An econometric evaluation of Scottish Enterprise grant support to businesses

The report evaluates the impact of Scottish Enterprise grant support over the period 2009/10-2017/18 on businesses in Scotland. The grants reviewed are Regional Selective Assistance (RSA), R&D, SMART: Scotland, Environmental Aid, Proof of Concept grants, and Training Plus. The report evaluates the impact of grants on firm-level employment, turnover, and average turnover per employee (a proxy for productivity).

An econometric analysis was conducted using firm level data from UK business databases, alongside Scottish Enterprise data. This aimed to compare the performance (turnover, employment, turnover per employee) of grant supported businesses, with a carefully selected sample of similar, but unsupported, businesses. A difference-in-difference method was used to account for the characteristics of businesses that are awarded grants so as to ensure that a robust set of results are obtained.

The report finds that employment levels in businesses which receive grant support are, on average, higher than they otherwise would have been. For example, five years after receiving a grant, businesses had, on average, employed 69 more staff than they would have in the grant’s absence. The most significant employment impacts are for those in receipt of Regional Selective Assistance (RSA) grants, where five years after receiving an RSA grant, businesses had on average employed 92 more staff than they would have in its absence. There is less evidence to suggest that grants have had an impact upon turnover, turnover per employee, or on the growth of any outcome. Employment effects appear most significant for small and medium sized grants, but there is no equivalent differential effect across grant sizes on turnover. The scale of the grant is also found to be positively correlated with the number of jobs supported. There is some evidence of a small reduction on average turnover per worker of businesses that receive grants in between £250,000-£500,000 and also limited evidence of a small reduction in turnover per worker among RSA recipients (although the impact is generally only marginally statistically significant). Although findings do not find consistent evidence of a statistically significant impact of grants on all outcomes, this does not mean that they have had no effect. Instead, the combination of data and methods used are unable or unsuitable to detect any impact either way.

The study recommends that further research and additional analysis focussed upon individual businesses in receipt of grants should be conducted and further consideration of how data is collected prior to grants being awarded or rolled-out should be undertaken to inform future research.