December, 2001
  Incentives Deal of the Month
   from Site Selection's exclusive New Plant database
 

Target: 10,000 Jobs in Five Years


Finance Wales
Lands $63.7 Million
to Aid SMEs

By JACK LYNESite Selection Executive Editor
of Interactive Publishing

CARDIFF, Wales -- The Welsh government's efforts to boost the nation's small and medium-sized enterprises (SMEs) just got considerably bigger. Finance Wales (www.financewales.co.uk) has secured a US$63.7 million capital injection that will be used to help bankroll Welsh SMEs.

Though Wales has below-average levels of SME growth, some of its small and mid-sized firms are flourishing. One such firm is Medelect (pictured above), founded by seven doctors in 2000 to develop a Web site for physician testing. Working with the Wales Spinout Program, the company has grown into one of the UK's most comprehensive guides to all areas of medical study.

        Of the $63.7 million, $27.9 million is in European Objective 1 funds awarded by the European Commission (EC at www.europa.eu.int) on Nov. 19; the $27.9 million is the EC's largest Objective 1 funding package to date. The other $35.8 million in Finance Wales' total is coming in matching funds from Barclays (www.barclays.com).
        The $63.7 million will give help combat what Graham Hawker, chief executive of the Welsh Development Agency (www.wda.co.uk), called the nation's "entrepreneurial deficit." The new funding will fuel efforts to boost the nation's below-average levels of new business startups and SME growth, government officials explained. Rhodri Morgan
        "In the past, lack of capital for expansion has often been cited as the reason why small companies have not flourished in Wales," said National Assembly First Minister Rhodri Morgan. "Our own home-grown companies will play a key role in the development of the Welsh economy in the coming years."
        Finance Wales will administer the SME expansion capital. Established in April of 2000 as an executive agency of the National Assembly for Wales, Finance Wales manages all Welsh-related aspects of the EC's European Structural Fund Programs, the Rural Development Plan and the Local Regeneration Fund.

"In the past, lack of capital for expansion has often been cited as the reason why small companies have not flourished in Wales," said National Assembly First Minister Rhodri Morgan (pictured above).

        Colin Mitten, chief executive of Finance Wales, said that creating 10,000 new SME jobs over the next five years will be his agency's goal in dispersing the $63.7 million. And the assistance will be available soon, he indicated.
        "We are in the final stages of accessing very large additional resources for Finance Wales to invest in small and medium-sized enterprises," Mitten noted. "If everything proceeds according to schedule, we expect to be able to announce full details of the additional funds and the ways in which we are going to use them in early November."

Wales to Receive $1.7 Million
From EU Structural Funds program

The Objective 1 program is part of the EU Structural Funds program. Government officials project that Wales will receive a total of some $1.7 billion from the EU Structural Funds program during the 2000-06 timeframe for allocation.
        Objective 1 funds are generally awarded to European Union areas where per-capita gross domestic product is less than 75 percent of the European average. The EC has designated West Wales and the nation's Valleys regions as eligible areas for the Objective 1 funds dispersed from 2000 through 2006.
        Combined with matching private-sector funds and the EU's new regional development structure, the new Objective 1 funds will enable Finance Wales to annually assist four times as many SMEs, government officials believe. Finance Wales will be aiming to help 4,000 small firms with the new funding from the EC and Barclays, Witten said.
        The $27.9 million brings Wales' total Objective 1 allocation since October of 2000 to more than $311 million. Matching funds have raised the total invested around Wales to more than $566 million in 350-plus projects, according to government officials.
        "One of the Assembly's first decisions was that Wales needed this kind of development fund to back our small and medium enterprises," Morgan said.

Range of Support Broadened

SMEs participating in the program will borrow funding from Finance Wales. They will repay the loans, with interest, to Finance Wales, which will re-circulate the capital. Similarly, the $35.8 million from Barclays is a loan to Finance Wales, to be repaid with interest. Barclays in September established a $283 million fund to provide loans to UK businesses unable to secure conventional bank funding.
        "Working with the EC and Finance Wales makes it possible for us to provide finance on a positive, commercial basis [to] enable these businesses to fulfill their potential," said Geraint Jones, Barclays regional corporate director for Wales and South West.
        SMEs, Mitten agreed, would hit a wall if they went to traditional financial channels for expansion capital.
        "No conventional financial institution is prepared to undertake such small deals, because the paperwork makes it too much trouble. We can and we will, because a lot of small firms need small equity deals to get started," he said.
        "The additional resources mean that we are now able to broaden the range of our activities from loans of as low as 1,000 ($1,415) to equity investments of up to 750,000 ($1.06 million)," Mitten added.

Objective 1 Monitoring Official: 'Not a Race,
A Long-term Program with Long-term Targets'

The SME initiative is part of the National Assembly's 10-year economic development plan, Winning Wales. The plan sets targets over the next decade of creating 135,000 new jobs and increasing Welsh GDP to 90 percent of the UK average.
        "Working to bridge the prosperity gap between Wales and the rest of the UK and Europe is one of our top priorities," Morgan said.
        The SME initiative, part of the Winning Wales program, seems apt for the times, judging from recent studies.
        A recent Grant Thornton/Business Strategies survey, for example, found that European SMEs' confidence on turnover and output had dropped 22 to 24 percentage points, twice the plunge usually recorded in economic downturns. On a similar note, a recent Barclays' study found that fewer new businesses were started in England and Wales during third-quarter 2001 than at any time since mid-1992.
        Statistics from the Wales Dept. of Trade and Industry (DTI at www.dti.gov.uk) indicate that Wales has committed more of its Objective 1 funds to projects - 24 percent -- than any of the English regions. The statistics were presented last month in answering questions from Parliament regarding progress in allocating Objective 1 funds.
        "This is further evidence to show that the Objective 1 program is making good progress in Wales," Christine Chapman, chair of the Wales Objective 1 Program Monitoring Committee, said of the DTI data.
        But Chapman cautioned, "While these figures provide a useful snapshot comparison, we must remember that this is not a race. This is a long-term program with long-term targets, and we must continue to ensure that the projects we support are of high quality and in line with in line with the aims we have set."


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