Regional Growth Fund

Thursday 12th July 2012 Written Statements

[The Minister of State, Department for Business, Innovation and Skills (Mr Mark Prisk)]

The regional growth fund is an important part of the Government’s “Plan for Growth” and supports two of the main ambitions:

To make the UK the best place in Europe to start, finance and grow a business;

To encourage investment and exports as a route to a more balanced economy.

The following details will update you on the current round, as well as progress from the previous two rounds.

Round 3

Round 3 for bidding to the regional growth fund (RGF) closed on 13 June and the team received 414 bids with a value of over £2.7 billion. This shows that the fund is relevant, popular and that businesses are looking for opportunities to grow.

A breakdown of bids by region, and by type (programme or project) is provided at annex A.

During the summer all bids will be appraised by officials, the independent advisory panel and the ministerial group. After an initial assessment, Ministers will shortlist bids: those going forward to full appraisal will be visited by officials and those who are no longer in the running for funding will be notified immediately. Announcements of the successful bidders will be in the autumn.

A significant improvement to round 3 will be that the contracting process timeline has been defined—the timings have been fixed so that the terms of a conditional offer must be agreed within three months of the announcement, and bidders then have a further three months to complete due diligence.

This means that bidders will sign a final offer within six months of Ministers deciding to support the bid.

If the process takes longer than six months despite our best efforts, we reserve the right to withdraw the offer of funding.

Rounds 1 and 2

From the previous rounds, 176 successful bids have been conditionally allocated £1.4 billion.

This translates into 237 final offer agreements because some bids comprise of multiple counterparties.

Of the 237 agreements:

110 (46.6%) have a final agreement in place, to a value of over £718 million. These projects are able to draw down their funding. These projects leverage over £3.7 billion of private sector investment.

50 have agreed terms and conditions including leverage, funding and jobs—these will now proceed through due diligence and represent a further £1 billion of private sector investment.

16 have withdrawn from the RGF process in total, which has released over £40 million to be recycled into the RGF. The additional companies to withdraw include: Vestas Technology UK Ltd, Aggregate Industries Ltd, Sirius Minerals and Shepherd Offshore Ltd. See annex B for full list.

61 companies have received draft offers, but are still considering terms and conditions.

My officials are writing to many of these 61 successful bidders, as progressing their bids is a priority. Projects and programmes where the terms and conditions have yet to be agreed, and where no reasons for the delay have been discussed, will be given a time limit to the conditional offer. This money is intended to be used to stimulate the economy and I am confident that if these bidders are unable to take it up at this time and create jobs, then we will be able to find good uses for it elsewhere.

Some 139 (58.9%) projects have started, which is more than those with final offers. Some projects are able to start in advance of signing a final offer as even a conditional offer of Government support can safeguard jobs and unlock private sector investment. Examples of projects which have started:

Getrag Ford in the north-west will use £3.4 million from the RGF to expand capacity for the production of B6 transmissions at the Halewood plant. The RGF investment will be supported by £28.3 million of private investment and will create and protect 120 jobs.

Cornwall Deep Geothermal Energy Project in the south-west will use £6 million of RGF to drill the deepest onshore borehole in the UK to test the potential to site a geothermal plant near Redruth. If the tests are successful, £45 million of private investment has already been secured to drill a further two boreholes and construct a geothermal power plant. The project includes establishing a centre of research excellence in partnership with Exeter university and aims to create over 100 direct jobs and 1,500 indirect jobs.

Birmingham Post Business Growth Fund in the west midlands, managed by Bournville college will make funding of £10,000 to £100,000 available for SMEs and start-ups, as up to 50% match funding for their investment. Each business supported will be provided with a mentor, as well as skills assessment and training. There will be an extensive media-led campaign with various events to raise awareness and engage the community. They will receive £5 million from RGF, supported by £750,000 of private investment and will aim to create 250 jobs.

Value for money

The NAO has recently reported on the RGF. It found that the average cost per job (£33,000) created by the RGF is in line with other similar funds while also recognising that the projects being supported will, in many cases, create wider benefits on top of the immediate employment boost (such as training spill-overs and economic and social infrastructure). The NAO report and Government response to the Public Accounts Committee (PAC) hearing held on 16 May can be seen online:

http://www.publications.parliament.uk/pa/cm201213/cmselect/cmpubacc/writev/104/m02.htm.

The next update on RGF progress will be in October 2012.

Annex A - Round 3 bidding data