Regional Growth Fund is oversubscribed by LEPs and bounds

The pot of money set aside by the Government to fund businesses has received three times as many bids as it can fulfil. Another LEP-related cock-up?

by Emma Haslett
Last Updated: 06 Nov 2012
More bad news for those in search of funding: business secretary Vince Cable has admitted there’s going to be more competition than expected for the £1.4bn of cash the Government set aside to fund businesses. Apparently, the second round of Regional Growth Fund bidding, worth £950m, has already had 500 applications totalling £3bn (and bidding won’t close until July 1). Looks like the man in charge of allocating the funding, ex-deputy PM Lord Heseltine (and the chairman of Haymarket, MT’s parent company) is going to have some tough decisions on his hands.

Admittedly, it’s nothing he hasn’t been faced with in the past: in fact, the previous round was so popular that Heseltine brought an extra £200m forward, raising the total to £450m. This time, though, he’s using up the rest of the money available – and the chances of his being able to persuade the Government to part with even more cash are very, very slim.

Right from the start, the RGF has been beset by problems. The scheme is tied in with Local Enterprise Partnerships, allegiances formed between local businesses and councils that replaced the old Regional Development Agencies. And while Labour has made much of the fact that the £1.4bn is just a third of the amount designated to RDAs, the idea was that this money would be spent more efficiently, being ploughed straight into businesses, rather than being squandered on admin costs.

But the best laid schemes, and all that. Back in May Mark Prisk, the small business minister, assigned an extra £5m to Leps to help them pay for staff – despite the fact that they were originally supposed to be self-sufficient (ie. not dependent on the Government) organisations run by volunteers. Richard Lambert, ex-head of the CBI, described the policy as a ‘shambles’, and some parts of the country were left without Leps altogether, meaning businesses in those areas wishing to bid for RGF cash were put at a disadvantage.

There have, though, been hints that if scheme turns out to be a success, there may be more cash available. Earlier this year, Nick Clegg suggested that all being well in the first couple of rounds, some money from the Government’s Project Merlin deal with banks might be directed towards Leps. And it looks like the first round was fairly successful, ‘creating or safeguarding’ at least 27,000 jobs. So you never know: these problems could turn out to be nothing more than teething troubles. Although we wouldn’t necessarily bet on it.

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