News / SIC sets up £15m business lending fund
MONEY inherited from Shetland Development Trust (SDT) is to be used by Shetland Islands Council to set up an investment fund and lending service with a value of £15 million that can be accessed by businesses operating locally.
The local authority’s development committee approved the creation of the fund, with a remaining sum of £3 million to be invested on the stock market, at a meeting in Lerwick Town Hall on Monday afternoon.
Economic development manager Douglas Irvine said options for what to do with the £18 million of assets transferred to the SIC when SDT was wound up almost two years ago had been examined closely.
SDT was established in 1996 to support economic development by providing finance for local businesses and industries which found it difficult to obtain bank loans.
The development committee unanimously approved the creation of the £15 million Shetland Investment Fund after officials laid out the business case in a comprehensive report.
It weighed up the pros and cons of various permutations dividing the £18 million between an investment fund and the stock market, and concluded that a 5-1 ratio would give the council the best financial deal with net benefits estimated at £3.13 million.
Irvine said supporting the development of businesses had additional social and community benefits, improving local employment prospects and helping to retain more people of working age in the islands.
He said the cost of running the fund would be met from existing council budgets and the department had the necessary expertise to operate it.
Asked whether businesses from outwith Shetland could also access financing, Irvine said that would depend on whether the business would benefit the isles and not harm any existing firms locally.
“If there is a company that we think merits investment from the council then the policy exists to do that, but it is a matter for you to decide whether you want to back businesses that are not based in Shetland,” he said.
“We would look favourably on inward investment.”
He said the fund would not face state aid issues as long as it was investing commercially: “We would be worried if we were supporting businesses that were going to erode or be detrimental to existing local businesses – we’d try to avoid that if we could.”
Irvine said any money not being lent out would be invested on the stock market to generate revenue in the meantime.
Committee chairman Alastair Cooper said the council played a useful role in providing funding. Some firms were subsequently able to come back to the SIC and redeem their loans once their business was well enough established to attract lending from elsewhere.
SIC leader Gary Robinson said the extensive business case included evidence that, contrary to being a centralising council, much of its investment benefited outlying areas.
“This is a council that’s very often accused of being quite centralist,” he said. “This picture [on page 133 of the report] is a demonstration that we’re quite clearly not centralist. The investment is creating more jobs in the country than it is in Lerwick.”
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