Business support investor missed targets

The chief executive of Finance Yorkshire, a regional venture and capital loan fund, said it had missed its goal for equity investments, even after taking into account the political logjam caused by the General Election and public spending cuts.

Alex McWhirter said fears over the fragile economic recovery were putting off the region’s small and medium sized enterprises (SMEs) from applying for cash.

The Yorkshire Post can also reveal the pattern of the fund’s initial lending and investments, which have gone to firms in areas such as engineering, industry and healthcare.

Mr McWhirter said the fund’s figures for equity investments were “slightly behind” targets but making up ground, seedcorn investment was on target and business loans were “on target or slightly ahead” for the year to March. Lending began in August, rather than as originally planned in spring 2010, because a period of political upheaval cast doubt over the start-up of the fund.

“My view is that we have had a very good first year of investing. I believe the fund is doing well,” Mr McWhirter said.

“Because of the change of government and public sector cuts... we had to go through months of negotiations with the European Investment Bank and Government departments and the regional development agency to make sure we could get it up and running.”

Finance Yorkshire, based in Barnsley, was set up to invest in fast-growing businesses across Yorkshire and Humber and North and North-East Lincolnshire. Funding ranges from £15,000 to £2m and is to complete its investment phase by December 2013.

Mr McWhirter said it had provided cash to firms in engineering, industry, healthcare, pharmaceuticals and bio-science, information, communications and digital technology, renewables and energy. It does not have targets for specific sectors so it is free to invest on an “opportunistic” basis.

He added: “The range of stuff coming in looking for investment (loans or equity) has been interesting. It puts me in an upbeat mood.

“(However) the quality has been quite variable. We have had everything from applications which are very poor... to things which are exceptionally worthwhile.”

Finance Yorkshire made investments of £4.6m between August last year and March. The total invested to date is £9.6m.

It had 367 initial applications in the period to March 31, making 75 investments. It received another 46 in the next quarter, making 23 investments.

Some firms have abandoned or delayed their applications because of the “fragile” state of the economy, which grew by only 0.2 per cent between April and June, Mr McWhirter said.

“The nature of the economy is making companies think whether they go ahead with expansion plans... It does have an effect on us. It takes longer to complete deals (but) I think we are on the cusp of seeing something develop. It is looking very bright.”

One senior Yorkshire accountant said the fund “had been given a hell of a lot of cash... and not done a lot of investing”. He added, however, that the fund had to wait until it saw credible investment opportunities.

Simon Williams, Federation of Small Business’ regional chairman for North Yorkshire said: “Finance Yorkshire has failed to meet its internal targets, the FSB will be reaffirming to them the importance of supporting small businesses in their aims and ambitions... Micro, small and medium sized businesses are desperate for the funds that would allow them to flourish.”

PUBLIC MONEY FOR FIRMS

Finance Yorkshire has a £90m fund drawn from the European Regional Development Fund, Yorkshire Forward and the largely publicly-funded European Investment Bank.

It is made up of three portfolios – the £15m set aside for seedcorn is to invest in innovative technology or knowledge-based businesses; the £27m small loans fund provides mainly unsecured loans to complete finance packages for firms which have already agreed finance from banks and the £48m equity fund makes equity-based investments to support activities including growth, capital expenditure and some larger start-up ventures.