The CLA’s senior rural business and economics adviser Charles Trotman discusses development grants in a pre- and post-Brexit world
The grants that are available under the Rural Development Programme are vital in stimulating rural economic growth. This is the instrument by which Defra fulfils its rural development obligations in England, as set out by the European Union.
In a sense, this programme brings together public funding and private investment in a way that generates increased productivity and creates jobs. However, as the UK prepares to leave the EU it has to find new ways to assist in growing the rural economy, ways that are both effective and innovative. Here, we look at the current grant system and explore how grants may look in a post-Brexit world.
Out of a total budget pot of £3.5bn for the Rural Development Programme for England, some £3bn goes to agri-environment schemes. This leaves £500m to be spread across Countryside Productivity, LEADER and the socio-economic schemes that make up the Growth Programme within the European Structural and Investment Fund (ESIF). However, rural businesses also have access to other EU funds within ESIF through the European Regional Development Fund and the European Social Fund which is worth a potential £6bn.
For those rural businesses seeking to diversify, access to these funds is crucial. Whether it’s a farm wanting to enter the tourism market, or an existing leisure business looking to expand, the socio-economic grants on offer will make a significant difference. This has been recognised by Defra in that it has three priority areas for grant funding: rural tourism, knowledge transfer and food processing.
However, there are issues within the present system that disincentivises a business from applying for a grant. The often sheer complexity of the grants system will act as a brake on plans to diversify. In addition, the lack of communication at central and local government level, between the Rural Payments Agency (RPA) and the Local Enterprise Partnerships (LEPs) tends to make this complex structure even more bewildering. The hope will be that, when the UK leaves the EU, a more flexible approach can be taken.
The mechanics of the existing socio-economic grants process
Although applying for grants can be seen to be complex and time consuming, the evidence from previous grant recipients is that this money is invaluable in new business start-ups. So how does the process work?
Firstly, all grants are competitive and the process is administered by the Rural Payments Agency (RPA) that is assisted by ESIF committees to ensure that the applications fit with local economic strategies. The minimum size of the grant is £35,000 with match funding of 60% of the total cost of the project. So this means that the total project will be a minimum £87,000.
For the socio-economic grants, there is a two stage application process. Stage 1 is the outline application, more commonly known as the “expression of interest”. Although this is a very simple two page application it is extremely important. By expressing an interest in applying for a grant, the business is locking itself into the RPA system. This is important for two reasons. Firstly, it provides Defra with a picture of how many applications are likely to be made and the interest shown in a particular grant scheme. Secondly, it shows how far the grants will go and how effective they will be.
If an expression of interest is successful, the applicant will go onto the second stage, the full application. This has to show the business case for the grant, the securing of planning permission and how the project will achieve growth.
Each grant scheme will have an application window. For the latest grants under the growth programme this will be the end of May. So if an expression of interest has been submitted before this date, the applicant will not have missed the deadline. The RPA will also carefully monitor a project to completion. Importantly, grant funds will only be released at certain times in the development of the project. Although in the past, the process of awarding a grant has been painfully slow, the RPA is now intending to significantly speed up the process, directly as a result of the position post Brexit.
What is interesting is that some businesses are already seeing Brexit as an opportunity to re-examine their operation and see where to expand. That’s where the availability of grants is important and even more so now as the UK leaves the EU. On the positive side the government has already said that rural development funds will be available until 2020. On the less positive side, these funds need to be, in effect, allocated to projects by the time the UK leaves in March 2019, although projects themselves do not need to be completed until 2020.
What is interesting are the two different approaches and views of Defra and HM Treasury respectively to current EU funds. As far as Defra is concerned, it wants EU funds “out of the door” as soon as possible and committed before March 2019. As regards the Treasury, it wants to make sure these funds are spent in a way that guarantees “value for money”. In a sense, both statements have the same effect – that is, use the EU money now before it gets lost forever.
The latest schemes
Defra announced a series of new grant schemes last year. These include £120m for Countryside Productivity, £165m for the growth programme focusing on rural tourism, knowledge transfer and food processing, and £30m for rural broadband to be bid for by local broadband delivery bodies.
To date, the level of expressions of interest has been positive. For tourism and food processing grants, these have reached now over 100% of the total available budget but more applicants are needed so that the projects that are awarded grants are the most productive.
The grants schemes may be seen as cumbersome and bureaucratic, but they are still an essential mechanism for helping to stimulate private investment. Funding will be available for the right projects but the conditions imposed must be met. It is vital that every application is based on a sound business plan and a sound business case. One should also consider the implications of any planning permissions needed, change of use, third party agreements and taxation when looking at diversifying. The CLA can help advise with all of these and more, together of course with advice on all funding avenues. For more information please visit www.cla.org.uk