SME Policy Support in Britain since the 1990s: What have We Learnt?

Abstract

I examine the evolution of British government support to small and medium-sized enterprises (SMEs), using results from four waves of survey evidence in 1991, 1997, 2002, and 2004, and comparison with other analyses. Whilst government support is often based on overcoming market failures in the availability or use of supports to SMEs, I argue that successful government intervention is difficult to make effective at realistic cost – benefit ratios. The analysis demonstrates little evidence of market failure in provision or take-up of business support. If a market gap existed in the past, it is no longer apparent. Any systemic market failures that remain can influence only the start-up, very early stage growth, and/or the very smallest single-person businesses. I also find that different modes of delivery by centralised, regionalised, or localised structures have very little influence on market penetration. Decentralisation can increase take-up marginally, but this has been achieved only with tenfold increases in costs and major increases in administrative complexity. There is some marginal but significant benefit of policy delivery being in the hands of market, or near-market, agencies. But for all delivery bodies there is massive variability in use, impact, and satisfaction levels achieved. Finally, a brief analysis of gender differences suggests some significant variations in use of advice from different sources, but that government sources have some of the most adverse use levels for female-headed business, and this particularly applies to Business Link. Over the period 1991 – 2004 there is little to indicate the overwhelming success of government SME support policies, particularly at the level of cost that they now involve.