PART 1
(OPEN TO THE PUBLIC)
ITEM NO.
REPORT TO THE
LEADER OF THE COUNCIL AND LEAD MEMBER, CHIEF EXECUTIVES DIRECTORATE
Date: 1st March 2006
TITLE: Funding for Salford Hundred Venture
RECOMMENDATIONS: Approve the use of Local Authority Business Growth Initiative (LABGI)
funding to ensure the continuation of business support services in Salford.
BACKGROUND DOCUMENTS Economic Development Strategy, Community Plan
CONTACT MEMBER / OFFICER: Stuart Kitchen Assistant Director Economic Development.
Financial advice from John Spink Head of Finance and Nigel Dickens Principal Group Accountant,
Regeneration and Improvement.
WARD (S) TO WHICH REPORT RELATE (S) ALL
KEY COUNCIL POLICIES (that have an impact on service delivery)
Economic Development Strategy, Community Plan
CURRENT POSITION
At the present time the situation relating to funded business support is as follows:
New business starts – SHV contract with ChamberLink ended in December 2005. SHV, Ridgway
Associates and Manchester Business Consortium have been successful in submitting a coalition
bid for new business start up services in Salford, Tameside and Manchester respectively. The
allocation of funding for these contracts has maximised available ERDF and is just over 20% of
previous years - as a result ChamberLink have asked for a revised model of support services to
reflect the dramatic cut in funding. It is suggested that clients under a new proposed delivery model
will have 5/6 contacts – via one to one or group sessions - compared with 17 in the previous
model. While it is accepted that this is a result of financial stringency the delivery model has no
provision for post start care, which could have a bearing in survivability prospects.
Support for existing business – ChamberLink are no longer providing funding for existing
business support. ChamberLink will be providing direct delivery of business support to small and
micro businesses as part of their overall business support package - including services such as
Business Information, Client Relationship Management, networking and specialist support such as
International Trade advice and the European Information Centre services. The services offered by
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ChamberLink complement current support for existing businesses but do not directly relate to the
activity involved in dealing with the operational and training requirements of micro companies.
The Agency does have recourse to the business information centre amongst other sources but the
other facilities on offer are more relevant to the larger and more developed firms and businesses
than small and emerging businesses in Salford.
Neighbourhood Renewal Funding – SHV currently have a contract for 2005/06 to deliver business
support services to start up and existing companies. This funding is currently filling the gap left by
the withdrawal of ChamberLink contracts, but after March 2006, there will be a large funding gap
for services demanded by, on average, 700 local businesses per year.
SHV funding analysis
2004/05
2005/06
2006/07
£338K
£75K
£211K
£122K
£671K
£311K
£125K
£180K
£84K
£700K
Expenditure
(£650K)
(£680K)
(£500K)
Gross Profit
£21K
£20K
(£95K)
Income
ChamberLink
NRF
Private sector
Other
Total revenue
£250K
£80K
£405K
The accounts of Salford Hundred Venture have been examined and the following conclusions have
been drawn:
The total assets from the audited balance sheet as at 31/3/05 of SHV were £589,204. This
includes reserves for a deposit on a building (£300k) and funds for sustainability (£289k).
Within the funding predictions there is no expectation that SHV will move premises.
The audited bank balance as at 31/3/05 was £522,758.
According to the management accounts statement, the profit and loss position for the current year
shows a deficit position of around £40k.
The position as regards the other funds is that these are subject to tender at the end of this
financial year for the Out of school Childcare services. SHV expect the provision of the service to
increase and have therefore increased the expected income by £10k per annum, which is much
greater than the increase would be for inflation. There is considerable risk attached to this income
stream and should the tender not be awarded to SHV then there will be a significant impact on the
projected revenue income.
The position as regards the private sector income is that this figure is projected to increase on an
annual basis of £20k. Again should this projection fail to be realised this too will have a serious
impact on the revenue income.
The best-case scenarios have been used in the case of the private sector and the other income to
reduce the burden on SCC, however, it should be noted that there is an element of risk with this
income.
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The fixed costs are predominantly staffing and premises and the direct costs would of course
reduce as the income reduces. Should future revenue streams fail to realise target income this
would have an effect on the current fixed costs.
SHV produce monthly management accounts and therefore monitor their financial position. Any
issues arising are dealt with quickly, and they are able to plan for the future.
The predictions have been based on the audited accounts for 2004/05 with an adjustment for
inflation.
NRF allocation
A recent submission for NRF funding was unsuccessful as the LSP decided that priority should be
given to activity around health and education floor targets and that a successful LEGI bid would
fund any future business support services.
Proposal
Income
ChamberLink
£75K
SCC 135K
Private sector
£250K
Other £80K
Total £540K
Income
ChamberLink
£75K
SCC 115K
Private sector
£270K
Other £90K
Total £550K
Income
ChamberLink
£75K
SCC 96K
Private sector
£290K
Other £100K
Total £561K
Expenditure
Expenditure
Expenditure
Direct £220K
Fixed £320K
Direct £224K
Fixed £326K
Direct £228K
Fixed £332K
Total £540K
Total £550K
Total £560K
Net Profit
nil
Net Profit
nil
Net Profit
£1K
Programme
includes all
activity in the
preferred
option but with
a lower
intensity of
existing
business
support on
average 5
contacts with
client generating
only 65 starts
per annum
and a 60% 3
year survival
rate
This funding
scenario
guarantees the
short-term
survival of SHV
and as such a
continued
business support
service in
Salford. It is
predicted that
self-employment
rates would
decline as would
GVA and it is
likely VAT deregistrations
would increase.
Funding implications
It is proposed that the Council enter into a contract with SHV and ChamberLink guaranteeing a
financial ‘safety net’ over 2006/7 – 2008/9 and that this commitment will reduce each year as other
funding streams are sourced. This contract would be subject to a 3-year business plan detailing
specific agreed outputs and a sustainability strategy that will see SHV become self-financing by
April 2009. Funding will be channelled through ChamberLink to SHV and as such will have access
to management information in order to ensure a co-ordinated service but will not receive a
management fee for this.
The source of funding recommended is the Local Authority Business Growth Initiative, which is
intended to create positive financial incentives for local authorities to work in partnership with
business and other key players to maximise economic growth. The level of funding obtained from
LABGI is a direct function of the number of businesses starting up and surviving. Therefore a
funding model based around LABGI could be developed to reward and incentivise business
support activities provided by SHV for the period 2006/07 – 2008/09.
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