Business support must not 'fall victim' to spending cuts

The government has announced that the Department for Business, Innovation and Skills (BIS) is to lose £836 million from its budget as part of an initial £6 billion of spending cuts.

However, the British Chambers of Commerce (BCC), while welcoming the government's early commitment to reducing the deficit and to encouraging confidence in the public finances, argued that business support investment should not be a "casualty" of the spending squeeze.

In its statement, the BIS said that the savings would be delivered through specific efficiencies such as a £74 million cut in Regional Development Agency funding and dropping the office of the SME credit adjudicator.

The SME credit adjudicator had been established by the previous Chancellor, Alistair Darling with the aim of helping smaller firms gain access to funding.

Funds that had been set aside for the Train to Gain programme are now to be switched to creating new apprenticeships and to backing further education courses.

David Frost, director general of the BCC, said: "While significant additional cuts will be required at the emergency budget, businesses will see this announcement as an important first step to restoring confidence in the public finances.

"We will, however, scrutinise cuts carefully to ensure that investment that supports business growth is not a casualty of the spending squeeze. We will analyse new cuts to business, transport, and local government spending to ensure that these do not undermine investment and job creation. While action to eliminate lower value spending is necessary, we must not axe investment in productive infrastructure."

A similar note of caution was struck by Matthew Goodman, head of policy at the Forum of Private Business (FPB).

Mr Goodman commented: "The cuts announced by the government are regrettable and many smaller businesses will be affected in one way or another.

"The £836 million reduction earmarked for the Department for Business, Innovation and Skills could potentially mean that business support will be one of the worst casualties of the cutbacks. This, of course, is a cause for concern."

But Mr Goodman added that the impact of the cuts could be mitigated by greater efficiency and use of resources at grassroots level, rather than traditional top-down approaches such as indiscriminate redundancy programmes and blanket spending cuts in certain areas.

He also said that the FPB would be keeping a close watch on how a shake-up of local government funding will affect smaller businesses.

"The Chancellor has said that a lot of the ring-fencing which currently restricts council spending will be removed," Mr Goodman continued. "This could potentially be helpful to small businesses if town halls use it as an opportunity to direct more resources to supporting their local economies. It could, however, place key support services for local businesses under threat."