The SME perspective: reviving regions

As part of our ongoing work with SMEs across the country, we’ve been speaking to our small and medium size members on what steps need to be taken to improve the business environment across the UK. Our latest discussions has highlighted three key areas of focus: closing productivity gaps between and within regions, how Net zero is core to building back better as well as the business recovery from coronavirus.

Leveling up by closing productivity gaps

The government has repeatedly affirmed its commitment to ‘level up’ the country, bringing prosperity to all corners of the UK, but this remains an ambiguous term. The CBI is developing a series of recommendations to shape government policy on this agenda, considering the short-term impacts of COVID-19 and Brexit on all regions, as well as how we might address the long-term gaps in productivity and inequality across the country.

A focus on the key drivers of productivity (skills, innovation, connectivity, and business practices) will be fundamental to closing those productivity gaps. However, to do this right also requires a shift in government thinking, to empower places to take local and regional decisions that are relevant to their local economies. Devolution will therefore be key, providing regions with the means to develop and deliver local strategies to drive growth and close inequality gaps. The Devolution and Local Recovery White Paper, expected to be published October, is likely to address some of these questions. 

Feedback from small and medium size members on regional inequality:

SME member feedback to our work on reviving regions focused on the role of local and regional stakeholders, particularly Local Enterprise Partnerships (LEPs) and Growth Hubs. Whilst members felt that there was a key role for local and regional stakeholders, the consensus was that there was room for improvement, with three key areas of focus:

• Resourcing: more consistency is needed in resource, capacity and skill set across LEPs. The current system creates a patchwork of approaches and opportunities across the country
• Scale and geographies: questions were raised around the right scale for regional policy making; some felt there are too many LEPs and they lacked a strategic approach; however, it was noted that a local approach was key to ensuring SMEs are well served, with different areas facing different barriers to growth
• Business engagement: awareness of LEPs and Growth Hubs varied from those consulted, with SMEs, and particularly mid-sized firms sometimes struggling to engage.

Net zero and build back better

As the UK looks to reopening, the CBI believes the crisis represents a way to rethink the world of work, and to embed greater principles of sustainability and inclusivity. One of the biggest steps we took in this area was to be an early advocate of the ‘Net Zero’ climate targets, which the UK government recently passed in law.

A key part of this will be in encouraging a green recovery, which the CBI has been calling for as part of our response to COVID-19, publishing our Green Recovery Priorities, which resulted in several positive announcements within the Summer Economic Update. This included supporting our calls for retrofitting of homes and public sector buildings to improve energy efficiency; with £3bn being made available this year to help with this effort. We’ll be publishing further ideas as part of our Budget and Comprehensive Spending Review work, and continuing to help shape the National Infrastructure Strategy, and Energy White Paper.

Feedback from small and medium size members on the importance of a green recovery:

• Opportunities: Members saw important potential opportunities from a green recovery. This includes adapting their businesses and embedding innovative practices to reduce their own carbon footprint, as well as using this opportunity to win new, low-carbon contracts with clients
• Challenges: one of the impacts of COVID-19 has been a change in the way businesses and people are able to / choose to work; the SMEs we spoke to wanted policy makers to be equally responsive to adapt to the changing environment and create the right climate for businesses to invest and grow here in the UK.

Business recovery from the impacts of COVID-19

The government moved quickly to respond to the impacts of coronavirus on the business community, guaranteeing a total of £43bn of lending to businesses through the Bounce Back Loans and the Coronavirus Business Interruption Loans, and supporting the wages of as many as 9.5million workers through the Job Retention Scheme. However, as we start to reopen the economy, the challenges businesses face arguably become more complex.

As we return to work and look to the last week, three key themes stand out as priorities, firstly the fact that local lockdowns will continue to be a feature of our new normal, and more must be done to get these right, including supporting businesses to manage the disruption. Secondly, having a clear approach to quarantine across all four nations will be key to getting international travel back up and running. And finally, we need easy access to cost effective mass testing, particularly in the return to schools and offices.

Feedback from small and medium size members on the business recovery:

On the topic of specific government initiatives and the issue of support for firms trying to survive the lockdown imposed by the government, member feedback focused on employment and skills.

• The Kickstart scheme: this was a widely supported idea, but it was felt that it had been designed without smaller firms in mind, particularly given requirements for firms to provide 30 apprenticeship places unless they go through an aggregator; more clarity is needed on the scheme to ensure SMEs can benefit from it, and that is has sufficient flexibility to meet the needs of SME businesses
• The Job Retention Scheme: whilst this has been a lifeline for many businesses throughout the crisis, as we transition into the new normal, it is key that the support changes to ensure it reflects new ways of working and the viability of different industries in the long term. With some jobs likely not to exist in the future, ensuring that skills and employment support are aligned to help with retraining, particularly for SMEs who may have different skills requirements, is key.