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BAB-25 September 2004 Analysis
September's survey sought views on developing new product ideas, current account interest, second mortgages, easier access to university research and working to capacity plus the quarterly trends questions. The trends charts from the responses to the regular quarterly questions can be accessed from the UKBAB home page.
178 Business Advisers responded to this Survey.
Survey Findings
Recent years have seen more responsibility for different kinds of business support being transferred to RDAs, together with the responsibility for administering more regional funding on behalf of government. The September UK Business Advisers Barometer asked how much panellists believe that this strategy will give significant opportunities for a less fragmented and more coherent approach to business support. 28% agree with this highly or relatively highly but 43% were of the opposite opinion, opting for not at all, or very little.
For smaller businesses, debt tends to be a preferable way to raise finance rather than issuing equity (see August UK Business Barometer Survey, Question 3; www.ukbb.ac). Often the only practical way to achieve this is by using the family home, either through a second mortgage or by securing a loan by using the home as collateral.
The UKBAB Survey asked how common Advisers believe it is to take out a second mortgage for business funding, and 47% responded that it is common or very common. The parallel UK Business Barometer September Survey found that 12% of its respondents have taken a second mortgage on their house to fund their businesses in the last three years alone.
The practice of using the family home as collateral for a business loan was thought to be even more common than taking out second mortgages, with 71% of UKBAB respondents saying that it is common or very common. 29% of UKBB respondents have used their house as collateral on a loan.
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A number of evaluation toolkits have been developed, particularly over the last five years, to help assess whether potential products would be likely to be commercially successful. Many of those providing services to innovators or considering investment in innovation, such as banks, venture capitalists, those awarding development grants, companies considering taking a license, use this approach to help make their decisions. The September UK Business Advisers Barometer (UKBAB) Survey asked if formal evaluation tools were used by Advisers' clients to assess the potential of their new developments. In the parallel UK Business Barometer (UKBB) the survey asked whether panellists use such techniques in assessment of new product ideas that they are developing.
The UKBAB Survey found that 9% of Advisers' clients already use an evaluation tool, but 73% do not. Only 18% of UKBAB said the question was not applicable. The UKBB Survey showed that 15% of UKBB respondents already use an evaluation tool, while 46% do not. The question was not applicable to 39%.
When firms are running at full capacity, average costs are at their lowest and the use of assets is at its highest, but also the potential for future growth is limited by the need for additional staff or other resources. 6% of respondents to the UKBAB say that over 90% of their clients are running at full capacity, while 60% of respondents say that between half and 90% of their clients are at full capacity.
In addition to the need for additional staff and other resources associated with significant growth, there are points at which new and more onerous bands of 'red tape' regulations come into force. The Survey shows that 47% of responding Advisers believe that their clients resist significant growth in order to avoid the associated red tape, to a high or relatively high extent.
The September Surveys asked how much easier access to universities would benefit businesses. Advisers were asked how much their clients would benefit from easier access to universities. 46% of UKBAB respondents believe that easier access would benefit their clients' businesses highly or relatively highly, while one third of UKBB respondents also believe that it would benefit their businesses highly or relatively highly. A further 25% of UKBAB and 24% of UKBB respondents think there would be some moderate benefit.
Trends Questions
The average number of clients seeking business advice continued to increase in the September quarter, but at a lower pace than in the June quarter.
There was again an increase in the number wanting to start a business but not as strongly as in the June quarter.
The ability to gain access to finance dropped back yet again, continuing a small downward drift over the past year.
The number of Advisers' clients finding that there is a shortage of skilled labour increased on average during the September quarter.
In the September quarter, Advisers were on average more pessimistic about the continuance of their clients trading over the next year. Only 12% of Advisers consider that none of their clients will close over the next year, compared with 16% in June, while 68% thought that up to 10% of their clients might cease trading compared with 67% in the June 04 quarter. There was an increase in expectations of higher numbers of business cessations: 20% in September, compared with 17% in June thought that over 10% might cease trading.
Feedback into the September 2004 Survey BAB-25
Views expressed are those of individual panellists and may not represent those
of the University.
Answers to the question on business support via RDA's should not be construed as an opportunity that is likely to be taken. All the indicators to date suggest levels of quality and impartiality will be reduced and the system will become even more fragmented and uncontrollable.
Re question 1. Whilst it is better to bring business support under one roof using RDA's, my experience so far is that this very quickly becomes an "old boys" network and a building of "ivory towers" with the end goal of providing the best business support to the community sadly being lost. I have yet to experience an RDA without the constant politics and backstabbing by individuals/groups to further their own agendas.
The Universities should stop kidding themselves, funding bodies and the business world that they are well suited to take products to the market and provide a cost effective resource. In spite of all the money they have received to exploit expertise and research results, they are, largely, hopelessly inefficient at it. It is time that this myth was exploded!
Formal evaluation tool has been interpreted as the collation of results of questionnaires and market testing. Full capacity has been based on the premise that most businesses have the capacity to expand further.
With regards to the question about business support provision becoming less fragmented and more coherent should it pass to RDA's.. I work in Wales and the funding/ provision of business support was passed over to the Welsh Development Agency from the various Training and Enterprise Councils 4 years ago. During that time, what we have been able to offer under that provision has chopped/changed so many times I have lost count. In my experience, not only does the provision vary from division to division (North, Mid and South Wales), but it varies across the areas within each of them also. With the WDA soon to disappear what will replace it we can only imagine and live in hope. It can't get much worse for the poor souls out there who are having to struggle through the maze/barriers that have been put up to try and find the help and support that myself and colleagues are more than capable of offering but are being prevented from doing so by this-project-and-that-scheme.
The first three question all needed a "don't know /not applicable option. I used the neutral middle dot as It was impossible to complete the survey otherwise.
The "Enterprise Act" is having an impact in relation to the Inland Revenue's significantly hardening line on debt. It is basically pay up now, borrow the money or we will make you bankrupt. Several clients have indicated that they have had enough and are going to sell up or close down. The general feeling is that they have been battling against an increasing tide of red tape and regulation and business has been picking up the tab. A very significant number are at breaking point. One building client who employs about 20 full time staff and around 30 subcontractors has decided that he is closing the doors at Christmas due to Health & Safety legislation. The company is over 100 years old!! He provides all the safety equipment together with the training. All employees and subcontractors are warned that if they do not comply they will be put off the job. However as soon as the owner leaves the site the workmen ignore the H & S rules. A workman removed safety netting on scaffolding against H & S instructions, tripped and fell to the ground. He was badly injured and the client was prosecuted receiving a sizeable fine.
In my clients words "unless I sit and watch them all day I can never make sure they comply with the rules." Small jobs are also uneconomical if a foreman or manager has to be present at all times to ensure compliance.
As my client said "they want to put all small businesses out of business and I have had enough"
If the individuals do not take personal responsibility for their own actions why should their employer be left to take the blame when he has done everything that a small business (turnover c£4m) can reasonably be expected to do?
I believe that we are seeing a significant shift in the balance of business in the UK. SMEs are under significant pressure and will reduce in number whilst at the same time both "White van man" and big business will grow. I find it hard to see how this is an improvement. It reduces quality and pushes up costs.
The pre-occupation with red tape in limiting the development of a new business or expanding an existing business is to a certain extent a negative to people who want to be self-determining and add-value to our economy. yes, I would love every person who is responsible for creating red tape to spend a week of each year working in an SME - being responsible for completing all of the forms that are required to operate within the law. The same goes for any 'servant' who is responsible for declaration on any industry or sector to do the same. For example, any civil servant who has the responsibility to introduce something to the farming sector should be made to spend time to implement the 'requirement 'in a 'real' situation.
I see organisations such as Business Link spend over 50% of their financial budgets to justify their existence - in stead of adding value to their local economies. I specialise in unlocking businesses overlooked, underutilized and hidden assets along with simplifying processes. We are in a new age and if we are to compete with the rest of the world, a useful and extremely profitable venture for any University would be to analyse industry by industry all of the 'legal' requirement and systems - then simplify them.
Greater access to funds offering smaller investments c 100k-250k is really helpful to SME's.
It would be nice to know the reasoning behind each question - why is it being asked?
Useful set of questions this time around.
A large number of my clients use the DTI consultancy schemes (Grants to Investigate a Innovative Idea) and Research & Development schemes (Grants for R&D - G4R&D) to influence and move ne technology and new product development forwards. The G4R&D competition has severely restricted access to this form of technical risk finance.
Business support, from Government, targets "flavour of the month" initiatives, generally, and is protected by a wall of unnecessary red tape. The proberty issue (making sure public money is "well spent") has created a class of self serving bureaucracy that adds no value whatsover to UK PLC. Clients cannot access EEC cash without help and don't understand what is available to them.
