Gesture of goodwill
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
The European Investment Bank (EIB), the European Regional Development Fund (ERDF) and the North-East Fund Limited signed an agreement to create a £120m investment fund, an initiative fashioned to inspire innovation and support to Small and Medium-sized enterprises (SMEs) in the North East of England.
The fund created is expected to provide financial support to over 600 businesses and generate over 3,500 much needed jobs over the life of the fund. If successful it will also deliver a legacy of up to £80m for further investment over the next decade. While there is much scepticism as to the effectiveness of government channelled funds what it does effectively is shine a spotlight on the need for action.
The North East is a region that was one once dominated by heavy industries such as steel and coal. Therefore, it has struggled to fully evolve its economy and redefine its identity in a new, tech savvy world. Today, the regional unemployment rate of 5.2% is above the UK’s average (4.2%), falling from its 10% level in 2014.
Unfortunately, with expenditure on Research and Development lagging, shown by the chart below, there is a lot of catching up to do.
Chart: Regional Breakdown of Expenditure on R&D
Source: Office for National Statistics, March 2018
This is the first large UK investment fund backed by the EIB since the triggering of Article 50. The gesture is important but the real source of wealth generation is through entrepreneurial spirit. When this is demonstrated capital finds its way to the source.