ADB SME DEVELOPMENT TA BACKGROUND REPORT INSTITUTIONAL SET-UP FOR SME POLICY DESIGN AND IMPLEMENTATION CASE STUDY UNITED KINGDOM ROB HITCHINS JULY 2001 Published by: ADB Technical Assistance SME Development State Ministry for Cooperatives & SME Jalan H.R. Rasuna Said Kav.3 Jakarta 12940 Tel: ++62 21 520 15 40 Fax: ++62 21 527 94 82 e-mail: [email protected] ADB SME DEVELOPMENTTA I. TABLE OF CONTENTS I. TABLE OF CONTENTS ..........................................................................................3 II. TABLE OF ABBREVIATIONS.................................................................................5 III. TABLE OF FIGURES..............................................................................................6 IV. TABLE OF REFERENCES......................................................................................7 V. EXECUTIVE SUMMARY ENGLISH ........................................................................8 VI. EXECUTIVE SUMMARY BAHASA INDONESIA..................................................10 1 INTRODUCTION....................................................................................................12 1.1 Objectives of the case study ..................................................................................12 1.2 Structure of the case study ....................................................................................12 1.3 Country comparisons .............................................................................................12 1.4 Overview of UK economic performance.................................................................14 2 CHARACTERISTIC OF SMEs..............................................................................15 2.1 Role of SMEs in the UK economy..........................................................................15 2.2 Definitions ..............................................................................................................15 3 GENERAL UNDERSTANDING OF SME POLICY................................................16 3.1 The wider policy context.........................................................................................16 3.2 Important influences of privatisation and deregulation...........................................17 3.3 SME-specific policy................................................................................................18 4 INSTITUTIONAL SET UP......................................................................................19 4.1 Nature of government ............................................................................................19 3 ADB SME DEVELOPMENTTA 4.2 Central government................................................................................................19 4.3 Regional or sub-central government ......................................................................20 4.4 Important trends in UK government .......................................................................22 4.5 Government's role in business promotion ..............................................................23 5 REGIONAL/LOCAL DEVELOPMENT...................................................................34 5.1 Important challenges in regional development.......................................................34 6 MAJOR POINTS OF INTEREST FOR INDONESIA..............................................36 APPENDICES.......................................................................................................................I Appendix 1: SME definitions in the UK and EU ....................................................................i Appendix 2: Map of United Kingdom ................................................................................... ii Appendix 3: Structure of the UK constitutional and political set up..................................... iii Appendix 4: Industrial development and SMEs in East Anglia ......................................... xiii 4 ADB SME DEVELOPMENTTA II. TABLE OF ABBREVIATIONS BSI British Standards Institution BTI British Trade International CBI Confederation of British Industry DTI Department for Trade and Industry DfEE Department for Education and Employment DETR Department for the Environment, Transport and the Regions DSS Department for Social Security EU European Union ESRC Economic and Social Research Council FCO Foreign and Commonwealth Office FDI Foreign Direct Investment FSB Federation of Small Businesses FSA Food Standards Agency FSA Financial Services Authority GO Government Office for the Regions IMF International Monetary Fund IOD Institute of Directors IUK Invest UK LSC Learning and Skills Council MP Member of Parliament MAFF Ministry of Agriculture, Fisheries and Food NMD Non-ministerial department NDPB Non-departmental Public Bodies NTO National Training Organisation OECD Organisation for Economic Cooperation and Development OFT Office of Fair Trading RDA Regional Development Agency RIU Regulation Impact Unit SBS Small Business Service SITPRO Simpler Trade Procedures Board SME Small & Medium Enterprise TPUK Trade Partners UK UK United Kingdom of Great Britain and Northern Ireland 5 ADB SME DEVELOPMENTTA III. TABLE OF FIGURES Figure 1: Comparative national statistics ....................................................................................13 Table 1: FDI in UK (1998) ...........................................................................................................14 Table 2: EU definition of SMEs ...................................................................................................15 Table 3: Principle responsibilities of local authorities in England................................................21 Table 4: Examples of indicators used by local authorities ..........................................................22 Table 5: Registering the incorporation of a limited company ......................................................27 Table 6: Selected business support in England..........................................................................28 Figure A: Structure of UK legislature and executive ..................................................................... v Table A: Core functions of key central government departments ................................................ vi Table B: Principle responsibilities of local authorities in England ...............................................viii Figure B: Structure of UK regional and local government............................................................. x 6 ADB SME DEVELOPMENTTA IV. TABLE OF REFERENCES (1) Yergin, D., J.Stanislaw, The Commanding Heights, Touchstone (1998) (2) DTI Statistical News Release Small and Medium Enterprise (SME) Statistics, 1999, DTI (August 2000) (3) SME Outlook, OECD (2000) (4) Managing Across Levels of Government: United Kingdom, OECD (1997) (5) Opportunity and Skills in the Knowledge-driven Economy, DfEE (2000) (6) Final report of Programme-wide Appraisal of the Yorkshire and Humber Region Objective 2 Programme 1994-6, University of Sheffield (1997) (7) Small Business Service Integrating the Business Support Infrastructure for SMEs: A National Framework for Business Support, SBS (2000) (8) Bennett, R., P. Robson, W. Bratton, Government Advice Networks for SMEs: An Assessment of the Influence of Local Context on Business Link Use, Impact and Satisfaction, ESRC (2000) (9) Bryson, J., D. Ingram, P. Daniels, Evaluating the Impact of Business Service Expertise & Business Links on Performance of SMEs in England, ESRC (1999) (10) Ernst & Young, Thematic Evaluation of Structural fund Impacts on SMEs, European Commission DGXVI, (1999) (11) University of Strathclyde Barriers to Survival and Growth in UK Small Firms: A Report to the Federation of Small Businesses, Federation of Small Businesses (2000) (12) Bennett, R., P. Robson, The Use and Impact of Business Advice by SMEs in Britain: An Empirical Assessment Using Logit and Ordered Logit Models, ESRC (1999) (13) Bennett, R., P. Robson, The Market for External Business Advice Services in Britain, ESRC (1999) (14) Keeble, D. Local Industrial Development and Dynamics: the East Anglian Case, ESRC (1998) Selected bibliography List of Ministerial Responsibilities, Including Agencies, Cabinet Office (2001) World Factbook, CIA Standard Names and Codes Database, Office of National Statistics (2000) 7 ADB SME DEVELOPMENTTA V. EXECUTIVE SUMMARY ENGLISH This case study examines the institutional set up and policies of UK government for promoting private sector - and SME - development and how this has evolved over the past two decades. UK government structure and SME policy Identifying clear lessons from the UK institutional set up is challenging. The UK's distinctive constitutional arrangements reflect a process of evolution and tradition over several centuries which underpins much of the way in which the UK governs itself, and therefore do not lend themselves to direct replication or lesson learning. Central government in the UK has a powerful role, it controls the bulk of public finance is responsible for shaping the national strategic direction and policy framework, and to a large extent determines the scope and standards of government services. Other layers of government at the regional or local levels have relatively little policy formulation or legislative role. Specific SME policy and support structures in the UK remain rather unfocused and uncoordinated, and have suffered from a tendency to short term, stop-gap and politically-driven measures