Whilst many within the business world in Wales would have been surprised by the recent closure of the Cardiff Chamber of Commerce, they will have been stunned to read of the demise of Entrepreneur Action last week.
The Cardiff-based enterprise agency was placed into liquidation after directors decided that they could not longer trade as a going concern.
Given the close links between the company and the Assembly’s Economy and Transport division, I would expect that Assembly Members will be looking for answers as to why a business with a cast iron contract for millions of pounds with the public sector could end up in such a position.
Certainly, the way that the Assembly has quickly washed its hands of the company should prompt an inquiry into why a £15 million programme of business support has failed. More importantly, it throws into doubt much of the current approach by the Assembly towards business support and, in particular, its strategy for the future.
Policymakers within the Assembly had seen the High Growth Programme (HGP), run by Entrepreneur Action, as the blueprint for the future of business support in Wales.
First of all, the HGP programme focused on ‘picking winners’ by working only with companies who were judged to be capable of reaching a £1 million plus turnover by the end of their third year of trading. Given that this would be, at best, around two per cent of all start-ups, it meant that the market for the company’s products was very small.
Secondly, the services to be provided by the programme were to come from the private sector, and not the enterprise agency itself. As a result, nearly one hundred legal accountancy, marketing and other specialist firms were signed up as members of an ‘associate network’ to provide services to the growth companies on the programme. The different services to be offered were worth around £17,000 to each business signing up on the programme
Finally, Entrepreneur Action created a 40-strong team of highly experienced business people to work closely alongside their client companies, especially in the first few years when the right type of advice could mean the difference between success and failure.
Despite all of these elements being in place, the whole initiative eventually failed.
Was the programme too ambitious with not enough potential million pound businesses in Wales?
Was it because of failures in the relationship between Entrepreneur Action and Assembly officials?
These are obviously some of the questions that need to be answered when a £15 million programme fails to achieve its goals. However, the main question that every civil servant involved in business support should be asking is - where do we go from here?
The model adopted by Entrepreneur Action – private sector led and focusing on a few growth companies – is what has been driving the reorganisation of business support since the ‘bonfire of the quangos’ ended the role of the WDA in supporting Welsh business.
The whole rationale behind the slimming down of support services within Wales during the last two years was that business service companies could provide far better services than dedicated enterprise agencies straddling the divide between the public and private sectors.
This bias against the enterprise agency movement, based on no real policy evidence, has meant that these vital business support bodies have had their funding streams eroded away to the extent that only the ones that remain financially viable are those with extensive property portfolios built up over the last decade.
The destruction of the WDA as an act of political vandalism was one thing but for civil servants to continue their ‘death by a thousand cuts’ approach to the enterprise agency movement – the only bodies in Wales that have the necessary expertise and experience to support business - is tantamount to economic suicide.
When will the Assembly learn that the biggest problem in business support is not the providers themselves but the massive amounts of bureaucracy they have created for individuals who try to access publicly funded business support programmes?
Establishing a new investment fund without the necessary business support structure will not work, especially when there is no-one there to assist the businesses in utilising such funding effectively.
Five years ago, Wales had a business support network that was the envy of every region in the UK. It was effectively cut off in its prime, and if we are to begin the economic recovery from being bottom of the UK prosperity league, then our business community, especially within our more deprived areas, needs all the help it can get.
I urge the Assembly to think again about business support, and to work alongside what is left of our enterprise agency movement in building a strong economy for the future.