Business support services – value for money in Wales?

AT FSB, we’ve recently undertaken a project to look at the future of business support services in Wales.

This is in the light of huge change facing the sector when EU funding ends in 2020 following the UK’s exit from the European Union.

Funding in Wales has been protected until 2020, but the picture thereafter currently remains uncertain.

To give some context to the scale of the challenge facing Welsh Government, currently £10m per year of EU funding is used to support Business Wales alone.

In order to assess our current business support landscape, we looked at which services provide the best value-for-money.

Supporting Success: Business Support Beyond 2020 analysed various business support services in Wales in order to look at the best and worst value-for-money in terms of job creation – which is the main way in which Welsh Government currently assesses the value of a scheme.

It found that based on value-formoney-per-job, Welsh Government’s main business support service, Business Wales, delivers a good return on the money spent costing £3,031 per job created.

The Development Bank of Wales also provides good value for money with an estimated cost per job of £2,909.

By comparison, Capgemini, which was given £1.4m under the Business Finance Scheme, cost the Welsh Government £14,000 per job. Other investments in larger companies were for organisations such as Aldi, who were given £4.5m which cost £7,773 per job.

The report asserts that direct grant funding to larger companies is of variable value-for-money, with the examples highlighted in the report ranging from a similar cost per job to Business Wales, to over four and a half times more expensive.

Also on the more expensive end of the scale were Enterprise Zones, which come in at over £21,000 perjob, – seven times as much as Business Wales and the Development Bank.

However, the report accepts this may be due to the fact that interventions are provided in a number of areas such as through business support, property investment, tax relief and infrastructure.

This analysis from FSB Wales is based on the best, publicly available evidence. In the longer term, there are better ways to measure effectiveness than purely job figures and we are keen to see a conversation started with business as to what appropriate alternative measures may be.

We know that in the wake of Brexit, and as we look at an uncertain funding landscape for business support, difficult decisions may have to be made.

Our research demonstrates that if there is a squeeze on funding as a result of Brexit, prioritising business support to SMEs provides a better return on investment in a broader sense, than direct investment in larger firms.

Business Wales is a significant resource to smaller firms and must be funded and empowered to continue post-Brexit, with face-to-face advice proving particularly popular with smaller firms across Wales.

Whilst we are not suggesting that direct funding for larger firms ceases entirely, Welsh Government must be prepared to take a nuanced approach to finding how business support can best help those businesses across Wales and support sustainable, indigenous growth.

Where inward investment does take place, we want to see decisions taken that will support the entire Welsh economy, and will create supply chain opportunities for Welsh businesses.

We hope that our new research will inform some of the critical decisions that will need to be taken by Welsh Government in the coming years as we plan to leave the European Union whilst delivering prosperity and sustainability for the Welsh economy.