Presentation to take place in the meeting.
Minutes:
David Ayton-Hill informed the committee that the Warwickshire Recovery Investment Fund (WRIF) had been reviewed by Fire & Resources OSC in May 2021 and the WRIF had a proposed £140 million investment into Warwickshire over five years. The WRIF originated from the Recovery Plan in September 2020, Cabinet approved the business plan in June 2021, and it was presented to Full Council in July 2021. The WRIF was developed to stimulate Warwickshire’s economy during/after the pandemic. There was a gap in the market pre-pandemic with larger investment sources for debt funding/finance between £500,000 and £5 million. The aim was to stimulate economic growth/recovery, secure new private sector investments, create over 2000 more jobs and save 4000. Enquires from investors were received before it was implemented, the council will receive a small net return and save business/council tax progressing forward.
The negative economic impact of Covid-19 was not as bad as previously projected, and recovery had started early partly due to central government investment. It was predicted that Warwickshire would be back to pre-pandemic economy levels by 2023 but employment levels would not recover until post-2025. Businesses were concerned with low cash flows/reserves and the government support schemes ending in 2021; banks were also concerned with investing in businesses. Historically, business start-ups increased post-recession so the WRIF supported this new growth.
The £140 million from the WRIF was split into three sectors: £90 million for business growth (more secure investments), £10 million for local enterprises (riskier but smaller investments) and £40 million for property/infrastructure (for commercial business premises). Existing businesses that relocated to Warwickshire and employed over 50 people received loans between £500,000-£10 million to fund Warwickshire’s economic growth. Businesses growth investments that were prioritised included the automotive technology, digital creative (inc. gaming), future of mobility (transport/logistics/electric vehicle deliveries) and low carbon technologies; followed by advanced manufacturing, tourism & hospitality, modern methods of construction, health & wellbeing, agri-tech and rural businesses. Prioritised local enterprises (businesses that already existed or new start-ups that employed between 2-50 people) were advanced manufacturing, digital creative and wider digital technologies, culture, tourism & hospitality, and low carbon technologies; followed by retail, community based businesses, creative industries, health & wellbeing, social care or other supply markets to Warwickshire County Council or the wider public sector. The Local Communities & Enterprise Fund would offer a higher volume of smaller loans (up to £100,000 generally). The WRIF Investment Stratgey will be reviewed annually, based on monitoring and evaluation of impact and wider market conditions.
To gain business’ interest, an advertisement/communication campaign will be launched as well as communication with business bodies. Applications for funding will be reviewed by the Economy and Skills team and, if applicable, the business was appointed a business advisor to meet with them to review their business plan/management structure/finances and approve them for a WRIF loan (if applicable). The advisors and businesses cooperate to see what works for the businesses even if this was not a WRIF loan.
The business growth investments will be monitored by the council itself and the finance team who sent WRIF applications to the investment panel; the investment panel will then send them to Cabinet for approval. Local enterprise investments will be outsourced to ensure all applications met FCA (financial conduct authority) rules. The indicative interest rate matrix will be based on the business’ creditworthiness and security level for the provided loan. The higher their credit score and loan security, then the lower their interest rate was.
In response to Councillor Sinclair, David Ayton-Hill stated that the priority business sectors were pre-existing strong businesses in Warwickshire’s economy and had strong economic growth potential. Electric vehicles were focused on as all automotive manufacturers were focusing on this and Warwickshire supplied components for electric vehicles already. Following a supplementary from Councillor Sinclair, David Ayton-Hill confirmed that they had consulted with businesses and funding providers for the WRIF, but they were not there to compete with providers. The WRIF’s interest rates will be in line with the market, but they were able to take a bit more risks with investments than private sector investors.
In response to Councillor Chilvers, David Ayton-hill clarified that there was a lack of funding streams for new businesses who were working on their credit score outside of London and the South-East. Following the pandemic, private sector funding streams increased their interest rates for these types of businesses. Following a supplementary from Councillor Chilvers, David Ayton-Hill stated that the council’s profile risk was lower and they did not need to make billion pound profits like the private sector; therefore they accepted a lower interest rate return to boost Warwickshire’s economic growth.
Following a question from Councillor Baxter-Payne, David Ayton-Hill said that the WRIF’s interest rates cannot undercut the private sectors with public money so businesses with higher risks had to be charged with higher interest rates. The WRIF invested into the Coventry and Warwickshire Reinvestment Trust who operated a 10-12% interest rate level with new businesses. This model worked well and was largely self-financing. The interest rate changed as the business grew to ensure the business had a system that worked for them.
Following a question from the Chair, David Ayton-Hill confirmed that all WRIF business applications must have their business premises in Warwickshire or employ Warwickshire residents primarily.