The range of government initiatives to help small and medium businesses gain access to finance are not operating as a unified programme.

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Despite a renewed focus by government on the financing challenges facing small and medium-sized enterprises (SMEs), there is scope for the range of funding initiatives currently in place to work as a more unified programme, according to the National Audit Office.

Preparations for the Business Bank, which was publicly launched in October 2013 but will  start operating as an independent entity in 2014, prompted the Department for Business, Innovation & Skills (BIS) to re-examine the nature of the finance problems facing SMEs. These include a possible need by SMEs by 2017 for an additional £22 billion over and above the finance available to them.

BIS and HM Treasury are able to draw on an increasingly strong body of data to inform decision-making, including Bank of England reports on credit conditions, the SME business barometer and aggregated information from the British Bankers’ Association on loan applications and approvals. Today’s report found that, at present, although BIS and HM Treasury both have teams dealing with ‘enterprise’ policy, there is no formal research programme joining the Departments with other departments, such as HMRC, with an interest in SMEs.

One of the Treasury’s priorities is to support the development of new routes to finance for SMEs, while BIS schemes target specific parts of the market. To date, the Departments have not articulated clearly enough what the various schemes are expected to deliver as a programme.

The NAO found that BIS-led schemes such as the Enterprise Finance Guarantee and Start-Up Loans provided direct support to around 5,900 firms in 2012-13, and the current schemes are generally performing positively in terms of meeting the largely activity-based success measures set for them. BIS has also taken steps to provide better explanations to SMEs on the options available to them for financing their business, but raising the profile of the help available will be a challenge for the Business Bank.

“Access to finance is a significant and enduring problem for many small and medium-sized businesses. There is a range of schemes led by the Department for Business, Innovation & Skills to address areas of the market where there are problems. But there is work to be done in terms of managing the schemes as a unified portfolio and articulating what they are intended to achieve as a whole. Given the importance to the Government of promoting growth, greater benefits and public value could be achieved through treating the interventions as a programme, with a clearer focus on assessing what results can realistically be delivered.”

Amyas Morse, head of the National Audit Office


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