South West Regional Skills Enterprise and Employment Analysis 2007/2008

Final Report

5.3 Stimulating enterprise

5.3.1 Improving business start ups

According to the Small Business Service (SBS), the main objective in encouraging a more dynamic start-up market is to boost productivity and economic growth by strengthening business support networks and creating an environment that encourages and supports entrepreneurial activity.

The SBS has identified a range of market failures that create significant obstacles to starting and growing a business, hamper the quality and early success of new businesses and ultimately prevent a dynamic start-up market from emerging. One such market failure is in the form of the imperfect information that prevents or deters potential entrepreneurs and new business owners from accessing information, and advice from business support organisations.

SBS survey evidence(86) points to access to finance as the key barrier to starting up a business, followed by fear of debt, losing income and financial security. The next significant factor was the economic climate. Other significant barriers are the complexity of regulations, knowing how to start a business and lack of business skills.

Many potential entrepreneurs lack the necessary knowledge to start a business. Survey evidence shows that one-in-three people thinking of starting a business felt that they lacked knowledge on how to obtain finance. A similar number felt they lacked the skills to develop a business plan. A significant number also felt they did not have the necessary marketing skills, or the accounting skills necessary to start a business. Around one-in-four felt that they did not know how to ‘get business support’ to help them start up their business(87).

While research shows that start-ups who seek external advice typically build turnover faster, and are more likely to survive than those new businesses that do not, it is estimated that only around 50% of start-ups seek external advice(88). Other surveys of young businesses also show that only around half use external advice, with the most used sources being accountants and banks(89). Business Link (BL) was the most widely used public sector support service.

(86) A government action plan for small business: Making the UK the best place in the world to start and grow a business, the evidence base, DTI, 2002
(87) Ibid
(88) Barclays/National Federation of Enterprise Agencies, Profiting from Support. London, Barclays Bank plc. 2002
(89) A government action plan for small business: Making the UK the best place in the world to start and grow a business, the evidence base, DTI, 2002