GRA_tabs7aRegional Growth Fund

Background: Financial assistance towards large capital investment projects was offered in England in certain qualifying areas by Grant for Business Investment (GBI) but since Feb 2011, was available only for exceptional projects where the grant aid required is £2M or more.

A new discretionary £1.4Bn Fund was set up in 2011 for grant aid of £1M or more. This is called the Regional Growth Fund (RGF) and is available over the period 2011- 14. Criteria as far as manufacturing industry is concerned is broadly similar to that of GBI.

The Regional Growth Fund (RGF) is now 'all but ended' but has been a competitive £3.2 billion fund brought in by the coalition government in 2011,intent on helping companies throughout England to create jobs between now and the mid-2020s. The payment of RGF money is spread between 2011 and 2017. RGF supports projects and programmes that are using private sector investment to create economic growth and sustainable employment.

The first three rounds of the Regional Growth Fund have now delivered more than £2 billion awarded to almost 300 projects and programmes. These projects and programmes have committed to deliver 473,000 jobs and £12 billion of private sector investment.

Following the June 2013 Spending Round allocation of a further £600 million to the Regional Growth Fund, Round 5 offered half of this with an emphasis on Capital projects. It closed for bidding on 9th December and results were to be announced in the Spring of 2014. To comply with current Sate Aid Rules which will end on 30th June, 2014, it will be necessary for all conditional bids affected to be through due diligence and confirmed prior to this date.

A final Round 6 will take place in the summer of 2014, but this will be under the new EU State Aid Rules and are unlikely to be favour large companies under present proposals under discussion.

There is also an option in exceptional circumstances only to award RGF grants outside the normal bidding process. Applications for exceptional Regional Growth Fund support will be subject to the same level of appraisal, including independent scrutiny. Where support is granted due diligence is still required. Contact GRA if you think you could qualify for exceptional RGF. so we can examine the possibility to establish such a case.

RGF operates in England only (the devolved regions have their own schemes) and is intended to provide support for projects and programmes which offer significant potential for creating long term private sector led economic growth and employment - such grants being available to both manufacturing and service sector industries as well as to public - private sector partnerships but where in every case the outcome of the project MUST BE to provide goods and/or services.

Successful bids will be those that demonstrably leverage private sector investment and create sustainable quality jobs. If awarded to large companies the projects must be situated in those areas of the UK now designated as Tier 1, Tier 2 by the European Commission on 1st January 2007 since all grant aided projects must conform to State Aid rules. There are set bid by dates - the first closed on 21st January 2011, the second round closed on 1st July 2011, the 3rd Round closed in September 2012, and the 4th Round in March 2013 with winner announces 11th July. A 5th Round will probably open in September / October 2013.
Whilst there are similarities to GBI - completing a successful application is much more difficult, and requires considerable expertise due to the competitive nature of the scheme and the number of public bodies also bidding for attention and capital grant funding.

ALL grants are discretionary and require an applicant to prove a genuine need, and that a project for which funding is sought will create and/or safeguard jobs. Additionality must be proven and there can be no prior start. There is a minimum threshold of award of £1.0M which in practice means capital and amortized investment of the order of £8M should be intended in a three year project period.

The discretionary and challenge scheme nature of the RGF bidding process and subsequent evaluation at each stage by Officials and the two awarding panels make it hard to ensure a positive outcome will flow from any application, but for sure a professional approach such as that of GRA will have a far better chance since regard for the past nature of previous grant schemes and practical experience, together with deep understanding of all aspects of the strict criteria by which eligibility is an imperative.

Best advice suggests that you should also speak first with GRA or other professionals rather than to the grant authority or other government body to avoid giving information prematurely which could then prejudice your potential case when final application submissions are reviewed during the formal appraisal process. Taxpayers' money is not given away lightly.

RGF is available for capital expenditure projects taking place within the English areas of the UK in Tier 1 and Tier 2 Areas for large companies (250 plus employees), as well as for those undertaken by SME's in Tier 3 areas (* see FOOTNOTE), and which will create and/or safeguard jobs. Grants from £1.0M upwards, and running into many £Millions are possible.

In summary the eligibility criteria are:

For large companies the project must be undertaken within an Assisted Areas. 

Applicants must demonstrate that a grant is necessary to enable the project to go ahead as planned.

The project must involve amortized capital expenditure of more than £8M on fixed assets, such as property, plant and machinery.  Expenditure can relate to expansion, modernising or the establishment of a new company. Assets can be acquired outright or by finance lease or hire-purchase terms. Some property leases may also be eligible. Certain costs of a non-recurring nature (patent rights, professional fees) may also qualify.  The working capital spent on a project does not qualify directly, but can be taken into account when determining the need for assistance.  All projects must lead to sustainable economically viable operations continuing least five years after completion. If the grant is to be assessed against net new jobs created, eligible expenditure is 2 years of gross wages.

The project must mainly create jobs and replace jobs lost in the private sector, as well as safeguard jobs. The higher the skills and the more invested in improving skills base, the bigger the value put on them. Projects likely to create overcapacity, but allowing for technological changes, or which simply displace similar jobs elsewhere in the UK, or aim to relocate the same jobs from one part of the country to another, are not eligible for assistance.

A business should be viable and the project should help the business become more competitive. The project will normally be expected to become profitable within three years.

The emphasis in the scheme has changed from being mainly that of jobs creation and retention, to an emphasis on competitiveness, raising productivity and gaining improvements in the skills base.  This may come through new investment or as re-investment to meet changes in the market.

A number of factors may be assessed: The level of wages and salaries, as compared to the average for the sector and region; Whether the project is creating high skilled sustainable employment; The content of R&D - does the business invest in R&D for continuous product development or innovative processes; Training and Development - is there high-quality training for staff, including the provision of skills beyond job requirements

All projects should contribute positive benefits to both the regional and national economy.

There must be no prior commitment to the project otherwise there will be difficulty in establishing a need for assistance. Project appraisal must have been completed and a formal offer of assistance issued before the applicant enters into a commitment to proceed with the project. 

The greater part of the funding for the project should be met by the applicant or come from other sources in the private sector. These may include bank borrowings, hire-purchase or lease finance, equity and loan finance from existing or new shareholders, and loans from other organisations or institutions. Additional public sector assistance may be available from Enterprise Zones, Training and Enterprise Councils (TECs) or your local authority. However, finance from these sources will be cumulated with the RGF grant to ensure the total value of aid for the project complies with European Commission regional aid limits. Commercial loans direct from European Investment Bank (EIB) do not need to be cumulated. 

European Commission restrictions apply in some sectors where there is European over-capacity, including synthetic fibre and yarn, vehicles, iron and steel, coal, fishery and agricultural products.

Restrictions may also apply where projects are in sectors of the UK market which are already fully served and where support would simply displace or reduce existing jobs in similar businesses elsewhere.

* Note: In the Tier 3 areas, the maximum aggregate RGF grant to any one SME cannot exceed £2.2M for Small Companies, or £1.1M for Medium Companies, but this upper limit does not apply in the Tier 2 areas, where Grants for Small companies can be up to 35% of Capital Expenditure, or up to 20% for Medium sized companies.