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Comments from ACCA
March 2006

ACCA is pleased to comment on the consultation paper referred to above. ACCA is the largest and fastest-growing international accountancy body with 260,000 students and 110,000 members in 170 countries. ACCA’s headquarters are in London and the organisation has an extensive network of nearly 80 staffed offices and other centres around the world. ACCA has over 100 years’ experience of working with and providing professional advice to small and medium sized firms (SMEs) and in the UK, 56% of ACCA members work in or for SMEs with almost 20% of our UK members working in London.

Independent research shows consistently that accountants are the first choice advisors of small businesses. The biennial survey results1 released this month by the Federation of Small Businesses (FSB) show that accountants are still the most frequently used source of advice by small firms, consulted by over half of respondents. In the London region, 53% of respondents use accountants for business advice compared to only 4% who use Government funded business support services. Equally, the satisfaction rate of those who use accountants for business advice is 56% compared with only 6% of those who are satisfied with Government business support provision. As these figures indicate, accountants’ financial and business skills are crucial both for survival and growth of small firms. ACCA is involved in a continued dialogue with Government departments and agencies to ensure that this is appropriately recognised. However, ACCA appreciates the important role that Government plays in support of the sector particularly when there is market failure. In this context we have experienced a very productive relationship with Government Departments in joint programmes of events and publications in promoting the economic well being of SMEs.

Before setting out our comments, we would like to register our disappointment that the ‘Review’ does not sufficiently draw upon the growing wealth of research and other evidence based sources of information. In particular, much has been written from authoritative sources about business support, the role of Government and its relationship with the private sector but much of this appears to be ignored in the ‘Review’. References to these sources would give this document greater credibility and positively support on occasions the policies that have been developed and articulated.

There is a consensus that Government should only intervene when there is market failure. Careful analysis is needed to assess whether the current level of intervention is justified. It is therefore imperative that the right balance is reached regarding the type of support small businesses need. For example, recent research by the University of Cambridge2 demonstrates that despite the wide range of services which Business Links have offered, they were only really effective in a small number of areas such as training and grants. Penetration rates were very low in more specialist areas such as product design and finance. We hope that there will be careful analysis of whether Business Links should continue to offer such specialist services which are currently effectively provided by the private sector.

For this reason, ACCA welcomes the move towards the Information, Diagnostic and Brokerage (IDB) model for Business Link services but would urge caution as to how these services are brokered. We have been particularly concerned about the Supplier Matching Service currently operating in some of the Business Link regions. This service highlights a number of concerns for our members:

• The criteria used for this database is extremely restrictive when applied to the accountancy profession and grossly misrepresents the breadth of work accountants undertake, giving a misleading impression of our members’ abilities.
  
  
• Business Links ask for contact details of two to three customers that can provide satisfactory reference for each skill a supplier wishes to register. It seems inappropriate that Business Links will verify the skills of professionals which are already guaranteed by their membership with professional bodies.
  
  
• Finally, the process currently in place allows unqualified accountants to register their financial skills in the same way as qualified accountants. This undervalues the regulatory procedures that our members are subject to, including continuous professional development, professional indemnity insurance and disciplinary control, and therefore provides an unfair advantage to those practices which are not members of a professional body.

Whilst we welcome the move towards the diagnostic and brokerage model for Business Links services, we feel that it is inappropriate to use the same referral system for professionals such as accountants and solicitors and the more generalist business advisors. We would therefore urge the LDA to consider these concerns when developing the IDB model in order to ensure that skills and experience offered by professionals are adequately represented in the brokerage process.

ACCA welcomes the particular focus on female-owned businesses in the LDA Business Support Review but we are disappointed at the lack of emphasis placed on finance provision in relation to female enterprise. ACCA-funded research ‘Access to Finance: Women’s Enterprise and the Role of the Accountant’3 identified that women receive a third of the funding compared with men when starting up in business. Our findings also show that funding applications which have been endorsed by an accountant are seen as more credible by the bank managers. Professional business advisers have an educational role in advising women entrepreneurs and should therefore work with the accountancy profession to ensure that women have sufficient sources of finance to meet the needs of their business.

The Business Link and Accountancy Profession (BLAP) initiative set up in 1997, provided an excellent basis for mutually beneficial working relationships between Business Link partnerships and professionally qualified accountants for the good of the small business community. This initiative is currently only active in the West Sussex region and the recent roundtable event, ‘Women into Business’ organised by the Business Link Wessex, demonstrates that this is still a viable platform for developing good practice and effective cooperation between the accountancy profession and Government business support providers. ACCA would therefore urge that this group is replicated across the regions and that the LDA considers the benefits of establishing a similar group in the London region.

ACCA believes that the highest strategic priority should be given to the awareness raising of Business Link services as well as its overall branding. Latest FSB survey results show that over a quarter of their members are not even aware of Government support services with over a third stating that better information about service provision would encourage them to use it more often. Recent report by the Confederation of British Industries estimated that Business Links are currently reaching only 14% of existing small businesses.4 Low satisfaction ratings in other independent surveys suggest that Business Links ought to market their services more effectively5 and with the increasing emphasis placed on the brokerage model, it is imperative for a high level of public awareness to accompany this change in policy. In other words, when accessing Business Link services, small businesses need to be aware that they are accessing a referral service when specialist advice is required.

Finally, ACCA’s UK Small Business Committee has a wide membership which includes accountants, leading academics and representatives from the main small business organisations. At our meeting in September 2005, the Committee discussed the Government small business support provision which is summarised in a policy briefing paper ‘Public Sector Solutions for Improving Government Business Support Services’ and can be accessed at: http://www.accaglobal.com/policy/policybriefs/businesssupport.pdf

We recognise that the Regional Development Agencies have an important role to play in helping the small business community but this can only be achieved through improved communication and cooperation with the private sector providers. We would therefore welcome an opportunity to work with you in the near future towards enhancing the delivery of business support to small and medium size enterprises.

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