The Enterprise and Business Development Strategy

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WRITTEN QUESTION TO THE MINISTER FOR ECONOMIC DEVELOPMENT BY DEPUTY G.P. SOUTHERN OF ST. HELIER

ANSWER TO BE TABLED ON TUESDAY, 7th NOVEMBER 2006

Question

1. Followingthelaunchof the Enterprise andBusinessDevelopmentStrategyand its associated initiatives, including the Jersey Innovation Initiative, the PilotSmall Firms Loan Guarantee schemeandtheJersey ExportDevelopment Initiative, would the Minister inform members what financial resources are required for the overall strategy, brokendownto show the amounts for eachof the individual initiatives, and wouldhe indicate what proportion of the sumsrequired are –

( i)  new funding, and, if so, when and how these funds were agreed; or

( i i) re d i rected from existing funding elsewhere in the Department, stating how much has come from

which areas?

2. Would the Minister indicatehow the Strategyand its associated initiatives are tobedeliveredandhowmany, and which, staff will beinvolved?Wouldhestatewhetherstaffhavebeenredeployed from the delivery of existing schemes, such as the Jersey Business Venture and,if so, from which schemes. Are anyexisting schemes to cease as a resultofthenew Strategy?
3. Will  the  Department need  to  assess which businesses are  likely  to  succeed before  allowing  them  to participate inthese initiatives and, ifso, is this anappropriate rôle for his Department?

Answer

1. The total financial resource shown in the approved States Strategic Plan requiredto deliver the recently launched Enterprise and Business Development Strategy is approximately £2.4 million. This isout of the allocated £16 million EconomicDevelopmentbudgetwhich itself isundergoing a fundamental Zero based budgeting approach. This sum has been allocated against the followingexisting and new initiatives:

Improve access to business finance with the introduction £200,000 New initiatives of  a  Small  firms  Loan  Guarantee  Scheme,  a  business

angels network and by establishing links to the British

Venture Capital Association

Encourage inward investment from high yield low foot £100,000 New initiative print businesses

Open a first stop business centre £225,000 New initiative Encourage research investment into new technologies and £120,000 New initiative innovative ideas through the Jersey Innovation Initiative

Encourage  the  growth  in  exports  through  the  Jersey £250,000 New initiative Export Development Initiative

Enhance the existing and develop new advisory service £200,000 New initiative for would be entrepreneurs and new businesses

Introduce a business incubator to provide business with £75,000 New initiative access to suitable start-ups premises

Work  with  Educations  Sport  and  Culture  to  enhance £140,000 New initiative existing  and  develop  new  Enterprise  Education

programmes.

Develop Business to Business opportunities so encourage £70,000 New initiative clusters of business development opportunities

Total cost £2,400,000

The Economic Growth  Plan that was  approved by the  States  outlined the  cost  of delivering an Enterprise and Business Development Strategy. These new costs were subsequently refined and, as shown in the States Strategic Plan that was approved on 14 September 2006, the budget for delivering the Enterprise and Business Development Strategy was increased by approximately £1 million. Since then, the whole Department has been engaged in a rigorous business planning process to ensure that the entire cash limit is targeted towards delivering the approved States Strategies. The 2007 Business Plan is in the process of being finalised.

The  existing  2006  budget  of £1.4  million  shown  as  allocated  to  the  Training  and  Employment Partnership  (TEP)  area  of  the  Department  is  subsumed  within  the  new  total  for  Enterprise  and Business Development, which will continue to have responsibility for the development of workforce skills as a key component of the Strategy. There will not be any adverse impact on the Department's commitment to workforce development.

2. The delivery of the Strategy and its associated initiatives will require theopeningof a new Business Centre. Working alongside organisations such as the Jersey Business Venture, and with use ofmoderntechnology, this first-stop-shop will deal with all businessenquires, deliver customers, needsandmanagethe portfolio of products andservices described in the Strategy.

T h e staff employed within the Training and Employment Partnership have already started to deliver parts of

the Strategy. The existing staff complement is 5.5 FTE and the Chief Executive Officer is currently in discussion with the Chief Minister's Department to increase the Department's total head count by 4.5 FTE in order to deliver the new Strategy fully. The cost of the additional staff has been factored into the overall delivery cost of the Strategy, as shown in the table above.

T h e delivery of the Strategy will not require the redeployment of any staff from existing schemes such as the

Jersey Business Venture, nor will it result in any existing scheme having to cease.

3. All of the productset that forms the componentsof the Enterprise andBusinessDevelopment Strategy are designedtocomplywithStatesFinancial Directions for the awardofgrants.All products are subject to eligibility criteria and evaluation based upon businessplansand/or detailed proposals. All products will be delivered bybusinessadvisors acting as account managers  located in the newbusiness contact centre to b developed at Jubilee Wharf followingEDD relocation in early 2007.  In additiontoexisting staff, whowil

receive additional training in investment evaluation, a small number of new posts will be created to deliver greater

business advice capacity within EDD. This service will complement the current Jersey Business Venture which is a grant funded private sector organisation. I am also keen to develop the JBV's important role in advice to small and medium sized businesses.

T h e objective of the Enterprise and Business Development Strategy is to assist businesses in the non-financial

services sector in order to facilitate the diversification of  the  sectoral and tax base of Jersey's economy. In doing so, the strategy will increase the productivity and profitability of existing Jersey businesses, increase the export trade potential of Jersey's products and services and deliver increased business birth-rate. This  type of economic development activity, with its requirement to asses the ability of "businesses to succeed", is the norm in international jurisdictions, both small and large. In the UK alone there are nine English Regional Development Agencies (RDAs) reporting to the Office of the Deputy Prime Minister plus government economic development agencies in Scotland, Wales and Northern Ireland. Regional Government Economic Development Agencies in Europe number many hundreds and global  organisations number in the thousands. An example of the activities of one of  the English RDAs can be found athttp://www.southwestrda.org.uk/  

 A  pplications for all products in the Enterprise and Business Development Strategy will be subject to a

thorough  assessment. In the case of the Small Loans Guarantee Scheme (SFLGS), it is important to note that the Department is underwriting  funding that will be provided by Jersey banks. The banks will use thei existing risk management processes to evaluate the commercial viability of applications prior to seeking approval from the Department. Similar schemes, operated by the DTI in the UK have  proven to be very successful with  failure rates of between 2 and 3%. Eligibility criteria for the SFLGS are:

• The borrower must be registered under Part II of the Regulation of Undertaking and Development (Jersey) Law 1973.

• The licence must have been issued by the Regulation of Undertakings and Development Office, and the undertaking commenced, within the previous 5 years.

• The principal owner(s) of the undertaking must be resident and domiciled in Jersey.

• The guarantee is for a maximum of 75% of a business loan.

• The guarantee can be used as security for business loans of between £5,000 and £250,000.

• The loan must be repaid within a minimum of 2 and maximum of 10 years.

• The borrower can have more than one guarantee, but within the maximum £250,000.

• Annually, the borrower pays to the Government a 2% premium on the value of the outstanding loan.

• Interest rates and loan repayment periods are negotiated between the lender and the borrower and are not influenced by Government.

• A number of sector-specific restrictions will apply.

E v a l uation of other forms of grant support delivered through products such as the Jersey Export Development Initiative (JEDI) and the Jersey Innovation Initiative (JII) will also be based on defined eligibility criteria and delivery of results.

Strategic objectives, product details and eligibility criteria for the JEDI product are:

• Advice and support to new and less experienced exporters.

• Information and contacts to help identify and research overseas markets.

• Links to global networks which will help identify new markets.

• Financial assistance to help develop Jersey's export trade will also be available. An eligible company or individual will be entitled to claim support up to a maximum of £10,000 based on the following

formula:

5 0% of the total eligible costs for the first claim

4 0% of the total eligible costs for the second claim

3 0% of the total eligible costs for the third claim

2 0% of the total eligible costs for the fourth claim

1 0% of the total eligible costs for the fifth claim

Who is eligible?

• Any Jersey registered business, whose beneficial owner is a Jersey resident.

• Any would-be entrepreneur who has been resident in Jersey for 5 years.

Strategic objectives, product details and eligibility criteria for the JII are:

• Advice and guidance to new and less experienced inventors.

• Contacts who can advise on how to exploit ideas.

• Professional advice on how to protect an invention.

Financial assistance to help stimulate and develop innovation will also be available. In total, an eligible company, or individual, will be entitled to claim support up to a maximum of £5,000 based on the following formula:

5 0 % of the total eligible costs for the first invention

2 5 % of the total eligible costs for the second invention

1 5 % of the total eligible costs for the third invention

1 0 % of the total eligible costs for the fourth invention

Who is eligible?

• Any Jersey registered business whose beneficial owner is a Jersey resident.

• Any would-be entrepreneur, or inventor, who has been resident in Jersey for 5 years.