It’s not the amount of support for SMEs that’s the problem. It’s encouraging them to make use of it

In his speech to the conservative party conference last year, David Cameron asserted that we need to do more as a country to get behind the “doers” and the “risk-takers”. In his mind – and indeed in the minds of most people – the entrepreneurial class are like energetic Jack in the Boxes. They crave to be unleashed; to act on every opportunity, to start a business and grow it as fast and as big as possible. Ergo, all we need to do is to get out of their way and give them the occasional leg up.

This has been the narrative underpinning the many pro-entrepreneurial initiatives launched by the government over the past few years. Take, for example, the StartUp Loans scheme. Originally available only to the under 25s, the offer of a low-rate business loan of up to £5,000 (and accompanying expert advice) has just been extended to anyone up to the age of 30, and there are now calls to remove the age limit altogether.

For more mature businesses, there a multitude of new support schemes such as the Enterprise Finance Guarantee, whereby the government guarantees to secure loans from lenders to businesses typically seen too risky for a conventional loan. Myriad other mechanisms have sprung up to support businesses to grow, among them the MentorsMe mentorship service, the GrowthAccelerator initiative and the various National Insurance holidays.

Put simply, the support for entrepreneurs clearly isn’t lacking. Indeed, many of the schemes are highly effective. Research indicates that businesses which use support are much more likely to grow than those who spurn it. As I alluded to in my last blog post, the real problem is that businesses either aren’t willing to grow or aren’t event aware of the support that is available to them.

According to Lord Heseltine’s acclaimed report on the UK's economic competitiveness, 29 per cent of businesses experienced more or less static  growth in employment (-1 or +1 per cent) over the last 3 years. Echoing these concerns, Lord Young’s report on business growth released just yesterday cited figures showing that only a quarter of SMEs have ‘a substantive ambition to grow’. Nor is the situation improving. Fewer SMEs in 2012 said they aimed to grow than said so in 2010.

Contrary to what you might expect, the way out of this conundrum is not necessarily to expand support for entrepreneurs. In his report for the then Conservative shadow cabinet in 2008, the entrepreneur Douglas Richards lamented what he, perhaps justifiably, perceived to be a bloated enterprise support industry. He calculated that there were 3,000 government-led business support schemes in existence, costing some £2.4bn to the taxpayer (albeit at 2003 figures). The result was that entrepreneurs were left bewildered at the sheer amount of options available to them. Judging from the recent conversations we’ve had with young entrepreneurs for our own research, this is still very much a concern.

So, to return to the challenge, if more support isn’t the solution then what is? Two answers may be found in Lord Young’s latest report. First, although not one of his most exciting proposals, the recommendation that 5 per cent of the budget of future initiatives be spent on marketing and advertising could be genuinely transformational. As he states, one of the reasons why the old Enterprise Allowance Scheme was so successful is because it had a simple message and some hard-hitting marketing that helped it to go viral. (If only something like the National Insurance holiday had this, it may not have had the disastrous take-up rates that were reported last week).

Now while this gets at the people who want to grow their business but don’t know how, it doesn’t necessarily do anything to move the many entrepreneurs who currently lack the ambition to expand. This is where the second proposal comes in. Lord Young has outlined plans for a £30m Growth Vouchers programme to find “innovative approaches to help SMEs overcome behavioural barriers to increasing growth.” The detail is notably lacking, but the intention of using behavioural science to encourage more entrepreneurs to expand their operations and take on staff is a compelling one (and something the RSA might have something to contribute to).

Neither of these proposals sound incredibly daring, but they could potentially leave a bigger mark on the growth intentions of the country’s SMEs than the rest of the report’s recommendations put together. Whatever the direction of enterprise support over the coming years, the less talk of “unleashing” and “unlocking”, the better. In the end, it’s meaningless if there’s nothing waiting to be set free.