EXECUTIVE REPORT
15th December 2004
Report of: Assistant Chief Executive - Regeneration
Subject: Business Competitiveness/Growth Fund
SUMMARY SHEET
1.
PURPOSE AND SUMMARY OF REPORT (NOTE: Summary only
needed if report more than 3 sides)
The report proposes a detailed framework for a Business
Competitiveness/Growth Fund as part of the new
Regeneration/Economic Development Service activities. This report
follows on from the Executive Report dated 17th August entitled
Business Support Grants.
2.
IF THIS IS A KEY DECISION WHICH KEY DECISION TEST
APPLIES?
It is over the financial threshold (£75 000)
It has a significant impact on 2 or more wards
Non Key
3.

X

SUMMARY OF RECOMMENDATIONS
It is recommended that:
The Executive Member endorses this report, including the proposals for
the Business Competitiveness/Growth Fund and approval of the
mechanisms identified.
The funding allocations identified in this report be endorsed, but
flexibility be retained to move resources between different funds to
respond to demand/opportunities as effectively as possible.
4.
DECISION IMPLEMENTATION DEADLINE
For the purposes of the scrutiny call in procedure this report is
Non-urgent
Urgent report
X

If urgent please give full reasons
For the purposes for the Scrutiny Call-In procedures this report is
considered to be non-urgent.
BUSINESS COMPETITIVENESS/GROWTH FUND
EXECUTIVE MEMBER FOR ECONOMIC REGENERATION &
CULTURE
PURPOSE OF THE REPORT
1.
The purpose of the report is to outline a detailed framework for the development of
a Business Competitiveness/Growth Fund to support the Council’s Economic
Development objectives.
BACKGROUND AND EXTERNAL CONSULTATION
2.
A report was brought before CMT on 5th August and subsequently approved by the
Executive Member for Regeneration on 17 th August, outlining a framework for
business support grants as per below:
 Start-Up Fund – grants of up to £1,500 aimed at new businesses within
Middlesbrough to encourage entrepreneurship;
 Business Competitiveness/Growth Fund – grants aimed at existing businesses
and potential inward investors to encourage their support and growth;
 Tees Valley/Business Planning Grants – grants to be used in conjunction with
Tees Valley Regeneration to be offered to potential inward investors, or
indigenous businesses planning large scale investments, to help lever additional
funding via the production of business plans;
 Strategic Grants – grants to cover occasions where a particular investment
requires funding but falls outside the parameters of general grant schemes.
3.
The Business Competitiveness/Growth Fund was put forward in order to encourage
and support the growth of indigenous businesses, attract inward investment,
stimulate an enterprise culture, encourage job creation and promote new
technology within businesses. However, no detail was submitted as the funding
allocation and grant criteria were still to be finalised. This report outlines the
relevant criteria for this fund.
4.
The purpose of all the funding schemes is to supplement the activities of the
council’s revitalised economic development team and to address the comparatively
poor economic performance indicators of the Middlesbrough economy. A widely
accepted indicator for measuring the wellbeing of the business sector is the number
of businesses registered for Value Added Tax (VAT). In 2002, Middlesbrough had
a stock of 1,890 VAT registered business, which equates to a ratio of 14 VAT
registered businesses per 1,000 resident population. This compares with the Tees
Valley ratio of 15 VAT registered businesses per 1,000 resident population, 17 per
1,000 in the North East and 28 per 1,000 nationally. Similarly Middlesbrough’s
business stock remains, despite significant diversification over the last decade,
behind the sub-regional, regional, and national indicators for diversity (by both size
and sector) and competitiveness. For example, Middlesbrough’s GDP per head
was £9,997 in 1998 compared to £10,683 for the Tees Valley and £12,548
nationally.
5.
This proposal forms part of the programme laid out within the Promoting the
Economic Vitality of Middlesbrough theme of the Corporate Performance Plan
2004/05, to tackle the poor economic performance of the town, namely to:
 support the growth of indigenous business and provide a positive environment
for inward investment;
 regenerate the key economic locations in the town;
 promote regeneration through culture, arts and learning.
6.
Although this proposal will only form a small part of this process, it is anticipated
that it will provide access for the Economic Development team to work with
businesses in Middlesbrough and support them in order to help achieve the overall
targets.
7.
NRF funding to support economic development activities is in place for 2004/5 and
2005/6 and will fund all the grant schemes including this proposal. The possibility
of attracting further ERDF funding to supplement the fund is also being explored.
8.
Informal consultation as to the demand and format of these funds, has taken place
with a number of business support agencies, including:
 Business Link;
 Inbiz;
 Walker Hall Associates;
 Northern Pinetree Trust;
 Tees Valley Regeneration;
 North East Chamber of Commerce; and
 Federation of Small Business
The result of this consultation was support for the introduction of a grants package
to support Middlesbrough businesses.
9.
Middlesbrough’s stock of existing businesses demonstrates poor indicators in terms
of competitiveness and growth.
It is proposed that the Business
Competitiveness/Growth Fund be established in association with other business
support agencies (Business Link, North East Chamber of Commerce, Federation of
Small Businesses, etc), with the following aims:  to support the growth of indigenous businesses who have been trading for
longer than six months, or to support high-growth business start-up’s;
 to provide a positive environment for inward investment;




to stimulate a stronger enterprise culture;
to encourage job creation;
to promote new technology within indigenous businesses; and
to promote greater productivity within indigenous businesses.
10.
Detailed proposals for the establishment of the Competitiveness/Growth Fund are
attached at Appendix 1. In essence a grant fund will be established offering grants
of up to £15,000 to be available to businesses located or intending to locate in
Middlesbrough, which meet the fund’s priorities.
11.
It is proposed that an initial commitment of £40,000 will be made to this fund in
2004/5 as a pilot phase up to 31 st March 2005. An evaluation will be undertaken at
the end of 2004/5 to determine the scheme’s impacts.
12.
The proposed assessment and approval process is as follows. The process for
considering applications would firstly be via a panel consisting of staff from
Middlesbrough Council Economic Development Team, Business Link, a
representative from one of the high street banks, and an accountant from a local
firm. The panel would make a recommendation for approval or rejection. Following
the recommendation by the panel, the approval mechanism would be by delegated
powers to the Head of Economic and Community Regeneration with quarterly
reporting to the Executive Member for Regeneration.
13.
This grant alongside the other funds that are already established, will provide a
useful tool to enable the Economic Development team to form a pro-active
approach with local businesses.
OPTION APPRAISAL/RISK ASSESSMENT
The following options are available: 14.
Do nothing – the impact of the proposal being declined would be to miss a chance
of accessing an opportunity to improve the comparatively poor performance of the
Middlesbrough economy, specifically with regards to indigenous businesses and
inward investment. At present the economic performance indicators show that
Middlesbrough has poor VAT registrations, lower business stock and poor GDP per
head. These indicators show that Middlesbrough is behind the sub-regional,
regional and national indicators and by not addressing these, there is a substantial
risk of these indicators continuing to show poor performance and declining further.
15.
Approve the proposal – by approving the proposal, this financial incentive would
form part of a process to make Middlesbrough more attractive to further investment
by indigenous businesses and inward investors. Although the grant will only assist
a small number of businesses, it is anticipated that it will provide the economic
development team with a good tool to work with a number of businesses and to
enhance the role of Middlesbrough Council within the business community
FINANCIAL, LEGAL AND WARD IMPLICATIONS
16.
The following table provides an updated summary of the financial implications for all
the Business Grant Schemes:
Grant Scheme
Business Start Up Grant
Business
Competitiveness/Growth
Fund
Tees Valley/Business
Planning Grants
Strategic Grants
Budget (£)
40,000
Maximum Grant (£)
NRF Resident – 1,500
Other – 1,000
15,000
10,000
3,000
10,000
TBC
50,000
17.
The above allocations will be made from the £400,000 of Neighbourhood Renewal
Funding that was allocated to support economic development activities for 2004/5
and 2005/6.
18.
It is proposed that the above commitments are made from the NRF fund as a pilot
phase and that evaluation will take place at the end of 2004/5 to determine the
impact.
19.
Should these incentives prove successful then the scheme will be built into the
medium term financial plan.
20.
It is a scheme, which enables proactive intervention with a significant potential
multiplier effect in that it is anticipated that significant levels of private sector
investment will be secured on the back of Council grant.
RECOMMENDATIONS
It is recommended that:
21.
The Executive Member for Regeneration approve this report.
22.
The funding allocations identified in this report be endorsed, but flexibility be
retained to move resources between different funds to respond to
demand/opportunities as effectively as possible.
REASONS
The recommendations are made for the following reasons:
23.
to address the comparatively poor economic performance indicators of the
Middlesbrough economy, including the number of VAT registrations, etc;
24.
to support indigenous businesses to expand and grow and attract inward
investment to Middlesbrough; and
25.
to continue to raise the profile of Middlesbrough Council within the business
community and re-emphasize the Mayor’s Open for Business theme.
BACKGROUND PAPERS
The following background papers were used in the preparation of this report:

CMT Report – 24th November 2004 – Business Competitiveness/Growth Fund

Executive Report – 17th August 2004 – Economic Development Business Development
Grants
AUTHOR: Richard Dowson, Economic Development
TEL NO: 01642 729560
__________________________________________________________________
Address: PO Box 99A, Town Hall, Middlesbrough. TS1 2QQ
Website: http://www.middlesbrough.gov.uk
Appendix One
Detailed Proposal to Establish a Business Competitiveness/Growth Fund
Objectives
1.
One of the priority areas for the Council’s economic strategy will be to support
business development and growth in the town and contribute to the establishment
of a more entrepreneurial culture.
2.
To support this the objective is that the Council will establish a Business
Competitiveness/Growth Fund alongside the existing Business Grant Schemes.
This fund will have the following objectives:
 to support the growth of indigenous businesses;
 to support the formation of high-growth start-up businesses;
 to provide a positive environment for inward investment;
 to stimulate a stronger enterprise culture;
 to promote new technology within indigenous businesses;
 to promote greater productivity within indigenous businesses
 to particularly support business growth in priority sectors:  knowledge based businesses;
 businesses with the potential for future growth; and
 businesses which add to broader regeneration objectives;
 to encourage businesses to expand and grow, to create additional jobs, and to
achieve the VAT registration threshold;
 to complement and add value to other measures in place to support the growth
of businesses, including Business Link services, other grant regimes, etc; and
 to encourage businesses to become involved with business support networks
and the take up of other business support services.
Proposal
3.
A grant fund will be established offering grants of up to £15,000 to be available to
businesses located or intending to locate in Middlesbrough, which meet the fund’s
priorities.
5.
Certain businesses would be excluded from the scheme as follows:


5.
car related activities, taxis, nightclubs, public houses or bars, betting or gaming
establishments, personal services and retail businesses serving predominately
local markets, and which do not add distinctiveness or diversity to
Middlesbrough’s offer, including take-away food retail businesses, or any
activities involving politics, religion, pornography and clairvoyancy; and
businesses whose activities might bring the Council into disrepute.
Grants will be targeted at companies who have been trading longer than six months
(i.e. excluding those that can receive support via the Business Start-Up Grants),
high-growth business start-up’s who will require more funding than available via the
existing Start-Up Fund, and companies who cannot receive financial assistance
from other sources such as Business Link, Selective Finance for Investment (SFI),
etc.
6.
Grant assistance is aimed at job creation or improved competitiveness within the
Middlesbrough Council boundary and it is anticipated that all projects will have
some job creation elements to them or with some significant improvements in
business competitiveness.
Scheme Administration
7.
Middlesbrough Borough Council would administer the scheme.
8.
A fast response in decision making on financial support is essential. However, any
decision making process needs to be thorough and accountable. The process
outlined below is designed to satisfy these requirements.
9.
A key part of the process involves the use of an independent panel, which
assesses and advises on grant applications. The panel is chaired by a member of
the Middlesbrough Council Economic Development team and consists of the
following representatives:
 Business Link;
 a representative from one of the high street banks; and
 an accountant from a local firm.
Members of the panel are required to declare any interest in an applicant’s
business, both past and present, to enable a suitable alternative member to be
found. The panels’ decision will be via consensus and will be dependent upon the
number of applications compared to the budget available.
10.
The integrity of the decision making process is essential and a clearly defined two
stage process is followed.
Stage One – Application and Evaluation of Projects
11.
A Business Development Officer of Middlesbrough Council will visit the business
and discuss the project. The business will be notified that the grant scheme will be
a competitive process due to budgetary restraints and that the quality of application
will be critical. If there is merit in an application the business will be asked to
develop a business plan, complete an application form and a statement of interest
from each principal behind the venture. The business plan is expected to be in a
standard format, including the relevant financial projections.
12.
Applicants who have been in business for 12 months or more will be expected to
provide their most recent accounts. In the case of limited companies, these are
audited accounts.
13.
The following assessment criteria are taken into account when considering
applications:
 Will the project/business go ahead without MBC assistance? If yes, how will
MBC assistance improve the viability/performance of the project? Will MBC
assistance:
- reduce risk;
- reduce gearing ratios
- improve initial cashflow position; and





- otherwise improve the potential for success.
Will the project increase local competition? If yes will this have an adverse
effect on existing businesses within the town?
How will the project lead to improved business performance?
How will the improved performance be demonstrated in financial or market
terms?
How many jobs will be created?
Experience of the management team.
Answers to the above questions will be crucial to the decision making process,
given the budgetary constraints.
14.
The emphasis will be placed on the applicant to develop a business plan. Business
Development Officers are available to guide on this process, to enable a company
to submit an application, which covers the panel’s requirements as fully as possible.
15.
The business plan will be then evaluated by the Business Development Officer and
a report written for presentation to the panel with information provided by the
business (see 3.6.1)
16.
This process is carried out in conjunction with a Business Adviser/Counsellor from
the business support network if they are assisting the business.
17.
An informal information check will be run, either on the company or the individuals
in the case of partnerships or sole traders to check for poor credit history and
disqualified directors, etc.
Stage Two – Appraisal and Decision Formulation
18.
Once the Business Development Officer considers they have all the pertinent
information, their report together with the business plan and other information is
circulated to panel members.
19.
The panel members then appraise the information received.
20.
There follows a meeting of the panel, at which the Business Development Officer
presents applications.
21.
If any member of the panel requires additional information or clarification on
aspects of the application, then the recommendation is deferred until further
satisfactory information is received.
22.
Once the panel is satisfied that enough information and clarification is available to
make a final decision, the panel will make a recommendation as to whether the
application should be approved, or declined and, in the case of approvals,
recommend a level of support.
23.
All panel decisions are fully minuted, including any points of clarification and the
panel’s ultimate recommendation.
24.
Following the recommendation by the panel, if positive the approval mechanism for
this scheme would be by delegated powers to the Head of Economic and
Community Regeneration with quarterly reporting to the Executive Member for
Regeneration.
Follow Up and Monitoring Process
25.
Successful applicants for grant assistance are notified in the form of an offer letter.
This offer letter includes: -
26.
The amount of assistance being offered.
27.
Any conditions that may be attached to the grant, e.g. the increase of full time
employees anticipated, the purpose of the grant.
28.
Details of any clawback, which may be imposed on the business. This includes:
 full repayment of the grant should the business cease trading or move outside
the boundaries of Middlesbrough within two years of receiving the grant; and
 full repayment of the grant should the terms & conditions of the grant not be
met;
29.
Businesses awarded assistance will be monitored in the following ways:
 Business Development Officer making regular visits to the company;
 businesses to provide quarterly management accounts and final annual
accounts, audited in the case of limited companies;
 six-monthly telephone questionnaires/on-site surveys; and
 completion of annual pro-forma to confirm the number of full time employees (or
equivalent) the business has.
The length of time of the monitoring process is dependent upon the individual
projects, and is determined as part of the decision making process.
Funding Available
30.
An initial commitment of £40,000 has been made to this fund in 2004/5 as a pilot
phase. Evaluation will be undertaken at the end of 2004/5 to determine the
scheme’s impact on supporting indigenous businesses (via enquiry/business
support programme entry-rates), and on business sustainability (via comparison
with previous rates). Evaluation will also include qualitative as well as quantitative
evaluation of scheme impact with businesses, including the popularity of the
scheme, i.e. number of expressions of interest and applications.
31.
To avoid disruption to the scheme and unnecessary distortion of support available,
and to maintain momentum, a commitment of £40,000 will also be made to the
scheme in 2005/6 whilst the evaluation is undertaken. Future funding for the
scheme will be subject to the evaluation. It may be possible to secure additional
ERDF funding and this is being explored.
32.
The scheme will be funded from NRF resources already in place for economic
development.