Talks ‘well advanced’ to create £1bn to fund SME growth in Midlands
Midlands Engine chairman Sir John Peace has revealed that talks have begun to create a fund of up to £1bn to supplement the financial support already in place for business.
Sir John, speaking at a Midlands Engine Investment Fund event to launch the allocation to fund managers of £92m now available for equity financing, set out the target he is now focusing on.
Midlands Engine ministerial champion Sajid Javid MP gave his backing to the Midlands Engine Investment Fund
Sajid Javid MP, ministerial champion for the Midlands Engine, was more circumspect in his response.
He told TheBusinessDesk.com: “When I came in someone talked about ‘should it be £1bn? should it be more than that?’.
“I think £250m is a great start and of course this is just one of a set of funds that is available for local companies to grow and to encourage investment.
“With the way it has been set up, as we see how it works, as we review progress, then we can look to see if it can be built upon.”
The Midlands Engine Investment Fund was announced in George Osborne’s final budget, delivered in March 2016, three months before the EU referendum.
49% of the money for the £250m fund is being provided by the European Investment Bank, while a further 31% is money that originates from the European Regional Development Fund.
It took the head of European Investment Bank in the UK, Wiebke Jardet, to address “the elephant in the room” regarding the UK’s relationship with Europe as she sought to provide some clarification on the impact of Brexit.
“The UK will remain a stakeholder in the EIB until March next year,” she said. “The future relationship between the UK and the EU institutions, including the EIB, is currently being negotiated by Michael Barnier and his team.
“As clarified in the joint UK-EU report in December, the UK considers there could be a mutual benefit from a continuing arrangement between the UK and the EIB and that the UK wishes to explore the arrangements in the second phase of the negotiations.”
The Midlands Engine Investment Fund provides funding to businesses that have been refused funding elsewhere.
The equity funding, launched today, is being split between three fund managers. Midven and Foresight will received £34.5m each to operate a venture fund in the West and East Midlands respectively. Mercia Fund Managers will have £23m for its proof of concept and early stage equity fund that covers the whole of the Midlands, while it is also able to pair MEIF money with its other funding to boost the overall investment.
Dr Mark Payton, chief executive of Mercia, said: “It is perfectly aligned with our focus on the under-served regions of the UK, our headquarters in the Midlands and of course alongside nine of our 19 university partners which are also in the Midlands. Our partnerships with some of the most forward-thinking academic establishments in the country offers a valuable pipeline of deal flow opportunities and will in large part be key to the success of this new fund.”
The fund managers will have until the end of 2023 to distribute the money, with some scope for follow-on investments after that deadline. The investments across the three funding pots can range from £25,000 to £2m.
The funding pots which were announced last summer sees Maven Capital operate the debt finance funds, with £50m for businesses in the West Midlands and £40m for those in the East Midlands. Businesses can apply for loans ranging from £100,000 to £1.5m.
The small business loans have been split between BCRS, which will have £17.5m to distribute in the West Midlands, and First Enterprise, with £12.5m for East Midlands businesses. Loans of between £25,000 and £150,000 will be available.
Four loans from the small business loans debt fund were announced before Christmas while Maven expects to close its first deal shortly.
