Tale of Two Small Business Surveys

The Journal (Newcastle, England), June 21, 2006 | Go to article overview

Tale of Two Small Business Surveys


Byline: By Graeme King

New research from the Federation of Small Businesses shows North-East firms becoming less reliant on grants and business support services, but One NorthEast research says otherwise. Graeme King tries to understand what is really going on.

For many years, statistics detailing the size and scale of the North-East economy have not always made easy reading for those charged with driving the region forward.

Unemployment above the national average, GDP below it, a huge reliance on the public sector, and 30,000 fewer small businesses here than the national average.

And there was the suggestion that as a region we were too reliant on public money to support business.

There were high profile grants to inward investors who then left when the money ran out ( the likes of Viasystems, Black & Decker, Siemens, Philips and Samsung received more than pounds 50m between them, but have since left the North-East or reduced their operations.

But then without the success story of Nissan in Sunderland, not only would 4,500 workers at the factory not have jobs, but those thousands in the supply chain would not be in business either.

Meanwhile, the 90% of businesses in the region which employ just 10 staff or less have received rather less attention.

With Business Links ( the main source of support to SMEs ( the impression given has been one of a patchy success rate, with the organisations either loved or loathed depending on the individual's experience of them.

And still the perception has lingered that grants have been propping up the world of small business more than is healthy for an economy with growth ambitions.

Earlier this month, however, the Federation of Small Businesses published a survey indicating a bright new independence in its members' outlook.

The FSB found in its fourth biennial survey Lifting the Barriers to Growth in Small Businesses 2006 that fewer companies in the region are relying on grants to get them started and keep them going.

The organisation found the use of grant funding has dropped from 17% of businesses in 2000 to 10% of businesses now, and other figures showed the North-East has the highest proportion of self-financing small businesses across the UK.

More entrepreneurs in the region use their own savings (41%) than bank loans (26%), while the proportion of business owners using bank overdrafts has also fallen from 67% to 40%.

The research also found small businesses were standing on their own when it came to advice.

The use of accountants for business advice has fallen from 75% in 2004 to 47%, of banks from 36% in 2004 to 8% and of Government-funded business support from 24% to just 6%.

These figures are queried by One NorthEast, who say their research indicates more and more companies are using business support.

And even the FSB recognises that less use of support from the likes of Business Link may not be a good thing ( just a sign that business leaders simply don't have the time to devote to anything other than the essentials of keeping their businesses running on a day to day basis.

John Wright, North-East policy chairman for the FSB, says: "The Lifting the Barriers to Growth survey was quite positive.

"It said a lot of our members want to grow moderately and take on more people, and that's a very positive thing because, at the moment, we are one of the regions which is heavily reliant on the public sector for employment and wealth.

"If we can move way from that reliance, we will have a more stable economy."

Mr Wright also says there is a need to recognise that European money, which had once been available to the North-East, would now be going elsewhere.

"The European money we have had in the past, a large percentage of that is now going to the eastern bloc.

"You have to try to grow the economy so we are not reliant on grants, as if they are discontinued or reduced, then it could have a dramatic effect on businesses and the economy generally. …

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