As the Let’s Grow programme draws to a close the pot of money available for grants empties. Less money has implications for applicants still wanting to take advantage of the scheme, as Neville Bearpark of accountants UNW explains.
“The whole programme is a competition and as it comes towards its end funds will be scarcer and this highlights the need for a strong application because we’ll get to the point where we’ll perhaps need to raise the bar. It’s a competition, everybody has to put forward an argument as to why they need it and if the panel don’t think that argument is strong enough they will reject it.’’
So, what makes a good application? First, it’s important to remember that Let’s Grow has to meet strict rules laid down by the Government and the EU State Aid Rules. It can support sound investment projects from businesses typically in the manufacturing sector or which provide a service which has a reach for a B2B service beyond the North East, such as a national IT provider.
The amount of support asked for must be the minimum needed but mustn’t exceed the limits imposed by State Aid rules. This means a maximum level of support of 30% on capital projects and 25% on R&D projects. Depending on size of the applicant and project location these limits can be as low as 10%.
State Aid rules say large company capital investment projects can only be supported where they represent a new activity for the applicant, the project is not a relocation project and the applicant has not closed down similar activities in the UK. A change in the State Aid rules means a larger company (employing more than 250 people) could qualify if the project means the employment of `disadvantaged workers’. This could be somebody who has been unemployed for six months, or somebody under the age of 25, or is just leaving full-time education, and also anybody over the age of 50. Female workers might come into this category if there is a gender imbalance in an industry such as engineering.
“So if a business is employing that sort of profile of people we might be able to do some interesting things in terms of the grant,’’ says Bearpark. For the Let’s Grow programme, the investment panel will focus on the difference the project will make. Here, the jobs impact is vital. The panel looks at the number of jobs created in relation to the grant and, as a general rule, wouldn’t expect the grant to exceed £10,000 per job created or safeguarded.
Only projects that can demonstrate that the amount of grant is genuinely needed will be supported. It might be that grant support is needed to mitigate project risks or influence the location of a project that might otherwise go overseas.
There is also a need to demonstrate the viability of the business and that the project is deliverable through a robust business plan and strong management. Let’s Grow is not for local businesses which provide only a local service, such as shops, hotels, or care homes. Property development and infrastructure are also excluded – there is other support available for such schemes from the LEPs and European funds such as the new ERDF programme.
Others that would not qualify are projects already underway or which can proceed regardless of grant; where they cannot provide clear evidence that all other possible funding sources, including internal, have been used; projects which displace jobs elsewhere; companies in financial difficulties; and applicants which cannot demonstrate there is adequate conventional funding in place to deliver the project. Bearpark explains that many companies which contact BE Group with an expression of interest fail.
“The reason they fail is that they don’t read the scheme criteria. But we make it quite clear there are certain sectors we can’t support and applications from those sectors will be rejected right at the very beginning. The scheme is really aimed at manufacturing businesses and those that service that sector.
“The next hurdle is compliance with State Aid rules. So, applications could be in the right sector but might get knocked back because they fall foul of some of the technicalities around State Aid Rules. “If they get through the initial stuff, it’s a question of what the investment panel rejects applications for. More often than not, it’s simply because they don’t believe the applicant needs the grant. Quite often a company is very profitable, has lots of cash and they don’t need support and that’s a valid and common reason for rejection.’’
The last hurdle after the panel is UNW’s due diligence. “We reject very few at that stage and it would be on a real technicality or because the company had lied on its application,’’ says Bearpark.
And is making an application to Let’s Grow an onerous and time consuming business? “No, it’s not. It’s always a criticism of grant applications and people will say it’s too much hassle and too much red tape. We don’t think it is and across all 150 applications I can’t recall an instance where anybody has said it’s too difficult.’’
Applicants can always use the services of an accountant to help them with the application and about half of the Let’s Grow candidates do so.
“Potentially an adviser could add value but it’s by no means needed,’’ says Bearpark. Furthermore, the work that goes into making an application can bring benefits to a company that go beyond the grant itself. He adds: “We do require a business to provide us with what is tantamount to a business plan. They have to do financial forecasts and they will be monitored against those forecasts.
So, I think a spin-off is a bit of external diligence in their business. There are also benefits in going through the appraisal by UNW because when we do that we will provide some advice for a company if we think there are issues.
“It’s also important in that it forces the business to focus on how it’s funding an investment.
We challenge them on how they are going to fund a project. It’s not just, `Have you got the £100,000 you need to buy the machine?’, it’s, `Have you got the working capital to stay in business for the year after you’ve bought that machine?’ We will look in some detail at their cash flow forecasts.’’
So, there are rules but businesses which make applications for help to the Let’s Grow programme should not feel daunted. The investment panel, UNW and the BE Group are all on their side.
“I feel passionate about this,’’ says Bearpark. “We really do want them to succeed. We worked really hard to get the RGF money in the first place and every member of the panel is passionate about ensuring that that money is spent properly and diligently on projects which are going to create a load of jobs in the North East.
“The worst case scenario is that at the end of this programme we have to give some of that money back to the Treasury. We don’t want to do that.’’
He emphasises the importance of grants going to strong businesses. “Sometimes there’s a sense that businesses that get grants are the ones that are struggling and are the ones that desperately need cash. We don’t want to support businesses that are struggling because they might not sustain the jobs. We want to see successful businesses.
“That will then give us the best chance to position ourselves to ask for some more funding, which is the biggest challenge we’ve got now. When RGF money runs out, where are we going to find any more for this programme? We need to get that message across to the Combined Authority and the LEPs and the Northern Powerhouse that this is a worthwhile programme. We can demonstrate that it has been immensely successful so far.’’