Coalition shuts North East business fund

BUSINESS growth in the North East suffered a double blow yesterday when ministers snatched away critical funding lifelines.

david cameron

BUSINESS growth in the North East suffered a double blow yesterday when ministers snatched away critical funding lifelines.

On the day that Prime Minister David Cameron said his Government would do more to help small and medium sized enterprises (SMEs), it emerged that a fund helping those firms has been quietly axed.

The Grant for Business Investment has provided more than £50m to help North East firms grow in the last two years alone, helping create nearly 8,000 jobs.

Under the scheme, businesses received around 10-15% of a project’s capital cost but – crucially – the minimum threshold for applications was just £10,000.

And in a further blow, a minimum £1m bid level has been placed on organisations wanting to apply for money from the Government’s £1.4bn regional growth fund – sparking fears that will be out of SMEs’ reach.

That is despite the Government yesterday holding a summit with small business in London yesterday in recognition that SMEs are at the heart of the economy, providing 60% of jobs and half of national income.

During the event, Business Secretary Vince Cable came under pressure to ensure small firms had access to the regional growth fund.

But he said: “There is a threshold of £1m, so it is for packages over £1m, and individually small companies are unlikely to bid for it on that basis.”

Challenged by The Journal, Small Business Minister Mark Prisk insisted SMEs would be able to access the fund – although the Federation of Small Businesses (FSB) warned he was being was unrealistic.

“If you look at the rules, businesses are able to come forward with proposals for the regional growth fund. Clearly, they need to be of a certain size and the minimum we have established is £1m.

“But that doesn’t mean that various projects across the country with a common theme can’t be pooled together in order to make up the £1m in value.”

Regional FSB chairman Pauline Osborne said: “It is going to have to be me and 200 other people? I cannot say it can’t be done, but it’s not convincing.

“I don’t see that as being terribly helpful, the bidding for £1m for small businesses. A lot of smaller businesses may only turn over £50-60,000 a year. Why would they want £1m?”

A spokesman for manufacturers’ organisation EEF said: “The Grant for Business Investment scheme was used extensively by North East manufacturers and was a valuable source of investment in helping to expand and growth their business.

“And therefore the news of the scrapping will come as a disappointment to many North East manufacturers.”

Mr Prisk said an issue of “affordability” made the continuation of some programmes “impossible”. A Department for Business spokeswoman said “exceptional” bids of more than £2m would still be considered.

Page 3 - Cameron told the banks will not shell out >>

Cameron told the banks will not shell out

SMALL business leaders have told David Cameron that the struggle to persuade banks to lend money was stopping job creation.

The Prime Minister visited a graphic production company in Watford before meeting bosses from the town’s Croxley Green Business Park.
Mr Cameron said he wanted to get their problems “nailed down“ and admitted it was difficult to know “which lever to pull” to get banks to lend more money.

Oliver Bridgeman, managing director of Rocket Graphics, discussed the issue of banks wanting personal guarantees for loans, as he guided the Prime Minister around his workshops.

Mr Bridgeman said: “We spoke about how the economy has turned around and we are ready to expand.

“We have full order books but the capital equipment we need to maximise the returns is difficult to purchase, because we aren’t getting support from the banks.

“They are asking for personal guarantees and yet our books are just as good as four years ago. If we could expand we could employ more people.”

Region hit hardest as money-raising scheme axed

THE North East will be the hardest hit by the axing of the Grant for Business Investment, official figures show.

The scheme provided a capital grant to businesses to help them expand, rationalise, modernise or diversify and it has played an "important and effective" part of the economic development of the North East, according to the latest report on the scheme.

During 2009-10, 179 applications for the fund were made in the North East and 119 offers made to the total value of £32.2m.

The projects were associated with £294m capital investment, and forecast to create 4,847 jobs and safeguard 1,246 jobs, at an average cost per job of £5,290.

The total award dwarfed the amounts handed to other regions, with Yorkshire the second largest recipient with £14.6m of Grant for Business Investment awarded in the last financial year.

While the amount on offer varied, firms typically received around 10-15% of a project’s capital cost. The minimum threshold for applications was £10,000.

Delivery of the scheme was primarily through regional development agencies, which are now being axed. Applications for up to £2m were appraised by One North East, although bids between £250,000 and £2m went to the North East Industrial Development Board.

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