Regional Selective Assistance

September 2014

Purpose Of The Grant

 Aims to

improve job opportunities

Areas of Scotland provided in the Assisted • Supporting investment projects which create/safeguard jobs • Open to limited companies, sole traders or partnerships • Discretionary grant dependent on a number of factors ……..

Key Features

 Based on specific projects based on: •

Expansion

•

Reinvestment

 Can be used more than once for different projects as long as separate assets and jobs, and this separation is verifiable  Grant calculated with reference to either: •

Capital expenditure

(fixed assets); or •

Creation of new jobs

(2 years’ wages for new jobs)

The project must:

Directly create/ safeguard employment Capital expenditure Funded mainly from private sector Require RSA to proceed Serve more than just local market

Criteria

Jobs

 Ideally projects should

create new jobs.

 Increase in jobs

not to be offset by job losses elsewhere

(job displacement)  Can assist if a real threat of jobs being lost in the near future if a project does not proceed –

safeguarding

 Only jobs

directly created by the applicant

are eligible  We look for at least

2-3 new jobs

in the first year of the project

Criteria

Capital Expenditure

 Expenditure on for a long time:

‘capital’ items

– those that the business will own • Land & buildings • Plant and machinery • Computer equipment  Does not include general running costs of the business: • Marketing costs

Criteria

Need for assistance (1)

Demonstrate RSA is necessary to:  Fill a

funding gap



Satisfy parent company investment

criteria (e.g. payback, ROC, IRR) 

Reduce gearing and risks

to an acceptable level  Make the project happen in an

Assisted Area

Criteria Need for assistance (2)



Prior Commitment

- companies seeking grant assistance should not proceed with projects or enter into expenditure commitments until the appraisal process has been completed

Criteria

Viability

 Proposals must make

sound commercial sense

 Applicant and the project must be

financially viable

 We will share risks but the venture must have

a good chance of success

Sectors We Cannot Support

EC Legislation

       Fisheries and aquaculture Growing agricultural products Coal industry Steel industry Shipbuilding Synthetic fibres Purchase of transport equipment in the transport sector

Sectors We Are Unlikely To Support

      Mining and construction Tourism Charitable organisations Public sector e.g. health service, colleges/schools, defence etc Energy generation Tobacco

Types Of Businesses We Do Not Support (1)



Businesses operating in a ‘local market’

– where customers come from the nearby area and have a wide choice of where to buy the product/service: • • • • • Retail Restaurants, hotels, cafes, bars Nurseries, soft play, crèche Joiners, plumbers, electricians, double glazing, garages Hairdressers, newsagents, bakers

Types Of Businesses We Do Not Support (2)

• We consider the following to be

well served markets

:  Printing sector   Basic metal fabrication Double glazing    Leisure and tourism Retail Professions (lawyer, accountant, doctor, dentist)  These markets are highly competitive and it is hard to differentiate between businesses.

The project would likely lead to significant job displacement

– no point in supporting one project if it just moves businesses/jobs from another company.

Types of businesses we don’t support (3)

Charitable Organisations

  We can

only support a commercial activity

i.e. the part that aims to make a profit and does not rely on donations. This may only be a small part of the charity’s activities.

 The grant scheme is

not really designed for charities/social businesses

In general, it is

difficult to show that the commercial activity aims to make a profit

and is a viable business in its own right.

 Often, the

commercial activity operates on a local basis

(e.g. shop) or is in a well-served market (e.g. training) and would

therefore be ineligible.

Assisted Areas - 2014 to 2020

Company Size Small Medium Large Tier 2 30% 20% 10% Tier 3 20% 10% 0%

Tier 2 (sparsely populated areas may be eligible for an additional 5% funding) Tier 2 Tier 3

Large Companies

Summary

• Large companies can only receive regional aid for

“initial investment in favour of new economic activity”

in the area concerned. This means large companies are only eligible where they are:  Setting up a new establishment in a different NUTS 3 region from any existing operations of the firm; or  Diversifying the activity of an establishment to one that is not the same or similar to that previously performed

Large Companies (2)

“Initial Investment in new economic activity”

Initial investment relates to:   Setting up of a new establishment, or Diversification of the activity of an establishment

under the condition that the new activity is not the same or similar to the activity previously performed in the establishment

 ‘the same or similar activity’ : activity falling under the same class (4digit code) of the

NACE Rev 2 statistical classification of economic activities.

 If the project is “the same or similar activity” in the same NUTS 3 area then it cannot be supported.

 NUT 3 areas generally follow local authority boundaries, with a few exceptions.

Large Companies (3)

New establishment

 If the project is “new establishment” and “new economic activity in the area concerned”.

by a business not already in Scotland

then it is  If a project is proposed by a

business already in Scotland but in a different NUTS 3 area

then it can also be regarded as new economic activity in the area concerned if is it related to setting up a new establishment. There is no requirement to show that this is not “the same or similar activity”.

 The

exception to this is relocation

Large Companies (4)

Relocation

 What about a

relocation from one NUTS 3 to another

– is that eligible?

• No - If the project is an outcome of a closure of the same or similar activity anywhere in the EEA in the previous 2 years it cannot be supported. Also, if, at the time of the application for aid, there are concrete plans to close down such an activity within 2 years following the initial investment, this would also mean a project is ineligible for support. This will mean most relocations will be ineligible for support.

Company Size

Enterprise Category Medium Small Headcount And Annual Turnover Or Net Assets < 250 < €50 million < €43 million < 50 < €10 million < €10 million

Example Aid for Investment (“traditional method”)

£’000 Capital expenditure 500 Aid limit

(small co in Tier 2)

Maximum RSA grant available

30%

150

Aid For Job Creation

Example

Gross salaries over 2 years (35k salaries x 20 jobs x 2 years) Aid limit

(small co in Tier 2)

Maximum RSA grant available

£’000 1,400 30%

420

Level Of Support

Factors Considered



Need for assistance



Quality of jobs (qualifications, pay, etc)



Quality of Project (R&D, headquarters, etc)



Timing of jobs, capex, draw down of grant

RSA Project Appraisal Process



Initial enquiry

• High level review of project against scheme criteria   

Appraisal of application

• Size and impact of project • Market assessment • • Financial viability Need for assistance

Decision

(Approval group for grants >£500k)

Turnaround 10-40 working days

depending on size of grant

Appraisal Teams



RSA team

handles • • Scottish companies UK companies already established in Scotland 

SDI team

handles • • • New inward investment cases Overseas owned companies UK companies setting up in Scotland initially

Payment Of Grant



Paid in instalments

, in arrears, over the life of the project 

Need to meet conditions

to trigger instalment: • Capex • • Jobs Gross wages (AfJC only)  Standard conditions include

provisions that assets and jobs are maintained for a period of time after final payment

(3 to 5 years there are specific EU rules)

RSA Annual Results 2013-2014



117 offers of RSA in Scotland

were accepted, totalling over

£52.5 million.

 These offers relate to projects with planned capital expenditure of over £267 million and the expected creation or safeguarding of 6,161 jobs.  12 offers accepted of £1 million or more were accepted.



SMEs accounted for 85 (73%)

of the accepted RSA offers, totalling almost

£18 million.

• These projects involve

planned investment of over £66.6 million

with the aim of creating or safeguarding

2,368 jobs.

•

32 of these offers

, totalling over

£6.2 million

and aiming to create and safeguard over

1,070 jobs

,

were for our ‘Tier 3’ RSA grant aimed solely at SMEs