The government’s raft of business financial support programmes, introduced in the depths of the recession, was used by fewer firms than predicted.
Six schemes, offering firms subsidies, loans and guarantees, were launched by the Department for Innovation, Business and Skills (DBIS) during the autumn of 2008 in response to the economic downturn.
The total support package was worth £20 billion, but, according to the National Audit Office (NAO), only £3 billion were actually used.
The package included working capital guarantees and enterprise finance schemes designed to allow businesses access to funding during the economic crisis.
It is estimated that some 6,200 businesses benefited from direct support from the schemes, although there are no figures for those that received indirect help as a result.
The NAO report suggested that one reason for the lower take-up was that the DBIS adopted a cautious policy in an effort to limit the exposure of taxpayers’ money.
The levels of support offered were also ambitious and, as such, “unrealistic” the NAO added. “Announcing such high numbers may have been an approach to lift confidence but it raised expectations as to what was achievable and created pressure to deliver.”
Some of the measures were described as short-term support but, in the case of the Capital for Enterprise fund, actually required detailed due diligence and lengthy investment periods.
Nevertheless, the NAO applauded the DBIS for the speed with which the schemes were set up, all of them coming on stream by the second quarter of 2009.
A DBIS spokesman said: “We’re pleased that the report praises our decision to prioritise a fast response, which meant the first schemes were helping businesses in need within just four weeks.
“In establishing these schemes, we focused on responding quickly to the needs of business instead of setting targets.
“The schemes were intended as a back-up to normal commercial lending and in many cases businesses were able to find other means to secure finance and continue trading.”