The European Investment Bank (EIB) is lending GBP 75 million to Finance Wales plc to provide risk capital to small and medium sized enterprises in Wales under the EU’s JEREMIE initiative - Joint European Resources for Micro to Medium Enterprises. The initiative combines EIB finance with GBP 75 million from other sources, including the European Commission under the European Regional Development Fund to encourage effective investment in small businesses in the EU’s least developed regions.

The EIB loan in support of Welsh SMEs is of heightened importance given the current financial and economic climate. The JEREMIE project will facilitate access to finance for an important sector of SME community in Wales who might otherwise have faced funding difficulties. This will enable the creation and expansion of small enterprises which in the long-term will encourage regional economic growth. The GBP 150 million fund will allow Finance Wales plc to make equity and debt investments in Welsh businesses, building on its already successful investment record.

Simon Brooks, EIB Vice President responsible for lending activity in the UK, said “The EIB Group is delighted to work with Finance Wales, in cooperation with the European Commission, to implement the JEREMIE scheme for the first time in the UK. This operation will provide additional strength to the EIB’s reinforced commitment to supporting SMEs during the financial crisis. I am convinced that our strong and successful relationship with Finance Wales will act as a catalyst to encourage further JEREMIE schemes in other UK regions.”

Welcoming the new funding, First Minister Rhodri Morgan said: "This is a good day for our small and medium sized businesses, the backbone of the Welsh economy. The launch of this innovative new fund - a first in the UK - will be of tremendous value in helping Wales to ride out the recession and positioning companies to take full advantage of the economic upturn that will follow. This latest announcement again demonstrates how the Welsh Assembly Government is agile and innovative in devising new and practical ways to helping companies to surmount the current global economic and financial challenges, and grow for the future."

Siân Lloyd Jones, CEO, of Finance Wales plc, said: “The new £150m fund will allow Finance Wales plc to continue to invest in growth businesses throughout Wales. Having already invested over £110m through more than 2,000 investments in Wales since 2001 and leveraged a further £322m of private sector investment, we can now build on our successful record.”

Finance Wales will act as the Holding Fund for the EIB loan which it will on-lend to a specially created JEREMIE fund. Under the JEREMIE initiative managed by the European Investment Fund (EIF), this fund will then be supplemented by finance from the European Regional Development Fund, which is managed by the European Commission Directorate General for Regional Policy (DG Regio) and other sources. The JEREMIE fund in turn will provide capital to SMEs via sub-funds in the form of loans, mezzanine finance and equity investments.

The project will have an important economic and social impact on Wales as a whole, creating employment and encouraging growth across a wide range of economic sectors. Despite the fact that over 99% of Welsh enterprises are classed as SMEs and account for up to 70% of employment, Wales has relatively limited venture capital funding in comparison to other UK regions. The JEREMIE fund will help to plug this financing gap and bring Wales to the same standard as the rest of the UK.

Background notes:

JEREMIE - Joint European Resources for Micro to Medium Enterprises initiative – is one of the Cohesion Policy Joint Initiatives developed by the European Commission and the EIB Group to contribute to making EU Cohesion Policy more efficient and sustainable. The JEREMIE mechanism is based on cooperation established between the Commission, the EIB Group and a series of selected financial institutions and supports investment in small businesses across the EU.

EU Structural Funds have traditionally been spent as grants, which are issued as one-off payments on a project basis. The JEREMIE initiative offers new opportunities for EU Member States and Regions to invest and re-invest Structural Funds using a range of financial instruments, instead of grants. Investment and re-investment opportunities through JEREMIE mean that funds are used to maximum advantage, gaining additional value, or leverage, and also that funds can be used over a longer period for the benefit of SMEs. JEREMIE provides a range of financial tools to obtain the most appropriate allocation of funds in order to match supply and demand for SME finance at national or regional level. More information on JEREMIE which is principally managed by the European Investment Fund (EIF) can be found on the EIF website:
http://www.eif.org/what_we_do/jeremie/faq/What is JEREMIE.htm

The Cohesion Policy Joint Initiatives originate from partnerships established between the European Commission, the European Investment Bank Group and other international financial institutions. The four Joint Initiatives in the context of the Cohesion policy are:

JASPERS – Joint Assistance to support Projects in European Regions (EIB, European Bank for Reconstruction and Development and KfW Bankengruppe);
JEREMIE - Joint European Resources for Micro to Medium Enterprises initiative (EIF);
JESSICA - Joint European Support for Sustainable Investment in City Areas (EIB and Council of Europe Development Bank)
JASMINE - Joint Action to Support Micro-Finance Institutions in Europe (EIB Group)

EIB support for EU Cohesion Policy

The EIB, the European Union’s long-term financing institution, contributes to the integration, balanced development and economic and social cohesion of the Member States by financing sound investment. Between 2007 and 2013, some EUR 350 billion have been earmarked for EU cohesion policy, representing nearly 36% of the Union’s total budget. This puts the allocation for this finance stream ahead of the common agricultural policy for the first time.

EIB activity in Wales

From 2004 to 2008, the EIB has provided loans to projects in Wales amounting to a total of EUR 503 million in support of infrastructure and industry. In 2008 the EIB lent over EUR 70 million for the refurbishment of social housing in the County Borough of Torfaen and a further GBP 100 million for a series of water supply and wastewater treatment schemes across Wales.

In the UK as a whole in 2008, the Bank lent some EUR 3.8 billion (GBP 3.6 billion) for projects, ranging from investment helping the UK's regions, to protecting the environment and improving national health facilities, transport, and supporting the activities of small and medium sized enterprises. Financing in the UK accounted for over 7% of the EIB’s overall lending in the EU in 2008.