With Brexit looming, we’ve been running a series of workshops with local areas to think about different policy responses and consider what the evidence says on effectiveness. One thing that local areas wanted to know was what the evaluation evidence said on export support and inward investment promotion. In response, we’ve surveyed the available evaluations and launched three new toolkits that consider what we can learn.
Two of the toolkits look at supporting exports through either export promotion agencies (EPA) or export credit agencies (ECA). The third, looks at inward investment promotion.
What did we learn? The toolkits themselves provide lots of details but three things stand out for me.
The first, which comes through clearly in the EPA and ECA toolkits, is that lighter touch interventions might be more cost effective. Evaluations of both kinds of support suggest that they can increase exports but the proportion of studies reporting positive effects is slightly lower than for relatively cheaper ECA support. When it comes to which types of EPA or ECA support are most effective there’s not a lot of evidence available. What evidence there is for EPAs suggest that limited resources may be most productively spent educating and informing businesses about exporting because lighter touch market information appears to be more effective than more intensive and expensive market service provision. Similarly for ECA, where again we don’t have much evidence, what we have suggests (cheaper) insurance provision may be more cost-effective than (more expensive) credit provision. I think this is important and pretty striking. It also flags, as with so much business support, that we need to do more piloting and testing to figure out what interventions are cost effective. Brexit might be a good moment to start.
The second thing that stands out for me builds on this point. Despite all the arguments about UKTI and the need to regionalise export support or inward investment agencies, the evidence doesn’t really make the case either way. On EPA there is some evidence that UK support arrangements are at least as effective as support in other countries. For both IPA and EPA the available evidence suggests that regional agencies are no more or less effective than national support. We reach a similar conclusion on sector targeting. We simply don’t know if this helps with effectiveness. As is so often the case, arguments about the structure of the support and who has control distract from efforts to focus on the nitty gritty of the most cost-effective ways to provide support.
The third point I’d highlight comes from evidence on whether EPA improve other aspects of firm performance. The broader evidence base suggests that firms can ‘learn by exporting’. However, while some EPA schemes may improve firm performance the evidence suggests that most don’t. This suggests that other forms of direct business support might be better at delivering general improvements in firm performance (see our business advice toolkits).