Failed businesses 'cost North East taxpayers millions'

Northumberland Foods in Amble
Image caption Northumberland Foods is one of the businesses that went into administration owing money to the fund

Millions of pounds of taxpayers' money lent to businesses which could not get finance during the credit crunch has been lost, the BBC has discovered.

The money was handed out by the regional development agency One North East from its Transitional Loan Fund.

But the BBC has learnt that 34 of 75 firms that were helped have gone into either administration or liquidation.

One North East said the fund had helped struggling firms and 41 of those given money were still operating.

Using the Freedom of Information Act, the BBC found that £2.7m of the almost £8.7m that was lent will not be repaid.

The failed businesses loaned money by One North East include a flooring company, a roofing firm, a food processing factory and several bakeries.

The fund was set up in 2008 to lend money to struggling businesses which could not get finance from the banks.

'Bad luck'

Northumberland County Councillor Wayne Daley, Conservative, said: "One North East have got some very serious questions to answer to the North East and the country, in fact.

"Nearly half of the businesses that they gave money to have either gone into liquidation or administration and clearly what that demonstrates is that either it was really bad luck, or they just weren't taking due diligence on the organisations that they were giving money to."

Image caption Ian Williams from One North East: "It was clearly a high-risk product"

But One North East said the Transitional Loan Fund had saved many firms that would otherwise have gone to the wall had they not received help.

The agency has also pointed out that 41 of the firms that did receive money from the fund were still operating - employing more than 2,000 people.

Ian Williams, from One North East, said: "If you look at the context of the Transitional Loan Fund it was introduced at a time when clearly we were in very difficult economic times.

"These companies were struggling. Clearly the purpose of the Transitional Loan Fund was to enable those companies to survive and go forward.

"It was clearly a high-risk product introduced at a time when they could not access finance from other places.

"So, inevitably, there were going to be some casualties, but we were trying to give those companies the best possible chance to secure their future."

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