Eight in 10 SMEs have sought business support services over the past 12 months, according to a report from the Federation of Small Businesses (FSB). With £3.6bn of dedicated small business support coming from the EU (between 2014 and 2020) the UK must fill the shortfall to prevent economic slowdown after Brexit.

In addition, the UK government has not budgeted for a regional development fund beyond 2021. Mike Cherry, national chair of the FSB, said: “Small businesses across the country are staring into a business support black hole from 2021. This is a particularly pressing issue for the many small firms with growth ambitions and those in less economically developed regions.”

The government’s commitment to an industrial strategy that supports all regions cannot be delivered without new ways of supporting regional economic growth, says the report, Reformed Business Funding: what small firms want from Brexit.

Businesses in Northern Ireland (32%), Wales (26%) and Yorkshire (25%) were most likely to apply for EU-funded schemes, according to the report. Most applicants (68%) said that EU funding had a positive impact on their business, and (64%) said it had a positive impact on the local area.

There is a strong link between firms’ growth ambitions and their decision to apply for funding. Of those that applied, 89% were looking to grow the business by 20% or more.



The report highlights that funding to UK regions has varied according to economic need. It says: “EU funds provide a vital support structure for comparatively disadvantaged areas of the UK, such as Wales, the north east and Cornwall.”

The FSB recommends that the devolved governments of Scotland, Wales and Northern Ireland continue to control the allocation of funding in their respective regions after Brexit.

As the Local Growth Fund spending round also comes to an end in 2021 it is particularly important that the regional split of (future) funds is “maintained on the basis of need in the period after we leave the EU,” says the report.

Despite the level of EU funding, the FSB report finds a gap in small firms’ knowledge of EU-funded programmes. Of those that had not applied for EU funds, 44% said they were unaware of the opportunity.

While EU funding only makes up part of the UK’s business support and finance landscape, it is vital in regions where infrastructure is less developed. The FSB suggests that more small businesses have benefitted from EU funds than research suggests since much comes through intermediary sources.

However, those that knowingly applied for EU schemes were frustrated by the process. The most common complaints among EU funding applicants were the amount of information required (59%) the length of the application process (47%) and the level of reporting requirements once funds were granted (44%). As such, the FSB proposes a reduction in bureaucracy in business funding post-Brexit.



Cherry said: “Brexit marks an unprecedented opportunity for fundamental reform. LEPs [local enterprise partnerships] and Growth Hubs must be empowered to tailor and simplify support according to local requirements. Ensuring that all small firms are aware of business support schemes should be a top priority.”



He added: “The new government must prioritise the development of a Growth Fund for England pre-Brexit or risk a slowdown in the economy.”

The FSB report included a survey of 1,659 FSB members in December 2016 and interviews and focus groups with FSB members across the UK.

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