Agenda item

David Smith (Director of Economic Development) and Martyn Riley (Programme Manager (Business Investment)) was in attendance for this item.

1.    Mr Smith introduced the report that set out the results of Kent County Council’s (KCCs) monitoring returns that had been obtained in the period of January to March 2019, from companies that had received loans from the three Regional Growth Fund Programmes: Expansion East Kent, Tiger and Escalate. Mr Smith reminded Members that the schemes were funded through money that had been allocated by Central Government and therefore KCC were subject to the conditions imposed by the Department for Business, Energy and Industrial Strategy (BEIS) in terms of its management.

2.    The officers responded to comments and questions as follows:

(a)  With regard to the recovery rate of bad debts, Mr Riley and Mr Smith informed the Committee that there was a recurrent issue whereby companies continued to argue their inability to repay KCC, however, a considerable amount of time continued to be devoted in recovering funds before issuing new loans. Mr Smith said that 80% of the original loans had been repaid in full and that KCC were in a position to reoffer the recycled money back into the market. Mr Riley assured Members that KCC had taken a flexible approach to re-payments and engaged with companies as much as practically possible to support them in their re-payments rather than issue legal action. In previous years there had been a number of Government funded initiatives that operated on a local level which offered support to companies and KCC had worked closely with those services. However, the change in economic circumstance meant that the Government stopped offering support and KCC took on the responsibility of all expenses. Mr Riley informed the Committee that there were very few schemes available that KCC could tap into; the Kent and Medway Growth Hub was established in an attempt to support companies who were in financial difficulty, however, with limited resources there was very little that KCC were able to do. Mr Smith provided assurance that the debt recovery rate within the last quarter had not deteriorated and that there had been no increase in red ratings within the debt recovery category.

(b)  Mr Smith informed the Committee that the current economic climate and future climate was significantly different to that seven years ago when the scheme was first launched. Mr Smith said that the recent evidence revealed a freeze on investment from a number of Medium enterprises and said that fewer applicant companies were approaching KCC with investment proposals that were compliant with the basic criteria of the scheme (i.e. was the company solvent, would the company produce new jobs, was the business plan deliverable and manageable). Mr Smith said that work was being done to refresh the offer in an attempt to attract more companies and that KCC were looking at opportunities to engage with Leaders, elected Members and officers from the District and Borough Councils to review ways in which companies in those areas could be encouraged to re-engage with the scheme.

(c)   In response to queries as to whether the number of jobs created had been included or deducted from the figures, Mr Riley said that the Government had issued funding which entailed a number of conditions, one of those was that jobs created would be for a minimum of three years. If a business was to go into liquidation after four years, then that figure would still be reported to ensure that consistent information was being shared with Government and other bodies. Mr Riley was unable to provide the ‘job lost’ figure, however, informed Members that this information could be circulated upon request outside of the Committee meeting.

(d)    With regard to whether KCC could better utilise the money elsewhere, Mr Riley informed the Committee that the money was not KCC’s to give away and that it was contracted money from central government with a strict set of terms and conditions imposed by BEIS that KCC had to abide by. Mr Riley agreed that every opportunity had to be taken to review the scheme, however, highlighted to Members the difficulty in implementing change when operating under contractually restrained procedures as an authority. Both BEIS and the Ministry of Housing, Communities & Local Government were pleased with the management of the scheme in terms of the level of performance and governance that KCC had demonstrated. Mr Riley informed Members that should KCC change the way in which it allocates central government funding, Government would need to be involved in that process as it would require a number of contractual changes. KCC would also retain responsibility for all expenditure and contractual obligations until the last repayment was received.

(e)  Mr Riley acknowledged Members concerns regarding the terminology used in the report and agreed to revise this for future reports. He confirmed that the £4,027,000 was included within the monitoring period January to March 2019.

(f)    Mr Smith said that the Council had always taken security against a loan and assured the Committee that the security was always valued. KCC had not taken shares as a form of security as these were not tangible assets. The reason as to why KCC had deployed significant effort into recouping money was primarily due to the difficulty in liquidating tangible assets at a value that KCC had originally obtained them at when the loan was first issued. KCC had used Invicta Law and the Invicta Law appointed agents to recover outstanding loans, however, some debts were unrecoverable. This would often occur when a company ceased to exist, and the legal process meant that KCC could no longer make any attempt to retrieve the repayment of the loan.

(g)  In response to comments regarding discrepancies within the figures, Mr Smith said that the report did not include the equity investments that are briefly referred to which would be the difference in the total amount made. Mr Smith informed the Committee that the scheme had created jobs and placed additional investment in businesses, all of which was entirely dependent on the intervention of KCC. Mr Smith invited Members to address him directly outside of the Committee meeting with any further queries or comments regarding induvial companies as officers would be able to provide greater detail on specific schemes.

(h)  Mrs Cooper (Corporate Director for Growth, environment and Transport) assured Members that KCC pursued all its bad debts regardless of where the funding had come from. All money managed by the Council was public money and pursued using rigorous measures. 

(i)    Members thanked the officers for the scope and breadth of their responses and commended the scheme in generating recycled money which improved economic growth, however, a significant amount of work needed to be done to encourage greater interest in the scheme.

3.    RESOLVED that the report be noted.