On 10 March 2016, FEP attended a workshop organised by DG GROW on funding opportunities for the creative industries. The event aimed to present several funding opportunities for sectors in which the EU has a clear leadership and growth potential but that face difficulties in accessing capitals. Several funding schemes were presented, some focused on creative and cultural industries, some more general (but open to them), among which: the European Fund for Strategic Investment, the European Structural Funds, the Guarantee Facility for Cultural and Creative Industries (under Creative Europe), the skills development strands under Erasmus+. The instruments presented were mostly related to loans and guarantee funds, rather than project grants. FEP is increasingly looking into the opportunities to support innovation in the publishing sector.
Sławomir Tokarski, Director for Innovation and Advanced Manufacturing, DG GROW, made an opening address in which he argued that the EU had a clear leadership in the cultural and creative sectors, which presented a huge growth potential but at the same time faced problems in matching development needs with funding opportunities and access to capital; hence the decision by the Commission to have a look at a range of financial instruments and their possibilities and ask for feedback from stakeholders. Mr Tokarski also invited the participants to let the Commission know where they saw legislation creating barriers to their investments.
The first presentation focused on the lending schemes of the European Investment Bank (EIB) for the creative industries, and in particular on the implementation aspects and perspectives of the European Fund for Strategic Investment (EFSI). The EIB is the EU‘s long-term financing institution and acts as an autonomous body to finance (via loans) capital investments furthering European integration by promoting EU policies; loans must therefore fulfill policy goals, such as innovation, energy savings, convergence, etc. Priorities for 2015 were environment (19.6 billion € allocated), infrastructure (18.9 billion), innovation (18.7 billion) and SMEs (29.2 billion). Projects financed by the EIB must be economically justified, technically viable and financially self-supporting; the idea is to provide additional project funding, mobilising private investment.
EFSI is an initiative launched jointly by the EIB Group and the European Commission to help overcome the current investment gap in the EU by mobilising private financing for strategic investments. It is a 16 billion € guarantee from the EU budget, complemented by a 5 billion € allocation of the EIB’s own capital, which should unlock additional investment of at least 315 billion € over a three year period. Investments made under EFSI are meant to address market failures in risk-taking that hinder investment in Europe; EFSI lent some 50 billion € to EU companies in less than one year since its creation.
In terms of eligibility, EFSI operations need to be economically and technically viable projects, with a strategic dimension primarily in sectors like development of infrastructure (including digital, transport and energy), RDI, ICT, education, health, energy efficiency and support for, SMEs and mid-cap companies.
The potential of EFSI to support the creative industries resides in its focus on innovation promoted by the private sector, both tangible and intangible (without sectorial limits), directly by private sector based establishments; it provides supply-side financing to companies, to support initiatives such as business/technology parks and RDI cooperation (clusters, networks, etc.), as well as Public-Private Partnerships, pilot schemes for the deployment of technologies and lifelong learning to access technologies (e.g. staff training).
Often the participation of the EIB encourages other investors to get involved and/or offer better loan conditions. Maximum loan amount can be up to 50% of the total eligible project cost or credit risk limit and applicants must provide comprehensive project information (including a detailed business plan on potential private sector revenues). The loans are supposed to be relatively large (around 10 million €), but smaller projects could be taken into consideration.
The presentation ended with some concluding remarks on creative industries: there is some new thinking in the context of EFSI, which is focusing on making support to innovation more effective, with the deepening and broadening of financial instruments (e.g.. risk sharing) and a broader scope of applications (e.g. innovative services, lead market initiatives, pre-commercial procurement); all of this should make it likelier for the creative sectors to become beneficiaries.
The next session featured a series of presentations on possible projects to be submitted to the EIB. One of them is St’art, a fund for creative entrepreneurs (supported by the Wallonia Region and the Wallonia-Brussels Federation, Belgium) addressing creative industry SMEs based in Wallonia/Brussels: design, music, architecture, fashion, design, publishing, etc. St’art is an investment fund (loan and equity); it also provides co-funding, to influence banks and private investors for 50-50 participation. The funding is for companies, not projects, based on criteria of economic viability of the company, economic and financial value of project(s), qualification and expertise of project owners, cultural and creative value of project(s), direct and indirect impact on employment.
Another project is the Regional Initiative for Culture and Creativity (RICC), a Brussels-based strategic European network led by regional representatives, focused on culture and creativity. Its aim is to provide regional governments and territorial stakeholders with an EU network; key topics include creative industries (access to finance, new business models, skills, etc.) and cultural observatories (collection of cultural data, cultural observatories and research centres). The main axes of activities are lobbying the EU institutions and the development of common EU projects.
Next on the agenda was a presentation on the financial instruments for SMEs in COSME (the EU programme for the Competitiveness of Enterprises and Small and Medium-sized Enterprises). The budget for these instruments represents some 60% of the total COSME programme (over 1.3 billion €) and aims to support SMEs that otherwise would not get financing; overall targets envisage supporting up to 330,000 SMEs, through debt and equity financial instruments: the Loan Guarantee Facility (LGF) and the Equity Facility for Growth (EGF).
The LGF is meant to provide support for transactions which otherwise would not have taken place (e.g. perceived higher SME risk, insufficient collateral across all sectors), via guarantees to financial intermediaries for newly generated SME financing portfolios (commercial banks, promotional institutes, guarantee societies, alternative lending platforms); it has a broad coverage: working capital, bank loans, subordinated loans, bank guarantees, leasing transactions. The EFG aims to attract private capital into venture capital (VC) investments and support the creation of a pan-European VC market, focusing on investments into equity funds which in turn invest into SMEs at the growth and expansion stage and on joint investments with Horizon 2020 into funds that invest across development stages.
EU financial instruments in practice are based on agreements between the Commission and the EIB Group (EIB and EIF, the European Investment Fund) or the managing authorities of the Member States (for funding in shared management), who in turn make guarantee agreements with financial intermediaries; SMEs must then go to those intermediaries to apply to be beneficiaries. 19 financial intermediaries in 13 countries had signed COSME guarantee agreements as of October 2015, and some 30,000 SMEs had received loans supported by the LGF for a total of some 700 million € as of September 2015, some 2% of which in the ‘arts, entertainment and recreation’ sector. More than 97% of the SMEs supported are very small (up to 10 people employed). The first EFG transactions have been signed at the end of 2015, leading to the establishment of funds in The Netherlands, France and Italy and to investment in two expansion and growth stage funds in Germany and Austria.
To find EU funding, a single access to finance portal (www.access2finance.eu) for all the EU financial instruments has been set up, in all the EU official languages, covering 38 countries with over 1,000 intermediaries, giving access to more than 100 billion € of financing.
The following presentation outlined the opportunities under the European Structural and Investment Funds (ESIF), with a focus on Smart Specialisation. The ESIF are not research funds, but contribute to the EU Cohesion Policy by encouraging economic, social and territorial cohesion and the economic reconversion of regions. Their management is shared between the Commission and mostly national, regional and local authorities; there are currently 456 national/regional programmes and 79 interregional programmes, with different co-funding rates, specific objectives, targets, etc., for a total allocation of over 450 billion € plus over 180 billion € of co-funding. The European Regional Development Fund (ERDF) is the most interesting of the ESIF for the creative industries.
The ESIF have undergone a major reform process recently; its key elements are the move from an absorption logic to an investment policy for growth and jobs, greater focus on results, targeting resources at key growth sectors, a stronger link to EU economic governance, reinforced partnerships, increased synergies between funds and with other EU instruments and the introduction of Smart Specialisation as a key feature to ensure effectiveness of ERDF investments in innovation.
The ERDF focuses its investments around several priority thematic objectives, among which innovation and research, access to and use and quality of ICT, the competitiveness of SMEs, employment and labour mobility and education, training and lifelong learning. The funds have no sectorial specialisation, but creative industries can participate on any theme. Almost 60 billion € are available for business R&I; one strand is ‘SME research, innovation, incubation, creative industries’. These investment priorities are relevant for innovative enterprises as they cover all types of firms, for business investments in R&I, including product and service development (in particular ICT products and services). Support for enterprises can take the form of grants to individual recipients and consortia (EU state aid rules apply), financial instruments (loans, venture capital, guarantees) via individual schemes or the SME initiative (EIB) or off the shelf instruments, public procurement and support services.
Applicants must identify the relevant operational programmes and managing authorities, by territory and theme/specific objectives (see here), identify open calls and funding opportunities (funds are mostly spent within an operational programme’s territory) and contact the managing authorities.
The existence of a national or regional Research and Innovation Strategy for Smart Specialisation (RIS3) is the ‘ex-ante conditionality’ for the use of ESIF to support R&I. The concept of Smart Specialisation implies proposing initiatives specific to capacities on the ground and using innovation as driver for regional development policy; it is about prioritising the development of new specialties based on regional concentration of knowledge. Basically regions select priorities areas for knowledge-driven investments (see the EYE@RIS3 map) and one of the most frequently cited fields includes the creative industries.
Next came a presentation of the Guarantee Facility for Cultural and Creative Industries, planned under the Creative Europe programme. The programme’s general objectives are to promote cultural and linguistic diversity and cultural heritage and to strengthen the competitiveness of the European cultural and creative sectors (CCS), in particular the audiovisual sector; one specific objective (and the rationale for the Facility) is to strengthen the financial capacity of CCS.
The creation of the Facility was inspired by considerations about difficulties for the CCS to access the funding needed for their activities and historical weaknesses such as fragmentation, chronic underinvestment and undercapitalization, related to certain specificities of the CCS, namely: the intangible nature of their assets (mainly IPR), difficult to evaluate; the prototype nature of their output; the often small size of their markets, creating a lack of critical mass.; their specific cash flow schemes and life-cycle; the fact that personal collateral is typically requested when providing finance; a shortage of reliable data which limits the possibilities of SMEs in the sector to get funding. Consequently, evaluating credit risk in the CCS requires specific and different approaches and cannot be done in a really standardised way. Most European financial intermediaries do not currently have the in-house necessary expertise for evaluating credit risk in the CCS.
Hence the creation of the Loan Guarantee Facility for the CCS, intended to provide capacity and skills to assess credit risk by financial intermediaries and significant risk cover, through the two pillars of capacity building (for financial intermediaries) and credit risk protection (through financial guarantees/counter-guarantees to financial intermediaries/guarantee institutions building/guaranteeing portfolios of loans in the CCS). The CCS are defined quite broadly (and include book publishing). Criteria for the loans include: no tangible collateral external to SME assets shall be requested, it is encouraged to assess IPRs and take them where possible as collateral; financing should go to investment in tangible and intangible assets and/or business transfers and/or working capital; loan principals shall be up to 2 million €.
The Commission and CE Desks are communicating about the Facility to the CCS SMEs, while the EIF is informing financial intermediaries; the financial intermediaries will have to propose a promotion plan to SMEs in their markets as part of their applications to the EIF. The Facility will be managed by DG CNECT (in cooperation with DG EAC) and will be first implemented in the period 2016-20, making available 121 million € in fund raising credits to leverage up to 600 million in loans. The plan should be launched by April 2016, for the first calls to be opened in May/June.
A presentation followed on Erasmus+, the EU single programme for education, training, youth and sport for 2014-20, and in particular its support for initiatives on vocational training, apprenticeships and skills development. Erasmus+ is an integrated programme covering all educational fields (including vocational education and training, VET), comprising three key actions: learning mobility of individuals, cooperation for innovation and exchange of good practices and support for policy reform.
The potentially relevant activities to be supported under the key actions are:
- For Key Action 1 (Mobility in the VET sector): mobility for VET learners. The aim is to increase training opportunities abroad for VET learners and to provide them with skills needed for the transition from education and training to work, through traineeships abroad for 2 weeks to 12 months in a company, other workplace or in a VET school with periods of work-based learning in a company.
- Also for Key Action 1: mobility for VET staff. This is to update/acquire knowledge of work practices and/or refresh pedagogical skills of VET professionals (VET teachers, in-company trainers, also non-teaching staff e.g. VET institution leaders, training managers, guidance counsellors) through work placement in an enterprise/training/teaching institution.
- For Key Action 2 (Cooperation for innovation): VET Strategic Partnerships. The aim is to encourage cooperation between VET providers and local/regional business communities with a view on the internationalisation of VET, through exchanging good practices and innovation in VET provisions, guidance, counselling and developing and delivering of new teaching/training materials and methods.
- Also for Key Action 2: Sector Skills Alliances. These are meant to enhance the responsiveness of VET systems to sector-specific labour market needs, contributing to increased economic competitiveness of the concerned sector, through designing and delivering curricula responding to the needs of labour market and of the learners in economic sectors, promoting work based learning and facilitating the transparency and recognition of qualifications at EU level.
The final presentation focused on cluster facilitated projects for new industrial value chains and the European Strategic Cluster Partnerships. Since a lot of growth comes from the creative industries, one of the most dynamic economic areas, emerging ones should be nurtured. The Commission thus wants to promote cluster cooperation for industrial leadership in global markets and support capacity building in cluster management, through programmes such as the Cluster Internationalisation Programme for SMEs (COSME, € 19 million) and the Cluster Excellence Programme for SMEs (COSME, € 8.25 million). Cluster organisations should support groups of related SMEs, promote cross-border and cross-sectoral cooperation, create open spaces for cross-fertilisation and so on. A specific topic on ‘Cluster facilitated projects for new industrial value chains’ has been included in the current Horizon 2020 work programme. The Commission has also set up a dedicated EU Cluster Portal.