Small businesses 'creating many new jobs'

A government initiative that involved handing grants to small businesses in deprived areas has helped to create "significant numbers" of new employment positions, a new report has indicated

The Centre for Economic Performance at the London School of Economics study revealed that businesses which received grants worth up to ten per cent of the cost of a business project, or around £5,000, created seven per cent more local jobs than if the grant had not been made.

The findings have led to calls for the coalition to reconsider its decision to scrap the Grants for Business Investment scheme, which has issued £470 million to 2,361 firms in deprived areas over the last seven years.

Professor John van Reenen, who led the study, said it showed that firms with fewer than 150 staff could be encouraged to hire unemployed people for a "relatively small cost" and boost the UK's job numbers.

"By completely scrapping it and not refocusing it on SMEs, [the coalition] was absolutely throwing the baby out with the bath water," he added.

It is now hoped the report will lead to a government U-turn and the reinstatement of the grants as the UK looks to increase job numbers in 2012.

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Posted by John Oak and Wayne Bly

Filed: 01-02-2012