A FLAGSHIP Government loan scheme will fail to help all but a handful of North East companies, employers have warned.

Ministers have been told they have set the criteria too high for North East firms to benefit from the Business Growth Fund.

The warning comes as Whitehall pushes ahead with plans to take control of a dedicated £125m regional loan pot and administer the scheme from London.

Vince Cable’s Business Growth Fund was created to hand out up to £10m to firms needing expansion cash in exchange for a return on profits and a place on the board.

But rules stating the company must have a minimum £10m turnover means hundreds of firms across region which could have benefited are denied help at a time when the Government is cutting public sector spending and adding to the unemployment lines.

Chief executive of the fund Stephen Welton said last month that he would not apply the rules quite so rigidly and insisted that in Scotland and Wales firms with a £5m turnover could still benefit.

Officers at the North East Chamber of Commerce have included a warning on the need for regional investment as part of their submission to the Department for Business’s growth review.

Last night Chamber chief executive James Ramsbotham said the Government had to do more to intervene and solve the “market failure in finance” which was threatening the regional economy.

He told The Journal: “Many sources of investment are focused on the South East and difficult to access for growing firms in the North.

“The Business Growth Fund is one method designed to address that, but it’s likely to have limited impact in the North East because of the size of businesses it’s looking to invest in.

“While we welcome the fact the fund is prepared to look flexibly at this, it suggests we still need more options available. That’s why the Finance for Business North East fund is important.

“It must continue to be managed in the North East where local investment opportunities can be identified and understood. It would also generate returns for reinvestment in North East businesses long into the future.”

A spokeswoman for the Business Growth Fund said turnover was not the only criteria against which a decision to invest is made.

She added: “The £10m threshold is not set in stone, it is just one of the criteria. With up to £100m to invest, the type of companies looking for this are likely to be those with or approaching a £10m turnover.

“What we really want to see is strong growth projections.”

It’s likely to have limited impact in the North East because of the size of firms it’s looking to invest in