North East LEPs come together for £160m 'Jeremie 2' plan

Local enterprise partnerships for the North East and Teesside have joined forces in efforts to create a "Jeremie 2" investment programme, potentially ploughing a further £160m into the region's businesses

Ross Smith
Ross Smith

Local enterprise partnerships for the North East and Teesside have joined forces in efforts to create a "Jeremie 2" investment programme, potentially ploughing a further £160m into the region's businesses.

Tees Valley Unlimited and the North East LEP have already been given Government money and held initial meetings at North East Finance in Newcastle, designed to create a programme board who would manage the fund.

The injection of the money is subject to several confirmation stages from UK Government and European bodies, but its potential has already been welcomed by the North East Chamber of Commerce (NECC) and high profile investor Jeremy Middleton, North East LEP board member.

NECC director of policy, Ross Smith, said: “In the past, some of our excellent regional businesses have found it difficult to access non-banking funding sources, with many investors tending to be overly-focused on business in London, but Jeremie has provided an accessible suite of investment funds for helping our regional businesses grow and expand.

“With the NECC Quarterly Economic Survey demonstrating a growing optimism among our membership and Government GVA statistics showing that the North East is recovering ground on the rest of the UK, it is great to think that the fund could be extended and provide a further boost to regional economic rebuilding.”

Jeremy Middleton added: “It’s great news for North East business that this important source of risk finance has been extended for another year.

“I’m delighted that the North East LEP with colleagues from the Department for Communities and Local Government and the Regional Growth Fund has put together a package that maintains the supply of finance to North East SMEs.

“The next task is to create the terms of reference for a second Jeremie which we are doing jointly, in partnership with colleagues in Tees Valley.”

Jeremy Middleton CBE
Jeremy Middleton CBE
 

The move towards a second fund comes as Ed Twiddy, outgoing director of the North East LEP, confirms that the application for a £20m extension to the current fund has now been granted, providing investment opportunities until the end of 2014.

Twiddy said: “It’s been signed off. A year ago we put in an application and we are delighted to get reward from that process.”

The £125m Finance for Business North East fund – originally named Jeremie – was launched in 2010 aiming to underpin the growth of business start-ups, technology-based companies and growing smaller businesses through targeted loans and equity investments.

Since then it has become the most successful of its type in the UK, helping 500 small and medium sized firms, creating or safeguarding around 2,500 jobs in the region. It is on track to create more than 5,000 jobs and safeguard a further 2,800 by the end of 2014.

Overseen by North East Finance, the programme involves seven funds, each devised to deal with different levels of the market, from startups to larger specialist technology firms, such as AIM-listed Applied Graphene Materials.

So far, around £90m has been invested into 600 businesses within manufacturing, software, IT and engineering sectors, with returns on those investments being returned to a legacy fund.

Chief executive Andrew Mitchell hailed work into a second programme by the two LEPs as invaluable if the region is to cement its position as the most vibrant area outside of London for early stage investment.

He said: “We were meant to finish our active investment the end of this year but in fact that will be extended to the end of 2015 because we’ve got some additional money from Europe and from the Regional Growth Fund so we’ll have an additional £20m to invest during 2015.

“In terms of what happens after 2016, the two local enterprise partnerships have agreed to come together to support a second version of this fund, which will probably be open for business around the beginning of 2016.

“These things take time to put together, but if you are a small business that might need investment over the next few years you are looking at visibility of locally-based venture capital through to 2021.

“Momentum is a key part in all of this. In the past a lot of government intervention happens, then they stop and another one comes along.

“The idea here is that if you get sustainable activity over a long period of time, that creates the confidence in the entrepreneurial community to do things, because you know that if you’ve got a good idea and that it’s investable, you can take it along to somebody who will invest.

“You don’t have to go to London, you have fund managers locally who really understand the market.

“All of our fund managers are based in the North East - they have teams of people based on the ground here.

“All of them are in Newcastle currently, one of them has an office in the Team Valley, so it’s broad venture capital into the North East community, in a major way, for the first time ever.

“If we get this second programme, this Jeremie 2, we’ll have seen £25m going into these businesses every single year.

“The interesting thing about North East Finance and what we do with Jeremie is that we provide the rocket fuel that all of these ideas need and we absolutely endorse things like Science City, Net Park and Digital City because they are trying to create clusters of exciting young companies providing them with all the facilities, support that they need and access to expertise, but they will also need investment.”

Mitchell also believes the funding extension will ultimately encourage graduates to remain in the North East and build their futures, rather than look to London or overseas.

He continued: “I passionately believe that the North East has advantages.

“It’s got five extremely good universities, we’ve got a great entrepreneurial spirit here because we’re quite far from other centres of population. There are lots of entrepreneurs here who build a business.

“Technology businesses can be based here and be powerful worldwide, as Sage has shown.

“The whole point about technology is that you can be worldwide from anywhere.

“For me, whether we get five Sages in five years or 20 Sages in 20 years, some of these small acorns become big oak trees.”

Stephen Catchpole
Stephen Catchpole
 

Both Tees Valley Unlimited (TVU) and the North East LEP recognise that working together on the proposed £160m fund will reduce costs and build upon experience of many years of experience.

Stephen Catchpole, TVU managing director, said: “We are certainly working with the other LEP to make it happen.

“At the moment there will be £160m in funding, and 25% of that, £40m will be for companies in the Tees Valley. The important thing is for the two of us to come together and have a fund.”

Ed Twiddy, who will remain at the North East LEP until June when he takes up a new post at Atom Bank, said: “This is all about the relationship issue – performance of professional fund managers and the relationships they have created having been here for 10 years now.

“The fact that they are physically here and able to continue means we are able to protect something that’s genuinely sensitive to the needs of the region and builds on the fact that relationships matter.

“Now we look to Jeremie 2, and as far as government is concerned they have already given us money to start developing it, and we are making great strides.

“And by far it is the most successful in the UK in terms of incomes, outcomes and outputs, so to be able to extend it is fantastic.”

 A programme team and programme board is now being established between the two LEPs and a full evaluation will be carried out to explore the funds that would be put in place, possibly replacing the current structure.

The work done so far will also ensure that all the legacy funds – dating from 1999 onwards – will remain in the region,

The fact that the North East has been so successful in the field of investment management means there is a tremendous amount of data that lies at their finger tips, dating back to 1999. That extensive learning was used to establish Jeremie 1, and can be easily deployed into a new fund.

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