New dedicated funding for the South West - Tim Jones

It is a sadly rare occasion when three initiatives from Whitehall hit the right spot in the same week. Treasure this moment, as it might not happen again in the near future.

The first, and hugely important announcement, is that after months of negotiation the UK government are about to rejoin the European Horizon Research & Innovation project. This is a £85 billion fund. Whilst we were part of this programme prior to Brexit, since January 2020 we have not been a Member.

This might sound a very remote subject for Northern Devon but it is one of the most important research and development programmes in the world. Our local Universities and Further Education Colleges have been huge beneficiaries from this. A lot of technical innovation has come directly as a result of this initiative.

The benefits of this are then directly available to improve our existing businesses and encourage new starts. The Prime Minister is expected to sign on the dotted line in the next few days, this will be a moment of great relief for our local academic and research institutions.

The second announcement, which is also due to hit the media, is an apparently obscure series of regulations called Solvency II. This is part of the regulations imposed by Europe dating back to 2016. It sets out a series of requirements for insurance and reinsurance companies within the EU, to ensure adequate protection for policy holders and beneficiaries.

The government have been reviewing these regulations as part of the Financial Services and Markets Bill (June 2022), to enable some flexibility for this to be applied. Effectively, this could release funds that are currently held by financial institutions in excess of £100 billion for major capital projects, such as, critical national infrastructure or energy transition.

Whilst it is still necessary to protect policy holders, it has long been argued that some flexibility to better manage risk is long overdue. Many other countries around the world have pension funds which invest in critical infrastructure, such as, the Ontario Teacher’s Pension Plan, which owns the largest number of shares and has been an investor in Bristol airport since 2001.

The government are desperate not to add more to the national debt. Unlocking funds which are currently frozen through regulations, is an obvious tactic. There is a slight increase in the risk factor but this should be easily managed. The benefit of liberating these huge financial resources should be able to benefit the South West, particularly if the government are true to their words on the Levelling-Up Agenda.

The third, and by far the most important government initiative, which was launched last week, is the South West Investment Fund. This is part of a series of Nations and Regions Investment Funds, totalling £1.6 billion. This was launched by the British Business Bank. A total of £200 million has been allocated for the entire South West Region, including everything from Bristol to Cornwall (and the Isles of Scilly).

It is designed to provide funding for new and growing businesses. The intention is to assist in improving productivity, innovation, jobs and environmentally sustainable activities.

The fund has been divided into a number of different product types. There is a small loans fund for new or growing businesses, this starts at £25,000 with a limit of £100,000 for each applicant. There is a debt finance package. Again, these are business loans for those who can demonstrate growth potential.

These funds start at £100,000 and go up to a total £2 million. The third pot is available for businesses who cannot take on debt but have ambitious plans for growth. This is an equity fund for early stage growth. The fund total for each successful applicant is a total of £5 million.

The funds are available immediately. In order to avoid all of the allocation being gobbled up by, for example, businesses in the Bristol or Northern parts of the South West region, the funds have been split and are allocated. Northern Devon is grouped within the lower South West area. The funding pot is then further sub-divided into the three categories described above. It is important to know that this is not a grant fund, also that some matched funding from each applicant will be required.

The programme is sector blind, which means it is open to all comers. Examples of the types of projects which will be supported include funding for expansion projects, leasing or buying new commercial premises, making asset acquisitions, hiring a new team, purchasing new machinery or equipment, and launching a new product or service. These are good examples but this is not an inclusive list, exciting ideas will be encouraged.

This is a great opportunity for a wide range of businesses in our region, such as, manufacturing, tourism and creative/digital industries. Agriculture and marine are not excluded. The trick in being successful with an application will be a clear demonstration of growth potential.

The doors are now open for applications. The fund administrator has appointed Fund Managers to look after each of these pots. Their names are available on the website and it is great that one of our very local companies has been appointed.

The South West Investment Group will be administering the smaller loans fund. For many years they have been doing great work across Devon & Cornwall. They know our geography well. They also have a good instinct for businesses with the greatest growth potential.

This is a brilliant opportunity for us. It comes at a time when other funding sources, through conventional bank lending, are becoming increasingly difficult to access or are simply too expensive. It has long been the case that access to equity funds becomes increasingly difficult to source, particularly in rural areas where there are low levels of business density.

It is also important that this initiative comes with management support. Many of our smaller businesses do not have a Financial Director on board, also many do not have a current business plan. This programme will help to plug these gaps and make sure that there is a shoulder to lean on when the going gets rough.

It is important that Northern Devon already has business organisations who can support our local companies to enter these programmes – North Devon + is a good example. Our Local Authorities also have some excellent and professional officers who can provide economic advice.

It would be my greatest wish that in 3-5 years’ time Northern Devon has filled its boots with funds from this source. There is nothing to stop us now, please roll your sleeves up and dive in.