LEP funding cuts would ‘undoubtedly’ undermine small business support

Central Government is considering withdrawing funding for Local Enterprise Partnerships (LEPs) from April 2024, with local Government expected to take up the reins in future.

LEPs, voluntary partnerships between local authorities and businesses, were first set up in 2011 by the Department of Business, Innovation & Skills to help boost economic growth and job creation at a local level.

Most, if not all of the 38 LEPs across England manage so-called ‘Growth Hubs’ which bring together public, private, third sector and university support to provide advice and support to local businesses. The Department for Business, Energy & Industrial Strategy (BEIS) described Growth Hubs as a ‘vital link’ between businesses and national and local policy, initiatives and private sector provision.

Cutting Government funding to LEPs and therefore Growth Hubs would effectively abolish LEPs, should local authorities be unable to take responsibility for them due to a shortage of budget, expertise and resources as well as legal complexities.

According to the LEP network, LEPS:

• Support over two million businesses.
• Create over 180,000 jobs.
• Help three million people to upskill.
• Encourage investment in local economy.
• Help to build 100,000 homes.

Although not widely understood across the business community, there are concerns that the impact of central Government funding cuts and the massive restructuring of LEPs could impact the local economy and local jobs.

We spoke to accountants to find out about their concerns and what they’re hearing from clients.

Accountants can provide similar services to help plug the LEP support gap

Bev Wakefield, co-founder, Vibrant Accountancy

Growth Hubs supported by LEPs provide valuable resources and support to help businesses thrive, and their closure could have a significant impact on the ability of local businesses to grow and create jobs.

Many businesses and clients are therefore concerned. Businesses could struggle to access the resources and expertise they need, leading to job losses and a slowdown in economic activity.

It’s likely councils will now be providing the funding directly without the use of LEPS, through methods such as the levelling up fund – which is being billed as its replacement. 

If LEPs are facing funding cuts, it could have significant implications for their ability to meet ongoing liabilities and going concern commitments. Many LEPs are incorporated companies and as such, they have legal and financial obligations to fulfill.

If LEPs are unable to secure alternative sources of funding or generate sufficient revenue to cover their ongoing expenses, they may be forced to take steps to wind down their operations or seek alternative arrangements such as mergers with other LEPs or restructuring of their operations.

I believe as accountants, we can step in to help clients who previously relied on LEPs, by helping provide similar functions albeit on a smaller scale. This could include exploring alternative sources of funding or looking for other ways to access business support services. Accountants can help clients assess their exposure to this risk and develop contingency plans to mitigate any potential negative impacts.

Verdict: Accountants can play a role in providing similar services to help plug the LEP gap.

Accountants should be on guard about going concerns

Paul Samrah, Partner, Moore Kingston Smith

There has been very little publicity around LEP funding cuts – it’s very much under the radar. And it’s not just funding cuts that are a concern – changes to who runs LEPs and how will have a big impact, and will undoubtedly affect service delivery. Businesses want stability and consistency, but cutting funding and handing running of LEPs over to local Governments will create a lot more bureaucracy, confusion and change.

Currently, LEPs are manned by local business leaders who have done an enormous amount to boost jobs and skills. We know small businesses are the lifeblood of the UK, and many rely on LEPs for business plans, training and grants. So with increased costs flying around from energy increases, food increases, bills, talent shortages and lack of staff, it doesn’t seem the best time to cut funding and bring about massive restructuring and reorganizational changes.

There are also issues around liability commitments and going concern reporting so auditors and accountants preparing LEP accounts will need to be on their guard in relation to the going concern aspect particularly around business plans and forecasts.

Verdict: Many small businesses rely on LEPs, so cutting funding and changing structure and frameworks will ‘undoubtedly’ impact them. Auditors and accountants should also be on guard about going concerns.

Changes to LEPs will impact businesess that have previously relied on their services

Mahmood Reza, Founder, Pro Active Solutions

LEPs typically work closely with local businesses through various channels. This includes collaboration with industry associations, partnerships with business support organisations and direct outreach to businesses within their regions. The level of engagement varies across different areas based on factors such as awareness, industry sectors and the specific initiatives and support available per region.

LEP funding cuts are likely to impact face-to-face and virtual support as well as (declining) grant funding. From clients I’ve spoken to, there’s a mixed reaction. A few businesses are concerned about the further erosion of Government support and grant funding. Others are not aware of LEPs, and don’t use their services.

For LEPs themselves, less money coming in now and ongoing commitments mean deficits in the short term. For some, there are likely to be redeployments and redundancies. However, future action will be dictated by the LEPs future business and financial plans including cash reserves and net assets.

For example, based on Companies House records, net assets as of 31 March 2022 for Buckinghamshire LEP were £6.9 million, Coventry and Warwickshire: £0 and Leicester filed dormant accounts £0.

Accountants should therefore review their clients’ financial plans and budgets to assess the potential impact of reduced funding and support on their operations and growth prospects. They should also explore alternative sources of funding or support that may be available to mitigate any negative effects.

Verdict: LEP engagement varies widely across regions but the impact of funding cuts will affect businesses that have previously relied on them.

Annie Makoff is a freelance journalist and editor.