Call to close VC gap
Jul 6 2009 by Jez Davison, Evening Gazette
BUSINESS leaders have welcomed a new report calling for a radical rethink of public/private finance to balance the equity gap with the South-east and pull the North out of recession.
The Preparing the Ground report from The Northern Way - a partnership of the three northern development agencies - claims the North-east is a victim of a “troubling imbalance” in the distribution of venture capital (VC) investment in the UK, which, it says is failing to deliver adequate funding to support growing businesses outside the greater South-east.
It proposes a public/private partnership with a “sufficient critical mass” of funding that could be delivered directly to businesses in each major city region. But it warns that Teesside’s growth potential will be constrained unless the Government simultaneously addresses infrastructure issues, including transport capacity and high-speed broadband communications.
Local business leaders have backed the report, which claims public funds are needed to top up private investment and take some of the risk out of vital regeneration projects.
The Confederation of British Industry (CBI) - which was involved in its preparation - said gaps in the private investment environment must be filled.
Liz Mayes, CBI assistant regional director, said: “We are still receiving feedback that credit is not flowing as well as needed around the economy, and many businesses are postponing investment decisions because of this.”
Ross Smith, head of policy for the North East Chamber of Commerce, said: “We have to create a mechanism whereby public sector investment can get a public return through cash or other tangible benefits.”
Tees Valley Regeneration said it hoped it would “act as a catalyst for future action”.
Darlington-based investment specialist Mark Blayney, however, questioned whether it was realistic to expect the public sector to fill the funding gap, given the £180bn of UK Government debt accruing in the next financial year.
North-east businesses have benefited from an estimated £100m-plus of VC-backed investment in the last two years, around £60m-70m from public/private VC funds.
Hugh Morgan Williams, new chairman of The Northern Way who is also director of Billingham specialist energy firm AAG Swepco, said innovative partnerships between local authorities and overseas investors could attract additional revenue to the region.
One North East has already formed several productive public/private partnerships including Onsite North East, a £25m tie-up with developer Langtree to manage the agency’s development land portfolio.
The agency is about to appoint a private sector-led board of VC specialists to oversee investment of the £125m JEREMIE (Joint European Resources for Micro to Medium Enterprises) fund, which is expected to benefit around 850 small local firms when it comes on stream in 2010.
