Decision details

Proposed decision:

To use Innovation Investment Loan (i3) programme funding to fund continuance of the KMBF specifically:

·                To continue to offer finance for business investment and the creation of jobs funded by the recycled\uncommitted i3 investments.

·                To conclude the negotiations with the Government on the continued use of recycled KMBF\RGF investments allocated to KCC under its existing contracts or ExEK, Tiger and Escalate

·                To continue to manage and recover outstanding investments from recipients of KMBF funding.

Reason for the decision:

This Key Decision would allow KCC to continue to offer funding for companies beyond the 31 March 2023 by transferring the pipeline of KMBF applications to the existing i3 programme, which has an existing Key Decision in place.

Background:

The Government allocated £55 million from the Regional Growth Fund (RGF) to KCC between 2011 and 2014. This funded three RGF programmes covering the whole of Kent and Medway and additional local authority areas:

•       East Kent (Expansion East Kent - £35 million)

•       North Kent, Medway, and Thurrock (Tiger - £14.5 million)

•       West Kent (Escalate - £5.5 million)

These programmes operated from November 2011 to January 2016. For most businesses, loan finance was provided at 0% interest, with a repayment period of between 5 and 7 years. KCC’s costs of administering these programmes were fully covered by an administration charge deducted from each loan and a charge to the RGF allocation.

Since January 2017, KCC has used the recycled KMBF\RGF investments (loan repayments and sale of shares in equity stakes) to enable the KMBF to provide new loans and equity investments ranging between £26,000-£500,000 to eligible businesses across Kent and Medway. Most funding recipients receive interest-free loans, with a repayment period of up to 5 years. KCC are seeking to operate the i3 programme in a similar way to the current KMBF programme by offering loans and equity. The total funding available under i3 is £3.8m and no further approvals will be made once this threshold has been reached.

Options:

Place all approvals on hold until a decision regarding the use of the recycled KMBF\RFG investments is confirmed by the Government. This was rejected as it may take several months and could have significant negative financial impacts on local companies, awaiting confirmation of funds.

Seek to appoint a third-party to manage the loans (an on-going management arrangement already exists for the equity). This option has not been pursued due to a) the size of the contract would involve a lengthy procurement exercise; b) it is unclear if this would offer savings or improved investment performance.

How does the proposed decision meet the priority actions of Kent County Council’s Strategic Statement Framing the Future: Framing Kent’s Future – Our Council Strategy:

This proposed action is in-line with the Priority 1: Levelling Up Action 3 as KMBF seeks to attract national and international investment to businesses in the county.

Financial Implications:

The Capital costs are the estimated i3 loan payments based on the existing KMBF pipeline; these are: £3,870,382.13 (£3,330,782.38 recycled & £539,599.75 uncommitted).

KCC Budget Book, the capital entry for the KMBF, row ref 18.

The revenue costs of administering (inclusive of staff, legal, appraisal and monitoring costs) of this activity on an annual basis will be £450,000 funded from two sources: a) a management charge of 5% levied from the fund on the value of all investments made to companies; and b) an administrative charge of 5% levied from the companies on the value of all loans. KCC will also be seeking an additional contribution from the recycled KMBF\RGF investments. This makes the administration of the programme self-funding. This approach can be continued with the i3 programme.

If applications to KMBF are not paused and recycled\uncommitted i3 investments are not used, KCC cannot: a) Issue new loan approvals; b) Cover its administrative costs for monitoring and debt recovery in the short term.  

Data Protection implications:

An existing privacy notice covers the operation of the KMBF and no new data protection issues will arise from the proposed change to utilising i3 monies.

As Cabinet Member for Economic Development, I agree that Kent County Council:

(i)       continue to manage, monitor, and recover outstanding investments from recipients of the Kent and Medway Business Fund (KMBF) and Regional Growth Fund (RGF) – former Expansion East Kent, Tiger and Escalate investments, after the expiry of the former delegated authority on 31 March 2023;

(ii)       divert the existing KMBF pipeline applications to the Innovation Investment Initiative (i3) fund, to continue to support economic growth within the county and to include the generation of income through administration and management fees to allow for the continuation of managing, monitoring, and recovery all outstanding investments;

(iii)      delegate the authority to the Director of Growth and Communities to enter into the relevant contracts and legal agreements required to implement this decision and to continue to manage and recover outstanding investments from recipients of KMBF\RGF funding after 31 March 2023; and

(iv)      before the end of 2023, to bring proposals to the Growth, Economic Development and Communities Cabinet Committee for new arrangements related to the recycled KMBF\RGF investments based on the outcome of on-going negotiations with the Government.