Government Support for Small Business

Small Business supportAm I the only one that is getting confused by the increasing number of initiatives that the government is rolling out to encourage entrepreneurship? Or frustrated because they don’t actually seem to make a difference?


We had Business Link, then we didn’t, except it still exists as a “business advice and guidance service portal”.

The Small Firms Loan Guarantee scheme (SFLG) has been around for decades and continues to help companies that need a bank loan. Or it would if the banks fulfilled their part of the deal by releasing the funds.

To encourage them to do so the government set up Project Merlin last year whereby the banks agreed to lend £76B specifically to small firms. However it has been a failure and banks are still holding on to their money. Now Merlin looks like being dumped along with any credibility that the banks could have gained by making good on their promises.

For some time now we’ve had the Enterprise Investment Scheme (EIS) to encourage Investors, by giving them various tax breaks if they help to fund growing businesses.

In addition last year the Chancellor announced the Seed Enterprise Investment Scheme (SEIS) due to come into effect on the 6th April 2012. This is aimed at small start-ups and gives a 50% tax relief to Investors. I’ll do a write up of that shortly, but it looks promising in motivating Investors.

Enterprise Zones were introduced to mixed response and the jury is out on their long-term effectiveness.

The Government has pushed StartupBritain which they call “a national campaign by entrepreneurs for entrepreneurs, harnessing the expertise and passion of Britain’s leading businesspeople to celebrate, inspire and accelerate enterprise in the UK”. Fine words – but never-the-less just words.

Talking about fine words, recently the latest campaign is “There’s a business in you”, which provides inspiring stories and highlights support available. However most of the highlighted support simply takes you to the Business Link website.

Then there’s talk about cutting Red Tape. There is a “Red Tape Challenge”, where members of the public can suggest red tape to be cut and a “1 in, 1 out” idea that says if a department wants to bring in a piece of legislation, they must first remove one. Latest government news is that there have been 19 in and 33 out, saving small businesses £3.2 B a year. What shall we spend it on?

How about making tax simpler and easier to understand I hear you say. Well there’s a government office called “The office for Tax Simplification”. Yes there really is, let’s hope they are successful.

So is it all spin and gimmicks as some business experts have commented, or a well co-ordinated and ambitious campaign to release the entrepreneurial spirit in us all and make Britain great again?


11 thoughts on “Government Support for Small Business

  1. Kevin

    Well, something has to replace all the quangos’ they abolished – how else are they going to give work to their old school buddies!!! or am I just an old cynic. 

    If you ran a business with this many initiatives you might find the only thing you do is have initiatives!!!

    Maybe that is the crux of the matter!

    Yep, it’s official, I am a cynic.

    Good post… Thanks

  2. Simon Cox

    Great blog Lawrence. Many thanks for posting this.

    As an independent film maker I am very excited about the Seed Enterprise Investment Scheme. The idea of being able to offer investors the opportunity of a 50% tax break is really helpful when embarking on a high risk venture like making a movie. There is also the Producers Tax Credit which pays back 20% to the company once the film is made, thus reducing the risk to investors even more. The thing that I am also really excited about is the new distribution models that have come about in the last twelve months which enables Producers to keep a tight control on how they sell their films. Hopefully, these schemes will kick start the independent film scene once more.  

  3. David Phillips

    The response from so many of us is to just do our own thing.
    We do not have a spare day to fill in forms and attend ever more meetings, briefings, courses, launches or to answer quango emails.
    My most recent investor was from South Africa. No government initiatives and the whole deal done including legals in 48 hours.
    My most recent investment in software outsourced to India because I could get ownership of the code (patent) faster and for a fraction of the cost in India.

    Dear Secretary of State and umpteen Ministers, Departmental Civil Servants and those companies getting so much by way of fees to support the business initiative, save the cost and cut the taxes.

  4. Savatanem

    The banks have been bailed out to the tune of hundreds of billions of pounds, so that should have solved their problems and they should have been able to continue supporting small and medium enterprises as they have traditionally done, especially with all the government backed initiatives. But that has not happened, why, because the problems within the banks, caused by massive misdealings, misappropriations, embezzlement and downright theft has been many times greater than we have been led to believe. There will be no appreciative advances in bank support to businesses until the banks have solved their own problems and that could take years. In the meantime the bankers will be consolidating their positions and increasing their own fortunes, thereby widening the already untenable socio-economic divide.

  5. martin

    You might like to take a look at what the government has done with three other support services:
    1) MAS – The Manufacturing Advisory Service (now the Manufacturing Advisory Consortium) 2) The Coaching for Growth programme operated by the Coaching for Growth consortium 3) UK Trade & Investment All are being delivered under various new government contracts and all are potentially worthwhile support services for SME’s. The jury is still out as to whether the involvement of large consultancies like Grant Thornton, PA Consulting and Pera in the delivery of these will prove to be better than what Business Link and the RDA’s did with them in the past as they in turn it appears subcontract out the delivery of the actual support work to a number of ‘delivery partners’ (smaller consultancies / Universities) etc. These delivery partners then themselves I believe may often subcontract out the delivery again to self employed or very small consultancy firms to do the actual work. This seems like a lot of links in the chain to me and will clearly result in a large dilution of the funding as various admin costs and corporate profits are being extracted. By the time the funding gets to the actual business being supported the consultant doing the work is only paid a fraction of the amount being invested by government. Only time will tell if BIS have made the right decision to contract out these two important services in this way. Lets hope so we badly need them to work and we need the to be directed at the right companies.

  6. David Shaw

    In my opinion tax would be simpler and drive down debt if there was a tier type system in place. A system that was compulsory and enforced whatever transactions were made, be it by an established business or a private/personal transaction, like selling your own goods.
    So for example, if you earn (your profit) is under £10K then you pay 1% tax, if its under £20K 2% to a maximum of 20% no matter if you earn Billions of £’s. Simples!
    Then no one would cheat or defraud the system as no one could claim any back for whatever reason. The percentage is fixed to the amount of profit you make and that is what you pay the tax man once a year, full stop!
    David Shaw

  7. David Redfern

    Having been searching for funding for a start-up, or as it’s now known, a pre-start up, for the last 3 years I can report as follows. Most of the Government initiatives require that you have at least one year’s trading under your belt. Most of them are aimed obsessively at online business including ‘app’ development and associated nonsense; in my opinion we will suffer a new dotcom bubble bursting shortly.

    As my proposition is straightforward manufacturing I’m met with brick walls. There is a groundswell of opinion supporting getting the uneducated youth of our country back to work by self-employment. How the hell does anyone in their right mind imagine supporting app development will benefit these people as many of them can still barely read and write. The plunge into the service sector in the 70′s & 80′s was seen by many as folly and it wasn’t until Tony Blair’s “Education, Education, Education” mantra that someone seemed to realise that the service sector relies on educated people; a bit late and the wrong way round, no wonder the economy is on its arse!

    To compound matters, in order to allow access to higher education ‘Media studies’ and associated daft degrees were handed out like sweeties and now we have an educated underclass who won’t demean themselves with manual labour, they’ll just take their £35,000 (Gross) ‘capped’ handout for remaining unemployable; I wish I earned £35,000 but because my wife works I can’t get benefits, not that I’d want them. I’ll get my business up and running, but it won’t be thanks to the government, and the employment I’ll generate will benefit the less fortunate of my community, but only if they can be bothered to get up at 4am for a job interview and queue for an hour in the cold and wet beforehand, at least they won’t need a CV!

    Government funding? Don’t bother unless you’re a high tech operation. Business Angels? They used to invest in small ideas with big risks, now they are sophisticated and want finite business plans that as an educated man I have problems putting together and they don’t want pre startups anymore; roll on the next generation of low level investors, Business Pixies?

  8. Gerry Foskett

    Well said Lawrence. I have just about given up on getting Government funding for worthy projects. The TSB turned out to be a huge time waster. There is a limited appeal route when turned down which basically gives 2 chances. The form advises a 60 minute task and with limits on content and gets rejected due to insufficient detail.
    So we apply for EFG at the bank, only to be told we dont comply (yes actually we do comply). Which muppet thought that leaving the banks to decide who qualifies for a government backed security was a good idea. Its a bit like leaving the fox in charge of the hen house!
    Its a pity there is not a health warning with every inititive – something to warn of the liklihood of actually getting one and the stress and time it will take.
    That way we would all do something more positive than depend on hollow promises.

  9. Ivan P.

    I ask in my Bank Lloyds TSB for loan Government Guaranty scheme for start up business, only because my personal assets can reach 100 up to 120k, and I’m ready to put my home at risk. But respond of Bank officer, yes you can apply but we have not money to give you loan. Also I have apply online not respond within one month then I send online urgency to respond to me again nothing, and I repeated urgency every 14 days till the Bank not decided to reed off my account, with discretion right, to not explain reason.
    I have great business plan on 50 pages, discuss my ideas with professionals in industry, most of them was very impressed with my ideas an plan. There is planned to employ 27 members of staff within 6 months, from day one list 15. But what this mean if I cannot reach fund of £350k.
    On the other side it is so many of the “advisers” and consultants tray to sell useless advice, or list of address where you can request for the money, on all this I spent over 15K and haven’t not reach a single penny in funding, all is just scam. Also I’m not more giving a single penny upfront to all this “advisers” but give them commission when fund will be operative.

  10. David Hilditch

    I don’t even know where to start when it comes to getting help from the government. I know that my business is revolutionary and should take the market by storm and on top of that saves companies a ton of money and helps them improve communication, team-work and productivity so it’s actually something that the UK government should really appreciate.

    I know from previous work that the SMART grants involve many hoops to jump through – it would be very nice if there was really solid help available, not just monetary help, but e.g. marketing and sales help would be great for new startups.

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