Government fails small business - CBI

The Government has failed to hit the majority of its targets to stimulate and encourage the development of small businesses, according to a CBI report.

Five years ago the Government pledged to make the UK the best place in the world to start and grow a business by 2005. Now CBI analysis of its efforts reveals that more than half of the targets set by the Government's Small Business Service (SBS) to deliver this have been missed.

The CBI, the UK's largest business organisation, is better known for speaking up on behalf of large businesses, so its vocal criticism of the Government's attitude towards small business should be particularly noted.

The CBI claimed that the small businesses are responsible for creating half of all UK jobs and GDP and their growth plays a key part in securing future economic success. Yet increasing regulation and uncoordinated delivery of Government support means - despite stable economic conditions - this is not happening.

More effort

Sir Digby Jones, Director-General of the CBI, said: "The Government was right to set up the Small Business Service and right to set it clear targets. But with more than half the targets missed it is clear more effort and coordination is needed across Government - especially to ensure that the work of the SBS is not undermined by other departments in Whitehall.

"The SBS is not to blame for these results. How can an enterprise economy breakthrough when the Government presides over systemic, stifling red tape, a discredited planning regime and a society that becomes more politically correct and risk-averse by the day?

"The UK has a proud entrepreneurial tradition. The next Richard Branson or Martha Lane Fox is out there but they must be encouraged and supported as they risk, set up and grow their businesses."

Strategic themes - passed and failed

Two years after it was launched the SBS set seven strategic themes to drive its work - the CBI judged how it had fared against its own criteria:

• To build an enterprise culture (failed);
  
• to make it easier to start up a firm (achieved);
  
• to encourage entrepreneurs in disadvantaged areas and by under-represented groups (failed);
  
• to make Government more accessible and helpful (achieved);
  
• to improve regulation (failed);
  
• to improve access to funding (achieved);
  
• to create a positive environment for growth (failed).

In particular, the CBI, which speaks for 200,000 smaller businesses, found:

More and more red tape has been introduced since 2000, with businesses citing it as a major obstacle to growth.

• Whilst progress has been made to help businesses access finance many still struggle to find affordable or appropriate sources of capital.
  
• Fewer bosses are taking on employees, in particular as a result of concern about employment legislation. Since 1999, whilst the number of businesses in the UK has grown from 3.7 million to 4.1 million, the number of companies with staff fell from 1.35 million to 1.23 million - reflecting an increasing proportion of 'one-man-bands'.
  
• Fewer adults and young people consider going into business now than in 2000 with the numbers of women, black or Asian entrepreneurs increasing at a slower rate than the national average.
  
• A third of Britons say they would not start their own business because of fear of failure, compared to one in five in the US.
  
• Whilst businesses report better state help and advice there are still nearly 3,000 Government programmes available, with fundamental problems of duplication, confusion and inconsistency.
  
• Large regional discrepancies in business start-up rates remain. The rate in London is 62 per 10,000 people, compared to 21 in the North East, 29 in Wales, Scotland and Northern Ireland, 34 in Yorkshire/Humberside, 35 in the North West, 37 in the Midlands, 40 in the South West, 42 in the East of England and 47 in the South East. England as a whole averages 42 whilst the overall UK average is 40.

This analysis of the Government's progress will be followed by a series of CBI reports making recommendations for delivering each of the seven key targets.