Coalition growth fund ‘could see up to £6bn of investment’

The Conservative grandee, who chairs the advisory panel to the £1.4bn regional growth fund, told Yorkshire companies the expected rate of bidders’ own contributions, on top of Government money, could generate £5bn to £6bn for England.

He also shrugged off suggestions that businesses had not been given sufficient time to make good quality applications to the fund, which was set up to spur private sector job creation in areas hit hardest by public spending cuts.

Lord Heseltine said the key to securing public money in the first round of funding, agreed in April, was proposing “large numbers of deliverable jobs”.

“Gearing was also a crucial factor. If you look at the first round for every pound of Government money almost five was added by bidders themselves.

“If this level of gearing is seen in the next round, and I see no reason why it should not, then the global investment from this fund could be as high as £5bn to £6bn – a huge sum in anyone’s book.

“I would urge bidders to consider leverage carefully when putting in their own applications.”

The multimillionaire publisher and former deputy Prime Minister was speaking at the University of York, in one of a series of fund roadshows, and faced questions from an audience drawn from the business community.

Jane Lambert, a barrister at Huddersfield-based NIPC Law, told Lord Heseltine the launch of the fund had come “too fast” and that it had hit the quality of applications.

He responded by asking the 200 people present if they were thinking of applying and the overwhelming majority raised their hands.

He added: “We are overwhelmed. This was the same in Dudley and Preston. Our problem is coping with the demand.

“We need the support industry like lawyers and accountants but I am not sure that is what our target was.

“My feeling is they (other businesses) have got off their backsides quickly.”

Coalition spending cuts mean Yorkshire’s regional development agency (RDA) and Business Link service are being axed but the region will benefit from grants made in the fund’s first round.

It expects to see up to 10,000 jobs created after the Government pledged £47m to seven projects, including the UK arm of sweetmaker Haribo, which will create nearly 300 positions by building a new factory in Normanton.

The second round of funding applications opened in April and will close on July 1. It also includes programme bids, which show an overall investment strategy for a geographical area.

Lord Heseltine said: “Programme bids will not be slush funds for organisations to create bureaucratic systems, or funding to replace RDA schemes...

“Programme bids need to be able to demonstrate tangible economic outputs in terms of jobs and growth and in appropriate locations.”

He also said that finding ways for the fund to support SMEs was a “central preoccupation” and said business angels, community development finance institutions and high street banks are being funded to help SMEs which are too small to meet the minimum investment bid of £1m.

Applications from the housing sector should seek to create employment beyond the construction phase and transport projects should show benefits going beyond efficiency gains, he added.