Buried Treasure

Take two companies, both based in Assisted Areas - 'disadvantaged' locations where EU legislation allows regional aid. Last year PPE, which makes innovative elastomer sealing products in Blackburn, received a Selective Finance for Investment (SFI) grant for new machinery already in use by its overseas competitors. The investment will help to maintain employment, create new jobs at the company, which currently employs 148 people, and safeguard the future of the business. Few people would dispute the value of such an investment in our industrial base. At the same time, however, flexographic printing business Arteb, which exploits a niche area in the packaging industry with huge determination and creativity, was turned down for a grant for new Italian machinery that would put it streets ahead. Arteb is in St Helens, Lancashire. It, too, is an Assisted Area, and the project also turned on maintaining existing jobs and creating new ones. Now, let's be realistic about this. It didn't actually stop Arteb. The company managed to raise the funding through the normal bank route and, indeed, the machinery is now in and working. But the whole experience left a bitter taste in director Simon Parisi's mouth: "We did loads of work - proposals, business plans, questionnaires, case presentations - all for nothing. And we haven't got the time to be doing that kind of thing." There is a possibility Arteb was turned down because it could, with difficulty, raise the money elsewhere. Or because it eventually placed an order before it got its answer: "We were in a chicken and egg situation," says Parisi, "do we hang fire for the grant but risk a delay on a machine our business urgently needed?" Or even because of perceived over-capacity in that particular sector. Obviously, the regional development agency cannot comment on individual cases. Even so, it illustrates the difficulties and frustrations faced by many companies looking for government funding and support for developing their business. It's hard to find out just what you need to do to be in with a chance. SFI is a core ingredient in a suite of nine products that the DTI offers to businesses. And yes, 'products' is the official description. In 2003 the Secretary of State for Industry (then Patricia Hewitt) instituted a review of the 100-plus on offer which whittled them down to ten (one of which subsequently foundered because it didn't comply with EU guidelines). It was part of a so-called simplification agenda which still causes hollow laughs among those who have to deal with them on a daily basis. Other core ones are R&D, KTP and debt funding. Our box item on page 25 is an attempt to distil in one page something that occupies hundreds of pages on the websites of DTI, development agencies, Business Link, and more. The sheer volume of information, restrictions and caveats is the first high fence any hopeful company is expected to hurdle. The second is the highly regional flavour of what's on offer. Have pity for the company that loses out on thousands because its plant is on the wrong side of the road from an Assisted Area. Andrew Bridge, SFI development manager at Northwest Regional Development Agency (NWDA) understands the problem. "Unless you know where to look, it's hard to find what you need. The NWDA has recognised that we must make our interface with the customer a lot more user-friendly. We are not going to get the type of projects that will make a difference to our economy unless we can encourage companies to apply for funding. We are not hearing from people we could really help." He frankly admits that the people who come to speak to NWDA tend to be those who have been successful with applications in the past or are very clued up about the support mechanisms, often because of previous involvement with local chambers of commerce or Learning and Skills Councils (LSCs). Whereas, he suspects that the people he really needs to reach are spending their time getting orders through the door rather than trying to track down the one specific scheme that meets their needs. "They just know they need to buy one machine and employ ten extra people; the bank will lend some but they need to make up the difference. They just want to know where to go." An additional difficulty for all the grant-giving bodies is that they have to stick within rigorous DTI guidelines. Bridge says that those with severe overcapacity, like uPVC window producers, cannot be supported even if they are good for the regional economy because it would simply be moving jobs around the country as a whole. There are a fair number of other qualifications to discretionary grants like SFI including the sector, the number of jobs created, the level of own funding involved and their long-term viability. To help SMEs (which today make up around 90% of our manufacturing base) to navigate the shoals, NWDA will be launching an online interactive process in mid-spring. It will give immediate feedback on whether it is worth a company proceeding with an application. It will be open to those looking for SFI, grants for R&D, and venture capital funds that NWDA, and others, run through third parties. "It will mean you don't have to fill in the form or the five financial appendices or wait six weeks," Bridge explains. "You will get a fast response and although you might not like the answer, at least you haven't had to go through the pain of going through all the paperwork to get to a negative result." Currently, manufacturers often sidestep the problems by calling in specialists to manage the application for them. Bridge, however, sees little point in giving a company a grant of £15,000 when it will have to pay over anywhere from 10%-30% to a consultant. "Most of these businesses, if they were advised properly by an online mechanism or via experts from my team, could complete the process themselves and use the money they would have paid a consultant to develop the business." It's a good point; several of the RDAs have specialist advisers on staff. Bridge says it's particularly useful for companies looking for venture capital (VC) funding: "Often that's not what they actually need and there could be more appropriate ways of accessing funds." Most requests for professional help come via the website or a dedicated enquiry line, but NWDA also runs an Investors' Club which often acts as a first port of call and word of mouth referrals are high. There are other channels of professional help open to manufacturers, albeit on a more informal basis. Practitioners from the Manufacturing Advisory Service (MAS) can often act as conduits to the right source of funds as part of their work with manufacturers on general improvement programmes. Colin Allaway, principal business improvement specialist with MAS London says that MAS can often offer thoroughly practical help through close ties with a number of providers from Business Link to specialists in raising capital. They often know the right person in particular networks; for example, the person within Business Link who is close to LDA (London Development Agency), and they have specific links with the regional support agencies like SEME in Dagenham. "We also have an extensive network that ties up with the HE and FE community which can be useful for free or sponsored funding programmes for specific knowledge areas like rapid prototyping and design support. It may even extend into referrals for the Knowledge Transfer Partnership," he explains. Advice like this can do much to iron out the uneven geographical picture. It can also help to find support through sources that aren't immediately obvious. For example, as part of his work with a company that 'decorates' bottles for perfumes and cosmetics, MAS London specialist Sylvain Briand worked with the MD to prepare a business case for a new, more efficient curing oven. The old oven was creating a bottleneck in the production flow, limiting production capacity, increasing overtime and thereby ramping up energy use. The return on investment is less than six months. The £45,000 investment would allow them to recover a positive balance sheet after year one and increase capacity and productivity by a third to capture new markets. The investment would help to make the business solvent and secure 16 jobs, and new markets would allow the glass import business to increase its annual profit by around £113,000. Equally importantly, however, the investment would produce a 'carbon payback' of about four years, a factor which persuaded the Carbon Trust - introduced by MAS - to offer an interest-free loan of 50% of the investment. It is an excellent example of the all-round gains achieved by joined-up thinking from several government agencies. In essence, finding funding is never going to be easy but the process is getting clearer and there is a real determination to make it work. Some of the RDAs are even working to cure the anomaly where SMEs needing help are denied it because they are outside an Assisted Area. "We are looking how we can help SMEs across the NW, and specifically those in targeted sectors identified by our regional economic strategy," explains Bridge. "There are some restrictions - we can't distort the competition - but the EC looks at SMEs differently which means we can do more than previously." He is in no doubt that companies can do more to help themselves: "Many are put off by the public sector speak we use in our application forms and rather than directly answering the questions, read something else into it and try and second guess us. And they don't come and get our advice before completing the forms. We are more than happy to advise them and the earlier we know about a project, the better result we get at the end of the day." He says that the agency often doesn't hear back from applicants who, on initial enquiry, stood a very good chance of support. His hope is that the new, easier approach will mean far more will stay the course. So stick with it, me hearties. Find X on the map and start digging for gold.