Regional Studies

ISSN: 0034-3404 (Print) 1360-0591 (Online) Journal homepage: https://www.tandfonline.com/loi/cres20

Panacea or White Elephant? A Critical Examination

of the Proposed New Small Business Service and
Response to the DTI Consultancy Paper

James Curran Shaw & Robert A. Blackburn

To cite this article: James Curran Shaw & Robert A. Blackburn (2000) Panacea or White
Elephant? A Critical Examination of the Proposed New Small Business Service and Response to
the DTI Consultancy Paper, Regional Studies, 34:2, 181-189, DOI: 10.1080/00343400050006096

To link to this article: https://doi.org/10.1080/00343400050006096

Published online: 18 Aug 2010.

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Regional Studies, Vol. 34.2, pp. 181± 206, 2000

Policy Review Section

Edited by J. M AWS O N

In this issue of the Policy Review Section James Curran and Robert Blackburn of the Small Business Research
Centre, Kingston University, present a critical assessment of central government’s proposed new Small Business
Service. Their review is based on an analysis of the market for such services and the lessons which can be drawn
from the performance of current business support systems. In the second article, Kevin Thomas of the School of
the Built Environment, Leeds Metropolitan University, considers the signi® cance of Regional Innovation Strategies
prepared for Strathclyde, the West Midlands and the Yorkshire and Humberside regions as part of a broader
European wide attempt to foster improved regional competitiveness. Finally, in the third article, Martin Perry and
Caroline Yeoh of the Departments of Geography and Economics at the National University of Singapore present
a critical account of Singapore’s Regionalization Programme 2000 which is based on the development of industrial
townships in China, India and several South East Asian countries.

PAN AC EA O R W HI T E E LE PH AN T ? December 1998 White Paper, for instance, could hardly

A CR I T I CA L E X A MI NAT I O N O F T H E
P RO P O S ED NE W S MA LL BU S I N ES S
S ERV I C E AN D R E S P O N SE TO T H E
D T I CO N S U LTAN C Y PAP ER
The context
Since the late 1970s, the UK and many other advanced
and developing economies have adopted policies high-
lighting the central role of the entrepreneurial small
® rm in furthering economic prosperity (H A R R I S O N ,
1994, pp. 15± 17). To foster this policy emphasis, a host
of support initiatives and structures have been put in
place. By 1983, the Department of Trade and Industry
(DTI) already listed almost 100 small business support
measures (D TI, 1983). This support has been more
than maintained since with further policies, schemes
and support infrastructures added almost every year
(S T OR EY, 1994; D TI, 1995, 1998a). A recent estimate
(G A V R O N et al., 1998, p. 59), based on information
supplied by the Cabinet OYce, suggests there are
currently over 200 initiatives supporting small ® rms in
the UK.
Although the emphasis on the small business as an
engine of economic regeneration originated on the
political right (G O S S , 1991; H A R R I S O N , 1994), it has
now been adopted by virtually all political parties. In
the UK, the change of government in 1997 illustrated
clearly just how much the belief in the importance of
the small business and entrepreneurship to promote
economic prosperity has come to be shared. The
have put this consensus more plainly:
Entrepreneurship and innovation are central to the crea-
tive process in the economy and to promoting growth,
increasing productivity and creating jobs. . . . As many
people as possible should have the skills and support to
set up, run and grow businesses. . . . The Government’s
aim is to create a broadly-based entrepreneurial culture,
in which more people of all ages and background start
their own businesses (DTI, 1998b, pp. 14± 15).
The proposal (D TI, 1999a) to set up a new Small
Business Service in April 2000 oVers further evidence
of this commitment. It is, in a key sense, an important
and timely initiative. The profusion of support initia-
tives over the last 20 years has led to a very chaotic
pattern of support for the small business in the UK. In
the last decade or so, two attempts to bring order
to the situation were made. Training and Enterprise
Councils (TE Cs ± launched in 1988) and, even more
ambitiously, the later `one stop shop’ solution in the
form of Business Link (launched in 1992) have both
been deemed as, at best, partial successes (B E NN ET T
et al., 1994; P A R K ER and V I C K ER S T A FF, 1996;
P R I E S T, 1997; G I B B , 1998; H O U S E OF C O M M O NS ,
1998; B EN NET T and R O BS O N , 1999). A new national
initiative is therefore an opportunity to remedy past
weaknesses and deliver small business support more
eVectively. But, perhaps even more important, it oVers
an opportunity to review more generally the role of
small business support in the UK in the late 1990s.

0034-3404 print/1360-0591 online/00/020181-26 ©2000 Regional Studies Association

182 Policy Review Section
Our response in this article to the proposal to set up
a new Small Business Service is based on the extensive
academic research which has paralleled the growth of
small business support over the last two decades in the
UK. This research has been concerned with both
individual support initiatives and the vehicles for their
delivery such as TECs and Business Link. In particular,
the response also draws on recent reviews of UK small
business policy carried out by researchers at Kingston
University Small Business Research Centre for the
Government of Finland (B L A C KB U R N et al., 1999;
C U R R A N et al., 1999) and JETRO, a Japanese trade
organization.
Customer needs and a new small business service
The consultancy paper proposes a centralized Small
Business Service set up as a `Next Steps Agency’:
Next Steps Agencies are designed to deliver Government
services and other executive functions in a more eYcient
and eVective way. . . . Agencies work within a framework
of policy, targets, and resources set by Ministers, to whom
the Chief Executive of the Agency is accountable. An
Agency Steering Board, including the Chief Executive
and senior oYcials from the DTI, as well as private
sector representatives, will be put in place to advise on
management and performance issues (DTI, 1999a, p. 13).
This appears to be a hybrid arrangement which, while
directly responsible to government, would also have
some of the attributes of private sector organizations.
As the paper explains, the Agency will work inside
government to in¯ uence the development of policy
and make all departments conscious of the needs and
importance of small business. The private sector charac-
teristics, it is implied, will help it operate in a much
more business-like way and be more responsive to the
market, in this case small and medium sized enterprises
(SMEs).
Despite the above, a major hiatus in the proposal is
the way in which it ignores the key advice given by
banks and support agencies to anybody setting up a
new enterprise. All urge that a sound business plan for
any new enterprise needs to establish the market for
the services it aims to provide. It could be argued that
the new service is not really new but rather a revamping
of existing provision to an established market so such a
market analysis is not needed. But this would disregard
the enormous amount of market knowledge which
already exists in the form of independent evaluations
of small ® rm support initiatives and their delivery.
What this reveals is especially relevant because what it
shows is the overwhelmingly low market penetration
of small business support services over the period since
1980 (M A C M I L L A N et al., 1989, p. 4; S M A L L BO NE
et al., 1993; C U R R A N and B L A C KB U R N , 1994,
pp. 98± 99; S T OR EY, 1994, p. 288; PA C A M B R I D G E
E C O N OM I C C O NS U L T A N T S , 1995, pp. 46± 47;
C U R R A N et al., 1996, p. 37).
Low market penetration can arise for diVerent
reasons. There are ® ve obvious reasons why low take-
up of any service by small business owners might occur:
(1) the services could have been poorly marketed so
many potential users are simply not aware of what is
available; (2) the services could be priced above what
consumers are willing to pay; (3) the delivery of the
services could be so poor that consumers believe it is
not worth the bother of trying to access them; (4) the
consumers may distrust or have low con® dence in the
supplier; and (5) the services on oVer are not what the
consumers want or feel they need.
Independent research on support services for small
businesses oVers assessments on each of the above.
Research suggests that while it does take time for
busy small business owners to become aware of new
initiatives, the level of publicity which they typically
receive means that awareness grows quickly. This has
been particularly true for the delivery agencies them-
selves such as TE Cs and Business Link. For example,
a tracking study of small service sector ® rms in the
early 1990s (C U R R A N and B L A C K BU R N , 1992)
showed that although TECs had eVectively been in
existence for under two years, by 1992 awareness of
TECs had reached almost 70% among owner-
managers. By 1994 it had reached near saturation at
over 90% (C U R R A N et al., 1994). Similarly, the survey
in 1997 found that over three-quarters of the respond-
ents were aware of Business Link (F I T C H EW and
B L A C K B U R N , 1998).1 Similar results are shown in
analyses of Business Link awareness (B EN NE T T and
R O B S O N , 1999, p. 110).
Awareness of speci® c initiatives is more diYcult to
establish. There have been a large number over the last
two decades and, as mentioned earlier, there are about
200 currently. However, central government initiatives
such as the Enterprise Initiative, which ran between
1988 and 1994, received extensive press and television
advertising. Locally delivered support initiatives in the
1990s have been marketed mainly by TE Cs. There is
every reason to suppose they have marketed their
services energetically. Central government resourcing
for TE Cs, for example, has been increasingly based on
output related funding, a payment by results system.
Business Link similarly have marketed their services
enthusiastically (helped by considerable central govern-
ment supported advertising in national printed and
other media).
Overall, therefore, it would be diYcult to argue that
the lack of take-up of small support services has been
due to inadequate marketing. Similarly, the second
reason listed above, that the prices at which support
services have been oVered might have been too high,
is unlikely to have been a deterrent. Most services have
been oVered free or at subsidized prices or even with
cash incentives to take advantage of them. In other
 Policy Review Section
words, there has rarely been any attempt to charge
market rates for the services. Indeed, private sector
providers of business support services have sometimes
complained that TECs and Business Link in eVect
crowd them out by charging below cost for their
services or by creating expectations on the part of small
business owners that support should be inexpensive.2
The third possible reason, that small business owners
refuse to use support services because of poor delivery,
is more diYcult to assess. On the one hand, researchers
have reported that owner-managers expect services pro-
vided, or funded by government, to be slow to access
and over-bureaucratically administered (C U R R A N ,
1987, p. 17). Some owner-managers report attempting
to bene® t from an initiative but ® nd the rules excluded
them, or that there was so much paperwork they gave
up seeking support. There is little evidence that more
recent institutions and policies have overcome this
criticism (H O U S E O F C O M MO N S , 1988, pp. viii± x;
W E L L ER , 1999). On the other hand, a high proportion
who have used some services rate them as satisfactory
or better (PA C A MB R I D G E E C O NO M I C C O NS U L T -
A NT S , 1995, p. 45; B EN NE T T and R OB S O N , 1999;
W E L L ER , 1999). There may be some self-selection
here, that is, some business owners may have a predis-
position to source external support. For instance, some
research has suggested that small business owners who
used publicly provided services are also more likely to
use private sector support services (PA C A MB R I D G E
E C ON O M I C C O N S U L T A NT S , 1995, p. 51). But, over-
all, using publicly provided external support appears
characteristic of only a minority of small business
owners.
The fourth reason for low penetration concerns
distrust of sources of support. There is a good deal of
research reporting that small business owners distrust
the state, or any mechanisms associated with the state,
in providing help to SMEs (C U R R A N , 1987; M A C -
M I L L A N et al., 1989; C UR R A N et al., 1992). Fre-
quently asserted beliefs by small business owners in
surveys are that government does not have the experi-
ence or skills to advise on how small businesses should
be run and that politicians’ commitment to the small
enterprise is often simply a ploy to win votes while
policies, particularly macro-economic policies on taxes
and interest rates, often actually hurt small businesses.
This makes it diYcult for government funded support
agencies to reach small business owners because they
are seen as too closely associated with the state.
The ® nal reason suggested, that small business
owners feel that what is oVered is not what they want
or need, appears to be the most important in explaining
the general lack of take up. The research here focuses
on the psychological pro® le of SME owner-managers
and its implications for their behaviour in running
their enterprises. L I G H T FO O T, 1998, highlights a much
repeated theme in owner-managers’ replies when asked
why they do not use external support, even when free
183
or subsidized. This is that the support provider `does not
understand’ their business. He argues that so common is
this response, it suggests that it does not simply refer
to the lack of initial close knowledge of the business
of external advisers. A competent adviser can gain this
knowledge given time. It may, of course, refer to a lack
of specialist understanding of ® rms in particular sectors.
Small ® rms in, for example, printing do diVer some-
times fundamentally from, for example, small computer
software businesses. But some advisers specialize and a
capable adviser should be able to acquire a working
knowledge of any sector and combine this with their
wider consultancy skills.
Instead, L I G H T FO O T, 1998, p. 237, suggests that the
extreme reluctance to accept external advice has its
roots in small business owners’ psychology as identi® ed
in numerous studies (see reviews in G O S S , 1991, and
G O FFE E and S C A S E , 1995). This shows that a common
psychological trait is a very strong commitment to
autonomy and independence resulting in a stubborn `I
do it my way’ attitude to running their businesses.
Even when the business is in crisis, owner-managers
are very resistant to seeking outside help in any way
which might allow anybody to `tell them how to run
their business’ (C U R R A N and B L A C K BU R N , 1994,
pp. 105± 13). Equally, this commitment to indepen-
dence has been seen as a reason why so few small
businesses grow (S T O R E Y, 1994). Having set up a
business to gain independence and make their own
economic destiny, many owner-managers are reluctant
to pursue growth because they fear this will lead to a
loss of control. For instance, successful growth requires
managerial delegation and many owner-managers are
reluctant to delegate control in this way. Growth is also
risky. Running a small business is a high risk activity
even where the aim is stability and a reasonable pro® t.
Going for growth adds to these risks and could jeopard-
ize the autonomy already achieved. At best, most small
business owners want their businesses to grow slowly
at a pace which they can manage while still retaining
their autonomy.
One of the aims of the new service is to promote
entrepreneurial businesses, particularly in the new
knowledge-based sectors. If `entrepreneur’ and `entre-
preneurial behaviour’ are to mean anything more than
simply `small business owner’ and `running a small
business’ , then it might be argued as to be referring to
people whose de® ning characteristic is breaking with
existing ways of doing things to create something new.
They pioneer new products and services and/or new
ways of delivering them to the market. As G I B B , 1998,
has argued, these are diYcult people to help in many
ways. Because they believe passionately in their ways
of doing things, they often have little time for the
ordered, formal methods of the conventional business.
Yet the latter are the basis of the skills and approach
that small business support providers oVer to small
business owners. The essence of what advisers have to
184 Policy Review Section
oVer are tried and tested methods for managing ® nance,
human resources, raising quality standards and growth
strategies. Moreover, much of the existing support for
small enterprises is in the form of support packages
(initiatives, schemes, etc.) with a strongly `top-down’
character.
Support providers oVer what is currently seen as
what every business needs to succeed. The main sources
of this business wisdom are business and management
education and adaptations of large ® rm practice. These
provide the advice on business planning, ® nancial man-
agement, marketing strategies, human resource man-
agement, etc. oVered to small enterprises. Researchers
(for example, J A R V I S et al., 1996; G I B B , 1998;
L I G H T FO O T, 1998) have repeatedly found that small
business owners (and not just those who might be
labelled the most entrepreneurial) are sceptical about
the bene® ts of these packages for their businesses. The
research also suggests that they may well be correct.
Small businesses are not large businesses scaled down.
Best practice experiences of management in larger
companies is often poorly suited to the needs of small
enterprises.
What the above suggests therefore is that the new
service faces a very sceptical market and the failure to
directly address the issue of potential consumers’ atti-
tudes is a serious weakness in the paper. Previous
support programmes and agencies have found it diYcult
to reach the majority of small business owners. The
new service comes at the end of a long line of such
support initiatives for small ® rms with apparently little
radical or new to oVer in support content. The strong
likelihood is that it will be seen as `just another govern-
ment scheme’ by potential users.
Rethinking the potential of a small business service
A more radical review of small business support requires
a return to basics. The fundamental question here is:
can a publicly funded, national support agency provide
additional and eVective support for Britain’s small and
medium sized enterprises? As the consultancy paper
admits, `their diversity and numbers make it diYcult
. . . to develop policies that are responsive to their needs
and to deliver them eVectively’ (D TI, 1999a, p. 9).
But it does not pursue the full implications of this
admission. The most basic assumption upon which any
support service is based is that there is a `small business
sector’ or `SM E sector’ which exists as the market for
what is oVered. But some (see, for example, B UR -
R O WS and C UR R A N , 1989; R A I NN I E , 1991) have
argued that this assumption is extremely dubious. In
eVect, the assumption asserts that there is a population
of businesses which, because they employ up to 50
or up to 250 people, share common characteristics,
problems and needs to such an extent that they form a
distinct `small business sector’ or `SME sector’. But
simply because any grouping of businesses employs
under 50 or under 250 people is not robust enough a
criterion for attributing to them the economic distinc-
tiveness of `a sector’.3 Smaller businesses exist in every
area of the economy from furniture making to ® sh
farming and from ® nancial services to funeral parlours.
They are set up and run by people from all age groups,
genders, ethnic groups and educational backgrounds.
This extreme heterogeneity means they face very
diVerent markets, use very diVerent skills and types
of labour, and employ very diVerent organizational
structures to achieve a wide variety of personal and
business goals. In short, the consultancy document fails
like so many other government SM E initiatives: there
is no real proposal to undertake market research to
understand what businesses need.
If the `population’ whose needs the policies are
aimed to meet is so widely de® ned and heterogeneous,
this poses a further central question. Could any single
agency, such as the proposed Small Business Service,
operate to satisfy eVectively the needs or represent the
very diverse interests of such a mixed population?
Similarly, could a new Enterprise Council of 9± 12
members (even individuals with experience as entre-
preneurs and leading representatives of small ® rms)
adequately advise the Chief Executive and government
on the small business? At best, a service so widely tasked
faces some very diYcult problems and even the largest
of the generic small business lobby groups might have
their representativeness questioned.
There are ways in which the market for a small
business support service might be made more tractable.
One obvious and long standing focus of enterprise
support has been on start-ups. Indeed, over the whole
period since 1980, this has been the main market
served. Even under the Conservative Government of
the early 1990s which introduced Business Link with
a main aim of providing support for businesses with
between 10 and 200 employees (the SMEs with growth
potential), start-ups remained the main market served
(P R I E S T, 1997). Indeed, the reputation as promoters
of start-ups acquired by support providers in the 1980s
became so ® rmly entrenched that owner-managers of
established enterprises often advanced this as a reason
for not using support agencies: the latter were seen as
created to help start-ups rather than established busi-
nesses (C U R R A N , 1987; B L A C KB U R N et al., 1999).
Start-ups oVer a sizable market. In 1998, for example,
there were just over 470,000 in England and Wales
(B A N K O F E N G L A ND, 1999, July).4 It is also arguable
that start-ups have suYciently generic problems ± initial
registration as a business, registering with the Inland
Revenue, coping with V AT regulations, establishing
relations with banks, taking on employees, etc. ± to be
seen as a coherent customer base. This is much less
demanding than trying to meet the needs of longer
established businesses whose owners’ needs (where they
feel they have them and believe outside advice could
help) are much more specialized and complex.
 Policy Review Section
The weakness of the start-up market as S T O R EY,
1993, has argued is that the cost of any support
provision has to be set against the very short life
expectancy of most new small businesses. C R E S S Y and
S T O R E Y, 1995, for instance, tracked a sample of 2,000
new businesses started in 1988 until the end of 1994.
They reported that after almost six years, less than
20% of the businesses survived. Moreover, almost 30%
ceased to trade within 18 months of start-up.5 In other
words, the new jobs these businesses created, and their
contributions to UK business turnover, lasted only a
short time in most cases. Of course, some owners will
start-up again so some of the failures could be seen as
part of the `entrepreneurial learning curve’ emphasized
in recent policy statements (for example, D TI, 1998b,
pp. 15± 16) as important in promoting the small business
sector. But, nevertheless, justifying the cost of support
to such a transient market would need a stronger
vindication than the hope that those who failed once
would try again and be more successful second time
round.
As already argued, since the population of SM Es is
so large and SMEs are in every sector of the economy,
it is diYcult to produce generic policies oVering con-
vincing in-depth support. An alternative, therefore, is
to develop specialized, in-depth support to SM Es on
the basis of sector. To some extent this already happens.
For example, a great deal of specialist support is already
oVered to agriculture, often targeted at small producers.
Another example is the long established SMAR T
(Small Firms Merit Awards for Research and Techno-
logy) scheme which mainly helps manufacturing ® rms.
`Sector’ can mean diVerent things in this context. It can
refer to relatively narrowly de® ned areas of economic
activity such as hotels and restaurants or it might be
taken to refer to something more widely drawn, such as
leisure activities. Policies encouraging entrepreneurship
and enterprise development could aim at providing
specialist, in-depth support based on sectoral needs
with `sector’ taking account of the size of the relevant
business population. A tailored approach might well
have more appeal to potential users if it sold itself on
its expertise in the economic activities covered. It could
also co-operate with trade associations and use these as
another route to reaching potential users, allowing
some ownership over policy and facilitating meaningful
evaluation.
The disadvantage of sector-based approaches is that
they are administratively untidy and they may be more
expensive than a generic service. To keep costs down,
it might be necessary to create relatively large sized
sectors which might undermine claims to oVer in-
depth, specialist support. However, these disadvantages
might be oVset by greater market penetration so that
cost per unit helped6 is lower than generic services
have achieved in the past. Making trade bodies partners
in delivering support would enable the support services
to tap into existing business networks rather than, as
185
now, mainly having to contact potential users from
scratch.7 Some of the resources could be used to
help trade associations overcome their diYculties in
recruiting smaller businesses (N O R T H et al., 1997).
The above alternative approaches to supporting
SMEs, entrepreneurship and enterprise are merely
oVered to illustrate how SM E support and promotion
might be rethought. What is being argued is that the
consultancy paper fails to review existing SM E support
provision despite abundant evidence of its failure to
reach more than a small proportion of its potential
market. To simply adopt the current 200 initiatives as
the basis of the new service represents a failure of
imagination and a missed opportunity. Further, it will
reinforce the likelihood of an already sceptical market
seeing the Small Business Service as just a repackaging
of existing support, blighting irretrievably its chances
of being seen as an exciting and powerful new source
of support for SMEs.
Agency, structure and delivery
The consultancy paper oVers considerable detail on the
structure of the proposed service. It outlines the way a
Next Steps Agency works, the role of the Chief Execu-
tive, a new national Enterprise Council, a franchised
local delivery network with local user panels plus the
links the service will have with the new Learning and
Skills Councils and Regional Development Agencies.
This complex new structure will replace the Business
Link network and the Training and Enterprise Coun-
cils, the current main providers of support for SM Es.
In addition, the service aims to provide an electronic
gateway (through Internet access, for instance) to help
SMEs access information, particularly on the regu-
latory environment.
An issue which emerged with the substantial restruc-
turing of the UK economy since the 1970s, and is
becoming ever more apparent as the economy of the
new millennium develops, is the declining signi® cance
of locality in economic activities. Traditionally, the
local economy was seen as the basic unit of the national
economy (C U R R A N and B L A C KB U R N , 1994). Small
® rms especially have been seen as at the heart of local
economies, employing local resources to meet local
need while larger enterprises served national and inter-
national markets. But this model is increasingly ques-
tionable. The small business-based local economy is
fast disappearing. Many enterprises which sustained
traditional local economies are dying, the independent
corner shop being the most obvious example. They
are being replaced by satellite outlets of larger enter-
prises or, even more signi® cantly, by newer forms of
enterprise whose physical location is unimportant.
Small businesses in the expanding knowledge-based
and e-business sectors, for instance, have geographical
locations but their suppliers and customers can be
186 Policy Review Section
almost anywhere and their locations are irrelevant for
these relations.
The decline in the signi® cance of local economies
has implications for establishing a Small Business Ser-
vice. The emphasis which should be placed on the local
becomes problematic. The consultancy paper acknow-
ledges this in one sense by proposing both a strong
central presence for the agency as well as local delivery
of support. But the stress on local franchised outlets
implies a rather dated view of the signi® cance of locality
in economic activities. The most obvious indicator is
the emphasis on `local user panels’ to advise the Chief
Executive on setting up the local Small Business Service
and its performance in meeting local customer needs.
As the TECs have demonstrated, it has proved very
diYcult to involve small business owners in local busi-
ness bodies (E M ME R I C H and P E CK , 1993; C U R R A N
and B L A C K BU R N , 1994). One reason oVered by small
business owners is that they do not have the time for
such activities but, even more important, they see little
value in such participation.8 One fundamental explana-
tion for this is that their businesses are not closely tied
to the local economy.
The paper proposes to reduce the number of local
outlets compared with the present Business Link net-
work. The 81 current Business Link partnerships,
which are based on TE C boundaries, would be
slimmed down to 50 franchised outlets of the Small
Business Service. This would weaken further any claims
to a strong local focus that TE Cs/Business Link have.
In fact, the claims to close links with local economies
of Business Link and TECs have always been question-
able. Many cover large geographical areas with widely
varying economic activities and communities with little
in common with each other. For instance, the London
East TE C covers six London boroughs (Tower Ham-
lets, Newham, Barking and Dagenham, Havering,
Redbridge and Waltham Forest) and includes deprived
inner city areas as well as relatively aZ uent areas bor-
dering on rural Essex. The mainly non-urban Norfolk
and Waveney TE C covers 2,200 square miles and a
population of almost 850,000 which includes Norwich
at one end of its area and Great Yarmouth at the other.
Few would argue that either coincides with a `local
economy’ or a `community’ with which those who
live in the area could identify.
The reduction in the number of local delivery units
proposed in the consultancy paper therefore means that
any claims that they coincide with some kind of local
economic focus are not likely to be very convincing.
The role of a local user panel, even if suYcient
representatives of SMEs could be persuaded to particip-
ate, would not be easy to de® ne. At best, the area
might contain clusters of ® rms in particular economic
activities whose common interests could usefully be
integrated into the strategy of the local business service
franchise. But most of the new service areas will serve
a heterogeneous mix of enterprises whose only shared
characteristic is that they happen to be located within
the administrative boundaries of the franchise.
Added to this problem is the gloss over local partner-
ships and how the framework will mesh with the
proposed Regional Development Agencies. The insti-
tutional framework for small business policies is replete
with turf wars because of the ill-de® ned roles of
diVerent partners. The proposals do not provide an
adequate strategy or detailed explanation of how
existing local agencies will ® t into the model. Inevit-
ably, this will lead to anxieties and tensions within and
between existing bodies ± bodies which have just come
to terms with the Business Link framework.
In other words, the emphasis on the local level in
the consultancy paper requires scrutiny and may indeed
be misplaced.9 The logic of a national Small Business
Service strategy requires some form of local delivery,
particularly where help is to be delivered on site. But
a greater emphasis on centrally delivered support might
be worth more consideration. The paper already adopts
the potential of new technology in stressing Internet
sites. The mixed bag of sites listed in the document
will no doubt be developed into something more
coherent by the time the service is launched. But
whether this is the ideal way to route help and advice
to SM Es might be reconsidered. Few web sites are
easy to use currently, particularly if the user is a busy,
not particularly IT literate SME owner looking for
information they can often only roughly de® ne.10
Much more user friendly would be the older techno-
logy call centre with trained staV able to deal with a
wide range of queries directly and steer callers to more
specialized help where necessary.11 The Internet sources
could run alongside this `one stop’ call centre service
and perhaps eventually replace it.
The reference to staYng above points to another
major hiatus in the consultancy paper ± the human
resource needs of the new service. The wide range of
responsibilities of the service ± overseeing the 200 plus
support initiatives, setting up and monitoring the 50
local franchises, liaising with other government depart-
ments as well as establishing an electronic gateway to
information for small business owners ± requires ade-
quate staYng. One source of the uneven performance
of Business Link commented upon by the paper is the
uneven quality of staV (H O U S E OF C OM M O NS , 1998).
Currently, Business Link draws staV from several sources
± the TE Cs, Chambers of Commerce, enterprise agen-
cies, local government, etc. ± as well as the private
sector, notably for the key Personal Business Adviser
component of their services. The latter are assumed to
be high quality specialist suppliers of business support
but whether this is always the case has been doubted.
There are no speci® c quali® cations required to provide
such services. Nor is there an established training and
career structure for directly employed staV in Business
Link or their partners. Without much more attention
to staYng eVectiveness, it is diYcult to see how the
 Policy Review Section
quality of the help and advice oVered by the new
service will be any better than what it replaces.
Some concluding points
This response to the proposed Small Business Service
has been highly critical of many of its features and
particularly of the failure to address some key issues. It
has drawn upon the considerable research on small
business support in the UK over the last two decades.
A common theme which emerges is that the proposals
are not radical enough to suggest the new service will
avoid the weaknesses of current support provision. On
the contrary, the new service is in danger of being
dragged down by what it inherits from the past. A
more radical proposal would have investigated the
market for its services much more closely and reviewed
the current 200 initiatives to prune duplicate and
ineVective programmes. The remainder would need to
add up to a coherent range of services rather than the
present ```patchwork quilt’’ collection’ (S T O R E Y, 1994,
p. 254). Much more thought would also have been
devoted to the balance between centrally and locally
delivered help given the changing UK economy. There
would also have been more attention to staYng to
ensure SMEs received high quality help. Otherwise,
the new service could end up being seen as `just
another government initiative’ by potential users.
More radically still, the question of whether state-
funded, small business help is justi® ed at all in 2000
might be raised. In the 1970s it became widely accepted
that Britain’s small ® rms were neglected. Support was
introduced and over the next 20 plus years developed
to become the current complex set up. But since the
1970s there has been a spectacular increase in the
number of small businesses and a remarkable revival in
their role in the UK economy. It is estimated, for
example, that the business population is now 1´3 mil-
lion higher than in 1980, an increase of over 50%
(DTI, 1999b, p. 3). Given the extreme skewness of the
size distribution, most of the additions will have been
small enterprises.
Indicators of the increased importance of small busi-
nesses are their shares in employment and business
turnover. SMEs in 1998 were responsible for 56% of
employment in the private sector and 52% of turn-
over.12 In other words, SM Es are now more important
than large ® rms in their contributions to employment
and business turnover and have become a formidable
economic presence in the 1990s. To what extent this
achievement has been due to support programmes is
debatable given the low level of take up. Almost
certainly it has resulted more from economic restruc-
turing, creating more opportunities for small enterprise
and allowing small ® rms to compete more equally
with large ® rms, than government support (C U R R A N ,
1999). The proposed Small Business Service may,
therefore, not only have too many doubtful elements
187
inherited from existing support initiatives but may also
be arriving too late historically.
Finally, the costs of small business policy are rarely
discussed despite all governments in the 1990s being
very conscious of demands on public expenditure. So
strong has been the political consensus on promoting
small enterprise, apparently, that all the political skir-
mishing over public expenditure has overlooked the
costs of support for SM Es. But small business support
does not come cheap. G A V R ON et al., 1998, p. 59,
report Cabinet OYce estimates that the 200 or so
initiatives in 1995± 96 cost £632 million, a total which
will probably be substantially more with the new
service. Sooner or later, the question needs to be asked:
is publicly funded small business support good value
for taxpayers’ money? Research to date, indicates that
the low take up, lack of measurable impact on ® rms
actually helped (see, for example, S T OR EY and W E S T -
H EA D, 1994) and the overall costs of sustaining the
support, would suggest not. The new Small Business
Service, as outlined in the consultancy paper, oVers
little to show it will outperform the support pro-
grammes developed since the late 1970s.
SM Es do suVer disadvantages associated with size.
Diseconomies of scale, for example, in ® nance, pur-
chasing, human resourcing, marketing and compliance
costs, do undermine their ability to compete with
larger enterprises. Yet, clearly, as the last 20 years have
shown, the disadvantages can be overcome, perhaps by
the undoubted advantages linked to small size in many
sectors and markets. Any state intervention to support
SMEs therefore needs justi® cation based on a rigorous
assessment of its cost eVectiveness. It is likely that some
speci® c interventions would be justi® ed but almost
certainly the number and scale would be much below
current levels. Encouraging entrepreneurship and
enterprise are laudable, but whether blanket support
for all small businesses via a new national Small Business
Service, as outlined in the consultancy paper, is the
most eVective way to achieve this needs a clearer
demonstration than the paper oVers.
J A M ES C UR R A N and R O BE R T A. B L A C K B U R N
Small Business Research Centre
Kingston University
Acknowledgem ents ± An earlier version of this article was
presented to ISBA Small Firms Policy Forum sponsored by
Lloyds TSB at the Association of Chartered and Certi® ed
Accountants (ACCA) in London, October 1999. We would
like to thank our colleagues and members of the seminar
for comments on the article. Responsibility for the views
expressed, however, remain those of the authors.
Notes
1. This is better than it looks because Business Link
involved setting up partnerships between Chambers of
Commerce, enterprise agencies, TECs and other local
188 Policy Review Section
support sources such as local authorities, which often
took time to become fully operational (F IE L D et al.,
1999).
2. This issue was examined by P A C A M BRI D G E E CO -
N O MI C C O N SU L T A NT S , 1995, p. 3, who found no
evidence to support crowding out. Indeed, they argued
that TEC activities actually increased the market for
supplying business services to smaller ® rms.
3. The upper size limit of the SM E category makes this
even more questionable when it is noted that the most
recent D TI estimate of the UK business population
(DTI, 1999b) states that out of the 3´7 million businesses
in the U K, less than 7,000 (0´2%) employ more than
250 people. In other words, the SME sector as presently
de® ned for policy purposes comprises 99´2% of all
businesses in the U K.
4. These data are from Barclays Bank based on small
business accounts data converted to a national ® gure
using the Bank’s market share. A `small business’ is
de® ned by Barclays as one with a turnover up to £1
million. Estimates by NatWest produce a similar total.
5. C R E SS Y and S TO R EY, 1995, p. 9, commented that the
high death rate was due mainly to closure rather than
businesses switching banks. A higher rate might be
expected over the period covered due to the impact of
recession but a later tracking study of businesses, started
in 1991 in more prosperous conditions, showed little
diVerence.
6. `Cost per unit helped’ is currently often measured very
crudely by, for example, number of ® rms contacting the
agency and a sector-based approach would make more
re® ned measures, particularly of the impact of support
on business performance over time, easier to establish.
7. For a pessimistic view of the potential of trade bodies to
help promote entrepreneurship and enterprise, especially
for smaller businesses, see B E NN ET T, 1998.
8. This lack of interest in local business bodies extends to
Chambers of Commerce also. C U RRA N and B L ACK -
B U RN , 1994, pp. 102± 103, reported that, in the seven
localities they studied, only one in four small business
respondents belonged to the local Chamber and a pro-
portion of these amounted to little more than paying
the annual subscription.
9. We concur with B E NN ET T, 1997, that administrative
boundaries will tend to obsolescence. This echoes our
earlier argument regarding the changing spatial con® g-
uration of business activities.
10. A recent survey by E R NS T & Y O U N G (The Guardian,
22 September 1999) of the Internet services of 100
banks and insurance companies reported that customers
found diYculties in using the net. This resulted in
customers switching to using call centres, and banks
were therefore increasing their investment in call centres.
11. From 1973, Small Firms Information Centres (accessed
via a nationally publicized freephone number) operated
what would now be called `call centres’. They were run
by the then Department of Industry. By 1981 they were
providing advice and information to about 100,000
enquirers a year (B EESL E Y and W I L SO N , 1981).
12. Even if only small businesses are considered, that is,
® rms with fewer than 50 people, they are responsible
for 45% of jobs and almost 40% of turnover ± substantial
proportions by any measure.
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