One NorthEast - Europe has a big stake

Dec 11 2006 By The Journal

The North-East has attracted over £360m of EU funding - one of the biggest funding allocations available to the UK regions. The European Regional Competitiveness and Employment funding will support economic development in the region over the next seven years.

The allocation follows a major shake-up in the way the EU targets funding across the 25 member states. While the bulk of EU regional funding from 2007-2013 will now focus upon states in Eastern Europe, a significant amount of expenditure (£6.2bn) will be available to UK regions to deliver European Regional Development Fund (ERDF) and European Social Fund (ESF) programmes. There will be 12 ERDF programmes in the UK and the North East's allocation is the highest, per capita, of any region other than Northern Ireland.

Pat Ritchie, director of strategy and development, One NorthEast, explains: "We have known for some time that the way EU funding is to be awarded to established regions, like the North-East, was changing and we have been preparing for this.

"With new countries, such as Hungary and Poland, joining the EU, the money that previously came to the North-East for regeneration and infrastructure activities is now increasingly focused towards these accession countries.

"Money is still available to regions like the North-East but Europe is placing a major emphasis on UK regions to deliver more `hi-tech' activities that will increase competitiveness, create jobs and drive productivity as part of the EU's Lisbon Agenda."

The figures were announced by Government as it published its response to the consultation on the National Strategic Reference Framework (NSRF). This is the document that sets out how EU funds will be spent in the UK over the next seven years. The document also confirmed that the programmes that will be devised by regional partners to allocate EU funds will use the Regional Economic Strategy as the framework for establishing spending priorities.

The NSRF also details changes in the management of ERDF funding in the regions, with responsibility for grant delivery moving from Government Offices to the Regional Development Agencies. Government Offices will maintain a strategic overview of the funding programmes.

Pat Ritchie added: "The ERDF element of £224m awarded to the region for the period 2007-2013 will be administered by One NorthEast and we will be working closely with partners in local authorities, the North East Assembly, the Government Office for the North East, the region's universities and the voluntary and community sectors to prioritise funding.

"The way Europe is moving directly reflects the North-East agenda to drive forward productivity and participation and we are well placed to exploit our strengths in innovation to make best use of this latest tranche of support.

"The EU funds represent a welcome addition to the domestic resources available within the region and will be closely aligned with the RES so that they have maximum effect.

"The RES Action Plan that we are developing with partners over the coming weeks will provide the detail and, importantly, set out what the region wants to achieve in terms of job creation and business growth from its spend."

In recent years, the region has become increasingly successful in using European Funds to support firms and Universities through the development of a suite of equity and venture capital finance packages and business growth initiatives. This new allocation of funding will build on these initiatives and enable the North-East to develop new programmes.

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New £17m funding pot to spark business growth

The region has two new investment funds worth a total of £17m aimed at helping smaller North-East companies with big ambitions reach for success.

The funds will offer targeted loans and equity to small and medium-sized firms struggling to raise finance from traditional sources, helping them grow and plan ahead with greater certainty for the future.

The launch of the Evolve Mezzanine and NEL Growth Funds brings to £115m the total amount of finance made available to regional firms over the past six years through publicly backed investment.

Hugh Morgan-Williams is chairman of North East Regional Investment Fund Limited (NEIF), one of the primary backers of the two new funds.

"The completion of these funds means the North-East can boast that it has more money available to invest in small and medium-sized businesses per head of the population than any other English region," Mr Morgan-Williams said.

Barclays Bank has also contributed substantially to the funds. Steve Walker, Barclays relationships director, said: "Barclays is delighted to be involved in these latest funds.

"Their establishment has been an excellent example of public and private sectors working together for the benefit of the region."

Malcolm Page, One NorthEast director of corporate resources, said: "These two new funds complete a comprehensive suite of funding underpinned by publicly backed investment - helping some of our most dynamic companies at critically important stages in their evolution."

The Evolve Mezzanine Fund offers unsecured loans of between £15,000 and £500,000 - together with an equity option - to companies with strong business plans, experienced management teams and a specific financial requirement that cannot be met by traditional sources.

It will be managed by Evolve Finance, the specialist debt and mezzanine finance division of Gateshead-based NEL Fund Managers Limited.

NEL also manages the £5m NEL Growth Fund, a fast-track funding stream of between £50,000 and £350,000 into companies with high growth potential, with a maximum of £500,000 being invested in any one business.

Both funds were launched on Tuesday October 24, at Durham County Cricket Club, Chester-le-Street.

Two businesses to benefit from a previous round of publicly-backed funding are Hexham-based renewable energy specialists Econnect and development travel company Madventurer of Newcastle.

Both accessed finance from the North East Investment Fund - which houses the new Evolve Mezzanine Fund - to help with company development. John Lawler, Madventurer managing director, said: "NEIF funding took Madventurer to the next level - our mainstay had been student gap year travel and this funding has allowed us to realign ourselves in the marketplace to get into corporate and career break travel."

Guy Nicholson, chief executive of the Econnect Group, said: "As a renewable energy business we achieved 35% annual growth for a decade in an embryonic market through organic growth.

"The NEIF funding is giving Econnect the funding to increase that growth rate to over 50% per annum as the renewables industry takes off."

The European Regional Development Fund contributed 45% of the finance of both new funds.

Peter Smith, head of European programmes at Government Office for the North East, said: "More than half of the European funding in the North-East is dedicated to supporting business. We have pioneered support for access to finance, through cutting edge funds that other regions are looking to replicate."

Steve Garbutt, Evolve Fund manager, said: "The new funds follow on from the extremely successful £18m NEIF3 fund, which closes at the end of the year, and provides access for North-East businesses to another very significant tranche of investment capital."

Potential investee companies must be based within the North-East and have traded for at least 12 months. The Evolve Mezzanine Fund will also support management buy-out or buy-in transactions. Loans are unsecured and are typically structured to be repaid over a period of up to four years.

John Cuthbert, managing director of Northumbrian Water, said: "These funds provide an essential support to some companies on which the region will depend for its future success.

"Northumbrian Water is already a significant investor in the region through its own capital programme and is delighted to help provide the opportunity for others to grow as part of its partnership approach to building sustainable communities in the North-East."

Douglas Robertson, director of business development and regional affairs at Newcastle University, said: "Access to funds for company growth and development is critical for the future success of the North-East economy and these funds are to be welcomed."

Early stage technology venturing company NStar is launching a £2m investor readiness programme to help regional firms better access the new funds and prepare their business to make the maximum use of the finance.

• Businesses requiring more information on NEL's investment criteria should visit www.nel.co.uk or call 0845 111 1850.