Small businesses are being locked out of local economic decision-making

Local enterprise partnerships are dominated by large businesses to the detriment of growth in our communities.

Small businesses account for 47% of the UK’s private sector employment and around a third of turnover, but they are being left out of the loop when it comes to shaping and nurturing local economic growth.

They have had patchy involvement in England’s local enterprise partnerships (LEPs), bodies led by businesses and local authorities, tasked with creating strategic plans to influence more than £17bn of public spending over the next six to seven years. The government stated from the outset that LEPs were designed to promote private sector jobs growth locally; but how can they really do that without genuinely involving small businesses?

Research conducted by the Centre for Local Economic Strategies, working with the Federation of Small Businesses, shows that many LEPs are dominated by large businesses and are often detached from the small business community and local economy. These concerns come off the back of a critical National Audit Office report, which identified weaknesses in LEPs’ leadership, funding and administrative capacity.

The small business community is concerned about its limited role, with more than two-thirds of the federation’s representatives suggesting that big businesses exerted greater influence over LEPs. Twice as many businesses representatives than LEP and council respondents said they believed small businesses should provide LEPs with local intelligence.

It’s not just small businesses that are unhappy with the current state of play. Representatives of LEPs themselves said the partnerships are under-resourced and need guidance from government about what exactly their role should be. “We have not had long enough to make a difference and the expectations of government have been unrealistic,” said one. Another summed up the problem: “There is a lack of core resource and a lack of clarity from government on policy requirements.” One LEP warned, “Mission creep is a big challenge, yet we are increasingly expected to do everything for everybody.”

Government should clarify the purpose and remit of LEPs. They must be adequately funded and there should be greater clarity on what a transparent and accountable LEP should look like. Only 31% of LEPs publish annual accounts and just 44% produce annual reports. LEPs were set up to be flexible, and are vastly different in terms of size and scale, but these findings suggest that we need basic standards of transparency and clarity given the scale of the public resources they can influence. We also need a wider set of performance measures to replace the narrow and inconsistent approach currently adopted.

LEPs are vital to delivering good economic growth across England. Some are clearly reaching out successfully to the small business community, but it’s patchy. Given the importance of small businesses as a source of local jobs and as guarantors of local economic health more generally, it is essential that they play a strong role.

The track record of LEPs is characterised by misunderstandings around their purpose and usefulness. As the country returns to economic growth, many of our local economies continue to struggle. To push all parts of the country into good economic health, LEPs must embed small businesses more effectively into their structures and activities.

The original article can be read on the Guardian website here.