Is European model the future for UK’s business services?

Faced with the prospect of the big budgetary squeeze, few expect that public sector business support and development services will remain untouched. Scottish Enterprise seems safe enough for now, albeit in somewhat reduced circumstances, but government and business must nevertheless plan for a new era when business services, as we currently know them, will cease to exist – all the more reason to look beyond this island nation, to see how other economies, some markedly more successful than ours at incubating and nurturing the business base. Could it be that the Continental model of “public law” chambers of commerce, whereby all businesses are required to join their local branch of the worldwide chambers family, is the way ahead?

In France, Germany, the Netherlands, Italy and Spain, it is the private sector that takes the lead, and which often owns and manages key components of economic infrastructure. There are questions about whether this is one aspect of “Europe” that might inspire UK business.

“It is interesting to compare chamber models, not just within Europe, but across the globe,” says Liz Cameron, director of Scottish Chambers of Commerce.

“Would comp-ulsory membership for all businesses be the key to growing the Scottish business stock? It would certainly make life easier for our network across Scotland. If we had a chambers system that was regulated and compulsory, customers would be forced through our door – but would that be right? To be successful we need to be constantly innovating and creative, and we are obliged to stay focused on winning and retaining our customers.

“We need to revisit what chambers of commerce are set up to do. It is a global industry, set up by business for business. Our network in Scotland already provides the membership with connectivity, business support, international trade products, mentoring, training and that all important independent voice to influence and direct government. It puts us close to businesses, and you would lose that if you put chambers into a compulsory regulatory model.”

Much of the debate comes down to money. Compulsory membership, effectively a kind of tax, puts European chambers’ budgets in a different league from their UK counterparts.

One spokesman for a prominent Scottish chamber said: “We sometimes have huge delegations from the chambers of mid-size European size cities, who will sweep in for a few days of meetings. We meanwhile are wondering if we have enough to entertain them to a round of sandwiches.”

So it is the “public law” system based on compulsory registration that makes the chambers strong players in economics and policy.

By contrast Britain’s voluntary scheme gives the chambers that more personal relationship with their members. The British Chambers of Commerce, which calls itself “the ultimate business network”, offers services such as seminars, workshops and conferences, economics surveys and training solutions to their members (100,000 businesses with more than 5 million employees).

In Scotland there are 9,000 companies registered at the Scottish chambers, accounting for 50% of private-sector jobs according to the organisation. In 2008, 23 of the top 25 companies and 38 of the top 50 were members.

“It is a fair representation of Scotland’s economy with members in every sector and area”, explains Graham Bell who works with the Scottish chambers. For him, the advantage of the private model is to be “a true reflection its membership”.

However, they are limited in their budgets and actions when compared to major Europeans ones. “It is down to the chambers to persuade businesses to join,” comments Mr Bell, “and this costs money and resources.”

The French Chambers of Commerce and Industry (CCI) are funded by an additional tax on top of business tax (TATP) imposed by the departmental and regional councils to assist in the funding of local services.

In 2008, the entire CCI network had a total budget of €4bn (£3.65bn), making them a major actor of the economic development of the country. More importantly, 60% of that budget is raised by the chambers activities and through their assets such as airports, harbours, training colleges, warehouses or exhibitions centres. The French chambers’ first purpose is still to offer an economic network, but the CCIs are going a lot further, aiming to assist businesses at every step. Last year, their units dedicated to facilitate the creation of start-ups received 290,000 projects carriers. The chambers have also met 205,000 company bosses, in groups or individually. The CCIs also sign apprenticeship contracts and their colleges produce 100,000 trainees each year, with an ambitious objective of 600,000 in the next few years.

Last year, the Assembly of CCIs defined a five-point programme setting out their engagement strategy, with a focus on training, innovation, sharing and networking, internationalisation and diversity.

Germany, Europe’s largest economy, is the world’s second largest exporter. The 80 main Chambers of Industry and Commerce (IHK) and their central organisation (DIHK) are following a similar six-business segment programme: economic policy; business start-up and support; vocational and further training; innovation and environment; international affairs, legal affairs and competition. They have the resources to cover key trading areas with a network far more extensive than British public agencies such as UK Trade and Investment (UKTI) and Scottish Development International, with several hundreds of people on the ground in China for example.

As with the French system, the IHKs present themselves as the first and unique port of call for businesses.

German companies are required by law to join their local IHK, with the exception of handicraft businesses, liberal professions and farms. The subscriptions, paid according to the business capacity, assure the financial and political independence of the IHKs to represent the interest of more than 3.5 million entrepreneurs.

Their role includes tasks assigned by the government such as issuing certificates of origin and setting vocational training examinations. More recently they started a register of companies that meet specific environmental standards. The chambers also are responsible under German law for defining trade procedures and fighting against unfair competition and the pirating of products and brands.

In 2006, the German chambers had 68,847 individual meetings regarding new business plans and issued coaching programmes for 5,146 founders of start-ups. They also work to influence schools and universities, with a view to making the state education system more competitive and in 2006 provided further training programs for 350,000 people.

Both private and public models have their pros and cons. Some businesses can resent the fact that they are forced to register to one organisation. As David Ross, head of strategic communication for Glasgow chambers, puts it, “private chambers are more focused on service and trade, but don’t have the budget with which public chambers can act in broader fields”.

David Frost, chief executive of the British Chamber of Commerce, has no doubt that we are facing “a very significant squeeze on the public sector” and that business support is going to be at the forefront of where the sector will be hit. He argues that a retreat from the business development space gives the chambers a good chance to realise its potential

“Over the last dozen years, there has been huge expansion of public sector organisation, who have got this [business services]. My own view is that there is a very strong brand in the chambers, so we should seek to build upon success. It may be that the right model is half-in-half. You could see some public funding going in to help the chambers, but it will be significantly less than is going to agencies at the moment. The private sector will be able to deliver the same services very efficiently.”

What is in no doubt, is that the time is ripe to initiate what Liz Cameron calls “an open debate” with government in relation to business support.

“We need to recognise that the public sector at all levels will be facing reductions in their budgets, which is real and will not disappear,” she argues. “Locally we need seriously to grow Scottish business and in my view this could be achieved by the public and private sectors working more closely together: identifying our respective expertise, the challenges we face, and collectively providing those solutions in a productive and cost efficient way.”

“Compulsory membership is not the way forward, but more recognition of how our existing chamber network model is delivering. It is on the ground at a local level, with central and international connections, supported by a global brand. All levels of government should reconsider how best to use this unique network.”