Business support package take-up lower than expected

Take-up of the Government's £20 billion business support package launched at the height of the recession has been lower than expected, the UK's spending watchdog said today.

The National Audit Office (NAO) said the six schemes announced by the Department for Innovation, Business and Skills (DBIS) in autumn 2008 had provided just over £3 billion in subsidies, loans and guarantees as of the end of 2009.

The DBIS measures included the car scrappage scheme, as well as working capital guarantees and enterprise finance schemes to ensure that viable small businesses could gain access to loans.

The department estimates that 6,200 firms have received direct support as a result of the package although it does not know how many have indirectly benefited.

The take-up of the schemes was lower because of the department's conservative approach to limiting the taxpayer's exposure - as well as announcing "ambitious levels of support which proved unrealistic", the NAO said.

"Announcing such high numbers may have been an approach to lift confidence but it raised expectations as to what was achievable and created pressure to deliver," the report added.

While participation in the car scrappage scheme was higher than expected, some measures such as the Capital for Enterprise fund were billed as short-term support but needed detailed due diligence and long term investment.

The NAO praised the department for acting quickly to set up the schemes, which were up and running by the second quarter of 2009.

But the watchdog added that DBIS had been "monitoring" signs of financial market problems for more than a year before it began rushing out its response in October 2008 in the immediate aftermath of the financial crisis.

Edward Leigh MP, chairman of the Public Accounts Select Committee, said: "Once DBIS got going, it quickly developed the schemes to support businesses in the recession, but it took a long time for it to get going."

A DBIS spokesman said: "We're pleased that the report praises our decision to prioritise a fast response, which meant the first schemes were helping businesses in need within just four weeks.

"In establishing these schemes, we focused on responding quickly to the needs of business instead of setting targets.

"The schemes were intended as a back-up to normal commercial lending and in many cases businesses were able to find other means to secure finance and continue trading."