tata Steel’s regeneration fund claims that the lack of bank finance is making it harder for it to invest in fledgling businesses in areas already blighted by the decline of traditional industry.
Sheffield-based UK Steel Enterprise provides equity investments and loans to companies to help encourage job and wealth creation in steel-producing regions.
The evergreen fund specialises in finance that many growing companies find hard to obtain elsewhere and usually invests alongside banks and owner managers.
Stuart Green, chief executive, told the Yorkshire Post: “More and more these days the bank funding is absent.”
He said that this was leading to fewer private sector jobs being created.
“The banks are not wanting to fund a lot of smaller businesses,” added Mr Green. “A lot of smaller businesses are not willing to risk having their funding from the banks.”
The company has between £15m and £18m in circulation and expects to invest £3.5m this year in amounts ranging from £25,000 to £750,000.
Mr Green said the lack of bank funding was “reducing the number of projects that come forward and projects that do come forward don’t have the right balance of funding”.
He added: “If it’s a good project we will try to move heaven and earth to try to get funding.”
Banks have maintained the stance that they are open for business, but latest Bank of England figures show a contraction in lending to SMEs with levels significantly lower than last year.
Keith Williams, regional manager in Yorkshire and Humber, said: “There’s more demand for our funding because there’s less funding available from other sources.
“People are quite conservative and risk averse about taking on extra debt.”
The Government has announced plans to kickstart lending to smaller businesses through its new credit easing programme.
UK Steel Enterprise operates in 14 steel industry areas across the UK. It has around 30 ongoing investments in the region, mainly in South Yorkshire.
The majority of its investments are in manufacturing and engineering businesses, a sector seen as crucial by the Government in rebalancing the UK economy away from financial services in the South East and public sector spending in the North.
Alongside loan and equity investments, UK Steel Enterprise runs seven business centres offering space on flexible contracts to new and growing companies. It also offers advice.
Mr Green said: “Owner-managed businesses need somebody they can talk to. A lot of bodies like Business Link Yorkshire and the regional development agency are either folded or in the process of folding.
“There’s not much business advice being given by the state to SMEs. We have always given business advice, whether or not we can help fund them.”
A survey on behalf of the company in South Yorkshire and the East Midlands last month found that nearly 40 per cent of 103 companies expect to seek funding for expansion in the next year.
Mr Williams said: “This should be seen as an encouraging sign but we may need to temper that optimism given the delicate balance in the confidence that businesses have in obtaining the funding from various sources.”
The survey also found that only 36 per cent of respondents said that they would be confident in getting funding from high street banks.
Mr Williams added: “It is not surprising that businesses are feeling less buoyant about obtaining finance given the constant negative stories but we need to see strategies put in place to support business growth.”
Respondents called for cuts to rates and red tape and more help and guidance to help their companies grow.
They said banks should change their approach to lending and criticised lenders for being bureaucratic, inflexible and unwilling to help small businesses.
UK Steel Enterprise was established in 1975 by the British Steel Corporation. It is now a wholly owned subsidiary of Tata Steel, the Indian-owned multinational.
Over its lifetime, the company has supported more than 2,800 businesses and invested £78m to help create more than 60,000 jobs, it claims.
Tata Steel axed around 1,500 jobs during 2009. It added 450 in Yorkshire last year and is currently spending £4.5m on improvements at its Rotherham and Stocksbridge sites.
Tata Steel is the second largest steel producer in Europe.