The Regional Growth Fund is one of the flagship policies of the Government’s plans to kick-start the economy into growth. It was launched in order to pursue initiatives which will ‘create long-term private sector-led economic growth and employment’. In other words, high-growth start-ups with the potential to create lots of jobs. Which is exactly the sort of business (high-growth, high return) that business angels like.
The fund is part of the Government’s plans to replace the costly (yet, by all accounts, largely ineffective) Regional Development Agencies at the end of this year, the idea being that given the right backing, businesses can ‘create the right conditions for growth’ by themselves – they don’t need expensive public bodies to do it for them.
There have been plenty of criticisms, though. Labour has already taken the opportunity to point out that the £1.4bn allocated for the growth fund over three years is less than the annual budgets of RDAs. In fact, just yesterday, John Denham, the shadow business secretary, accused the Government of ‘stealing the funding intended for regional investment’, and warned that the fund is in danger of ‘becoming a slush fund for other projects’. Ouch.
We won’t find out exactly how much has been allocated to whom for a fortnight, but indications are that because of the number of applications the fund received (450 or so), the plan is to allocate more than the £250m originally intended for the first tranche. So that enthusiasm is encouraging.
The point being of course that, while the RDAs may have had more funding, that money wasn’t always spent in the wisest possible ways. While the RGF might be less well-funded, handing the money over to private investors – such as business angels – should be a more efficient way of investing. Obviously, we’ll reserve judgement until we know more – but it’s all a matter of execution.