Dti loan funding fiasco

[peterjhale]

A tough week for the government showed no signs of letting up today when it came under fire for backtracking on a new flagship loan for startup businesses.

The grant scheme was launched in June 2003 through the Small Business Service, part of the Department of Trade and Industry (DTI), and was intended to encourage small businesses to carry out research and development.

However, many applicants have now received letters asking them to withdraw their application and look elsewhere for funding.


Part of the letter reads: “We can only support a small proportion of these [applications]… it may be that you feel it appropriate to withdraw your application to seek funding from other sources.” To add insult to injury, the businesses must write to the DTI to inform them they are withdrawing their application.

At the time of its launch there was no suggestion that funding would be only open to “a small proportion” and all small businesses were invited to apply. What’s more, the DTI website was today still advising: “You are eligible to apply for a grant if you are planning to start up a new business in England or if you are already operating a small or medium sized business in England.”

The news has led to questioning of the government’s commitment to business, especially in the light of reports that the DTI will bare the brunt of a large slice of Chancellor Gordon Brown’s departmental cost cutting. The Times this week reported that it was possible Brown would cut the DTI’s small business budget by up to 60 per cent.

Business Link, the government’s official support service for new, small and growing businesses, could also see its budget slashed. On Wednesday, Judith Rutherford, ceo of Business Link for London, said it was “too early to tell” how its budget would be affected or whether job cuts to its 330 staff would need to be made.

Marc Waterman, a partner at the London office of chartered accountants UHY Hacker Young, said: “In May the government announced that funding was to be cut from £45 million to £36 million, and this latest development undermines the government’s pledge to boost innovation even further.”

However, despite the cuts, the government maintains it’s focused on Gordon Brown’s vision of creating “an economy based on enterprise”, and only this week, during his three-year spending review, the chancellor promised to make Britain the “best and most attractive location for science and innovation in the world”.

The DTI has also denied that it was preventing people from applying for the Grant for Research and Development scheme. In an interview with the Times, a DTI spokesperson said: “We were just saying that with the closing date for the first competition having come and gone, it will be a while before decisions are made and it might be more realistic for people who need funding sooner to go elsewhere.”