£10m shot in the arm for crisis firms

Sep 4 2008 by Peter McCusker, The Journal

AN emergency £10m economic “shot in the arm” fund has been launched to help hundreds of North East firms hit by the economic slowdown.

Regional development agency One NorthEast has raided its £350m annual budget to find the cash which it will spend over the next nine months

The Government initiative was launched on the day a new report branded the North East “the least competitive region” in the UK.

It includes over £6m to help new and growing firms, £2.5m for established business to work smarter, a further £250,000 to help struggling firms and £1m to help with rising fuel bills.

Alan Clarke, ONE chief executive said: “I believe the current economic problems will last for the next 12 months and supporting regional businesses at this time of great economic challenge is of the utmost importance to One NorthEast”.

North East Chamber of Commerce policy director Andrew Sugden said: “The help for struggling companies who may soon be facing serious problems will be welcome and it’s good to see One NorthEast getting prepared in advance.

“However, there were a lot of frustrations directed towards the Government over its long-term policy decisions which are hindering business. The removal of empty property rate relief and increasing bureaucracy and red tape have come at the wrong time for business.”

Alan Hall, regional director of the Engineering Employers’ Federation, said: “This was a realistic assessment of the regional economy, some companies are scaling back investment, and it’s a more problematic time to start a business, but there is still a real belief the regional economy can move forward and these measures will help.”

IN recent years the North East economy has outperformed the rest of the UK with manufacturing witnessing three years of successive growth, exports reaching record levels earlier this year and the number of new businesses rising at faster than the UK rate.

But the economic downturn, which started with last Summer’s credit crunch and has now spread to the housing market, knocking consumer confidence at a time of rising inflation, is beginning to impact on the North East.

A new report released by One NorthEast yesterday called ‘The North East Economy: A Joint Response to Changing Circumstances’ said: "There are increasing signs the business environment is getting much more difficult.

"There has been a marked change in business confidence over the past few months, for example funding new venture - especially for smaller businesses - is harder to secure and businesses are reporting outputs ands new orders are falling at a fast rate."

In the light of these difficulties ONE yesterday unveiled a £10m package of support for business containing four primary thrusts.

1.An extra £2.5m into the Selective Finance for Investment (SFI) grant to help SMEs expand, create new jobs and safeguard existing posts.

So far this year 68 companies have benefited from £10m of SFI money.

2. An additional £6.25m into the North East Investment and Co-Investment Funds to give access to finance for growing firms.

Since 2004, 225 businesses have benefited from over £40m of cash support from these two funds.

3. A doubling of the annual support of £250,000 to the Company Rescue Pathfinder programme to help firms struggling with tax and credit issues.

This has helped 130 businesses with tax and debt issues in the last six years.

4. An extra £1m into the innovative Energy Resource Efficiency scheme to help firms cut rising fuel bills.

This has helped 110 companies save a total of £2m in the last 18 months.