The incoming government must prioritise new enterprise support initiatives to replace EU funding worth £3.6bn to small firms, according to a new report.
In its latest report, the Federation of Small Businesses (FSB) outlined proposals to ensure effective support services for small firms were in place once Britain leaves the EU. Currently, there are no regional development funds planned beyond 2021 in Britain.
By 2021, small business owners across the UK will be “staring into a business support black hole”, according to FSB chairman Mike Cherry. He added the issue was a particular threat for firms in less economically developed regions.
Some eight in ten small business owners contacted a business support service in the last year, according to the study, highlighting the need for policy makers to replace EU directives domestically.
Research also revealed the link between owners with high growth ambitions and the likelihood to apply for funding and support. Almost 90 per cent of those looking to grow their company by 20 per cent or more applied for direct funding.
While 68 per cent of small business owners who had accessed EU funding reported a positive impact on company growth, the FSB uncovered a number of frustrations with the application rounds. Just one in ten found the process straightforward, with the length of submission forms the most common problem.
The FSB urged policy makers to learn from the failures of EU funding and support directives and tackle the levels of bureaucracy preventing small business owners from seeking support.
“If the next government is serious about developing an Industrial Strategy that delivers prosperity across all areas of England, it must replace EU funding dedicated to small business support and access to finance after we leave the EU,” Cherry said in a statement.
To fill the void left by EU funding initiatives, the FSB proposed a Growth Fund for England that would simplify existing funding rounds available through Local Enterprise Partnerships (LEPs).
Cherry added: “It’s not unusual to find small firms giving up halfway through an application because forms are too long or complex, or they fear grants will be clawed back at the first sign of an admin slip. Sadly, it’s often the time-poor businesses most in need that struggle in the face of this bureaucracy.”
Cherry said Brexit marked an “unprecendent opportunity” for government to reform the ways small business owners access support and funding and stressed the importance of a localised approach.
“We can’t have an environment where small businesses perceive personal contacts or administrative skills as more important to successful applications than genuine need.
“A shock to the business support landscape will have serious implications for small business aspirations as well as efforts to improve productivity and rebalance the economy. The new government must prioritise the development of a Growth Fund for England pre-Brexit or risk a slowdown in the economy.”
In February, LEPs in the North of England were given access to a £400m fund, financed by the British Business Bank (BBB) and the European Investment Bank, to provide loans up to £100,000 for new startups. The dedicated fund for firms in the North of England signalled the government’s commitment to financing the Northern Powerhouse.
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