Agenda item

To note the Regional Growth Funded Programmes Monitoring Report.

David Smith (Director of Economic Development) and Martin Riley (Economic Development Officer) were in attendance for this item.

1. Mr Smith introduced the report which summarised the results of Kent County Council’s monitoring returns of the three Regional Growth Funded (RGF) programmes for the period between 1 October 2017 to 31 December 2017. He informed the committee that due to discussions that took place within the Audit and Governance Committee on 24 April 2018, a supplementary report had been provided which listed Kent County Councils equity investments; all company names were within the public domain however reminded Members that discussions regarding the nature and value of those investments would need to take place in closed session.
2. As a supplement to this, Mr Riley said that the scheme had seen 2,709 jobs created since the last report in November 2017 with safeguarded jobs totalling 1,349. The RGF had managed to recover over £16.4 million which was recycled back into the Kent and Medway Business Fund, a scheme launched in 2017, however Kent County Council was in the process of seeking to recover £4,363,511 of defrayed funds. For those funds that could not be recovered, each company went through a rigorous administrative process before a final decision was made around the probability of recovery.
3. Mr Holden (Chair of the Growth, Economic Development and Communities Cabinet Committee) commended the success of the Regional Growth Funded programmes and the reinvestment of money from those companies whom Kent County Council had supported in providing loans.
4. In response to questions and comments, the following information was provided:

(a)  Mr Smith said that all decisions required two signatures, one being that of the responsible Cabinet Member who would be responsible for the decision from a policy point of view as to whether there was value for money and whether the funding would come in the form of a loan, grant or equity investment; the second signature was that of the responsible Director on behalf of the officer whom under the Executive Scheme of Officer Delegation confirmed that the decision had been lawfully taken. Mr Smith assured Members that every company who had received financial assistance from the Regional Growth Funded went through an externally commissioned process of examination which involved a panel of Bank Managers, people who were experienced investors and entrepreneurs. When the programme was first launched, Kent County Council was aware that the £56 million government funded scheme was not a commercial lending activity, it’s primary purpose was to produce an impact in Kent to improve social and economic development. Mr Smith informed the committee that the RGF had only accumulated 7% of unrecoverable funds compared to the 20% to 30% failure rate within the banking industry for the same category of companies.

(b)  Mr Smith informed the committee that the coalition government exempted small companies from a full audit, however, they were required to have signed accounts. All companies within Kent County Council’s portfolio were Company House registered and available to the public for review. In terms of the losses described by Members, Mr Smith assured the committee that Kent County Council monitored each loan recipient on a quarterly basis for those encountering problems with repayment or job creation we would seek detailed financial information such a company accounts to understand their current situation and seek to manage performance with a hands-on approach. In terms of those companies that were currently incurring losses, these were being managed on a regular basis to ensure a profitable return for the reinvestment of equity funds in the future.

(c)   Mr Riley said that the report did not include Ashford as it had been  only been added to the Expansion East Kent Regional Growth Funded Programme two years after the scheme was launched. The Government imposed submission deadline did not allow sufficient time for more companies in Ashford to apply for the loan. Mr Riley agreed to provide an explanation of this within the report for clarity.

(d)  Mr Dance (Cabinet Member for Economic Development) acknowledged Members concerns around the governance and audit process of the scheme and welcomed Members the opportunity to liaise with the responsible officers outside of the committee. Grant Thornton (an independent accounting and consulting member firm) had assessed similar loan schemes around the country and said that Kent County Council demonstrated strong and improving relative performance in the creation and safeguarding of local jobs. Mr Dance reminded the committee that Kent County Council were unable to monitor the impact of the Regional Growth Funded Programme on existing companies thriving off the success of the companies who have received investments from Kent County Council.

(e)  Mr Riley confirmed that all existing company jobs would be safeguarded if declared at the point in which the funding was offered. If a company were to move to a new site and issue new contracts of employment, that these would not be deemed as new jobs unless these roles were additional to those originally monitored.

(f)    Mr Smith assured the committee that Kent County Council did not rely on audited accounts of those companies who had applied for a loan as these may have been historic, instead, the company would be asked to provide a current account and a future projection of the companies expected asset trajectory. Those assets would then be interrogated and if questionable, an assessment would then be carried out. Mr Smith reassured Members that Kent County Council was not prepared to rely on publicly audited accounts and said that a substantial amount of work was being done with companies who were not performing as well as anticipated to help improve the probability of their succession.

(g)  Mr Smith said that the UK government pushed the European Union (EU) to adopt a State Aid Regime to eliminate the risk of continental countries undercutting UK companies with subsidies. Kent County Council was responsible for ensuring its policy measures and projects complied with the rules set out in the regime and applied these to all companies within its portfolio. He advised Members that certain sized companies could not receive a 0% loan and reasons for this could be found online within the National Regulations. He said that whilst Brexit could potentially see small changes to the State Aid Regime following its departure from the EU, the UK government may have had further discretion on how those rules within the regime were applied.

5. RESOLVED that the report be noted.