The Business Growth Service (BGS), which includes the popular Manufacturing Advisory Service (MAS) and the Growth Accelerator programme, is being scrapped.

BGS stats show that it has assisted more than 28,000 businesses, helped SMEs raise more than £155m in finance and that 9 in 10 firms would recommend it. Since 2012, the BGS has added £4.8bn of GVA and created 110,000 jobs.

The decision came out of the blue. Insiders at the Manufacturing Advisory Service (MAS) tell me that they had been prepared for a budget cut given the scale of Osborne’s cuts to non-protected government departments including BIS, but there had been no warning that MAS would be scrapped completely.

Nor did Osborne make the announcement in his Commons Autumn Statement - or even in the detailed settlement in the spending review and autumn statement, known as the ‘Blue Book’. Rather, notice of MAS’ demise was tucked away discretely on the Business Growth Service Website:

'As part of the Spending Review settlement the government has decided to wind down the national delivery of the Business Growth Service. The BGS will close to new applicants on Monday 30 November and will honour all existing commitments as long as they are completed by 31 March 2016.'

While businesses which have signed agreements with the BGS have been told these will still be honoured, those planning to access the BGS’s match-funding, coaching or mentoring services will now be unable to do so.

Following the announcement, a statement from BIS said the closure of the BGS would save the government £84m. It also said it was investing £12m per year into 39 local growth hubs that were led by Local Enterprise Partnerships.

Indeed BIS has gone out of its way to suggest that MAS is effectively being replaced by local Growth Hubs. But this is somewhat misleading. For a start, the £12m across 39 LEPs works out at just over £300K a LEP. Peanuts.

Secondly, while LEPs here in the West Midlands have prioritised manufacturing as one of their key sectors as part of their strategic plans (European Structural & Investment Funds Strategies or ‘ESIFs’ in the parlance of economic development), what about those LEPs that don’t prioritise manufacturing?

In such cases, local growth hubs are unlikely to offer much support – if any – to manufacturing firms. There is no longer a national drive to support manufacturing, it seems.

Thirdly, the Growth Hubs are simply unready in many cases to take on the mantle.

All of this leaves a fundamental question of where manufacturing firms go for help to when MAS is scrapped. It also raises wider questions about the government’s commitment – or not – to using industrial policy to support manufacturing.

On this, the BIS Secretary Sajid Javid has been pretty much silent since coming into office in May. While the last government didn’t have much of an industrial policy, what it did do in automotive and aerospace was pretty effective, for example through the Automotive Council which brought together key actors and identified opportunities and barriers to growth. That continued the work begun by Lord Mandelson at the back end of the last Labour government.

The Automotive Council is to continue. Critically, though, its work was previously backed up by a range of (modest) interventions to boost skills, rebuild supply chains, and encourage investment in the industry, such as through the Regional Growth Fund, the Advanced Manufacturing Supply Chain Initiative, MAS itself, and MAS’ Tooling up Fund to support investment in tools in the Supply Chain. All have now been scrapped.

This is a great shame as for years the UK didn’t ‘do’ industrial policy. It finally got things right in a few sectors on a modest scale and much of this now seems to be being tossed aside through the combined pressures of Osborne’s austerity and the BIS Secretary’s liberation instincts. It’s the death of industrial policy by a thousand cuts. The government has said that it will continue to support auto and aerospace. I’d like to see what that support will now actually look like.

There has, of course, been criticism of traditional small business business support, but it has to be recognised that MAS was much more than that.

Think for example of its work in plugging finance gaps to enable supply chain firms to ‘tool up’ to win automotive orders, or its work dating right back to the EU-funded Accelerate programme which was used to diversify and upgrade the automotive supply chain in the region (and which helped save tens of thousands of jobs when MG Rover eventually went under).

Or think of its work in supporting the supply chain when disasters struck – whether MG Rover or the Japanese earthquake and tsunami. The latter affected the supply of key components and hence production by Japanese firms in the UK – MAS provided critical support to tide supply chain firms over until production was back up and running.

Or think of its work in terms of its Automotive Response Programme in the last recession. Our own assessment saw this as a rapid and cost-effective intervention that prevented a further hollowing out of jobs and capacity in the automotive sector. On a spend of £4.5 million, the cost per job safeguarded/created was just £1350, with sales of £53 million estimated to have been safeguarded, and £36 million worth created ( Bailey and Berkeley, 2010 ).

Critically, this programme helped the supply chain to diversify and shift into new areas. Indeed, the scheme focused only on viable firms with the capacity to upgrade and diversify, recognizing that lower value added and less ‘strategic’ capacity would be lost. This ‘path branching’ is seen by many scholars as critical in allowing regions to reorientate and renew.

More recently, MAS’ ‘Tooling up’ fund was put in place because of long-standing failures in parts of banking system in relation to obtaining funding for tooling up. Its National Tooling Fund assisted toolmakers and component manufacturers to fund the design, development and manufacturing of tools following a firm order from an OEM. While small scale, it had real impact in also forcing banks themselves to offer more competitive support for tooling up.

Last week we were treated to the BIS Secretary’s presentation of his ‘Midlands Engine’ prospectus. Quite how scrapping MAS will help that has left me scratching my head. Make no mistake: scrapping MAS is a fundamental mistake.

* Professor David Bailey works at the Aston Business School in Birmingham.