Regional Growth Fund: Has the East Midlands been short-changed again?

The government may face accusations that it has turned its own philosophy on its head with the results of the second round of bidding for the Regional Growth Fund.
This, if you remember, was the £1.4 billion pot of money designed to cushion the blow of the loss of regional development budgets.
The East Midlands didn’t do well in the first round of bidding. In Notts, only one small project was approved, cash which will help a science company expand.
But local politicians – and, significantly, the Derbyshire-Nottinghamshire Local Enterprise Partnership – comforted themselves that the lion’s share of the money, some £900m, was going to be handed out in the second round.
All sorts of local projects submitted bids, a number of them related to small business growth. In Notts, only one bid succeeded again, cash for the Worksop wire rope manufacturer Brunton Shaw..
The decisions released today suggest that the dead hand of national politics has played a part. Derby will, quite rightly, be celebrating the success of the £50m Derby City bid. But it’s difficult not to wonder whether the Bombardier fiasco was in the back of the minds of ministers signing off these decisions.
Giving Derby a second kick in the teeth would have been a political disaster. So good luck to Derby - £50m represents a massive opportunity to make up ground lost through a series of big business setbacks.
Yet it also appears to fly in the face of Conservative philosophy, which suggests the best way to grow a sustainable economy is to avoid an over-dependence on public money.
There was bound to be disappointment in this exercise. While £900m was on offer, the value of the 492 bids nationally totalled more than £3.3 billion.
The point has also been made before that the East Midlands isn’t viewed as a weak economy, so more money is likely to go further north (indeed, nearly 40% of the bids came from the North East and North West).
Yet the East Midlands does appear to have come off badly from this exercise. One of the key measures is the number of direct and indirect jobs which successful bids will support. In the East Midlands it’s 1,400 direct jobs, 7.800 indirect. This is smaller than any other region, including the booming South East.
Three other questions are raised by the RGF result in the East Midlands. One is where this leaves the LEP, which needed a big project to give it some purpose – does the Derby City bid provide that or not?
The second revolves around Boots and its enterprise zone. The company is thought to have put in a bid for £200m. It got nothing, so where does that leave plans for a zone launched personally by David Cameron and Nick Clegg?
It certainly raises the stakes on the fight to win government funding for the dualling of the A453, which Boots views as crucial to the future of its Nottingham site.
The final question is one which seems to have dogged so many civil service business decisions, most notably Bombardier: did it enforce the rules around RGF decision-making literally, or did it interpret them in a way which ensured a desirable result?

RGF: Why the trophy projects are struggling

The plot thickens on the Regional Growth Fund.
There was widespread disappointment earlier this week when all but a handful of the bids for money to back projects in the East Midlands was rejected.
There are some sniffs emerging which suggest to me that disappointment may be something we have to get used to.
Of the successful projects, the key question is how it was that bids from business got the nod, but bids from the [government-backed] Local Enterprise Partnership didn’t. So here’s a puzzle: were the private sector bids ones which government was already familiar with because these firms had previously applied for money from other public funding streams?
In other words, was this money they were already going to get, now repackaged under another banner? To be absolutely clear, the businesses involved have done nothing wrong, but there is an interesting political question hanging over the way these decisions were arrived at by Government.
The answer isn’t straightforward. One source involved in the process has told me that the issue is that business found RGF more attractive because there was uncertainty surrounding the other funding streams, which would originally have been dealt with by the now-doomed regional development agencies.
There’s some truth in that. Money previously allocated to the RDAs has been disappearing back into a Whitehall-shaped black hole. Indeed, there’s an argument which says it has re-emerged from that black hole in the slimmed-down shape of the Regional Growth Fund. So what goes around comes around, financially at least.
The other question is whether some of these projects will actually go ahead. You’ll note that all over the country the bids that have got the nod have been accepted ‘conditionally’. This is because they still have to clear a number of legal hurdles – the businesses involved must be able to deliver their side of the financial bargain in a match-funded scheme, they’ve got to be what they say they are (in other words, not a widget company dressed up as an aerospace engineer), and, inevitably, they’ve got to conform to a European Union directive.
These are the EU regulations about government aid to business, the basic rule being that state aid should not distort the market.
So it’s not impossible that some of the projects which have won RGF backing may have to be modified in some way before they can proceed. Or that one or two of them might fall over completely.
It also seems pretty obvious that there IS a regional bias in where the RGF money goes. Most of the bids accepted so far have been tilted towards the north, in areas where the public sector is a big chunk of the economy. So the South East, South West, East and East Midlands had fewer bids accepted. I suspect it will end up being the same in round two, when most of the RGF money will be allocated.
From my inquiries, it seems pretty obvious that in the first round there was an emphasis on schemes which were going to fit the Government’s immediate growth agenda – schemes which directly created jobs rather than encouraged them in the longer-term
This is probably why some of the grander, trophy projects – projects which local politicians can’t resist, because they are seen as monuments to achievement - didn’t make it.
They may still struggle in the second round. We’ll see.

RGF: A growing controversy?

There’s a palpable sense of disappointment about the failure to secure anything other than a few crumbs for Nottinghamshire and Derbyshire businesses from the Government’s Regional Growth Fund.
This £1.4bn pot was set up by the government in the wake of its decision to get rid of regional development agencies like Emda.
While emda at one stage had an annual budget north of £150m, the amount of money Nottinghamshire and Derbyshire have managed to squeeze out of the RGF is a pitiful £1.6m. Out of 38 bids made for projects in the two counties, only one was successful.
The successful bid relates to the planned expansion of Molecular Profiles in Nottingham. Levering £8.4m of its own, the pharmaceutical research company plans to open a new building at Nottingham Science Park and create up to 65 new jobs.
This is a significant vote of confidence in an important sector for Nottingham, and Molecular Profiles CEO Nikin Patel is to be congratulated.
But what about everyone else? There are rumblings and machinations about why the 37 other local bids failed, but I suspect ours is not the only region where this soul-searching and teeth-gnashing is taking place.
Today’s announcement covers only the first of three rounds of funding bids, and has accounted for £450m of the £1.4bn available. So there is still £950m to bid for. It is the second round, which is underway now and closes shortly, which will see the lion’s share of the cash allocated.
We don’t know yet whether any of the unsuccessful bids from the first round will be considered again, but the word from Derbyshire & Nottinghamshire Chamber is that they had expected four of the 38 bids to be successful in round one – which suggests to me they will be looked at again.
I suspect the issue is that the Government's preference will be for projects which create wuick jobs, rather than trophy projects like physical infrastructure, which may only work in the long-term. It wants quick wins.
Just to complicate matters, the second round of RGF bidding coincides with the start of bidding for £19m of European Regional Development Fund cash available to the East Midlands. This is being administered by emda, though the word is that bids for this can be 'aligned' with bids for RGF money. Baffled? You're not alone...
There is a degree of paranoia in the East Midlands about its weak identity, and Business Secretary Vince Cable found himself having to reassure the region this morning that the decision was not a personal slight. That’s one to ponder – I’m not aware he has visited Nottinghamshire or Derbyshire since taking office.
There are some fairly blunt questions the government has to answer, though. It is almost certain that some of the bids will have failed precisely because the guidance from Whitehall about what they were looking for was far from clear.
That, in itself, is symptomatic of the government’s tendency to make policy on the hoof: having decided long ago that it did not want to put money into regional development agencies, it had no clear plan for what might fill the administrative void these organisations were bound to leave behind.
I blogged last week about the decision to maintain some parts of the Government Office for the East Midlands operation, and the concerns that – when put together with emda’s demise – it left the region voiceless in Whitehall.
For business, the most important part of the Government operation is the new regional representative for Mr Cable’s department, Rowena Limb. A robust conversation with her about Nottinghamshire and Derbyshire’s expectations for the next round of RGF money will be important.
So will an invitation to the Business Secretary, so that he can come and inspect for himself this unexplored corner of the Midlands. You know what we need to say when he finally does battle his way through the undergowth and find us: Dr Cable, we presume...