Small Businesses (Hansard, 22 July 1991)

§ Mr. Allan Stewart

The Government continue to place a high priority on helping small businesses, through improvements to the business climate, through deregulation and other measures and through specific programmes of support and assistance.

The importance to the Scottish economy of a vigorous and energetic small firms sector cannot be overstated, and small businesses continue to benefit from the comprehensive schemes of support that the Government have introduced. Policy responsibility lies within the Scottish Office Industry Department although, until 31 March 1991, the services were delivered mainly through the Scottish Development Agency and the Highlands and Islands Development Board; they are now delivered through their successor bodies. In addition to providing services specific to Scotland, these bodies also had responsibility for the delivery and monitoring in Scotland of United Kingdom services on behalf of other Departments, including the Department of Employment and the Department of Trade and Industry. The success of these policies is demonstrated by statistics for VAT registration. In 1980, 9,800 additional companies registered for VAT. In 1989 the comparable figure was 426W 16,800, an increase of 71 per cent. At the end of 1989 the total number of VAT-registered businesses in Scotland was 113,200, an increase of 19,800 or 21 per cent. on the comparable figure for 1979.

There follows a description of the services available to small firms in Scotland during the periods 1989–90 and 1990–91, and some of their achievements. For the period 1989–90 the Scottish Office Industry Department made 167 offers of regional selective assistance to the value of over £17 million to small companies—those employing fewer than 200 worldwide. This contributed to the creation of 3,080 planned new jobs and the safeguarding of 340 existing jobs. In 1990–91, 131 offers of regional selective assistance were made to the value of over £20 million to small companies and which contributed to the creation of 3,290 planned new jobs and the safeguarding of 560 existing jobs. Under both the investment and innovation elements of the regional enterprise grants scheme, 432 offers to the value of £4 million were made in Scotland in 1989–90 to companies employing under 25 people, contributing to the creation of 1,640 planned new jobs and the safeguarding of 1,660 existing jobs. In 1990–91, offers of regional enterprise grant to the value of £4.6 million were made, contributing to the creation of 1,650 planned new jobs and the safeguarding of 1,550 existing jobs. Residual offers to small companies under the regional development grants scheme, the last applications for which were accepted on 31 March 1988. totalled £100,000 with the potential for 50 associated jobs. During the periods in question, the better business service scheme was administered by the SDA and the HIDB. The scheme allows small companies to have access to subsidised professional business advice and in 1989–90 some 8,090 offers of assistance were made with an associated value of £3.7 million. In 1990–91 6,900 offers of assistance were made with an associated value of £3.3 million.

Scottish Development Agency support for small businesses included the provision of financial assistance and a wide range of advisory services, including the small firms service in Scotland and the administration of DTI's consultancy initiatives, under the enterprise initiative. In addition, the SFS offered an integrated and complementary range of business services including the Government business shop, the Euroinfocentre, a franchise desk and a Companies house satellite office. Under the consultancy initiatives, some 1,158 consultancy projects were undertaken during 1989–90 and in 1990–91 the figure was 1,200. In 1989–90 the SFS handled 17,286 inquiries, the figure for 1990–91 being 16,805. Figures for investment in small firms are not yet available for this period, but across all sectors in Scotland in 1990–91 the SDA invested £7 million and safeguarded 4,985 jobs.

As well as delivering a small firms counselling service in its area, the Highlands and Islands Development Board was responsible for a wide range of activities in support of businesses, most of which were small, to help them overcome the difficulties in operating in this rural part of the United Kingdom. The measures taken include financial support to business, provision of factories and assistance with business advice and training. In the period 1989–90 the board approved 983 offers of financial assistance worth £19.4 million on projects involving proposed private sector investment of £51.1 million and the planned creation or safeguarding of 2,700 jobs. For the period 1990–91 the board approved 1,071 offers of financial assistance worth £21.6 million on projects 427W involving proposed private sector investment of £54.9 million and the planned creation or safeguarding of 2,800 jobs. In the period 1989–90 the HIDB completed 7,208 sq m of factory floor space. In this period, some 3,200 jobs were housed in HIDB factories. In the period 1990–91 the HIDB completed 7,061 sq m of factory floor space. At the end of the period a total of some 3,300 jobs were housed in HIDB factories.

The network of local enterprise trusts in Scotland was formed in 1981 and there are now some 44 of them. They are private sector-led, but represent a partnership between the public and private sectors in the provision of business advice, counselling and training both to new and existing businesses. The total funding cost of the enterprise trusts during the year 1990–91 was £9.5 million. The percentage of SDA input to this total was 19 per cent., an increase of 2 per cent. from the previous year. This levered a further 19 per cent. from the local authorities and 28 per cent. from the private sector, in cash and kind, representing a total of £4.4 million. During the year the trusts estimate they have provided about 45,000 counselling sessions, some 13,000 of these to pre-start clients. Some 8,000 jobs were created or saved in new and existing businesses assisted by enterprise trusts and 3,255 new businesses were started by enterprise trust clients.

The establishment on 1 April 1991 of Scottish Enterprise and Highlands and Islands Enterprise represented a new approach to enterprise creation and development in Scotland, and is central to the Government's plans to give further impetus to the Scottish economy. The initiative is unique in two important respects; firstly, Scottish Enterprise and Highlands and Islands Enterprise have taken over responsibility for the design and implementation of Training Agency programmes in Scotland and are responsible for integrating these with the economic development activities previously discharged by the Scottish Development Agency and Highlands and Islands Development Board. Secondly, SE and HIE have contracted out a range of functions to a network of private sector-led and run local enterprise companies. Through this network business people and others prominent in the wider community will develop and shape training arrangements and business development programmes to match Scottish needs and to meet local circumstances in a manner that has not been possible before. It is appropriate that local people who are in the best position to judge should have responsibility for deciding the balance of provision most suited to the circumstances of the area concerned. Local enterprise companies work within a policy framework set by Scottish Enterprise and Highlands and Islands Enterprise and, while they are required to fulfil their contractual obligations to these bodies, they are given all possible freedom to act on their own initiative with a minimum of constraint. It is encouraging that a complete network of 22 local enterprise companies has been established in Scotland so quickly, and the Government's view of a decentralised and business-led approach to enterprise creation is clearly a widely shared one.

The deregulation initiative, a Government programme to reduce the bureaucratic burden which impinges upon all businesses, but perhaps disproportionately so in the case of smaller companies, is supported strongly by the Scottish Office. Future action on the initiative will concentrate strongly on improving the relationship between the business community and local authorities, and on 428W encouraging business people to take the lead in identifying, and in bringing to the attention of Government examples of regulation or legislation which they perceive as an unnecessary burden on business. Unique within the United Kingdom, the Government business shop in Glasgow continues to provide a single advice point on the range of Government regulation affecting business. Business people are able, in one location, to speak to advisers from Inland Revenue, Customs and Excise, DSS and the Health and Safety Executive. The Scottish Office Industry Department is co-operating with the Employment Service in encouraging small businesses to develop trading links with the newly privatised industries. Additionally, plans are in hand to organise a Scottish seminar on how small companies may do business with the large public utilities.