Dr. Llyr ap Gareth reflects on the necessary principles that should underpin the discussion of business support in FSB Wales’ new report.
This month, the UK Government has published the long-awaited Levelling Up White Paper, which has promised to provide a moral, social and economic programme for the whole of government and spread opportunity more equally across the UK.
In light of this, we wanted to find out about our members’ first-hand experience of business support in Wales and from the ground up in this changing landscape. The result of our member survey provided several insights about the support that small businesses truly need in order to flourish in, or indeed survive, the challenging post-Covid landscape.
What we found did not necessarily surprise us – we have long known that what matters to small businesses is how the system of funding performs and allows them to develop, filling gaps that the market does not.
The challenge is also that SMEs are disparate across the economy, with vastly different needs, aims and sectoral expertise.
We also already knew the main problem SMEs have is a lack of time and expertise. Many small businesses will not have their own HR department, or expertise on specific areas such as sustainability and decarbonisation. Often it will be the one person – the business owner – who deals with it all. The flipside of this is that when that person is empowered to make changes, that can happen quickly, as small can also mean agile. So, it’s less about slowly shifting a tanker than providing direction to a large fleet of small boats.
The challenge is also that SMEs are disparate across the economy, with vastly different needs, aims and sectoral expertise. In this sense then, they can feel a little hard to reach. This is also the SME sector’s strength of course, a wide pool of talent and different expertise and drives that are embedded in their communities.
The prize for getting it right is to provide for the growth and sustainability for the small businesses that provide for 99.9% of the firms in the economy, providing for 62.4% of private sector employment in Wales, and 37.9% of turnover. It would also allow us to build a sustainable, locally grounded, small business foundation to the Welsh economy, that is more resilient to shocks and builds up individual capacities and skilled jobs. In other words – the prize is worth the effort.
From the user perspective, the system therefore needs to build in long timelines for consistent and long-term engagement with businesses.
It is perhaps easier to think of what this means by what it should not be. Short term funding projects, aimed at getting money out quickly and with short timelines for development are less likely to reach most small businesses, or be able to accommodate many SMEs into a vision that work toward the long term adequately.
There are areas we can learn from the previous EU funding regime here, in terms of the mistakes made, but also lessons learned, improvements made, and experience and expertise gained.
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Many will be aware of early mistakes such as building so-called ‘temples in the desert’: building shiny new buildings while public toilets are being closed down the road. This became a metaphor for funding work that felt disconnected from the community it is meant to serve.
However, we should not throw the baby out with the bathwater – substantial expertise has been gained through Welsh institutions, such as Business Wales, Development Bank of Wales, and Wales European Funding Office. While these institutions are not perfect, and in need of renewal and review in moving to any new system, independent reviews point to the relative effectiveness of these bodies. Similarly, our surveys show that the name recognition of these intuitions has increased following the pandemic.
The danger therefore lies in UK Government policy bypassing these institutions, and the devolved level of government (including Welsh Government) is to lose much of its capacity and expertise to deliver on business support in this way, as well as to deliver atomised projects that do not fit across economic strategy more widely.
All levels of government need to acknowledge what the other brings
Local authorities are important to success, but it is unlikely that the 22 councils have the capacity needed to deliver. On the other hand, they will likely have better engagement with businesses, and better awareness of their concerns following the response to the Covid crisis, and so they have built substantial new networks that can be tapped for the long term.
It is now how the branches across the system work together to become stronger that is important here.
All levels of government need to acknowledge what the other brings, in firepower of financial support at the central UK Level, in providing the regional coordination and expertise at the devolved and regional level, and in direct community links at the local level.
In the end, a system that aims at the long term, that fits small business needs and uses each partner’s relative strengths should be in the mutual interest of all governments, of any political hue, and with whatever constitutional settlement they view as best.
In ‘thinking small business first’ in regard to how the business support system should function, we can find the ways of working that works best for the purported central concern of that system – small business.
Odd though it may seem, in this case, looking from the ground up can lead to expanding our horizons.
You can read the FSB’s report, ‘Building Businesses: Building Communities Through Business Support in Wales’ here.
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