THERE is a clear need to generate growth in the private sector, particularly in manufacturing, and last week saw more than £93m earmarked to companies across the North East in the second round of the regional growth fund (RGF).
It is a testament to the North East and the skilled workforce here that so many of our businesses secured funding in rounds one and two of the RGF. The key now for the successful RGF companies will be to ensure that the funds they receive are used effectively as part of a fully integrated, overall approach to expansion and growth.
This investment into the regional economy is very welcome indeed, but more is needed, as illustrated by the fact that many bids were unsuccessful. Indeed the total number of bids in round two of the RGF amounted to £3.3bn compared to a total fund value of £1.4bn.
Consequently many businesses will need to look for alternative sources of funding and often the best place to start is with an internal review. Cost control and cash retention remain key priorities of many businesses in our region.
Cost-cutting should not simply be a tactical action to maintain cash flow, but should be part of an approach to create more flexible and efficient operating models for future growth and should therefore be an integral element of long-term strategic planning.
Additional liquidity to support growth can often emerge from an in-depth review of working capital practices, going beyond simple debtor and creditor terms, to a full review of the business model, supply chain and logistics, invoice processing times and taxation efficiency. Improving financial controls often provides a business with the platform for improved performance and cash generation.
Private equity firms offer significant funding for investment in the form of development capital, and this can be a real driver for growth. Whilst there is a limited number of investment houses with full-time offices based locally, many nationally based houses recognise the strong opportunity in the North East and are keen to invest for growth.
The key is to ensure that companies have a full and clear understanding of their requirements, the different forms of funding that are available to meet them and how best to access them. That is likely to mean examining a range of funding options. Local Enterprise Partnerships, the Green Investment and Big Society banks and other business growth funds will have an important role to play in the future as smaller businesses continue to find that securing finance from mainstream banks is challenging. Having a credible and realistic business plan will be vital to achieve funding in what is an extremely challenging market.
:: David Frith is a corporate finance partner at Deloitte in Newcastle
