National Audit Office report on Government’s support to business

The NAO has published two reports today. The first, Business support schemes, looks at the management of the support government, particularly the Department for Business, Energy and Industrial Strategy (BEIS), provides to businesses. The second, British Business Bank, examines the impact of the British Business Bank on small-medium enterprises’ (SMEs) access to finance and its preparedness to respond to future challenges.

The NAO’s work has found that the support government provides to business is fragmented between different departments and often lacks overall co-ordination and prioritisation, which both BEIS and HM Treasury recognise needs to be improved. 

The British Business Bank was set up by BEIS to help make access to finance interventions more coherent and it has had some success in this area. However, while it has an objective to act as a centre of expertise for providing advice and support to public bodies, it is not "the default" operator of government interventions. The report on the Bank says BEIS and HM Treasury should consider whether their statement in 2014 that the Bank would operate all national SME access to finance schemes across government still holds. 

The NAO’s analysis of 10 schemes run by BEIS found that not enough was being done to understand which schemes are most helpful to businesses. Six out of the 10 schemes lacked measurable objectives and only one had a thorough evaluation of the scheme’s impact, making it difficult for BEIS to know which to continue with and which to stop. The report finds there are signs that BEIS is improving the set up and management of new schemes, but it is too soon to tell whether they have had an impact.

The British Business Bank, on the other hand, had clear performance metrics and carried out evaluation of its impact on SMEs. Overall, it has been performing well and SMEs have been growing as a result of its activities. However, the NAO says that this analysis will need to be ongoing as the value of many of the Bank’s interventions will only be known in the long-term and there is currently limited information on the cost-effectiveness of its activities.

Changes in the external environment could have an impact on the role and work of business support schemes and the British Business Bank in the future. With the UK leaving the EU, government may want to replace the support that businesses receive from the EU with its own initiatives – a task that will be made harder if central co-ordination of schemes is not improved. Several EU institutions also provide access to finance for SMEs in the UK, and the Bank may be best placed to take on some of these roles. 

The Bank has considered how it might help SMEs in an economic downturn through increasing the availability of its products. However, while it could make some products available within weeks, it might be more than a year before businesses could access others. It is also unclear how the Bank's contribution would fit within BEIS’s wider response to a downturn.

In the Business support schemes report, the NAO recommends that BEIS coordinate a review of its schemes to determine their strategic fit with the Industrial Strategy and changes required as a result. In British Business Bank, the NAO calls for government to set out more clearly what it wants the Bank to achieve as part of government's wider support to business.

Gareth Davies, the head of the NAO, said today:

“Government understands the importance of better co-ordination and coherence across the schemes it provides to business, but it still has some way to go before all the dots are joined up. More thorough evaluation of which schemes work best will help government plan and prioritise its support going forward.”

“The British Business Bank has performed well against its objectives. Government now needs to think carefully about the role it wants the Bank to play in the future, particularly after the UK leaves the European Union.”