Article 250 - The Midland Engine Investment Issue

The Midland Engine Investment Issue

Background

This essay examines the investment available for each of the Midlands Local Enterprise Partnerships in relation to the UK financial status.

Theory

Previous essays show that the economy of the UK has been dependent on Foreign and National borrowing to sustain its increasing population over the same land area over time.

Source: https://sites.google.com/site/architecturearticles/home/article-247---the-architecture-of-poverty-in-the-uk

This initial Foreign Revenue and National Revenue has been shown to be re-named as a debt, investment or leverage. This debt; investment, leverage; is passed from government to the devolved countries to the regions to the local authorities and then to the population to allow repayment through increased taxation.

The whole economy of the UK is therefore debt dependent to survive.

Foreign and National Debt is larger than GDP. Foreign and National Debt in the UK cannot be repaid by the amount of work; production; carried out by the UK workforce.

For every £1 of GDP £2.97 of Foreign Debt has to be obtained. For every £1 of GDP £0.95p is National Debt, investment, leverage.

This imbalance always moves a part of the UK population to a poverty level.

Source: https://sites.google.com/site/architecturearticles/home/article-247---the-architecture-of-poverty-in-the-uk

To add more debt; as leverage, investment; to each individual in a poor economy does not incentivize them it only increases their debts which they cannot pay off.

Source: https://sites.google.com/site/architecturearticles/home/article-239---the-current-financial-leverage-of-the-earth

Source: https://sites.google.com/site/architecturearticles/home/article-240---the-regional-mayors-investment-issue

Source: https://sites.google.com/site/architecturearticles/home/article-246---the-architecture-of-the-location-of-profit

Source: https://sites.google.com/site/architecturearticles/home/article-247---the-architecture-of-poverty-in-the-uk

The essay proposes that the LEP is not in its final form an investment. It is a form of debt as leverage as investment that will only accentuate the debt levels and poverty in the UK population at an individual, tax paying level.

Method

The essay establishes definitions.

Then it establishes data for the financial status of the UK.

Then for each LEP in the ‘Midlands Engine‘ and the ‘MEIF’ it relates the location, total investment fund,

equity fund, debt fund, small business loans, proof of concept and early stage fund, total average investment fund per LEP, total number of business supported, the investment per business, the timescale of the investment fund, the total average investment fund per capita per year, the population for each LEP area, the fund available per capita per year in each LEP area, the area of each LEP area, and the fund available per km2 of land in each LEP area per year.

The data for the MEIF is taken from the sources listed at the end of this essay.

This data is combined into one spreadsheet.

The essay next establishes the revenue for the UK in relation to location, population, tax returns revenue of UK, % of tax revenue per country, direct revenue per person, net worth, asset revenue to run country, assets per person, liabilities debt incl. interest, % of liabilities debt incl. interest per country, debt per person, direct revenue to debt ratio, assets / liabilities liquidity ratio, status as cash crunch or cash flow, net worth - assets / liabilities if assets value falls to zero and asset dependency.

This data is combined into one spreadsheet.

Conclusions are then drawn.

The spread sheets are attached to the essay.

References are included in the text and at the end of the essay.

Definitions

LEP

‘In England, local enterprise partnerships (LEPs) are voluntary partnerships between local authorities and businesses set up in 2011 by the Department for Business, Innovation and Skills to help determine local economic priorities and lead economic growth and job creation within the local area. They carry out some of the functions previously carried out by the regional development agencies which were abolished in March 2012….There are now 38 local enterprise partnerships in operation.’

Source: https://en.wikipedia.org/wiki/Local_enterprise_partnership

The Midlands Engine

‘The Midlands Engine is an extraordinary coalition of Councils, Combined Authorities, Local Enterprise Partnerships (LEP), Universities and businesses across the region, actively working with Government to build a collective identity, to enable us to present the Midlands as a competitive and compelling offer that is attractive at home and overseas. Our partnership is about additionality, complementing the work of our partners to generate added value, at scale – right across the Midlands. Home to over 10 million people and 440,000 large and small businesses, the Midlands has huge potential and the Partnership is focused on its global success – and this in turn will deliver an enhanced quality of life for our citizens and communities. Our Vision for Growth sets out our five priority areas of focus to ensure the Midlands drives the UK economy:

Connecting the Midlands through maximising new technologies to deliver a radical transformation of the Midlands transport network.

Tackling the mismatch between business skills needs and the skill levels of Midlands residents

Growing International Trade and Investment in existing and new markets.

Increasing Innovation and Enterprise, creating an environment where our science and innovation strengths can be maximised.

And, Shaping Great Places by promoting the Midlands as a great place to live, visit, learn and work.’

Source: https://www.midlandsengine.org/

MEIF

‘The Midlands Engine Investment Fund (MEIF), supported by the European Regional Development Fund, provides commercially focussed finance through Small Business Loans, Debt Finance, Proof of concept and Equity Finance funds. The Midlands Engine Investment Fund aims to transform the finance landscape for smaller businesses in the Midlands and to realise the region’s potential to achieve economic growth through enterprise. MEIF is a collaboration between the British Business Bank and ten Local Enterprise Partnerships (LEPs) in the West Midlands and East and South East Midlands.

MEIF provides over £250m of investment to boost small and medium business (SME) growth in the Midlands.’

Source: http://meif.co.uk/

‘The £250m Midlands Engine Investment Fund aims to boost the Midlands economy and support the growth ambitions of its 460,000 smaller businesses. The fund, a joint agreement between the British Business Bank and ten Local Enterprise Partnerships (LEPs) in the East & South East and West and East Midlands, is expected to bring together legacy funding from existing programmes, new funding from the British Business Bank and new European funding into a single ‘fund-of-funds’ structure. The funds will provide equity, debt, small business loans and early stage / proof-of-concept funds.

The British Business Bank has also committed to strengthening the links between its national access to finance programmes and local business support, including employing dedicated staff to work across the Midlands region.

Source: https://www.semlep.com/news/2016/250m-investment-to-drive-forward-the-midlands-engine/

‘A "fund of funds" (FOF) is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities. This type of investing is often referred to as multi-manager investment.’

Source: https://en.wikipedia.org/wiki/Fund_of_funds

‘All funds cover the whole of the MEIF investment area, but do have a geographic focus to provide a local service for companies.’

Source: http://meif.co.uk/funds-available/equity-finance/

Equity Fund

‘A stock fund or equity fund is a fund that invests in stocks, also called equity securities. Stock funds can be contrasted with bond funds and money funds. Fund assets are typically mainly in stock, with some amount of cash, which is generally quite small, as opposed to bonds, notes, or other securities.’

Source: https://en.wikipedia.org/wiki/Stock_fund

Investments are available up to £2m. Initial allocation of c. £80m, at least 20% of investments will be in amounts of under £250,000 and at least 70% will be in amounts of under £750,000.

Debt Fund

‘A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed income investments. A debt fund may invest in short-term or long-term bonds, securitized products, money market instruments or floating rate debt. The fee ratios on debt funds are usually lower, on average, than equity funds because the overall management costs are lower.’

Source: https://www.investopedia.com/terms/d/debtfund.asp#ixzz5BhIMB09d

Loans are available from £100k up to £1.5m. Initial allocation of c. £120m, at least 25% of loans under £200,000 and at least 70% of loans under £500,000.

Small Business Loans Fund

‘Loans provided to small businesses for various purposes by a lender.‘

Source: http://meif.co.uk/funds-available/small-business-loans/

Source: http://www.businessdictionary.com/definition/small-business-loan.html

Loans are available from £25k up to £150k. Initial allocation of c. £30m, at least 25% of loans under £50,000 and at least 70% of loans under £75,000.

Early Stage / Proof-of-Concept Fund

This is equity based funding.

Source: https://www.merciatech.co.uk/our-business/funds-we-manage/actively-investing/meif-POC/

‘Equity financing is the process of raising capital through the sale of shares in an enterprise. Equity financing essentially refers to the sale of an ownership interest to raise funds for business purposes.’

Source: https://www.investopedia.com/terms/e/equityfinancing.asp

‘Investments are available up to £750k. Initial allocation of c. £20m, at least 50% of investments will be in amounts of under £250,000.

This funding is aimed at higher-value start-ups and rapidly growing businesses and seeks to address a number of barriers including a grant dependency culture, lack of awareness or understanding of different types of finance and low or cautious ambitions for some businesses.’

Source: http://www.llepbizgateway.co.uk/how-to-access-finance/business-loans/midlands-engine-investment-fund/

Financial Leverage

‘Financial Leverage can be aptly described as the extent to which a business or investor is using the borrowed money. Business companies with high leverage are considered to be at risk of bankruptcy if, in case, they are not able to repay the debts, it might lead to difficulties in getting new lenders in future. It is not that financial leverage is always bad. However, it can lead to an increased shareholders’ return on investment. Also, very often, there are tax advantages related with borrowing, also known as leverage.’

Source: https://www.readyratios.com/reference/debt/financial_leverage.html

‘Financial leverage indicates the reliability of a business on its debts in order to operate.’

Source: https://www.readyratios.com/reference/debt/financial_leverage.html

‘If the financial leverage ratio of a company is higher than 2-to-1, it indicates financial weakness. If the company is leveraged highly, it is considered to be near bankruptcy. Also, it might not be able to secure new capital if it is incapable of meeting its current obligations.’

Source: https://www.readyratios.com/reference/debt/financial_leverage.html

‘A leverage ratio is meant to evaluate a company’s debt levels. The most common leverage ratios are the debt ratio and the debt-to-equity ratio.’

Source: http://www.investinganswers.com/dictionary/leverage-ratio

Leverage is the borrowing of money to increase the outcome of a business deal.

Debt

‘Debt is an amount of money borrowed by one party from another.’

Source: Google Search

Assets

‘an item of property owned by a person or company, regarded as having value and available to meet debts, commitments, or legacies.’

Source: Google Search

Liabilities

‘a thing for which someone is responsible, especially an amount of money owed.’

Source: Google Search

Net Worth

‘Net worth is the value of all assets, minus the total of all liabilities. Put another way, net worth is what is owned minus what is owed.’

Source: https://www.bankrate.com/calculators/smart.../personal-net-worth-calculator.aspx

Debt Ratio

A debt ratio is simply a company's total debt divided by its total assets.

Source: http://www.investinganswers.com/dictionary/leverage-ratio

The Total Equity of the UK

Equity: ‘the value of the shares issued by a company.’

Source: Google Search

Shares: ‘a part or portion of a larger amount which is divided among a number of people, or to which a number of people contribute.’

Source: Google Search

The Financial Leverage Ratio of the UK.

The Financial Leverage Ratio can be expressed as Financial Leverage Ratio = Total Debt / Total Equity

This is the same as the Debt-to-Equity Ratio. Debt-to-Equity Ratio = Total Debt/Total Equity

Source: http://www.investinganswers.com/dictionary/leverage-ratio

Data for the Financial Status of the UK

Population

The population of the UK is 65,640,100 (2016)

Source: Google Search

Source: https://en.wikipedia.org/wiki/United_Kingdom

Source: www.UKometers.info/UK-population/uk-population/

Tax Returns Revenue of the UK

This is made up of

Income and Capital Taxes £ 3,704 / person

National Insurance + £1,985 / person

Indirect Taxes + £4,345 / person

Fees and Charges + £0 / person

Business and Other Revenue + £664 / person

This allows for a Total Direct Revenue of £10,698 / person

Source: https://www.ukpublicrevenue.co.uk/numbers?units=d

The total revenue for the UK can be calculated as

Population x Tax Per Person

65,640,100 x £10,698 / person, approx. £702,217,789,800

Source: https://www.ukpublicrevenue.co.uk/numbers?units=d

Debt

The Total UK Debt for 1 year incl. capital and interest equates to £1,603,000,000,000.

Source: https://en.wikipedia.org/wiki/United_Kingdom_national_debt

Approx. £24,421 per person

Source: UK Public Spending.co.uk UK Central Government and Local Authority Public Spending 2016 - Pie Charts Tables

Assets

The actual UK Asset value be calculated as

Total UK Debt - Tax Returns = Assets

£1,603,000,000,000 - £702,217,789,800

This leaves a remaining revenue of

£900,782,210,200 to run the country for a year.

This amounts to approx. £13,723 per person in the UK.

Source: https://www.ukpublicrevenue.co.uk/numbers?units=d

Source: http://www.tradingeconomics.com/united-kingdom/money-supply-m1

Asset spending per Country in the UK

The total asset spending per capita can be calculated as country spending from

UK Funds / Country Population = Total Asset Spending Per Capita.

In England the spending per capita £9,111

In Wales the spending per Capita £10,120

In Scotland the spending per Capita £10,689

In N. Ireland the spending per Capita £11,209

Source: https://www.ukpublicspending.co.uk/year_spending_2016NIbn_17bc1n#ukgs302

Source: Google Search

Source: Public Expenditure by Country and Region www. parliament.co.uk

Liabilities

If the total UK debt is taken as the total liabilities of the UK the capital and interest for 1 year equate to £1,603,000,000,000.

Source: https://en.wikipedia.org/wiki/United_Kingdom_national_debt

Approx. £24,421 per person

Source: UK Public Spending.co.uk UK Central Government and Local Authority Public Spending 2016 - Pie Charts Tables

Net Worth

The Net Worth of the UK can be calculated as

Remaining Revenue – Total UK Debt.

£900,782,210,200 - £1,603,000,000,000

-£702,217,789,800.

Debt Ratio

The Debt Ratio of the UK can be calculated as

Total UK Debt / Remaining Revenue

£1,603,000,000,000 / £900,782,210,200

1.77 or 1.77%

Equity

The UK stock exchange has a total value of £3,272,000,000

Source: http://www.visualcapitalist.com/all-of-the-worlds-stock-exchanges-by-size/

£3,272,000,000 for a population of 65,640,000

Source: Google Search

Source: World Bank

Therefore Financial Leverage can be considered as Debt.

Financial Leverage Ratio

The Financial Leverage of the UK can be calculated as.

Total UK Debt / Total Equity

£1,603,000,000,000 / £3,272,000,000

489.91 to 1

Conclusions

The investment levels available for each of the LEP areas to allocate are minimal when examined in terms of the money available for each member of the population over the 5 year period of the investment.

The MEIF investment fund has been partly allocated from central government and as such must be part of the total government finances.

The total government finance assets of the UK are less than the total debts or liabilities of the UK.

The total government finances indicate that the UK has a negative net worth.

The total government finances indicate that for every pound of UK assets, the UK has £1.77 of debt.

The financial leverage ratio of the UK is more than 2 to 1 and so the UK is financially weak and moving to bankruptcy.

For every £1 of the UK owned by the shareholders; population; £489.91 is owed to someone else.

The UK government finance can be considered to be permanently moving towards a solvent situation by maintaining a revenue surplus; by regarding debt, leverage, as investment; above the tax collected to allow for constant investment.

The current UK economy is therefore debt; leverage; investment financed since the total public debt per person is higher than the per person amount of tax revenue.

The UK economy is dependent on infinite debt, leverage and investment.

This equates not only to money but also to environment, resources and energy.

This form of government financing; by regarding debt, leverage as investment; will not be available in the future after the effects of climate change, fossil fuel phase out and environment, resource and energy depletion due to increasing populations are considered.

If the central government is in debt then they have no ability to provide money as investment to the MEIF or to each country in the UK or each combined regional area or to each local authority or to any LEP or individual.

If the debt is considered as money borrowed to be invested then the nature of the investment is as a transferred debt repaid over a longer tax return timescale by the person, persons or location it is invested in.

The investment allocated to the combined regional authorities is therefore a debt moved from central government to a combined regional authority who move it to an LEP who move it to individuals.

The money available as investment per capita can be regarded as the amount of money each member of the population receives as an investment from the LEP or as the amount of money each member of the population has to pay back as a repayment on the original LEP debt by an increase per year in their taxes equal to their share of the total LEP investment; debt; over 5 years.

The LEP form of debt, leverage, investment will only accentuate the debt levels of the UK and increase the poverty in its population.

Other References

Source: https://www.blackcountrylep.co.uk/about-us/

Source: https://www.lepnetwork.net/

Source: http://www.lepnetwork.org.uk/leps/

Source: https://www.blackcountrylep.co.uk/business-growth/funding-opportunities/

Source: https://www.cwlep.com/funding/growth-deal

Source: http://www.llepbizgateway.co.uk/how-to-access-finance/business-loans/midlands-engine-investment-fund/

Source: https://british-business-bank.co.uk/wp-content/uploads/2016/09/160920-MEIF-Key-Terms-Final-20-September.pdf

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185537/report.aspx#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185541/report.aspx?town=Coventry%20and%20Warwickshire#tabrespop

Source:https://www.nomisweb.co.uk/reports/lmp/lep/1925185545/report.aspx?town=Greater%20Birmingham%20and%20So#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185562/report.aspx?town=stoke#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185565/report.aspx?town=the%20marches

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185567/report.aspx?town=Worcestershire#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185543/report.aspx?town=derby#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185553/report.aspx?town=greater%20lincolnshire#tabrespop

Source: https://www.nomisweb.co.uk/reports/lmp/lep/1925185552/report.aspx?town=Leicester%20and%20Leicestersh#tabrespop

Source CWLEP

Source: http://www.climate-em.org.uk/local-action/northamptonshire

Source: http://www.research-lincs.org.uk/lep-evidence-about.aspx

Source: https://www.marcheslep.org.uk/about/the-marches/

Source: https://gbslep.co.uk/wp-content/uploads/2017/06/GBSLEP-Annual-Report-2016-17.pdf

Source: http://www.llepbizgateway.co.uk/how-to-access-finance/business-loans/midlands-engine-investment-fund/

Source: Land Areas in Km2 from Standard Area Measurements for Local Enterprise Partnerships User Guide Dec 2015

Ian K Whittaker

Websites:

https://sites.google.com/site/architecturearticles

Email: iankwhittaker@gmail.com

04/04/2018

14/10/2020

2855 words over 7 pages

Data

West Midlands Engine 5 Year Investment Fund Breakdown

Financial Status UK.