Incentives Deal of the Month
from Site Selection's exclusive New Plant database
Target: 10,000 Jobs in Five Years
Lands $63.7 Million
to Aid SMEs
By JACK LYNE Site 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.
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).
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.
Wales to Receive $1.7 Million
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 BroadenedSMEs 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,
"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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