Examination of Witness (Questions 520-539)
9 NOVEMBER 2004
MR JOHN
MACKIE
Q520 Mr Fallon: How do you rate the Government's
attempts to improve the situation? Is there any evidence to show
that the Bridges Community Development Venture Fund has made an
impact?
Mr Mackie: There is evidence for
the Bridges Community Venture Fund, there is evidence from the
regional venture capital funds that have been established, there
is evidence on things like the university challenge funds, but
the more recent interventions or things that have had government
support, like Bridges, interventions like the regional venture
capital funds, what we have seen so far is that they have been
able to raise capital and they have been able to make investments
within their territory, within their monitoring limits. What we
have not yet seen is if those investments have been successful
and generated adequate returns, and so on. It is too early to
tell. I am not saying they are not going to, but I am saying the
evidence is not there yet other than, yes, they have raised capital,
yes, they have been able to deploy some of that capital in making
investments.
Q521 Mr Fallon: So far do you conclude
that these kinds of operations are discovering opportunities that
have previously been ignored, or are they investing in projects
that their mainstream private equity has turned down?
Mr Mackie: I do not believe it
is projects that mainstream private equity has turned down. I
believe, by and large, it is projects that mainstream private
equity generally would not get down to or very few providers would
get down to.
Q522 Mr Mudie: Staying on the equity
gap, you have touched on some of the problems of defining it and,
therefore, if there is no demand you can say there is no gap,
but there clearly is, from your annual report, an investment gap
between the regions, and on the figures you have supplied it seems
to be, not getting worse, but widening demonstrably?
Mr Mackie: In what sense? I am
sorry.
Q523 Mr Mudie: In terms of investment.
You tell me that the South East of London represented 47% of the
total UK investment. You do not mention Yorkshire, because I think
you stopped somewhere about 11%, so Yorkshire must be below that.
So, clearly, if 47% of investment is going to the South East and
under 11% is going to Yorkshire, the investment gap is widening?
Mr Mackie: I suppose it depends
what you relate it to; if you relate it to property.
Q524 Mr Mudie: It is in your report?
Mr Mackie: Yes, but if you say
there is a gap, do you mean a gap in terms of—
Q525 Mr Mudie: Exactly, that is the point,
in terms of equity gap. If there is not a demand because there
are no venture capital people located in the region, there will
not be a gap between the demand and the supply; but if we step
back and we are looking at investment in the regions and in the
South East and London is getting 47%, if 47% of all the investment
in the UK is going there and under 11% is going into Yorkshire,
there is a clear investment gap there, is there not, and it is
clearly widening in terms of what that investment actually means
in terms of productivity and business?
Mr Mackie: I suppose what . .
. I do not have the figures, but I guess what you would need to
relate it to when you are trying to measure it is you would need
to relate it to economic activity in the region or population
concentration. You need some measure. You would need some measure
against which to compare to say, "If 10% of the population
live in the North East and the North East gets 10% of the investment
activity, then perhaps that is appropriate, perhaps that is the
right level."
Q526 Mr Mudie: You would relate it to
population?
Mr Mackie: No, what I am saying
is that you would need to find something against which to measure
it, whether that was population, whether it was regional economic
activity.
Q527 Mr Mudie: If business does not get
investment, or the part it gets . . . If you look at two areas:
if you look at the North East and you look at London, if 47% of
the total investment in the country is going into the South East
and London, clearly there is going to be an increase in the productivity
gap, the business gap, the output gap, between London and the
North East, which means that people in the North East will have
less opportunities in economic terms and, very probably, as is
demonstrated in the figures, a smaller income?
Mr Mackie: I am sorry, I am not
trying to be difficult, but again—
Q528 Mr Mudie: Why do you put it in your
annual report? Why do you draw the figures to my attention in
terms of regional investment, if they are not important?
Mr Mackie: I am not saying they
are not important; they are important.
Q529 Mr Mudie: Why are they important,
Mr Mackie? Why is it important for London to get 47% of the country's
total investment?
Mr Mackie: I am not saying it
is important for London to get 47%.
Q530 Mr Mudie: But you say the figures
are important. Why are they important then?
Mr Mackie: The figures are important
to our members and to wider jurisdictions, like government, to
say, "We want to see some sort of regional analysis where
investment is being made. We want to see some sort of regional
activity."
Q531 Mr Mudie: Why; why; why?
Mr Mackie: Why?
Q532 Mr Mudie: Yes?
Mr Mackie: We want to see it because
it is of interest to government and of interest to other interested
parties. We produce these reports—
Q533 Mr Mudie: It goes beyond curiosity.
This hearing is not about just curiosity. It is very important
in terms of the growth of regional economies to grow—they
need investment—and if there is a pot of investment and
47% is going to a region in the country and the other seven are
sharing the rest, then clearly that is going to be a richer, better
off, more jobs economy, regional economy?
Mr Mackie: In that case, what
should the proportions be?
Q534 Mr Mudie: Thank you, Mr Mackie.
That is where we are in terms of having you before us. We are
going through where the investment is going, why it is going and
how do we actually do something to bring some equality in terms
of investment into the country so the North East's prosperity
output, productivity, earnings, start pulling up towards the South
East.
Mr Mackie: Yes, but you seem to
be starting from the premise that the current regional break-down
is in some way wrong or inappropriate or needs to be changed.
Q535 Mr Mudie: Yes. Is it not?
Mr Mackie: I do not know. I do
not know what the evidence is for that.
Q536 Mr Mudie: Is investment a good or
a bad thing?
Mr Mackie: Investment is a good
thing, in my view.
Q537 Mr Mudie: So you and I are competing
for it and you get 47% of new investment—of all the money
that is going to be invested in business you get 47% and I get
8%—who is doing better?
Mr Mackie: What are you comparing
it to? If 47% of businesses are located in the South East of England,
it is appropriate that 47% of investment should be directed there.
Q538 Mr Mudie: I will go back to the
script. All I can tell you as a Yorkshire politician is that if
I could get 47% of the national investment in business going into
Yorkshire, I think there would be a lot more economic activity
in Yorkshire than is presently taking place.
Mr Mackie: But there is a horse
and cart thing, is there not, that says where are existing businesses
that attract investment? If the greater concentration of those
is in particular parts of the country then that is where investment
generally is.
Q539 Mr Mudie: Yes, that is right, and
Mr Fallon touched on it—I will go on to it—the demand
side. Mr Fallon did ask you, and you accepted, and the various
pieces of evidence we have got is a lot of it can be traced to
chicken and egg. If there was an infrastructure for this business
in the regions then it happens, and if there is not it does not
happen. Is that right?
Mr Mackie: It is not just venture
capitalists, but, yes, if . . .
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