The North East has been urged to end the days of spending public cash on business parks filled with empty buildings.
One of the region’s leading financiers has said the time has come to use taxpayers’ cash to “back business not buildings”.
Jeremy Middleton, one of the region’s most influential investors, is calling on council leaders to move on from the days of “cutting a ribbon on a new site” and back a new loan fund.
The Middleton Enterprise boss sits on the region’s Local Enterprise Partnership, tasked by the Government with spending £500m of European cash over the next six years.
And while council leaders on the panel may want to spend the cash on buildings and roads, Mr Middleton is urging them to put money towards a £90m loan fund which, once repaid, would be used again to fund more regional firms.
Under strict EU funding rules, any use of the money will have to be match-funded by other sources, with councils the most likely to have to chip in to the loan fund.
As such, Mr Middleton would need to have control over an ever more scarce pot of council cash to make the fund a success.
“If we had this there would be no need for ongoing public funding going into the area,” Mr Middleton said. “It is a chance to finish the job of reducing our dependency on the public sector and give a significant competitive advantage to the North East.”
Mr Middleton, who leads on private sector investment for the partnership, said the region had already seen a high return on a similar loan fund, and giving local firms access to cash when banks were still reluctant to lend was the best way to grow the economy further.
Hinting at tensions on the partnership between businesses and the region’s seven council leaders, Mr Middleton said: “Yes, there are jobs linked to infrastructure, but the private sector will build offices if it needs them, we just don’t need more business parks, and we face a situation where the ones that exist are in some places empty.
“It is attractive to cut a ribbon on a new site, but we don’t have the businesses to go in them.”
He said the local enterprise partnership needed to agree a plan for how it will spend the cash, saying the group was likely to back some type of loan fund.
“We absolutely need to be the market leader in venture capitalism outside of London, that is how we will succeed.”
Last night, Newcastle Council leader Nick Forbes said the argument in favour of a loan fund was just one consideration.
He told The Journal: “These European structural funds are an opportunity to increase our investment in physical and social infrastructure, and particularly to ensure that people who are far away from the labour market are supported into employment.
“If you ask a venture capitalist whether this money should go to venture capitalists, they will say yes. But the important thing is that we have a broad range of projects that reflect the diversity of our economic needs in the region.”