution, whilst actual policies have changed. Established in 2012, the Green Investment Bank supported green finance to aid the transition to a low-carbon economy. It helped induce private investment in renewable energy projects. Its successor, the UK Infrastructure Bank invests in sustainable infrastructure to address regional inequalities and climate challenges. The institution’s continuity and focus have enabled it to maintain a clear agenda and adapt its strategies to evolving policy goals and economic contexts.
Another example – is the High-Value Manufacturing Catapults, which were established to support innovation and collaboration. Although they initially focused on large-scale advanced manufacturing, the organisation has expanded its remit to include SMEs and to develop sustainable manufacturing processes and decarbonization initiatives. This shift has leveraged consistent institutional expertise to address evolving priorities. Change in the institutions is bad; change in the policy implementation is good.
A call for new institutions around small business and entrepreneurship support in England may be an error. Better still would be to build on what is there. It is encouraging that the announcement for the new BGS notes that it will be national service, delivered locally, that will bring together existing services and work with key partner organisations and the Growth Hubs network. Growth Hubs were part of the LEPs programme, and they still remain. The Growth Hubs were evaluated in 2022, and econometric analysis showed positive impacts on engaged businesses, and a good reputation with local stakeholders and businesses. Nonetheless, in evaluating Growth Hubs as a whole this tends to put the organisation on trial rather than generate evidence on what works more or less effectively. In keeping with previous work, firms receiving higher intensity support seemed to have higher performance outcomes. In addition, the evaluation of the Growth Hubs highlighted rather opaque objectives such as ‘regional resilience’ or ‘increased business competitiveness’ (BEIS, 2022). The Growth Hubs need to have a clear set of objectives. These need to recognise the contradiction between a first stop shop and a growth-targeted organisation and also enable segmentation. Moreover, Growth Hub funding requires longer horizons to enable them to retain staff and build capacity. In other words, we need a clearer future for Growth Hubs, that will provide stronger mechanisms for the organisations themselves to learn.
Kevin Mole
Please note that the views expressed in this blog belong to the individual blogger and do not represent the official view of the
Enterprise Research Centre, its Funders or Advisory Group
