Millions of pounds worth of European cash earmarked for the West Midlands risks slipping out of the region’s grasp as a result of Government spending cuts.
Money allocated to the West Midlands under the European Regional Development Fund for projects such as business support and improving access to finance can only be “unlocked” if it is matched by public or private local investors.
But with the region’s major public sector match funder Advantage West Midlands (AWM) seeing its budget curtailed and match funding powers frozen ahead of its abolition, there are fears over how much of the £234 million left unspent in the current budget can be drawn down to help local businesses.
Although the private sector has to date put up the largest share of match funding for European cash – 44 per cent – AWM is the biggest public sector match funder in the region, stumping up 39 per cent of the total already committed.
Based on these previous levels of match funding, a question mark now hangs over a potential £91 million worth of unspent ERDF cash.
Under EU rules, if money is not spent within a target time, it could eventually be reimbursed to the Treasury, meaning the Government could pocket any unspent regional money.
David Bailey, professor of International business strategy and economics at Coventry University, expressed concern over what AWM’s abolition could mean for the region’s ability to find match funding.
“What it does is it maximises the impact of a cut,” he said. “I think it’s stupid, it’s money that is available from Europe for investment in regional development in the West Midlands.
“Because the regional development agencies are effectively being abolished and they can’t match fund, we’re losing access to that funding.
He said the loss of AWM’s expertise in managing European funds could also have a negative effect on the region.
Ahead of AWM’s abolition within the next two years, the agency has already had its ability to match funds frozen and has also begun a painful process of withdrawing money from projects in the region. Last week it announced cuts in 121 projects after the Government told it to find £37.1 million in savings from its 2010-11 budget.
The long-anticipated renovation of Dudley Zoo is one example of a project which has had AWM funding withdrawn.
Its £30 million makeover is still going ahead as the zoo, which owns 50 acres of land with its local authority, has managed to retain match funding by putting its own assets on the line.
Dudley Zoo chief executive Peter Suddock it was not necessarily a bad thing for businesses to raise their own match funding.
“It makes us more clear of the objectives of what we’re trying to do,” he said.
A Government spokesman from the Department for Communities and Local Government said the future of the ERDF programme had never been in doubt.
“Going forward, levels of ERDF commitment will be monitored to ensure they offer affordability and the flexibility for projects to be developed by local authorities and others after the RDAs have been abolished.’’
West Midlands ERDF
The ERDF programme in the West Midlands is worth £360 million for the 2007-2013 period
* £126 million of this is legally committed or has been spent
* £121 million is attributed to projects in the pipeline which are being developed with a view to approval and commitment
* £113 million is scheduled to be allocated before 2013
Source of match funding for ERDF funds already spent or legally committed for the 2007-2013 period
* Private sector 44 per cent
* Advantage West Midlands 39 per cent
* Other public sector 16 per cent