Business Collaboration Networks

By Jerry Cox,2014-07-09 08:55
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Business Collaboration Networks ...

    1. Business Collaboration Networks

    Helping businesses to work together to improve performance and

    exploit market opportunities and new knowledge


    To bring together businesses, to work on common challenges in fields of commercial activities

    that are essential for developing and strengthening regional economies.

    How will this be achieved?

    By providing a grant to set up and facilitate business collaboration that would:

    ? raise awareness of the benefits of collaboration;

    ? identify potential participants;

    ? facilitate a meeting based discussion forum on a specific topics;

    ? facilitate collaborative work groups on particular topics;

    ? recording and dissemination of discussion, information and conclusions reached by

    the group;

    ? facilitate inter-linking of similar collaborative groups in other parts of England. Why offer public sector support?

    There may be network externalities and spill-overs from collaboration and at the same time

    barriers to entering collaboration because:

    ? potential participants may be unaware of the benefits from collaboration;

    ? there may be problems internalising the benefits of the collaboration; and

    ? participants may not be able to agree how to divide up the benefits of collaboration

    (because they don‟t know what the benefits are).

    What will be offered?

    The subsidy will be to intermediaries to facilitate bringing together groups of new and more

    established small or medium sized enterprises and relevant key partners in high growth, or

    sectorally important, or deprived areas to discuss commercial opportunities or ventures.

    Who will be eligible?

    Intermediaries in general, private sector firms or organisations with relevant experience and

    a proven track record of successful facilitation of business collaboration. Network participants

    must centre around small-to medium sized firms to attract any public subsidy to the


    Interventions will be restricted to projects where:

    ? focus is on activities highlighted in Regional Economic Strategies;

    ? market failure and difficulty in achieving collaboration is identified at the project level;

    ? collaboration is necessary to develop and commercialise a business proposition that

    is outside the scope of supported activities elsewhere (e.g. under the „Innovation

    Collaboration‟ product);

    ? business case demonstrates the absence of subsidy to participating large companies;


    ? such networks will not support anti-competitive behaviour. Interventions when they are time limited, will have a clear exit strategy established at project

    inception and will be at a proportionate level of subsidy. The exit strategies will establish how

    the benefits of collaboration will become apparent and the networks will be able to become

    self sustaining. Where benefits are not apparent then there will be no value in maintaining the

    network. In either case the networks can be expected to have a limited time in which

    government funding is necessary. Timing of exit would be determined by exit criteria and

    monitoring results.

2. Business Creation

    Helping to overcome barriers to setting up and growing a new business Purpose

    To increase the level of enterprise in the UK by supporting the creation of new businesses by enabling those with an interest in starting up in business to take the necessary steps to do so, particularly overcoming barriers faced by some individuals from under-represented groups and disadvantaged communities.

    How will this be achieved?

    By providing individuals and new businesses with relevant and timely advice and guidance for successful business start-up, on for example, compliance and regulatory information, business planning (appropriate to the complexity of the business), finance (including small grants and loans and financial skills), business idea development, market research and market understanding, managing and running a small business at start-up, and employing people. This will be provided by Business Link. More intensive support will be provided to the most disadvantaged individuals to overcome barriers to starting up.

    Why offer public sector support?

    The creation of dynamic businesses is a key driver of economic prosperity. The level of entrepreneurial activity in the UK, however, is modest in comparison to some other economies. Certain groups, including women, disabled people and some minority ethnic groups, as well as certain geographical areas have a disproportionately low level of entrepreneurship. If these disparities were overcome as well as increasing the overall rate of business creation then entrepreneurial levels could match those of our competitors. The intervention is justified on equity grounds and government failure to provide enterprise education to some groups. In addition, people in some ethnic minority groups may not know where to seek the necessary information about how to start a business; they may not have the cultural or family history or networks to provide such information. For some groups in the population the transition from interest in starting up to running a business is made more difficult because of wider social and structural issues. The issues may become more entrenched without some suitable intervention.

    There may also be information failures about the risks of starting a business among some women and certain ethnic minority groups which prevent some from these groups with an interest in starting up from doing so.

    What will be offered?

    Assistance will be given to individuals and new businesses comprising of a mix of generic advice and guidance that a business needs to be able to start trading concerning:

    ? business idea development, market research and market understanding,

    ? business planning, operations and management,

    ? financial planning and management,

    ? employing people.

    More intensive support will also be available for some, including those from disadvantaged or under-represented groups. This will comprise:

    ? more personalised support from an adviser, coach or mentor who can work with the

    particular individual or business to overcome particular barriers to starting up;

    ? early stage support to ensure survival through mentoring or proactive account

    management, ongoing business review;

    ? limited financial assistance to disadvantaged individuals who face additional

    disproportionate costs when starting up. Who is eligible?

    Generic advice and guidance can be offered to all types of new business, including, for example, entering self employment and single person start-ups, team start-ups, high growth and high technology start ups, social enterprises start ups. The more intensive offer will be limited in availability to disadvantaged individuals.

3. Business expertise

    Help to get expert advice for targeted small-medium businesses to grow


    To improve the performance and productivity of businesses in the UK by providing expertise

    to help small-medium sized enterprises (SMEs) realize their full potential for growth and


    How will this be achieved?

    Through mentoring and coaching:

    ? at a national level, to meet a national market failure;

    ? at a regional or local level to meet market failures that would differ between regions or


    Why offer public sector support?

    The rationale for this intervention varies depending upon whether the underlying problem is

    national or sub-national.

    At the national level the intervention would fill in a missing market in business expertise. The

    intervention would be designed to rectify infrequent but possibly important instances where:

    ? there are major advances in business technologies and processes which radically

    alter the competitiveness of companies, e.g. lean manufacturing;

    ? yet markets for UK SMEs to acquire this knowledge are missing; e.g. due to the

    uneven geographical distribution of new technology and the industrial concentration

    of some industries;

    ? the intervention provides a means for UK SMEs to acquire knowledge of the

    technology or process until such time as UK based consultants and others make the

    knowledge available.

    At the regional and local level there may be specific geographically defined reasons why

    business expertise is not available. The intervention would be directed to rectifying the local

    market failure. Since the market failure might vary by locality the required type of expertise

    might differ from those provided nationally. For this reason the type of expertise will be

    determined locally after appraisal at regional and local levels to determine the existence of a

    market failure (as set out in the Treasury „Green Book‟), additionality and value for money.

    What will be offered?

    Subsidised access and provision of quality assured business expertise and specialist and

    advanced skills to SMEs which they would otherwise not have. The expertise would enable

    the take up of new technologies, techniques and processes. Broader benefits might include:

    ? lower costs;

    ? higher productivity; and

    ? creation of a market for the supply of mentoring and coaching services in new areas. The expertise would be provided by an external person or organisation most appropriate to

    meeting the individual businesses‟ needs. The expertise would vary and might be highly

    technical or specialist including advanced coaching for managing the growth of the business.

    Who will be eligible?

    National programmes would target SMEs where there is a:

    ? new technology or business process which is commercially important and materially

    affects the competitiveness of enterprises;

    ? barrier to acquiring that new technology or process, and where

    ? the intervention would be successful in creating a market for the type of expertise and

    the intervention would be time limited.

    SMEs would be eligible for programmes targeted at regional and local needs where:

    ? local or regional appraisal identifies a market failure;

    ? there is a well defined set of monitored exit criteria which would limit the duration of

    the intervention; and either

    ? the recipients are located in a deprived area, or

    ? the recipients are high growth or high potential companies, or

    ? the recipients are one of the selected few priority sectors in the region.

4. Capital investment grants

    Help to support capital investment projects either by SMEs or by

    companies operating in the assisted areas


    To encourage sustainable investment and job creation in some of the most disadvantaged areas in England.

    How will this be achieved?

    By providing capital grants to promote the expansion, rationalisation, modernisation and diversification of economic activities of businesses located in disadvantaged regions, in particular by encouraging firms to set up new establishments in the Assisted Areas. Why offer public sector support?

    Between and within the regions there are significant disparities in terms of employment and productivity that have persisted for the last 70-80 years. Business support products within the capital grants offer can help to raise the rate of sustainable growth in the regions by supporting investment and job creation in deprived areas.

    What will be offered?

    Financial support - normally in the form of grants though in some circumstances loans - to support investment projects by:

    ? all companies located inside the Assisted Areas, and

    ? small and medium-sized companies located outside of the Assisted Areas. In some cases hybrid financial support, (e.g. a grant that becomes a repayable loan if specific conditions are triggered) may also be available.

    The level of support provided is linked to the amount of capital investment, the amount and quality/skill level of the employment, and the amount of productivity growth associated with the project.

    Who will be eligible?

    The provision of public sector grant support is not automatic. Projects are only supported where:

    ? there is strong evidence that the project would not go ahead without support;

    ? the project has a good chance of delivering a sustainable productivity improvement;

    ? the project is of benefit to the regional and national economy (i.e. it will not simply

    displace similar economic activity from a deprived area).

    Full details on eligibility for public sector grant support are set out in the Selective Finance for Investment in England (SFIE) guidelines.

5. Debt finance

    Security and loan finance for SMEs with viable business plans


    To extend the availability of debt finance for SMEs that have viable business propositions but lack the necessary track record or collateral to obtain a loan.

    How will this be achieved

    By a dual approach of: (1) Guarantees; and (2) loan provision for SMEs particularly, less

    well-established enterprises and those underserved by mainstream providers.

    Why offer public sector support?

    There is a need to reduce the barriers to access to finance for SMEs that have viable business proposals, but cannot secure a conventional commercial loan.

    Finance providers often have little information about the entrepreneur or about the business proposal being championed and have difficulty in distinguishing between high risk and low risk proposals. To mitigate this, borrowers are often required to provide collateral as security for loan finance. Research has shown that mainstream banks perceive the transaction costs of serving some viable business propositions (i.e. time to assess prospective clients, approve them and provide support) as too high relative to the returns. Businesses and entrepreneurs who cannot provide collateral, or demonstrate a track record, can be locked out of the loan market.

    What will be offered?

    Enabling the provision of loans up to ?250,000 for those businesses with a viable commercial proposition. This will cover debt finance at an appropriate, risk-priced interest rate which reflects the nature of the borrowing enterprises.

    Drawing on the pre-existing SFLG framework, the intervention includes offering partial Government underwriting of loans from lenders.

    Who is Eligible?

    This intervention will be aimed at SMEs notably, start-ups and young businesses as they

    find it proportionately more difficult to raise finance than established businesses. It is these groups that are most likely to find it most difficult to provide collateral as security for loan finance.

6. Export credits guarantee

    Helping business manage non-payment risks in overseas markets


    To benefit the UK economy by helping exporters of UK goods and services win business, and UK firms to invest overseas, by providing Government-backed guarantees, insurance and re-insurance against the risk of non-payment when such support is unavailable from the commercial market.

    Why offer public sector support?

    To complement the commercial market by taking on the medium and long term payment risk due to commercial and political factors in markets where the private market is unwilling to take on those risks or has insufficient risk appetite.

    Such risks are generally unattractive to the private market because they are long duration and correlated.

    Government has greater leverage to maximise recoveries in the event of default and can wait longer for such recoveries, compared with private sector agents.

    The rationale therefore, is that ECGD is more efficient than the private sector. In line with World Trade Organization requirements, the guarantees and insurance will be granted at premium rates that are not below those rates available to borrowers in the international capital market.

    What will be offered?

    Helps UK exporters to compete against foreign competitors by

    ? insuring export contracts for the supply of capital goods and services;

    ? providing loan guarantees to financial institutions so that they can finance exports;

    ? insuring investments in overseas projects. Who will be eligible?

    Any person operating in the UK, who is exporting capital goods and services or is investing overseas, is eligible to apply for cover. Acceptance is subject to rigorous risk assessment of the exporter and buyer.

7. Financial awareness and capability

    Providing SMEs with the skills and expertise to secure private sector



    Increase levels of businesses accessing the most appropriate finance for their business.

    How will this be achieved?


    ? providing enterprises with the relevant skills to transform their business

    propositions into investable opportunities; and

    ? assisting enterprises in the introduction and interaction with potential investors

    where a business seeking finance understands the expectations of investors and

    can present a proposition which can attract investment. Why offer public sector support?

    To ensure that many more enterprises are able to take advantage of the increased supply of

    finance, it is important that they have the skills to develop appropriate funding strategies,

    understand what investors look for in an investment proposition and present robust

    investment propositions.

    This lack of skills can impede the start-up of potentially viable businesses, and for existing

    businesses, constrain their growth potential or cause businesses to be undercapitalised,

    affecting their chances of survival. The intervention would address the failure of government

    to provide adequate awareness of the alternative sources of finance and the requirements to

    apply successfully for the best type of finance. The intervention will improve small businesses

    access to finance, and enable additional business formation and growth to be realised, that

    would otherwise be forgone.

    What will be offered?

    Support comprises a combination of specialist information and expertise, comprising:

    ? the provision of in-depth advice and specialist support, combining finance readiness

    (as a means of straightforward financial advice/business planning for enterprises,

    including debt finance) and investment readiness ( a more intensive service largely

    focussed on equity options).

    ? mentoring and intermediation, helping to introduce enterprises/entrepreneurs to

    appropriate financiers.

    As a range (and by no means exhaustive), financial and investment readiness can be seen as:

    i. adopting appropriate funding strategies;

    ii. understanding the expectations and requirements of investors;

    iii. transforming a business proposal into an attractive investment opportunity;

    iv. accessing finance providers to present investment propositions, in particular,

    accessing providers of modest amounts of equity based risk finance that are not part of

    the „everyday‟ financing landscape of enterprises.

    Who will be eligible?

    Eligibility criteria are to be determined.

    8. Getting the most from foreign direct investment

    Increasing the contribution of foreign direct investment to economic

    activity in the UK


    To increase the contribution of foreign direct investment to economic activity in the UK,

    including Research and Development (R&D).

    How will this be achieved?

    By providing strategic engagement with overseas owned companies about initial investment

    or partnerships, or continued growth and development of business based in the UK for

    example, through partnerships, capital investment and supply chain linkages.

    Why offer public sector support?

    Knowledge spillovers from inward investment contribute productivity benefits to the UK which

    are not fully internalised. Inward investment, in the UK, would also be hindered by network

    and intermediation failures which act as barriers to entry for overseas firms.

    What will be offered?

    A mechanism for gaining understanding of inward investors‟ perceptions and concerns about

    the UK as a place to do business, and give inward investors a „voice in Government‟ on policy

    issues affecting their business.

    Information, advice, and tailored help would be provided for potential and existing inward

    investors, to help them with the decision to invest in the UK and, once invested, to develop

    their UK based business. This can relate to any aspect of business relevant to the high level

    aim of increasing the contribution of foreign direct investment to economic activity in the UK,

    including R&D.

    The types of assistance to be provided are as follows:

    ? provision of persuasive value propositions tailored to the overseas headquartered

    company‟s own development plans seeking to persuade the company of the benefit

    of locating in and growing from a UK base internationally, including visits overseas to

    make business case for investing.

    ? provision of general or tailored information specific to influencing a favourable

    investment decision including detailed property searches.

    ? facilitating access to the huge R&D resources present in the UK, as well as

    technology best practice schemes, to bring added value to both UK and international


    ? brokering links between inward investors and UK university and FE colleges to

    facilitate more effective partnerships in developing demand-led training courses and

    work placement schemes, and opportunities for graduate recruitment.

    ? ongoing strategic discussion with companies to help existing inward investors

    businesses develop and grow. Advice on the regulatory framework in the UK, and

    how best to work with legislative bodies; as well as a selective 'trouble-shooting' to

    help investors with specific UK regulatory or legislative concerns that are impacting

    adversely on their competitiveness.

    ? assistance with immigration issues; i.e. assisting client transit through UK borders

    and occasional selective direct intervention with immigration authorities.

    ? introduction to national and regional process improvement initiatives and innovative

    production techniques to help clients remain internationally competitive (to be

    consistent with the support provided under the Business Expertise product).

    ? provision of advice to identify available labour with appropriate skills, achieve

    successful recruitment and develop and retain clients‟ workforce, including assistance

    with relocating of staff.

    ? provision of information and signposting to services that contribute positively to

    perception of the UK as a place in which to grow an inward investor‟s business,

    addressing information market failures.

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