On Tuesday 13th July 2010 BBC Radio Cornwall carried a news report saying that the Treasury had ordered the South-West Regional Development Agency (SWRDA) not to process any new applications or issue any new funding agreements for the European Regional Development Funds (ERDF) that Cornwall receives from the European Union (EU) under the EU's Convergence programme.
The EU has allocated £371m of ERDF funding specifically to Cornwall, which has to be spent between 2007 and 2013. Cornwall qualifies for these Convergence funds on the basis of its economic performance, which is 25% lower than the EU average - putting Cornwall on a par with other economically-struggling areas of the EU such as Romania and Bulgaria.
The ERDF funds are to be used for projects that boost the Cornish economy by upgrading infrastructure, creating private sector jobs and attracting inward investment. Applications and allocations are managed by the RDA. In some cases funding allocations must be match-funded by the UK government and in other cases they can be match-funded by private investors.
ERDF Convergence Projects
The following are examples of projects that have already been approved or completed using ERDF funds (see the full list here):
The Pool Innovation Centre: high quality, flexible managed workspace for start-up businesses with potential for growth and high productivity.
The Wave Hub: a groundbreaking renewable energy project that aims to create the world’s first large scale wave energy farm by constructing an electrical ‘socket’ on the seabed off Hayle.
Truro Falmouth Branch Line Improvement: an upgrade to the Truro-Falmouth rail link at Penryn to make it easier for people to access work and education opportunities.
Cornish Crabbers: a boat building company based in Rock is receiving ERDF Convergence investment to expand the business by purchasing the premises it currently occupies and investing in production equipment.
ERDF Projects In Development
There are also a number of new ERDF projects in development which - it appears - are the projects that have now been frozen by the Treasury. These include:
Next-Generation Broadband Access for Cornwall: A £100m project to roll-out a high-speed fibre-optic network across Cornwall. £70m of funds were approved by the EU in May 2010 with match-funding agreed by BT and a £1m contribution from Cornwall Council. Described by Cornwall Council as "the single largest and most transformational Convergence project which could generate £250 million for Cornwall and the Isles of Scilly’s economies over the next 15 years."
Grants for Business Investment (GBI): a pot of money allocated under the ERDF for the RDA to invest in growth businesses in Cornwall. ERDF funds are matched by the company applying for the grant.
The Impact on Cornwall
Although there are few facts available currently about which projects have been frozen and for how long, Cornish business leaders have already been speculating about the economic impact on Cornwall of halting investment in these projects.
Convergence Freeze Will Cost Jobs, Say Winter Rule: Charted accountants Winter Rule warn that the Treasury’s moratorium on further spending by the European Convergence programme in Cornwall will hit growth businesses hard, starve them of investment and cost hundreds of jobs.
"We have five business clients with whom we are progressing GBI applications, and now they’ve been left in total limbo. If none of those projects go ahead then we calculate that £8 million of total investment and 650 potential jobs will have been lost from the Cornish economy from our clients alone," said David Bullen, Corporate Finance Manager at Winter Rule in Truro.
Companies Affected
Local media have been carrying reports of specific companies affected:
"One company caught out by the funding ban is Helston-based Spiral Construction, a market leader in the manufacture of spiral staircases, which employs 50 staff.
It had just been approved for £250,000 of investment towards a £500,000 factory extension that would increase its size by almost 50 per cent, create 12 new jobs and cater for the company's future growth.
Managing director Eric Nicholls said: "At a stroke of some bureaucrat's pen in Whitehall our plans for growth have been cut off at the knees. We need Ministers to be aware of how short sighted this decision is."
- Western Morning News, "County 'to miss out' on Euro millions", 14 July 2010
"One Winter Rule client caught out by the ERDF spending freeze is Clayworks on The Lizard Peninsula. The company, which specialises in eco-friendly building products, was confident of securing a £65,000 GBI investment in new machinery and to expand its product range. Clayworks, which has four staff, intends to grow this to 20 in the next five years.
Director James Bryce said: "We were hopeful of an offer letter for our grant from the South West RDA in the very near future because as far as we are concerned we had fulfilled all the criteria. As a low-carbon, eco-friendly business that derives a lot of its products from recycled materials and has ambitions for rapid growth we are just the sort of business that is being encouraged in Cornwall. But now the Government has tied the RDA’s hands we can’t get our offer letter. Unless there is a change of heart we’ll have to go back to the drawing board and risk losing our other investors who we have worked hard to assemble to match-fund the grant."
Winter Rule press release, Convergence freeze will cost jobs say Winter Rule, 13th July 2010
Cornwall's Response - Politicians
Cornwall's elected representatives appear to have been caught on the hop by the news, with neither the county's six MPs nor its councillors being informed in advance of the Treasury's decision - despite a visit from David Cameron to Cornwall last Friday 9th July. Since being apprised of the news MPs and councillors have had this to say:
Andrew George (LibDem, St Ives): "This aid is vital to Cornwall's economic recovery and I will be pressing Ministers to offer reassurance ahead of the announcement on the Comprehensive Spending Review on the 20th October this year." Read full post
Stephen Gilbert (LibDem, St Austell & Newquay): "Cornwall receives this European investment because it has some of the most deprived communities in the UK. Already, convergence funding has made a real difference to so many people in Cornwall, creating thousands of new jobs and providing lasting infrastructure. My message is clear, hands off Cornwall's cash. I will be using my position within the Coalition Government to make that representation to the Minister as soon as possible." Read full post
Cllr Andrew Wallis (Independent, Porthleven): "I have asked the CC Portfolio Holder for Regen for a up to date report on the current situation on Convergence Funding."
Cllr Jeremy Rowe (LibDem, Egloshayle): "Party Group Leaders at Cornwall Council agree to a 'single voice' approach on Convergence."
Cornwall's Response - Residents
People living in Cornwall have been angered ans confused at the news, especially as the Treasury and the department for Business, Information and Skills (BIS) have been so unforthcoming with information about why the freeze has been instituted and how long it will last. The following actions have been taken:
Facebook Group: A Facebook Group, Save Convergence Funding for Cornwall, has been set up to discuss the issue, which has gained 288 members in two days.
Twitter Account: A Twitter account, @SaveConvergence, has been set up to distribute any updates on the situation.
Twitter Hashtag: A Twitter hashtag, #saveconvergence, has been created for all discussion around the issue.
Cornwall Social Media Café: A meeting has been convened of the Cornwall Social Media Café for Tuesday 27th July at Vertigo Bar in Truro, to discuss the situation and hopefully to get an update from MPs and/or councillors.
Blog: This blog, The Convergence Freeze Blog, has been set up to monitor the situation and to collect information and input from Cornish residents.
Well done Fiona. Great post, very clear and simple. Great to have it all in one place.One comment. We have an email blast that I set up that goes round our local community. I put out about the convergence suspension and a lot of people don't understand what fibre optic means to them. They think it's just faster broadband. So what. I think amongst outselves we know the transformational nature of this technology but I don't think the general public does. We need to find a way of communicating that.
ReplyDeleteVery informative post on where things are.
ReplyDeleteHowever, it is the case throughout Govt and NGOs that a freeze pending a review is what is happening everywhere. Therefore the convergence money is simply being held within that process. It's not a great situation; but then Cornwall voted in the Con/Libs so in a democracy we have the Govt we deserve.
I think the most important issue is the scrutiny to which the convergence fund will withstand during a review. During the Objective 1 round of funding I recall the story of a film studio (!!?) project which was paid by EU investment and subsequently revealed that the entire project was a scam, no films made, no jobs created. There was even a court case, but the money was not recovered. I think the due diligence being carried out has been questionable. I also know of plenty of individuals who used EU funds to convert old buildings into holiday dwellings. These created a private profit and have benefited not the wider community or Cornwall but individuals.
My thoughts are that under detailed inspection the allocation of funds may not be coherent and fairly applied. It may be that more worthy projects such as the fibre optic network will then suffer.
I strongly believe that the money should be used to benefit Cornwall as a whole. I believe that investment which creates jobs and long lasting legacy is also valid. I do not believe that funding individual companies expansion represents good use of that money unless there is evidence that significant jobs will be created or that there will be other material, measurable benefits to Cornwall as a whole.
I draw your attention to investments in:
My First Day
My Cornwall TV
Cornwall Marketing (Cornwall Development Company)
Broader Deeper Information, Diagnostic and Brokerage
IMIX
Sector Networks Transition (Cornwall Enterprise)
I would be happy to be proved wrong on this but I'm not seeing tangible benefits in the above projects to Cornwall as a whole.
Having brushed against a number of funding initiatives over the last few years I await significant impact on Cornwall's economy which can be attributed to the spending of the EU grants.
Once again, I appreciate the freeze is without doubt an interruption to a process which has positive intentions. Nevertheless, the results from this investment do not necessarily equate to a better, more thriving Cornwall. Sad as it may be to say it, but if there are cuts in spending throughout the UK, then non strategic spending in Cornwall will be cut in the same way that spending on schools, hospitals and defence has also been cut.
If anyone can correct me on the value to Cornwall on the sample projects listed above I am happy to stand corrected.
Thanks to you both for your comments so far - I will come back and respond in more detail at lunchtime. Both very valid points!
ReplyDeleteI thought you may be interested in listening to a podcast by www.kernowpods.com that I've posted on the Facebook page. It is an interview on the doubt being spread by the Convergence confusion.
ReplyDeleteThe direct link to the podcast is:
http://www.kernowpods.com/audio/convergence.mp3