SMEs, local economic development & regional policy 1. Definitions & characteristics 2. SMEs & local economic development 3. SMEs & government policy

1. Definitions & characteristics DTI definitions … a small firm is an independent business, managed by its owner or part-owners and having a small market share. (Bolton Committee, 1971) Statistical definitions A) Employees Micro firm = 0-9 employees Small firm = Medium firm = Large firm = B) Turnover <= £ 2.8m (7m euros) + balance sheet < £ 1.4m (5m euros) or <50 employees

1. Characteristics of SMEs A) Number, employment & turnover B) Industrial distribution C) SMEs & the business cycle D) The spatial distribution of SMEs

2. SMEs & local economic development A) Factors influencing the growth of SMEs 1. Recession 2. Re-structuring of large firms 3. New technology helpful to small firms 4. Changes in consumption patterns 5. Break-up of state monopolies 6. Change of attitudes to SMEs 7. Government policy to SMEs

2. SMEs & local economic development B) The impact of SMEs 1. Job generation 2. The turbulence of the sector 3. Low quality jobs 4. SMEs & growth 5. Indigenous development

3. SMEs & Government Policy 1. Enterprise Fund Public-private partnership Rationale behind policy Young, fast-growing SMEs – negative cash flows Need to invest in products, facilities, equipment, etc. Banks reluctant to lend Venture capital is more appropriate Policy objectives Stimulate start-ups & growth Focus on the equity gap (< £ 05m investment) Provide finance at a regional level Promote private sector venture capital

3. SMEs & Government Policy Problems with the policy 1. Lack of experts to help SMEs 2. Fund is too small 3. Real equity gap = £ £ 1m 4. Displacement effects