Simplifying Business Support
Comments from ACCA
September 2007
Thank you for inviting us to submit ideas on Government proposals for simplifying business support. ACCA (the Association of Chartered Certified Accountants) is the largest and fastest-growing international accountancy body with 296,000 students and 115,000 members in 170 countries. ACCA’s headquarters are in London and the organisation has an extensive network of nearly 80 staffed offices and other centres around the world. ACCA has over 100 years’ experience of working with and providing professional advice to small and medium sized firms (SMEs) and in the UK, 56% of ACCA members work in or for SMEs.
As a body which represents accountants, our interest in the consultation proposals is not only based on the implications that we believe it has for our members, but also for their SME clients. The role accountants play in the provision of business advice to SMEs is becoming well recognised and is consistently demonstrated by numerous independent surveys. For example, FSB Biennial surveys from 20041 and 20062 both cite accountants as the most frequently used source of business advice that achieves the highest satisfaction amongst small businesses. More recently, the NatWest/SERTeam Quarterly Survey of Small Businesses in Britain3 found that 61% of respondents have received helpful business advice or information from their accountant. ACCA members therefore play an important role in small business support and can make a valuable contribution to Government’s simplification programme.
Before setting out our comments, we would like to register our disappointment that the Consultation Document does not sufficiently draw upon the growing wealth of independent research and other evidence based sources of information. In particular, much has been written from authoritative sources about business support, the role of Government and its relationship with the private sector but much of this appears to be ignored in the Consultation Document4 . References to these sources would give this document greater credibility and positively support on occasions the policies that have been developed and articulated. We therefore hope that as the Business Support Simplification Programme develops, more independent research will be used to inform the consequent policy decisions.
Below we address the relevant individual questions in the Consultation Paper.
Responses to specific questions
Q1 Do you think the business support outlined in Figure 2 and at Annex A adequately covers the key needs of business and helps achieve public policy aims outlined in this document?
ACCA, as well as other small business stakeholders, has for some time argued that Government-funded initiatives should only focus their resources on areas that the market cannot adequately serve. There is little evidence however in the Consultation Document that such approach has been adopted and it is difficult to ascertain how the proposals outlined in Figure 2 have been identified as market failures.
We are therefore concerned that the current proposals still contains areas of business support which are adequately served by the private sector. For example, the proposed model in Figure 2 refers to the provision of technical/specialist/generic business expertise without elaborating on why Government intervention is considered necessary.
Independent research by the University of Cambridge5 demonstrates that despite the wide range of services which Business Links have offered, penetration rates were very low in specialist areas such as product design and finance. Yet the current proposals still feature specialist advice services such as financial advice as well as product development, sales and marketing advice. We hope that as the simplification programme develops, there will be careful analysis of whether Business Links should continue to offer such specialist services which, we believe, are currently more effectively provided by the private sector. Given that one of the main objectives of this exercise is to ensure that public sector business support services do not compete with the private sector or duplicate what is already on offer, a more thoughtful analysis of market failures will be critical if Government is to achieve these objectives.
Q3 Where do you feel support is adequately provided by the private sector, thereby reducing the need for public sector support?
As mentioned previously, independent research6 shows consistently that accountants are the first choice advisors of small businesses. In addition to this, analysis from the Centre of Business Research at University of Cambridge indicates that despite a number of policy changes (such as different modes of delivery and tenfold increase in expenditure), ‘there is little to indicate the overwhelming success of government SME support policies’7. Their figures show that almost all SMEs use business support and almost all find their most important source outside the public sector, with Business Links achieving only 5% rating as the single most important source8. We would therefore argue that business advice is an area where support is adequately provided by the private sector with limited scope for the public sector to enhance supply.
Furthermore, where market failures have been identified, the simplification programme should consider using the high penetration rates of accountants and other private sector advisers to deliver its intervention programmes. For example, the Government target of increasing the number of female-owned businesses could be facilitated by professional advisers. ACCA-funded research ‘Access to Finance: Women’s Enterprise and the Role of the Accountant’9 shows that funding applications which have been endorsed by an accountant are seen as more credible by the bank managers. Also, the Report on the 2004 Survey of SME Finances10 shows that majority female owned business are more likely to use an accountant compared to their male counterparts. Professional business advisers such as accountants have an educational role in advising women entrepreneurs and Government should therefore work with the accountancy profession to deliver its policy interventions in this and other relevant policy areas.
There is evidence that some Government policy makers have been adopting this approach. For example, ACCA supports the recent work by the Better Regulation Executive11 which seeks to exploit the high penetration rates of intermediaries. Having found that accountants are the most popular source of advice on regulation as well as achieving the highest rates of satisfaction with the advice received (over 90%), one of the report’s recommendations is to communicate with businesses through intermediaries. We would therefore urge Government to adopt a similar approach in relation to all the relevant provision of business advice and to fully exploit the opportunity of using the private sector to deliver its policy objectives.
Q8 How can Business Link be further developed to meet business and government needs consistent with this policy?
ACCA believes that the highest strategic priority should be given to raising the awareness of Business Link services as well as its overall branding. The 2006 FSB survey results show that over a quarter of their members are not even aware of Government support services with over a third stating that better information about service provision would encourage them to use it more often. Recent report by the Confederation of British Industries estimated that Business Links are currently reaching only 14% of existing small businesses12. Government’s own annual survey from 2005 found that only 1% of SMEs sought advice or information from Business Link when starting or taking over the business13.
With the increasing emphasis placed on the brokerage model, where Business Link advisers direct SMEs to appropriate contracted service providers, it is imperative for high level of public awareness to accompany this change in policy. Currently, despite the formal announcements by Government, ACCA is concerned that the diagnostic and brokerage model is still not being adequately adopted and that the proposals contained in this Consultation Document are not signalling an improvement in this area. For example, annex A outlines the role of Business Link as: ‘provides information, advice and support people need to start and grow a business’. Similarly the detailed model in Figure two refers to the provision of advice on a number of expert areas. Reference to advice is therefore still prominent and will further confuse the brand identity of Business Link.
In our view, Business Link should develop its reputation as the authoritative source of information for business on regulatory compliance, business law, employment law and other aspects of trade where small businesses need to be in direct contact with Government. Information provision should in our view be the key aspect of Business Link services and we were therefore surprised to find that this aspect of business support did not feature more explicitly in the new model for business support. We would like to recommend that the emphasis currently placed on business advice should be replaced with information provision and brokerage which would clarify Business Link’s role and identity.
Q10 Do you agree with the proposed strategic oversight of business support?
Government business support has undergone a number of policy changes since the early 1990s. The current proposals signify yet another change and to ensure that this is a lasting and successful policy, Government must ensure that it is managed effectively. A large number of agencies, government departments, local authorities and other bodies will be involved in its delivery. We therefore agree that representatives from all of these bodies should be involved in the oversight of the new model and that procedures should be in place to ensure that any new proposals fit with the overall principles of the new model. However, in order to ensure continued relevance of the support on offer, there should be a mechanism in place that ensures regular consultation with the private sector. Consulting with businesses is referred to, albeit very briefly, in Section 5 but no reference is made to the private sector intermediaries. If Government is to use the private sector in the delivery of its programmes, then it should consult regularly with its representatives on the direction of business support across Government. The private sector should be used as a valuable resource for Government and some recognition of this should appear in the oversight strategy.
In addition to this, one of the key factors in the effective management of the new model will be Government’s ability to evaluate the effectiveness of its programmes. The recent report from the National Audit Office (NAO) clearly identified that the Small Business Service (SBS) does not have sufficient insight into the effectiveness of current support schemes: ‘While SBS has evaluated a number of individual programmes it is not able to establish the overall impact of either its or wider Government activity on small businesses’14. Lack of reliable Government performance data and the lack of ability to evaluate Government support programmes will combine to make it difficult for Government to develop and manage the simplified business support model as well as limit the role of oversight in terms of future development of the model. We welcome the general recognition of this issue in the Consultation Document and would urge Government to develop evaluation methodologies as recommended by the NAO15 report and make this a key aspect of the strategic oversight.
Q16 How far will our proposals make it simpler for business to know what publicly-funded business support is available and how to access it?
The general sentiment behind this exercise is valid and arguably long overdue. ACCA has argued for some time that Government should take stock of its business support activities and address the low penetration rates, high levels of proliferation and other factors which have severely limited its success. However, unless Government makes full use of the private sector in promoting the new model as well as in communicating with small businesses more generally, the danger is that the estimated £2.5 billion spent annually on direct business support will again not deliver value for money. The problems associated with the current model are not just the high levels of proliferation but as outlined above, low awareness rates, lack of relevance to small businesses and an already saturated market for business support. These critical factors are not addressed satisfactorily by the proposals outlined in the Consultation Document, and we would urge Government to consider how the private sector can contribute towards a more holistic approach to improving Government-funded business support.
We hope that these comments are helpful and would be happy to discuss any of them in greater depth.
1 Federation of Small Businesses (2004), FSB Survey, Lifting the Barriers to Growth
2 Federation of Small Businesses (2006), FSB Survey, Lifting the Barriers to Growth
3 NatWest/SERTeam Quarterly Survey of Small Business in Britain, 2007 Q1, Vol.23.No.1
4 References omitted include: Bennett, R.J. (2006); Bennett, R.J. and Robson P. (2003); Atherton A., Gibb A. and Sear L., (1997); Berry, AJ., Sweeting, R. and Goto, J. (2006); Gooderham, P et al. (2004); Mole K. (2004); Storey (2006)
5 Bennett, R. J., SME expectations from Business Link: How are they met?, Proceedings of ISBE Conference, Blackpool, November 2005; Bennett, R.J. and Robson P. (2003)
6 Federation of Small Businesses (2004 and 2006) and the SERTeam (2007)
7 Benett, Robert, ‘Government SME Policy since the 1990s: what have we learnt’ in British Enterprise: Surviving or Thriving, (2006)
8 Bennett, op cit
9 Carter, Sara and Marlow, Susan, ACCA Research Report ‘Access to Finance: Women’s Enterprise and the role of the Accountant’, (Research Report No. 90)
10 Fraser, Stuart, A Report on the 2004 UK Survey of SME Finances, (2007)
11 Better Regulation Executive, Regulation and Business Advice, (2007)
12 CBI (2006), ‘Improving Government Services for Small and Growing Businesses’
13 Small Business Survey, Annual Survey of Small Business:UK, 2005
14 NAO (2006), ‘Supporting Small Business’
15 Ibid