Just 6% of £250m business fund invested in 17 months

Sir John Peace, speaking at the Midlands Engine Investment Fund launch event (Credit: Jas Sansi)

The Midlands Engine Investment Fund (MEIF) has revealed it has paid out £15m to growing business in the region in the 17 months since the first funds went live.

It means it still has £235m to invest in the 71 months before the deadline.

George Osborne announced the Midlands Engine Investment Fund in his 2016 Budget

The money was first announced by then-Chancellor George Osborne in his Budget in March 2016.

£120m was released for the Fund’s debt finance and small business loans in August 2017 but the £92m allocated to the equity finance funds was delayed by legal issues with the original procurement process and only became available in February 2018. The remaining £38m is being held back to be provided to the fund managers with highest demand.

The taxpayer-funded MEIF refused to provide any breakdown of the performances of the individual funds nor say whether those funds are on target.

It would only said that more than 100 businesses had been supported and the funding had leveraged an additional £10m of private sector investment as it trumpeted a “£25m milestone”.

A spokesperson for the British Business Bank, which oversees the Fund, said: “The MEIF’s investment rate continues to grow, with both debt and equity funds increasing traction in the market place across the East and West Midlands.”

The MEIF as a whole has invested 6% and West Midlands-focused funds managed by BCRS and Midven are both ahead of the average.

Maven Capital is responsible for providing loans of up to £1.5m and has £50m for the West Midlands and £40m for the East Midlands.

Its own website details just nine deals from the two funds, totalling £3.26m – or 3.6% of the £90m it is managing. If it were to maintain that average deal value, it will need to complete another 240 deals in the next five years to invest all of its Midlands-wide funds.

In response to questions from TheBusinessDesk.com, a MEIF spokesperson said: “In the East Midlands, Maven has been responsible for a number of significant investments, including £500,000 to Leicester-based Lifeplan and £250,000 to Mansfield-based Proskins, with two sizeable Nottinghamshire deals set for announcement in the coming days.

“Within the West Midlands patch, Maven has done a number of high-value investments in multiple sectors – with £160,000 to Worcestershire-based Validair, £500,000 to Black Country-based Serene Furnishings, £350,000 to Tamworth-based OnLogistics and £1m to Coventry-based The GP Service being some significant deals announced in the past six months.”

Raj Minhas (Maven Capital Partners), Tasleem Tasab (Serene Furnishings) and Paul Brown (board member of the Midlands Engine Investment Fund)

Maven’s first West Midlands deal from the MEIF – with OnLogistics – was only announced six months ago, while the deal with Serene Furnishings only included £250,000 came from the MEIF, with the same amount being put in by HSBC.

The £250m MEIF brings together funding from Government, the European Regional Development Fund, British Business Bank and European Investment Bank. The 10 Midlands Local Enterprise Partnerships (LEPs) have redirected £79m of their European funding from a 2014-2020 programme into the MEIF.

More than 15% of the £250m MEIF is being held back so that it can be allocated to the best-performing fund managers.

The British Business Bank spokesperson added: “The British Business Bank and all appointed fund managers are committed to accelerating deal flow further. The MEIF will be investing until 2023 and we look forward to building this momentum over the next four years.”

The small business loans funds, which can provide loans of up to £150,000, are managed by BCRS, which has £17.5m to distribute in the West Midlands, and First Enterprise, with £12.5m for East Midlands businesses.

The equity finance is split between three fund managers. Midven and Foresight received £34.5m each to operate a venture fund in the West and East Midlands respectively. Mercia Fund Managers has £23m for its proof of concept and early stage equity fund that covers the whole of the Midlands.