Let’s first examine the issue of the provision of growth capital, which will affect Welsh businesses.
Its purpose is to provide growth capital for businesses in Wales and is aimed solely at businesses in key sectors or key-sector supply chain.
The finance offered by WAG, as discussed in the ERP, will be subject to an agreed repayment profile up to seven years (or the minimum term necessary to deliver the project) from completion of project. The offer may include a payment holiday option of up to one year at the beginning of the repayment period.
So, no surprises there. There will be a repayable grant system that was trailed heavily within the ERP.
However, what about those projects that are ‘mobile’ and wish to come to Wales? These are the very projects that Plaid Cymru AMs said we should stop grants to as, in their opinion, large inward investing companies like Bosch have let the Welsh economy down despite taking millions of pounds in grant funding.
Well, guess what. It would seem that Wales is again “open for business” to inward investors (and WAG is at pains to emphasise this). Those who have been lobbying hard for this have obviously struck a chord with the ever increasing sensitive crew inside the Department of the Economy and Transport (DE&T). More relevantly, any projects may not be restricted to key sectors and may not be repayable.
In an ambiguity that would make Sir Humphrey Appleby proud, it has been announced that “mobile projects” (i.e. those from outside of Wales) will be focused in key sectors or key-sector supply chain BUT that projects outside key sectors considered if they provide a better return/value than projects identified within our sector pipelines. In other words, any large inward investor creating jobs is welcome to get grants to come to Wales.
The question is whether they would have to repay the grant, as in the case of indigenous Welsh businesses?
Again, ambiguity is the order of the day with the document stating that whilst repayment terms would be “established during application process”, and that the finance would only be “repayable if agreed targets not met e.g. number and quality of jobs, leverage of investment, longevity of project”.
In other words, this suggests that inward investors get to keep the money if they hit their jobs target, which is exactly the same regime that the current grant system operates under.
However, the lack of consistency over the current grant regime does not end with its position on grants for large companies.
According to the guidance on business finance, this only applies to the DE&T, not those of other department i.e. other Assembly Government departments also provide specialised support to their sector – e.g. tourism, food, farming and social enterprise – and there are no current plans for changes in these areas.
Therefore, there will be support for food businesses from Rural Affairs, including a processing and marketing grant (if small or medium food processor); the administration and funding of Section 4 Tourism Grants will revert to the Department for Heritage on 1 October 2010.
In other words, grants will be made available to Welsh businesses operating in the food and tourism sectors but not in the rest of Wales simply because that funding is administered by another part of WAG.
Whilst the companies operating in those sectors are bound to be heaving a collective sigh of relief, you couldn’t make up the degree of inconsistency and indecision that seems to have infected the highest levels of government policy. In such circumstances, I am sure that a local manufacturing business will wonder why it is not eligible for any support to expand their business whereas the hotel down the road will get a grant to do so or, more relevantly, the large overseas company.
Therefore, the message from WAG is seemingly this.
If you are a Welsh company outside of the six key sectors, you get no access to finance at all, unless you are operating in the food or tourism industry where grants still seem to be available.
If you are a Welsh company inside the key sectors of the economy, you do get a grant but it has to be repaid back over a period of seven years.
However, if you are a non-Welsh company bringing jobs into Wales, you still get a grant that is not repayable.
This seems to suggest that we now evolved where the vast majority of indigenous Welsh companies are treated as inferior as compared to those coming in from outside of Wales.
Is that really a policy that Ieuan Wyn Jones and other Plaid Cymru AMs really believe in? It may be a logical approach that civil servants may be able to justify but what about the Party of Wales?
Indeed, what sort of reaction would the Deputy First Minister get if he put forward such a proposition to the gathered masses at the annual Plaid Cymru conference that starts today?
Comments
Is this 'internal' document available somewhere? It's difficult for others to respond objectively to the questions and concerns you raise without having the same access to the source material. Which means that I shall leave your rhetorical question unanswered - for the time being at least.
Financial support in whatever format has always been selective - there is nothing new in that. The six sectors are reasonably broad and it makes sense to target support where it is most likely to have an impact.
It would be unfeasible to open a grant scheme (repayable or not) to the entire Welsh economy - there would have to be some form of criteria which in turn would rule certain projects out.
Keeping grants for mobile projects is an excellent move and means Wales once more is open for business. The kind of mobile projects coming are way tend to be the smaller high value projects that require less investment for a higher return. Offering these a financial incentive both to move to Wales and succeed is surely the right way forward?
Happy to send you a copy if you email me. I was genuinely surprised at the contents, as they seem to suggest a move back to the pre assembly days of ignoring the massive potential of home grown entrepreneurs.
……1 – 0 to us!
Moreover, the ERP goalkeeper has just left the field, consequently by the end of the month it will be nearer 5-0!
I’ll explain why
a) Would it be silly of me to think that perhaps almost every project submitted to WAG from now on will be a carefully crafted International Mobility case?
Remember mobile projects can also relate to those businesses looking to leave Wales as well as those looking to come in.
b) Politically, discriminating against Welsh businesses is not a sustainable policy. What an own goal for Plaid!
c) The author of the ERP, IWJ, now has been exposed as being out of touch (or out of his mind) by stating on National TV ‘Businesses don’t want grants and Wales needs an end to the grants culture.’
In addition, I sat in the Senate when Andrew Davies was announcing the latest statistics on RSA/AIG and a certain Rhodri Glyn, AM, was complaining about the amount of grant funds given to Inward Investment Companies in relation to indigenous businesses
Well chaps, now you have contradicted yourselves, would you like to comment?
d) Many cases that normally go to WAG are on the grounds of financial constraint, financial gearing and/or commercial risk.
If the repayable grant has to start being repaid back as soon as one year, the match funders as well as the promoters will be frightened off. Financial constraint & gearing cases support the theory/practice that the business cannot support any additional debt funding that is why the project needs a grant.
Commercial risk cases support the idea the promoter has a good project, but there is a high risk of failure so the business or the promoter should keep business and personal risk to a minimum by applying for a grant. So it makes no sense to apply for a repayable grant?
So it won’t work!
e) The whole point of the Single Investment Fund (SIF) was to end the confusion between the different grants, so doh! we’re back to square one, again!
So if you (ERP) want to save yourselves anymore grief, start listening
a) Put the grant scheme back in place with options for repayable i.e. cash rich projects. Note: repayable grants came into being in 2004 and none of the businesses have paid any back yet.(so my sources say)
b) As can be seen by the local case in Erbistock, Broadband can be installed relatively cheaply, so why spend £240m on it. Review it and find the budget from somewhere else. The jobs will only be those installing it and will be short term.
c) Add construction to the 6 sectors to make it 7, as widely reported last week, this is a growth sector which is keeping the economy afloat at the moment.
d) Bring back in consultancy grants so businesses can access specialised expert advice.
Finally, if I was Labour supporter (which I’m not), I would dissolve the coalition agreement with Plaid Cymru, blame them for the mess, scrap the ERP and limp on to the next WAG election.
It’s obvious isn’t it?
“We’re ambitious for Wales, and our aspirations for Wales will set a high standard. We want everyone in Wales to have the opportunity to develop their full potential"
unless you are a Welsh SME.
I think some thought should also go to the WAG staff. They endured all the difficulties that went with the mergers, then SIF, now this ERP, where yet again staff are having to reapply for their jobs again.
In the meantime, the grant appraisal team are expected to work through an unprecedented number of applications and remain motivated, in the knowledge they will probably lose their jobs. What's their union doing?
Of course it will happen all over again, following next year's election.
Very poor mangement indeed. What's their Union doing.
"Plaid Cymru has long argued that small businesses are the lifeblood of the Welsh economy".
"Ieuan Wyn Jones has launched the Economic Renewal Programme which will see significant investment in infrastructure and a move away from the traditional grant culture for big business to a culture of investment ".
OOPS
c) The author of the ERP, IWJ, now has been exposed as being out of touch (or out of his mind) by stating on National TV ‘Businesses don’t want grants and Wales needs an end to the grants culture.’
In actual fact, the FSB have long argued that soft loans should replace grants, so this is a good move.
Anglosaxon runs a business which depends on a grant culture. I would therefore take his comments with a pinch of salt. I'm no real fan of the ERP(much room for improvement), but Anglosaxon needs to look at the economy of Wales as a whole and not just his own bank balance.
I also am keen to know why he has such a bee in his bonnet about the FSB? Maybe because Wales' biggest business organisation disagrees with him? Maybe because he has no idea how lobbying works? Maybe because he is losing business and wants to blame everyone and everything for this instead of blaming himself for building a business based on leeching off other business' grants?
This particular blog makes it clear describing the unfairness towards Welsh businesses that Inward Investment companies can receive a non repayable grant and Welsh businesses can’t.
My complaint about the FSB is it is not doing enough for its members on this issue and I have a perfect right to say so without receiving a personal attack.
I raise commercial finance generally, so my business is not entirely grant orientated.
Moreover, it has helped incentivise some of my clients from moving or outsourcing abroad or in one case from complete closure. For example, last year, this involved 4 companies and over 200 jobs. I should also point out that a repayable grant would not have prevented this from happening.
Correct, I am passionate about retaining the grant scheme because on so many occasions it has helped a promoter think that little bit bigger, take that extra risk which in turn has created jobs. The problem with repayable grants is that the promoter is expected to take all the risk and pay back a mountain of debt at the end.
Consequently they won’t do the projects and the economy will lose the jobs.
Finally, as a member of the FSB I don’t remember any officials asking me about the subject, so I am not sure what gives you the right to say your members agree with it.
Let’s pose the question to the membership now!
‘Would like a grant to expand your business or a soft loan?’…..surely a no brainer.
The London School of Economics is positive about grants as mention on this blog before, so I don’t understand why others aren’t who have no evidence to the contrary that they are a bad idea.
With this in mind, I think you are doing your members a disservice.