Small Business Service

What is the Small Business Service?

The Small Business Service (SBS) is an agency of the Department of Trade and Industry, providing leadership, expertise and promoting change and innovation within the small business sector.

The SBS acts as a fulcrum between the government and the small business sector, and works to protect the interests of the small business sector both at home and abroad. For the SBS, a "small business" is defined as one with up to 49 employees.

The work of the SBS is complemented by the Small Business Council, which advises the Government on issues regarding the development of the small business sector; the Small Business Investment Task Force; and the Ethnic Minorities Business Forum.

It is intended to provide a one-stop shop for assisting and advising small firms, cutting across Whitehall issues, and pulling together the services offered by Business Links, local chambers of commerce, Learning Skills Councils (LSCs) in England, Small Business Gateways in Scotland, Business Connect offices in Wales, and EDnet - the Economic Development Network for Northern Ireland.

In addition, the SBS provides grants to companies for encourage technological innovation; the SBS Small Firms Loan Guarantee Scheme (guaranteeing loans for business ventures that would normally be refused due to a lack of security); and the Shell Technology Enterprise Programme (which assists small firms to recruit skilled graduates).

Background

The Small Business Service was established in 2000 as an executive agency, promising to provide a "voice at the heart of government" for small companies. One of its initial functions was to take over national responsibility for "Business Link". This scheme was set up in 1995, to provide a one-stop advice service for small companies, through local providers.

Even by 1996, however, many within the business community were critical of the variations in the standards of services provided by Business Link, and the service was accused of focusing on the concerns of larger companies at the expense of truly small businesses. The quality of some advisers was also questioned. A survey by the Federation of Small Businesses in 1998 showed that only 23 per cent of small firms had actually made use of Business Link.

Labour's 1997 manifesto promised to assess the performance of the Business Links, in line with an "18 Point Plan", but this was not implemented, in favour of handing responsibility for the scheme to the new SBS.

Consultations on the Government's plans for the SBS prompted Ministers to add a special provision for the chief executive of the Service to have a special "hotline" to the Prime Minister, ostensibly paralleling the relationship between the US President and the head of the Small Business Administration in that country.

In 2002 the Government published “Small Business and Government - The Way Forward” providing a strategic framework to help develop the small business sector in the UK. The plan identified seven key themes to encourage growth in the business sector, which have subsequently been developed in the Government's 2004 "Action Plan for Small Business". The stated aim of the 2002 review framework is said "to accelerate the drive towards making the UK the best place to start and grow a business by 2005", and the SBS is intended to be a leading driver in this process.

The strategy aims to: encourage a more dynamic start up market; build on the capability of small business growth; improve access to finance for small businesses; encourage enterprise in disadvantaged communities and under-represented groups; improve small businesses' experience of government services; and to develop better regulation and policy.


Controversies

The principal criticism made of the Small Business Service was that it lacked the power and influence required to really give small business a voice at the heart of Government.

In particular, the weakness of the "hotline" arrangement was commented upon, by the Federation of Small Businesses amongst others. They argued that the head of the US Small Business Administration is empowered to submit a report directly to the President, who is then under a duty to respond to that report in Congress. In the UK, it argued, there is little evidence for direct access to the Prime Minister having had any effect. The FSB therefore called for more powers for the SBS' chief executive, particularly a right to sit on Cabinet Committees.

It was also alleged that the SBS has done little to address the burden of regulation that small firms are subject to, and that it has not been effective in promoting joined-up government in the interests of the sector. Again, the critics put this down to the SBS' lack of executive powers in respect of policy, warning that its primarily "advisory" capacity with regard to central government make it excessively weak.

The Government and the SBS' supporters rejected these arguments, pointing to the DTI's activity on the subject of small firms in recent years, as evidenced by the 2002 and 2004 strategies. They also argued that many of the negative trends evident within UK small business have been reversed (eg low levels of research and development investment).

However, in October 2006, the DTI announced the SBS would be reformed and would lose its executive agency status. The new SBS also lost it service-delivery role to local partners such as regional development agencies. It is now operates as a policy unit with the DTI's Enterprise and Business Group and focuses on supporting entrepreneurs and influencing the business environment. The decision was widely welcomed.

In February 2007, a public accounts committee report into the original SBS said it had failed to "justify its existence" and its influence on policy had been "limited". It also criticised the SBS for failing to tackle the issue of red tape for small businesses and said it was lacked a system to assess its own efficiency.

The committee also commented on the high default rate under the Small Firms Loan Guarantee Scheme and said this indicated the SBS was failing to generate enough viable new businesses.

Statistics

There were an estimated 3.8 million businesses in the UK at the start of 2002, and 99 per cent of those are small businesses.

They contribute 52 per cent per cent of total business turnover in the UK and employ 12.6 million people.

Business Link Operators (BLOs) helped a total of 245,342 businesses during 2001/-2002, including 18,163 that were helped to start-up.


Statistic 1: (Source: Small Business Service); Statistic 3: (Source: Prime Minister's Office, "Small Business Service Factsheet")

Quotes

“To help build an enterprise society in which small firms of all kinds thrive and achieve their potential - with an increase in the number of people considering going into business, an improvement in the overall productivity of small firms, and more enterprise in disadvantaged communities. the world to start and grow a business.”

Small Business Service Public Service Agreement, 2004

“Government-initiated business support schemes for small firms have performed with mixed success. Every so often, a new support network or a repackaging of existing schemes has been launched, with critics arguing that they spend most of their time politicking and wrestling with each other for budgets instead of doing the job they were set up to do”

Federation of Small Businesses