Identifying the 'gap' in business support: data analysis

The report aimed to explore whether there is a significant 'service gap' in business support between Scottish Enterprise (SE)/Highlands and Islands Enterprise (HIE) and the Business Gateway. It responded to the view that ‘many’ businesses are missing out on business support, particularly in light of the economic downturn. The report: analysed the dynamics of the business base in Scotland, including its scale, profile and characteristics; reviewed the available evidence on growth firms; and assessed the business support currently available to the Scottish business base.

The methodology consisted of a quantitative analysis of the latest published statistical datasets, Companies House data on firms, recent research on business support in Scotland and England, and qualitative data gathered by the Economic, Energy and Tourism Committee (EET).

The report suggests there is no significant gap in business support in Scotland. However, due to the worsening economic situation, Scotland has seen a rise in unregistered and micro-businesses, and these are more survival-oriented businesses, whose needs should not be ignored. There are signs that, generally, businesses are growing at a slower rate. Geographic variation means that the Highlands and Islands have higher proportions of micro-businesses. In some sectors, such as tourism and manufacturing, it is established businesses with a turnover of over one million per annum which are growing. Since the economic downturn, the Business Gateway has found it more difficult to identify the target number of businesses with the potential to grow their turnover by more £400,000 over three years. In response, Business Gateway has introduced ‘sub-growth pipeline’ support to reflect that a number of businesses are growing, but at a lower rate. Overall, the Business Gateway has supported an estimated 36,000 existing and start-up businesses since its transfer from local authorities. SE and HIE support is focused on the businesses where the greatest economic return can be secured for each pound of investment and, as such, they offer more intensive business support. In all, SE supported businesses equates to six per cent of the registered business base and nine per cent of the business base employing one employee or more.

The report recommends that, rather than creating additional business support, SE, HIE and Business Gateway should generate greater awareness of what support is already available and ensure that the right businesses access the right form of support. In particular, their response will require effective filtering to ensure that the higher numbers seeking support can be accommodated within fiscal constraints, and that those businesses with growth prospects are provided with the available advisory services and products. For example, small businesses which are willing to take on employees will require support from Business Gateway to help them through the recruitment process and registering for PAYE. Effective communication between organisations is critical. The report suggests that supporting innovation and wealth generating firms remains integral to the role of business support. To deal with geographic variations, it would be appropriate to make changes to the Business Gateway in order to increase flexibility in defining growth businesses by area. The report considers that further work may be required to review the approach to supporting businesses in the sectors which are expanding. The report recommends that there is a continuous need to identify and work with high growth firms, where the returns for public sector investment are highest, and this should remain the long-term objective of business support, regardless of the current point of the economic cycle.