Less than one per cent of UK Government fund to help business given to Scotland

Chancellor Rishi Sunak launched the Future Fund last year to provide government loans of up to £5 million to UK based companies, subject to at least equal match funding from private investors. Just more than £1.1bn has been distributed to 1190 companies under the now closed initiative, which is run by the UK Government-owned British Business Bank.

New figures show just £8.3m went to firms in Scotland, the lowest in all the devolved nations.

The bulk of the cash – £798.7m – went to London and the south east, which was also in huge contrast to £18.7m awarded to firms in Wales and £11.6m to Northern Ireland.

In a written House of Commons answer published last week, Treasury Minister Kemi Badenoch (above) said the fund used eligibility criteria, independent of ministers, as a way to make “funding available as widely as possible, irrespective of location”.

But Professor Dylan Jones-Evans of the University of South Wales, whose review for the Welsh Government resulted in a new Development Bank of Wales, said it was “enormously disappointing” that the fund did not reflect the UK Government’s “levelling up agenda”.

He said: “Whilst it could be argued that the majority of venture-backed firms are to be found in the more prosperous parts of the UK, any public support from the British Business Bank should have been about ensuring that all of the regions and nations benefited equally from this fund.

“The criteria set meant that many of those venture-capital backed businesses outside of London and the south east of England did not qualify for this support and this should have been taken into account when developing the fund’s criteria.”

He added: “We all know there are some incredible and innovative businesses in Scotland, Wales and other parts of the UK that could easily hold their own with those in London or the south east of England if only they could get access to the funding that is necessary to supercharge their growth.”

Daniel Robinson, of research agency Beauhurst, said between 2011 and last year, Scottish companies received 4.3% of all equity finance by value that was raised in the UK and accounted for 6.4% of the total number of deals.

“By either metric, the data released by the Government shows that Scotland received a lower proportion of Future Fund money than we would expect based on historic investment activity,” he said.

“This disparity likely reflects the greater prevalence of certain types of companies in England, particularly in London, that were deemed to be more worthy of investment during the pandemic.

“For example, software companies – which have fared well during the pandemic – make up a larger proportion of the equity-backed population in London.

“Private investors will have sought clear sector-based winners during the pandemic, resulting in a geographic bias toward London and the south east.”

Under the scheme, the state can get a stake in the firm as the loans turn into equity if the business completes a further funding round.

There has been criticism of the Future Fund for failing to publicly disclose which firms have been awarded money.

Concerns have also been raised over money going to “risky” investments. One firm which made educational kits for children reportedly secured nearly £700,000 from the Future Fund before going bust nine months later, with the assets later acquired by a new company.

Stephen Flynn MP (above), the SNP’s business spokesperson, said: “The lack of transparency over the use of millions of pounds of taxpayers’ money has been a common theme running through this UK Government over the course of the pandemic.

“These figures – showing so little funding for Scotland and skewed heavily towards London and the south east of England – also make for worrying reading.”

He added: “It is critical that as we look to recover from the pandemic that full support is available to firms across the UK and that there is transparency over how these funds are allocated and who is in receipt of them, given the Tory government’s record of awarding friends, close contacts, and party donors lucrative Covid contracts.”

A British Business Bank spokesperson said the Future Fund used a set of standard terms with published eligibility criteria, which provided a “clear efficient” way to make funding available as quickly as possible, and firms that met it received investment irrespective of location.

He added: “For commercial confidentiality reasons, the Future Fund can not disclose the identity of the companies in receipt of funding without their approval. The companies that have received funding may disclose their identity at their discretion.”

A Treasury spokesperson said: “The Future Fund successfully supported our high-growth firms through the pandemic with more than £1bn of investment.

“It used a set of standard terms with published eligibility criteria, including a minimum prior raise of £250,000, which is independent of ministers.”