Business Advice Toolkit: Subsidised Consultancy

What is it and what does it aim to do?

Subsidised consultancy services are grants or vouchers for firms, or for individual entrepreneurs, that cover all or part of the costs of private advisory services. They may come in the form of a payment before or after the provision of the service. They are usually targeted at micro, small or medium size firms and aim to improve various aspects of business performance.

How effective is it?

For business creation, firm performance (mostly employment, productivity or sales) and survival, the evidence is mixed. On balance, the evidence is somewhat more positive for firm performance outcomes than survival rates or business creation.

How secure is the evidence?

Generally, the evidence base on subsidised consultancy is rather weak, meaning that the conclusions on impact and cost-effectiveness are based on a limited number of studies. More rigorous studies are required. We found no systematic reviews of the effectiveness of subsidised consultancy and no meta-analysis.

We found five studies that examined the effectiveness of subsidised consultancy in business support programmes. Only one of these provided high quality evidence based on a randomised control trial, while three provided before and after comparisons using a control group and the one was a cross-sectional comparison of treated groups with untreated groups.

Two of these studies come from the UK. For a full list of studies and summaries of their findings please see the Annex in the PDF download below.

Is it cost-effective?

The costs of subsidised consultancy can vary substantially depending on the length and intensity of the support provided. In the programmes for which we have impact evidence, the cost of support varied from a low of around £153.8 per participant to a high of £7,602 per participant. Three of the programmes considered compare costs and benefits of the schemes, concluding that the benefits, in terms of employment and turnover, far exceed the costs of consultancy services (with benefits between 7.5 and 50 times costs depending on the study). However, while this may be cost-effective from the firm’s point of view, if these benefits come at the expense of other local firms, this may not be cost-effective from an area point of view.

Things to consider

  • Will it provide value for money? The costs of subsidised consultancy can vary a lot across programmes so it is important to monitor and evaluate their impact, especially on firm performance.
  • How long should the consultancy be provided for? Effects and costs may differ depending on whether the programme is a one-time service or it lasts for a longer period of time. Annual returns may not need to be very high to justify one-time services whereas more intensive interventions will need higher returns.
  • Are gains coming at the expense of other local businesses? The very large positive effects in some of the studies might raise concerns about the possibility of displacement (i.e. supported firms gaining market share at the expense of local competitors, so the net local effect may not be positive). This is more likely to be a problem for firms that tend to serve local markets (see our evidence review on other Area Based Initiatives).
  • What type of firms will benefit most? The effect of subsidised consultancy may vary by firm characteristics (e.g. it may be more effective for medium-size firms than for smaller firms).

Other tools for business advice:

MentorsPublic AdvisorsTailored SupportTraining | Accelerators | Incubators | Investment Promotion Agencies | Export Promotion Agencies | Export Credit Agencies

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