Scottish Local Authority Support for the Development and Growth of SMEs (SC10293)

Legal Context

In terms of Section 20 of the Local Government in Scotland Act 2003, Scottish Local Authorities may provide aid towards

a) Consultancy support for Small and Medium Sized Enterprises (SMEs);

b) Support for the participation of SMEs in fairs;

c) Support for start up small enterprises; and

d) Innovation Aid for SMEs.

Objectives of the Scheme

The scheme will support, on a discretionary basis, the growth and development of SMEs in Scotland. Assistance under this scheme will be the minimum necessary to achieve the above objectives.

Eligible Sectors

The scheme shall apply to all sectors of the economy. Aid will not however be given which is conditional on the exporting performance of the recipient nor will the aid be contingent on the use of domestic over imported goods and services. In addition aid will not be given to “ailing or insolvent” enterprises.

Eligible Costs

For consultancy support granted gross aid of up to 50% of the costs may be awarded in respect of the use of outside consultants, provided the services concerned are not continuous or periodic, and do not relate to the enterprise’s usual operating expenditure such as routine tax consultancy, regular legal servicing or advertising.

For participation in trade fairs gross aid of up to 50% of the costs of renting, setting up and running a stand at a fair or exhibition may be awarded.

This applies only to an enterprise’s participation at any particular fair or exhibition.

Start up aid granted shall take the form of;

(a) loans with interest rates which are not conform with market conditions, with a duration of 10 years and up to a maximum nominal amount of  £850,000 or £1,280,000 undertakings established in Assisted Areas For loans with a duration comprised between 5 and 10 years the maximum amounts may be adjusted by multiplying the amounts above by the ratio between 10 years and the actual duration of the loan. For loans with a duration of less than 5 years, the maximum amount shall be the same as for loans with a duration of 5 years;

(b) guarantees with premiums which are not conform with market conditions, with a duration of 10 years and up to maximum £1,280,000 of amount guaranteed, or £1,900.000 for undertakings established in Assisted Areas For guarantees with a duration comprised between 5and 10 years the maximum amount guaranteed amounts may be adjusted by multiplying the amounts above by the ratio between 10 years and the actual duration of the guarantee. For guarantees with a duration of less than 5 years, the maximum amount guaranteed shall be the same as for guarantees with a duration of 5 years. The guarantee shall not exceed 80% of the underlying loan.

c) grants, including equity or quasi equity investment, interest rate and guarantee premium reductions up to £350,000 grant equivalent or £520,000 for undertakings established in Assisted Areas.

A beneficiary can receive support through a mix of the aid instruments referred to above, provided that the proportion of the amount granted through one aid instrument, calculated on the basis of the maximum aid amount allowed for that instrument, is taken into account in order to determine the residual proportion of the maximum aid amount allowed for the other instruments forming part of such a mixed instrument.

Eligible costs for aid in respect of innovation for SMEs shall be the following:

(a) costs for obtaining, validating and defending patents and other intangible assets;

(b) costs for secondment of highly qualified personnel from a research and knowledge-dissemination organization or a large enterprise, working on research, development and innovation activities in a newly created function within the beneficiary and not replacing other personnel;

(c) costs for innovation advisory and support services;

The aid intensity shall not exceed 50% of the eligible costs.

In the particular case of aid for innovation advisory and support services the aid intensity can be increased up to 100 % of the eligible costs provided that the total amount of aid for innovation advisory and support services does not exceed €200 000 per undertaking within any three year period.

Definitions

A small enterprise is defined according to Section 382 of the Companies Act 2006. To be considered small an enterprise must satisfy two or more of the following requirements:

1. Turnover: Not more than £10.2 million
2. Balance sheet total: Not more than £5.1 million
3. Number of employees: Not more than 50

A medium enterprise is defined according to Section 465 of the Companies Act 2006. To be considered medium an enterprise must satisfy two or more of the following requirements:

The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements:

1. Turnover: Not more than £36 million
2. Balance sheet total: Not more than £18 million
3. Number of employees: Not more than 250

A “start up” undertaking relates to unlisted small enterprises up to five years following their registration which have not yet distributed profits and have not been formed through a merger. For eligible undertakings that are not subject to registration the five years’ eligibility period may be considered to start from the moment when the enterprise either starts its economic activity or is liable to tax for its economic activity.

“Assisted Areas” refers to areas designated in terms of the Assisted Areas Order 2014 as amended by the Assisted Areas (Amendment) Order 2017.

“Innovation advisory services” means consultancy, assistance and training in the fields of knowledge transfer, acquisition, protection and exploitation of intangible assets, use of standards and regulations embedding them.

“Innovation support services” means the provision of office space, data banks, libraries, market research, laboratories, quality labelling, testing and certification for the purpose of developing more effective products, processes or services.

Budget

The estimated budget of the scheme is £75m over 5 years.

Duration

The scheme will operate from 1st January 2021 to 31st December 2025.

(ML / June 2021)