North East a trailblazer for innovative SME funds
This year is an extremely important year for SME funding with the impending launch of a number of key funds. In fact, the FW Capital North East Property Fund has already launched, an addition to the Catalyst Fund operated by FW Capital in the Tees Valley. This is a significant fund for the North East as it is the first time an SME fund for property development has been started in England.
Hopefully once the period of sensitivity leading up to the General Election is over, there will also be announcements for the fund created by Business Durham, the Northern Powerhouse Investment Fund and also the North East Fund, the replacement for Finance for Business North East. This will bring hundreds of millions of pounds of funding available for SMEs into the North East, with funding available in amounts not previously available and for new sectors such as the property sector.
What has not always been apparent is the fact that within the UK the North East has been a trail blazer for creating innovative public/private funds for SMEs.
Since the first fund launched in 1999, right up until today, the North East has been at the forefront of delivering innovative funding structures and has developed a robust network of fund managers and professionals to support this work. To date, an estimated £500 million of funding has been invested over a period of nearly twenty years. However, that does not show the true picture of the impact. A very conservative estimate of the leverage the funds bring from additional private sector investment suggests that for every £1 invested by a fund there is another £2 of private sector investment. This additional leverage, together with the creation of the so-called eco-system of fund management, the jobs created and the impact on the supply chain has had an enormous effect on the economy of the North East.
Having previously advised on the establishment of the first JEREMIE fund whilst working at One North East, John Hammill, a corporate partner at commercial law firm, Square One Law said:
“The indirect impact of these funds on the regional economy cannot be underestimated and I’m delighted to say that our team has been involved in the creation of every one of the funds delivered in the North East and we have implemented almost every type of fund structure.”
With uncertainty about the UK exiting the EU and cut backs in public spending, the expectation will be to do more with less. Whilst grant funding has a vital role to kick start new businesses or to sustain scale-up businesses it will be necessary to create financial instruments which recycle and invest three or four times during their life cycle.
Neil Warwick, Head of EU and Competition Law at Square One Law said:
“The models we have helped create will be a potential blueprint for future funding in the region. They have demonstrated it is possible to invest money and create legacy funds for future investment. It is probably inevitable that we will have to roll out these models in other sectors to ensure that we continue to maintain growth in the regional economy”.