8 January 2016 | By Chris Cassley Insight

Life after the Business Growth Service

Insight: Chris Cassley, enterprise policy adviser, CBI

Funding cuts have fallen on the Business Growth Service, but the UK's small and medium-sized businesses still need consistent and coherent support.

Better than forecast tax receipts and lower debt repayments gave the chancellor more wiggle room in November’s comprehensive spending review, but a number of central government departments are still facing stiff budget cuts. With the Department of Business, Innovation and Skills (BIS) facing a 17 per cent cut in funding, the Business Growth Service (BGS) is to be dissolved. So what does that mean for the small and medium-sized businesses it was designed to help?

Although the BGS is a relatively recent creation, almost 10,000 small and medium-sized businesses have received assistance from it, many feeding back positively. It incorporated highly regarded schemes such as the Manufacturing Advisory Service, offering specialist advice in areas such as supply chain development and new products, and the Growth Accelerator for ambitious companies wanting to develop rapid and sustainable growth.

All contracted commitments will be honoured provided activity is completed by 31 March, but the service is already closed to new customers. So the question is, what will fill the gap in support?

Part of the government’s answer is to place greater emphasis on local growth hubs. By April there will be 39 hubs in England of varied shape and size. But, although they will be an allocated an additional £12m this year and a further £12m in 2017, there are fears over whether their resources are sufficient and whether they have a consistent and recognisable brand.

Other institutions will also play a role in the new set up. It is believed the British Business Bank (BBB) will take on some financial elements of the BGS, through the Help to Grow Scheme. The BBB is looking for delivery partners in the £100m pilot scheme which was originally announced in the 2015 Budget.

In the Autumn Statement, the Chancellor announced a £400m Northern Powerhouse Investment Fund, an agreement with the BBB and Local Enterprise Partnerships across the north, to support growth and jobs in these areas. The BBB will invest £50m of its own capital into the fund, matched by an additional £50m by the European Investment Bank subject to meeting European funding requirements.

Fast growing MSBs are critical to the UK economy. CBI research shows over 3,000 of them are growing by more than 25 per cent a year, propelling growth to new heights through business investment, new jobs and more sales.

If more ambitious companies are to follow their lead they need to address the 3 Cs; confidence, capabilities and capital. Support services have a critical role to play on each of these: forming networks to help companies raise their ambition, partnerships to increase skills within them and ensuring they can access the right finance at the right time.

Consistency is also important. Support services are only effective when they develop and create a brand companies trust. Working with local partners to ensure growth hubs, the BBB and UK Trade & Investment deliver will be key in filling any gaps left as the BGS winds down. It will be crucial in presenting a coherent offer to small and medium sized firms.