Small Talk: The effects of killing off Regional Development Agencies are showing

Having abolished the RDAs, what ministers are slowly realising now is that locally run initiatives that are properly resourced represent the best chance of economic rebalancing

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The Independent Online

Do you remember how George Osborne and his colleagues in the Coalition used to talk of their ambition to rebalance the economy so that it no longer depended so heavily on finance and the City of London? It’s not an aspiration we hear much about these days, probably because the Chancellor found the going tougher than expected (while enjoying the increasing contribution again being made by financial services companies now the crisis has passed).

The sad reality is that Britain looks more reliant on its capital city than ever before. Research from Beauhurst, a consultancy working with young growth businesses, highlights the scale of the challenge. In London, it says, for every million people there are now more than 90 growing companies. The equivalent figure for the East Midlands is just 12.

Beauhurst’s research focused on 2,200 growing small and medium-sized enterprises with investor backing, and the results include some surprises. For example, the North-east came second to London in the survey, with 62 growing companies per million people, while no other region could manage more than 35. That includes, by the way, the South-east (26) and East Anglia (30), two areas usually associated with growth. Beauhurst’s work suggests that these regions may be suffering at the hands of their London neighbours, which are sucking in all the investment capital.

What can be done about these imbalances? Let’s be fair to the Coalition – it is trying all sorts of initiatives to bring growth and prosperity to different parts of the country. Projects such as high-speed rail links, whether or not you’re in favour of them, are, in part, designed to tackle the problems identified by Beauhurst. The Chancellor’s vision is of a “northern powerhouse” comprising cities such as Manchester, Liverpool, Leeds and Sheffield, and schemes such as the Regional Growth Fund seek to boost young businesses and job creation all around the UK.

The problem is that so much of this work is piecemeal and poorly connected. What the UK is crying out for is a strategy that brings all the initiatives together – not under a scheme run from Whitehall, but via regional bodies that are capable both of liaising with one another and building local structures designed holistically according to what is needed on the ground. If that sounds suspiciously like a case for regional development agencies (RDAs), that’s exactly what it is. You may remember that we had nine such RDAs in England (as well as equivalent bodies in Wales, Scotland and Northern Ireland) when the Coalition came to power – they were abolished almost immediately as part of the “bonfire of the quangos”, an exercise that the new government proudly boasted about.

It may have been politically expedient to get shot of the RDAs, but they were doing a good job. By contrast, their replacements, the local enterprise partnerships, have been far less effective. No wonder: these bodies receive no government funding and form a weird patchwork across the country that leaves some areas without any support at all while in other cases, the same local authority is covered by several partnerships.

Other initiatives, meanwhile, have turned out to be mostly words rather than action. The Regional Growth Fund is a good example: last year, two years into the fund’s life, the National Audit Office warned that three-quarters of the cash allocated to the project had yet to be spent.

Having abolished the RDAs, what ministers are slowly realising now is that locally run initiatives that are properly resourced represent the best chance of economic rebalancing. As Beauhurst points out in its research, the success of the North-east is almost certainly linked to its status as the region of the UK that has attracted more enterprise funding from government through regional funds than anywhere else.

The truth is that the RDAs reflected many of the ideas that the Coalition was keen to sweep away. Originally set up at the behest of Gordon Brown, they appeared to be statist, bureaucratic institutions that prevented the free market delivering genuine enterprise. Unfortunately, it turns out that the free market isn’t so keen on delivering that enterprise after all – especially outside London.

Peer-to-peer lending at £2.2bn

The peer-to-peer lending sector lent more than £1.2bn last year, taking its total lending to £2.2bn, more than double the total in 2013. The figures, from the Peer-to-Peer Lending Association, underline the growth of the sector, which was formally regulated last year by the Financial Conduct Authority.

While peer-to-peer lending began with sites such as Zopa offering investors the chance to fund loans to individual borrowers, the volumes lent to small business borrowers now outstrip consumer finance by some margin. In the fourth quarter of last year, small business lending totalled £126m, compared to £71m of lending to individuals.

Christine Farnish, the body’s chairman, urged the Government to deliver on its proposals to allow investors to use their tax-free individual savings account (Isa) allowances to put money into peer-to-peer finance.

Who takes over the family firm?

Are family businesses on the verge of ceding control to new owners and bosses? Research reveals concern among owners about the ability and willingness of their heirs to take over.

More than two-thirds of family businesses surveyed by the law firm Gordons did not have someone from the next generation ready to take over. More than a third said family members did not want to get involved.

The survey replicates the findings of the 2014 Family Business Survey, which warned that up to two-thirds of the UK’s three million family businesses faced serious problems with succession planning.

Simon Pilling, a partner at Gordons, warned of problems in “protecting value for future generations”. Almost half of family business leaders who took over from a previous generation had experienced problems during the transition, potentially colouring their views about future succession.

Small Business Person of the Week: David Lewis, Founder, Young Voices

“It started almost by accident. About 20 years ago, I went to watch Wales play a rugby international at Cardiff Arms Park and was appalled by the lack of singing. I got talking to an official after the game and persuaded him to give me 150 tickets for the next match, which I split between several choirs, with singers stationed round the ground. They sang a small number of songs on rotation, the crowd joined in automatically, and the singing was transformed, though Wales lost the match.

“After that I organised a concert at the Arms Park at which six choirs performed together and Tom Jones joined us. I then did a string of similar concerts around the world and eventually we started getting letters from schoolchildren asking if we’d do something for them. Young Voices was the result.

“What we have now is the world’s largest children’s choir. This year, we’ve got more than 120,000 kids from 2,500 primary schools taking part in 19 shows in huge arenas around the country, including the O2 in London. We arrange the music and the schools get instructions so they can rehearse. Then they’re joined by professional acts on the night for what are always amazing concerts.

“I’ve never been in it for the money – the big thing for me has been that with resources so lacking, school music has been dying out – but this has become a significant business; we’re turning over £3m a year.”