Environment Enterprise & Transportation Committee
2nd June, 2011
Agenda Item No. 13
Business Gateway Annual Report 2010/11
Report by: Keith Winter – Head of Enterprise and Protective Services
Wards Affected: All
Purpose:
The purpose of this report is to highlight the improved performance of Business Gateway in
Fife during 2010/11; and to provide an overview on delivery arrangements for 2011/12
operations. The report also seeks approval for funding to support Business Gateway operations
in Fife in 2011/12 and updates members on tendering to deliver Business gateway Services
after the current contract expires, and on the current position regarding discharge of
outstanding employee related liabilities for the company’s staff.
Recommendation(s)
It is recommended that the committee:
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Note the improved performance of Business Gateway Fife in 2010/11 and planned activity
for 2011/12
Approves contract funding for Impact-21 to deliver Business Gateway National and Local
contracts for the period to 1st October 2012
Approves budget allocations for the Fife Investment Fund and East of Scotland
Investment Fund for 2011/12
Authorises the Head of Enterprise and Protective Services to invest balances from the
Fife Investment Fund (FIF) to the East of Scotland Investment Fund (ESIF) on an annual
basis to top up the available funding and to homologate the decision to transfer £123,000
from FIF to ESIF during 2010/11, as detailed in the Resources section of the report.
Remits the Head of Enterprise and Protective Services and the Executive Director - Policy
and Organisational Support to finalise agreement with Impact 21 regarding any
outstanding employee liabilities
Note that the National Business Gateway Board will be recommending local tendering for
the provision of Business gateway services after 1st October 2012, and remits the Head of
Enterprise and Protective Services and Executive Director - Policy and Organisational
Support to prepare a Competitive Tendering process commencing in Spring 2012
Resource Implications
The cost of delivering Business Gateway operations in Fife for 2011/2012 will be approximately
£1,103,858.00. This comprises:
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£923,858.00 transferred from Scottish Government to Fife Council for the management of
the national Business Gateway contract in Fife;
£180,000 funding to deliver the local Business Gateway contract;
The sums noted above are the maximum funding that can be drawn-down from the Contract
subject to performance activity. This funding package can be met from the approved
Enterprise and Protective Services revenue budget for 2011/12. An additional pro rata
allocation for the period from 1st April 2012 to 1st October 2012 will be met from the revenue
budget for 2012/13. Furthermore, Impact-21 Ltd administers the Fife Investment Fund (FIF)
and the East of Scotland Investment Fund (ESIF) on behalf of Fife Council which has been
allocated a total budget of £290,000 from the 2011/12 revenue budget. £200,000 is to deliver
the local grant and small loan fund with intention to invest £90,000 to ESIF fund as a specific
Fife Council top-up contribution.
In addition, balances from the loan repayments to the Fife Investment Fund will be transferred
to ESIF to ensure a long term sustainable growth investment fund. The principle of retaining
and reinvesting the loan repayments was approved by the Environment and Transport
Committee on 30 August 2007 when the Fife Investment Fund (FIF) was established. The
transfer of the accrued reserves and non interest bearing loan repayments from FIF to ESIF
was also endorsed by this Committee at its meeting in November 2009, approval was given to
join ESIF (ref. para 2.3.1). A progress report on the operation of ESIF will be submitted to
committee in November 2011.
Legal & Risk Implications
Fife Council Enterprise and Protective Services is responsible for contractual arrangements
with Impact-21 (formerly SBGF Ltd) for the delivery of Business Gateway Fife national and local
operational contracts. Compliance checks against national and local contracts are undertaken,
with monthly monitoring carried out against performance on both contracts including income
drawdown analysis and approval accordingly.
Policy & Impact Assessment
BG Fife helps to meet one of Fife Council’s Big 8 objectives “to improve Local Conditions for
economic development”. “Growing Fife’s Future” sets the context and strategy for developing
Fife’s economy and describes how sustained and sustainable economic growth can be
achieved. The performance of BG Fife is monitored through the indicator “Building a stronger
more flexible and diverse economy” within the Single Outcome Agreement.
Consultation
The Executive Director of Finance and Resources and the Executive Director of Performance
and Organisational Support have been consulted on the preparation of this report.
1.0 Background
1.1 The Scottish Government has given local authorities the lead role in local economic
development and Fife Council seeks to deliver services closer to users, to develop genuine
business development engagement and achieve better local accountability for the services it
delivers. The transfer of Business Gateway Services to Fife Council has allowed greater
integration with local authority services and important local stakeholders such as Chambers of
Commerce, Federation of Small Business and other local professional intermediaries.
Maintenance of this ‘one door approach’ to the delivery of business Enterprise and Protective
Services and partnership working is fundamental to maintaining and improving Fife’s business
customer experience and contributes to growing local business success.
1.2
This paper provides an overview and commentary on performance against the Business
Gateway contract targets for the period April 2010 to March 2011. It highlights the business
growth services that have been refocused to help businesses survive the effects of the current
recession and the level of support for growth businesses has been reviewed. Furthermore, it
outlines the national findings and recommendations for business gateway services post 2012
contract renewal.
2.0 Issues and Options
2.1
The BG delivery model makes an important contribution to the Government’s objectives for
growing the Scottish economy. It offers an opportunity to develop a large pool of new start
businesses and to support and encourage existing businesses to grow. Due to continuing
economic conditions, it is essential that Fife Council continues to identify areas of market
failure and opportunities to improve the provision of information and advisory services for
SMEs. There is a need to adapt and that the lessons learned and best practice achieved
since the transfer to LA delivery is used to enhance and develop integrated business
development support to the business community.
2.1.1 A number of alterations have already been identified for delivery within the 2011/12 BG
operations. This is to improve existing service elements within the contract in a bid to increase
market penetration and to work more effectively with start up and growth businesses at an
earlier stage. Access to an appropriate range of specialist advisory expertise is fundamental
to this approach. There is a need to continue to provide sufficient flexibility to enable
enhanced support for businesses which need short-term recovery and sustainable assistance
through this economic climate throughout 2011/12.
2.1.2 Furthermore, there is a requirement to realign Local Contracts to enable BG to support
businesses which do not demonstrate high growth potential but do have aspirations to grow at
a more modest level or require robust aftercare assistance. These businesses have a crucial
role to play in supporting the local economy and communities. It is important that these
variations to services within the Local Contract are complementary to the National Contract
and reflect the new economic reality facing Fife Council.
2.2
Monitoring and Evaluation
2.2.1
National survival monitoring reports are produced on a quarterly basis. They provide
information on a sample of start-up companies at 12 and 36 months survival points, although
Fife undertakes additional local monitoring to cover 100% of Fife’s start ups. The national
average survival rates are in the region of 80%-85% for 12 months survival and around 75%
at 36 months. The 2009/10 analysis for Fife has been reported as 12 months - 81.9%, 24
months - 74.3% and 36 months -76.8% respectively.
Comparison with wider business demography statistics suggests that 12 month survival rates
are marginally lower for Business Gateway customers compared with all business starts,
which would be expected given the nature of the Business Gateway client group profile which
has more ‘lifestyle’ businesses. However, by 36 months, survival rates amongst Business
Gateway customers are slightly better than the all business average. In simple terms, this
would suggest a positive effect from the Business Gateway support.
2.2.2
BG Fife has increased aftercare coverage considerably throughout 2010/11 to reflect the
needs of the businesses, as well as the operational objectives of Fife Council and the wider
economic agenda. National data shows that BG Fife has performed at, or above, the national
average on a range of performance measures, against comparable sized Business Gateway
providers throughout Scotland. The overall key performance achievements of BG Fife for
2010/11 are outlined in Appendix 1, however, headline indicators are noted below.
2.2.3
Business Start Up
The headline Business Start-up target of 700 was exceeded, with 804 new starts receiving
assistance via Business Gateway in 2010/11 (114%). It is anticipated that these will create
1131 jobs and £29.6 million in turnover during their first year of trading. Start-ups by Women
saw 340 achieved throughout 2010/11, against a full-year forecast of 280. 143 start ups were
achieved by Young People (i.e.–under 30 years of age) – which equates to around 18%.
BYOB contributed 8% to the overall start up total, which equates to creation of 77 jobs within
the regeneration areas of Fife.
2.2.4 Business Growth
BG Fife’s high level of activity within the existing business sector was reflected by the 124
training events carried out for existing business. 632 business advisory assists were
undertaken. In addition, 14 businesses with high growth potential were referred to SE for
Growth Pipeline assistance and a further 7 businesses were approved and transferred to SE
for enhanced Account Management support. Although Appendix One clearly highlights
underperformance in these specific target areas, it is important to note that external factors
such as economic downturn play a significant part in this.
However, the introduction of our new Sub-Growth Pipeline Advisory Services (outlined in
more detail in para 2.3.2) has allowed work with a further 53 growth businesses, supporting
the creation of 295 jobs and additional turnover of £30.5million with additional referral for
business gateway specialist services.
It should be noted however, that BG Fife is performing above national average against
Gateway areas with a similar contract value and target number, for start up and growth
measures and is ahead of other areas in terms of sub growth performance. The BG National
Unit, based at CoSLA, has undertaken an independent survey on Growth Pipeline outputs
which highlighted that BG Fife’s average turnover of businesses trading in 2009/10 was just
over £1M against an average turnover across Scotland of £608,238.
2.2.5 Fife Investment Fund/East of Scotland Investment Fund
Impact-21 Ltd administers Fife Council’s ‘Fife Investment Fund’ which involves the provision
of grants and repayable loans to assist new starts and growth of existing small businesses,
below 50 employees. It also administers the newly created East of Scotland Investment Fund
(ESIF) loan applications for Fife Council, which provides loans up to £50K to growth
businesses. The ESIF local authority partnership, led by Fife Council, has now secured £1.5
million of European funding towards a total fund of £5 million. During operational year
2010/11, 93 businesses have received grant or small loan approval from the Fife Investment
Fund to the value of £221k. This investment is anticipated to create 439 jobs over 3 years
and additional turnover of £18.3 million, and this will be further evaluated in the future. A full
breakdown of loans and grants offered is available on request.
In addition to the financial assistance provided, Business Gateway Advisers were instrumental
in providing or accessing other sources of funding support for clients: 65 referrals to Scottish Enterprise to a value of £334K for specialist intervention support
for Strategy Development, Marketing Strategies, Investor Readiness, Leadership
Development and Innovation
 35 Fife Council assists for specialist intervention support for recovery packages, product
development and market and sales development including key sector specialist advice
and growth assistance; anticipated to create around 240 new jobs with a turnover value
of around £6.8million.
2.3 Resource and Policy Implications
2.3.1 The Business Gateway network is operating below target levels against SE growth turnover
levels. Current market conditions continue to encourage companies (both existing and startup) to focus on consolidation and survival rather than growth. With regard to existing
companies in the Growth Pipeline, current economic conditions are slowing the rate at which
these companies are able to develop and making it more difficult to meet targets for
graduation to SE Account Management.
2.3.2 This underperformance resulted in a redeployment of business gateway resources in early
2010. It is important to note however, that this shift has maintained a focus on encouraging
growth in businesses, but at a lower rate of growth. A new complimentary “sub-growth
pipeline” advisory service has been introduced, for those businesses that projecting an
increase in turnover of between £200K and £400K. This service was piloted in Fife between
April and October 2010 and due its success and high levels of demand for assistance, has
now been rolled out to BG Networks across Scotland in January 2011.
2.3.4
Furthermore, Fife Council’s complementary local service entitled “Expert Help” has proven to
be very successful and the outcomes have proven demand and justify continuation in
2011/12. A specialist support service has also been introduced for growth businesses that
currently fall outwith Scottish Enterprise growth support criteria and give the access to support
services such as product or process improvements, environmental/market development and
investor readiness. This enhanced service has led to a recorded potential increase of 240
additional jobs created with a forecasted increased turnover of £6.8million during this period.
2.3.5
The Business Gateway Scotland Board is keen to ensure that all Business Gateway
resources are fully optimised, including the available resources which Local Authorities are
willing to make available to complement the core BG services. These additional services
provide valuable support to businesses that would not be in a position to access BG support
under current criteria.
In response to this, Fife Council has been proactive in engaging in a South East of Scotland
collaborative ERDF application in a bid to enhance these additional and complementary
services from European funds. Final approval was given by the Scottish Government on 1st
April 2011; this will provide an additional net European income of around £220K to Fife over
the whole of the 3 year project.
2.3.6 Management and Governance
Since Scottish Enterprise Fife was wound up, Fife Council has been left as the sole member
of the company. In an effort to ensure that the company is responsive to business needs and
to encourage its commercial viability to become less dependent on Fife Council funding, the
Board has been expanded to include a number of directors with a business background. As
part of the effort to generate new revenue sources outwith Business Gateway funded
contracts, the board agreed to change the name to Impact-21 Ltd. The company will, as part
of its wider commercial operations, continue to deliver Business Gateway Services in Fife on
behalf of Fife Council. As part of this process, Robin Presswood, Business and Strategy
Manager will step down as a director of the company with Keith Winter, Head of Service
continuing as a Fife Council representative on the Impact-21 Ltd board.
2.3.7
Impact 21 is an independent, not for profit company, and as such requires to ensure that it
has sufficient funds to cover liabilities. As such, the company has been growing its reserves
in recent years as part of a long term strategy to lessen the dependence on Fife Council.
Reserves will accrue from both the National and Local Business Gateway contracts, and from
other external contracts.
As the company's pension’s liability can be significant, it is important for a prudent level of
reserves to be maintained. In the financial year to 31st March 2010 the company had a
defined benefit pension scheme liability of £603,000, against total net assets of £633,000. It is
understood, however, that the pension scheme liability is likely to have reduced significantly in
the year to 31st March 2011.
2.3.8 The original partnership agreement that created Small Business Gateway Fife left the Council
responsible for certain employment related liabilities in the case of redundancy or early
retirement. It is now almost ten years since the creation of SBGF, and the Council and the
Company's Board are committed to a process of reducing the Company's dependence on Fife
Council. The Council has, therefore, entered into discussions with the Company to discharge
ongoing responsibility for employment related liabilities for the company's staff. The Council
received a financial settlement of £121,549 from Scottish Enterprise Fife regarding the
discharge of its responsibilities in April 2008, and as part of these discussions it is proposed, if
agreement can be reached, to transfer this settlement to the Company. The Council may also
be liable for a payment against such responsibilities. At this time, this is not established.
2.3.9 Post 2012 BG Tendering and Delivery Model
A national evaluation of business gateway services was completed in May 2011. The study
was commissioned by the Business Gateway Operations Network (BGON) to evaluate the
existing model and assist in recommendations for the future delivery post October 2012, when
the current contract ends. Early findings highlighted that the transfer of Business Gateway
services to the local authorities in lowland Scotland and the Highlands and Islands has been
achieved relatively smoothly, delivering a considerable volume of activity, which has
increased year-on-year despite the economic challenges. There appears to be a limited call
from stakeholders, business representative groups and those delivering the service for
significant changes to the delivery model and infrastructure. The Business Gateway is
generally fit for purpose and is a well recognised brand that should receive further investment
in it, rather than any diminution of it. The service reaches a large volume of businesses, and
the next phase should be about increasing the quality and impact of support without reducing
its reach. Local flexible solutions should be retained and increased, but within a national
framework of core services to ensure consistency across Scotland of the national brand.
The value for money assessment found considerable variation in unit costs but an overall
reasonable cost of delivery. A simple return on investment, based on local costs, provides a
minimum return on investment for the Business Gateway service of 1:7.2 (the £42m
generates some £301m in Gross Value Added to date and anticipated). For a volume
business support service this is within acceptable limits, particularly given the current
economic climate.
There are a number of recommendations arising from the review. In relation to the delivery
model, BG Scotland Board will be recommending to Scottish Government that contracting
measures should be put in place for local tendering across the 2 lead authorities. These
contracts will be informed by national consistent guidance and value for money analysis. The
operation of both one-to-one and one-to-many services is regarded as necessary and
beneficial. The introduction of the sub-growth pipeline advisory service piloted by Fife Council
was timely and should be continued and it is proposed that the VAT+ segmentation be
retained but to ensure the service is focussed on growth and not a driver for capturing VAT
thresholds.
A variety of Business Gateway Operational Group (BGON) Sub Groups have now been
established to develop a detailed specification of the core BG offer. This involves identifying
which parts of the existing model are to be retained, what new elements to be included, how
each element should be defined and how the process of moving through the service should
work. The groups will also use the outcomes to build a resultant tender specification and
tender process for the 12 lead local authorities.
3.0 Conclusions
3.1 In conclusion, 2010/11 has seen a continuation of the successful approach to service delivery
to business customers, across the full spectrum of Fife’s business base, in pursuit of business
growth and economic impact. Fife Council continues to make excellent inroads to develop
opportunities to scale up our activities within Business Gateway and wider business
development such as procurement and market development, directly within the agenda of Fife
Council’s Economic Development Team as well as across Fife Council wider services.
3.2
This continual realignment to local service delivery whilst ensuring a national consistent
service, will allow for increased resources to nurture growth thereby optimising our market
intervention. These enhanced services will help strengthen the existing services delivered
through Business Gateway operations, giving a clear message that Fife Council is responding
to market failure. The continuing development of Business Gateway services, in terms of both
customer service and value for money is very important to Fife Council and the local business
community.
List of Appendices

Appendix 1 - key performance achievements of BG Fife for 2010/11
Background Papers
The following papers were relied on in the preparation of this report in terms of the
Local Government (Scotland) Act, 1973:
Report Contact
Author Name: Pamela Stevenson
Author’s Job Title: Lead Officer, Enterprise and Business Development
Workplace: Enterprise and Protective Services – Economic Development Team
Telephone: 08451 55 55 55 + 473821/492180
Email – Pamela.stevenson@fife.gov.uk
Report agreed and signed off by
Robin Presswood
Manager
George Sneddon
Service Manager
APPENDIX ONE
BUSINESS GATEWAY FIFE
2010/2011 PERFORMANCE
MEASURE
Business Start Up Activity
Total Start Ups
Starts By Women
Starts By Young People (under 30
years)
Starts By Disabled Clients
Starts By Ethnic Clients
Starts by PSYBT Assistance
Starts in Disadvantaged Areas
Starts By Unemployed
Starts by SE Priority Industries
Number of VAT Registrations
MEASURE
Business Growth Activity
Number of Companies worked with
Number of new client assists
Starts referred to Sub-Growth Pipeline
Starts referred to Growth Pipeline
Starts referred to SE Management
Existing Business referred to Sub-Growth
Existing Business referred to Growth
Existing Business referred to SE
Number of SE Intervention Referrals
Number of SE Funding Referrals
Number of BG Expert Help Assists
High Growth Key Sector Specialist
Services – including new growth starts
Approved FIF/ESIF Fund Applications
MEASURE
Business Skills Events
Number of Start Up Events
Number of Existing Business Skill Events
BYOB Planned Events
TARGET
ACTUAL
%
11/12
Target
700
114
-
750
“
804
340
143
“
“
“
“
“
100
7
42
46
53
172
106
91
91
For Info
112
TARGET
ACTUAL
%
11/12
Target
For Info
632
-
(new)
10
5
(new)
20
8
(new)
(new)
15
5
3
42
14
7
103
19
33
-
200
15
10
5
45
25
10
(new)
For Info
”
50%
60
70
88
-
45
15
-
-
60
TARGET
ACTUAL
%
11/12
Target
100
100
120
90
118
93
90
118
78%
100
100
90