Manufacturing: To secure a grant, think first about business opportunities

When I speak to manufacturing CEOs, I often find that they’re missing out on potential government grants which could help them develop their businesses. In most cases they’ve assumed that getting state funding is so difficult and complex that there’s little point even finding out what’s involved.

But they could be missing out. The EU’s state aid regulations allow member governments to inject millions of euros into manufacturing projects that create jobs and wealth. The money is there in the UK’s Regional Growth Fund (RGF), and is readily available for the right projects.

But it isn’t hard to see why some manufacturers think the grants landscape is complicated. The percentage of overall project costs that can be returned as grants varies between different regions and sizes of business. And while the same EU rules apply across the UK as a whole, England applies a minimum of £1m to RGF grants for big-ticket projects – a threshold that doesn’t apply in Scotland, Northern Ireland or Wales.

This £1m minimum has created an increased role for the Local Enterprise Partnerships (LEPs) across England, which draw down money from the RGF and other government sources, and parcel it out into grants of broadly less than £1m. Again, the money is there and available. And while there is uncertainty in some quarters about what will happen with the LEPs after the general election, it is liely that they will stay in place as part of the wider grants structure.

Grant money can significantly benefit manufacturers. An injection of effectively ‘free’ government money not only supports the overall project investment, but also attracts bank funding by reducing risk, and boosts eventual returns for the business.

The political will is now there on all sides to support a resurgence in UK manufacturing. It’s widely accepted that the hollowing-out of our manufacturing industry and loss of skills to overseas competitors have gone too far. From reshoring of production to the growth in apprenticeships, the focus is on rebuilding our manufacturing base.

Grants are a key plank of this policy agenda – and the projects most likely to attract state funding are those that create jobs and skills in areas of need, and have high innovation content. Strong export potential is a further plus-point. Companies can also look beyond the UK’s RGF for money: the EU’s €80bn Horizon 2020 initiative is seeking to support socially beneficial R&D investments across Europe – and it’s currently underweight in making grants in the UK.

Faced with these various channels for accessing state aid, how should companies map out the optimal route for their own business? Perhaps surprisingly, the answer lies in looking not at the grants system or the qualification criteria, but at the business itself.

When I discuss grants with my manufacturing clients, I start by asking about their plans and aspirations for the company over the next three to five years: new products, markets, skills, technologies, R&D, export opportunities, and so on. They nearly always draw a graph from bottom left to top right, requiring new investments in plant, processes and talent. And it pretty soon becomes clear whether and where grants could play a role in sustaining their growth curve.

One of the worst possible approaches is to start with the factors that the grant providers are looking for, and then go out ‘grant-hunting’ with a project specifically designed to attract funds. The lack of an underlying robust business case will shine through. And there are many examples of companies that have gone grant-hunting and ended up having to return the money – or even going under.

Make no mistake, government money is ready and waiting for the right manufacturing ideas and projects. The landscape for accessing it may look complex and confusing. But with the right guidance, navigating the way there is definitely worth the effort.

For more information please contact Gareth Hodge on gareth.d.hodge@uk.pwc.com