Small and medium-sized business owners have been warned that the government’s proposed reform of the regional development agencies (RDAs) could lead to the removal of some support for entrepreneurs.

The £1bn Regional Growth Fund announced by Chancellor George Osborne in the emergency Budget is significantly less than the funds previously made available through the RDAs, which had around £1.7bn to spend this year.

A report by the Treasury published last year found that RDAs were among the 25% most efficient of all government departments. Similarly, a study by professional services firm PricewaterhouseCoopers in 2009 found that for every £1 invested by RDAs, regional economies saw a return of £4.50. Osborne’s reforms also mean it’s highly likely that Business Link, the agency for start-ups and small companies which falls under the remit of the country’s nine RDAs, will be heavily cut or scrapped altogether.
for every £1 invested by RDAs, regional economies saw a return of £4.50

Local enterprise partnerships (LEPs) are to be established to replace some of the RDAs’ functions. The bodies will address issues such as planning and housing as well as enterprise and supporting buisness start-ups, while other roles currently carried out by the RDAs will be centralised, such as inward investment, sector leadership, business support, innovation and access to finance.

The Department for Business, Innovation and Skills (BIS) says that LEPs and other public-private organisations will submit proposals for particular projects and bid for funding from the Regional Growth Fund. An applicant will need to demonstrate that the project will attract private sector co-investment and create sustainable private sector growth and jobs. However, a spokesperson for BIS says other government funding may be available to local enterprise partnerships besides the growth fund.

Sam Turvey of the British Chambers of Commerce is confident that there is still time for the government to get the reforms right: "We are concerned about this move, but it doesn’t have to be a disaster as everything will rest in the fleshing out of the details. The number one priority has to be business; the government needs to be listening to private companies in terms of how the LEPs are going to work."