Small businesses and regeneration: what role for LAs?

Of the 934,000 businesses in London, the vast majority (98%) employ 1-20 people. Together these small businesses employ around a third of London’s private-sector workforce. As highlighted by Lord Young’s 2013 report on growing micro businesses (pdf), SMEs, and micro enterprises in particular, have an important role to play in the UK’s economic development. The London LEP agrees, and has set up a working group on SMEs to see how their needs can be better integrated into policy.

The GLA has been looking at SMEs and workspace provision in the Capital. In 2014, the organisation published research on incubator, accelerator and co-working spaces, the potential for accommodating growth in town centres, and artist workspaces. The research on IACS was accompanied by an online map showing locations of office, artist and maker spaces.

London workspace
Source: GLA

On Tuesday, 9th December, Future of London partnered with the GLA’s regeneration team to hold a seminar exploring SME workspace provision, and how local authorities can link small business support to wider regeneration and economic development goals. The event, hosted by Workspace Group at their Westbourne Studios complex, brought together public, private and third-sector practitioners to discuss approaches to workspace provision and best practice in local authority support.

Beyond looking at numbers of employees, defining SMEs can be difficult and deceptive. The term is often used as a shorthand for tech start-ups, pop-ups, or the creative industries, but SMEs cover a much wider range of businesses across all economic sectors. Speakers were quick to emphasise that measures to help one group might not benefit others, and that therefore interventions should have clear aims and outcomes. Tobias Goevert, Area Regeneration Manager at the GLA, noted that a mix of SME types could be beneficial when planning workspace provision, as it allows for the ‘cross-pollination’ of ideas across sectors.

Given that most SMEs grow slowly, if at all, they should not be seen as a panacea to depressed local economies. However, with the large number of SMEs in London, incremental growth could have a significant cumulative impact. Outside of economic growth, SME workspace provision can be tied into other social and physical regeneration goals: providing training, reactivating empty shopfronts, increasing footfall to high streets and lowering the barriers for people wanting to start their own businesses.

Matthew Blades, Senior Economic Development Officer at City of Westminster, noted that the council’s involvement in workspace initiatives also gives it a different avenue to engage local people and receive feedback on its regeneration plans.

While there are moves to see more small-business-friendly spaces provided in new mixed-use developments, speakers were concerned that this could have the unintended effected of raising rents and pushing out existing businesses. ‘Shabby’ or ‘low-threshold’ spaces are often preferred by SMEs as they are cheaper and offer greater flexibility of use, something that should be taken into account when negotiating and designing provision in new developments.

Speakers highlighted a range of options for funding projects, from the New Homes Bonus, European Regional Development Fund and the GLA’s High Streets Fund to private funding and joint ventures. Mechanisms with fewer stipulations on how money should be spent, such as the NHB and business rates retention, were favoured as they allow greater flexibility on how money is spent.

With over 130 workspaces highlighted on the GLA’s map, local authorities have plenty of partners to choose from when designing workspace projects. Matthew Blades emphasised that choosing the right partners is critical, and should be based on ability to deliver against goals (both for providers and community groups). Universities were highlighted as good partners, as were specialist private sector providers.

As well as enabling authorities to give chances to entrepreneurs and artists, there was a desire to see workspace used to give business support that could help tenants move on once they had grown or completed a project. Mark Allan, Chief Executive of South Kilburn Trust, suggested that helping tenants find properties to move to benefits both parties, allowing businesses to develop and providers to use space to support fresh initiatives.

A key aspect of this process is maintaining a good knowledge of what the SMEs in question need in terms of support and facilities. Chris Pieroni, Operations Director at Workspace Group, emphasised that for most businesses, flexible contracts and high quality IT infrastructure were the most important factors for choosing a workspace, trumping the aesthetic or economic qualities of a particular space or area.

Pieroni also noted that local authorities should endeavour to have the same understanding of landlords’ needs and what the barriers are for them to supplying the flexible terms that are so beneficial to SMEs. By understanding these barriers, incentives could be developed that can work around natural risk-aversion and the difficulty of managing large numbers of tenants with a high turnover.

It was clear from the Q+A that there is a strong desire from practitioners to learn from best practice in this rapidly evolving area. While public-sector goals may differ from those of private providers, practitioners can learn a lot from established workspace providers as well as from exemplary public- and third-sector projects.

SME workspace regeneration seminar

Future of London will deliver further programmes on local economic development throughout 2015. Please check back!

Speaking at the seminar were:

  • Tobias Goevert, Area Regeneration Manager, GLA Regeneration (Chair)
  • Matthew Blades, Principal Economic Development Officer, Westminster Council
  • Mark Allan, Chief Executive, South Kilburn Trust
  • Chris Pieroni, Operations Director, Workspace Group