Funding competition for private business

October 11, 2010 3:39 PM

In our recent paper on Regional Development Agency (RDA) grants, we showed how most of the money was given to public sector organisations, or those firmly rooted in the public sector. Some of these organisations act as pseudo businesses, meaning that they can often crowd out genuine private sector companies in the region. The difference is they are propped up with public money, meaning that they are open to far less risk than companies started through genuine entrepreneurship. Their status often means that they are not subject to the Freedom of Information Act either.

Recently an example of this came to our attention that shows not only are these organisations operating on generous grants, they are also actively seeking to compete with private business; they are taking decisions to gain commercial advantage.

A private company produces visitor guides to various cities and regions around the UK and Ireland. They are placed free of charge in the bedrooms of leading hotels in the particular city or area and are intended as a guide to visitors on eating out, shopping, attractions, nightlife, events etc. In Leeds, his company have come up against some very unhealthy competition in Marketing Leeds, a body who are funded for the most part by Yorkshire Forward, the RDA, and Leeds City Council. Many of the hotels in Leeds are members of Leeds Hoteliers Association (LHA), which receives funding from Marketing Leeds.

The publishers have now been informed by LHA that Marketing Leeds will soon be publishing their own visitor guide (including paid-for advertising) and that Marketing Leeds do not want the rival publisher’s publication to appear in local hotel bedrooms, only their own.  The publisher has been advised by LHA officials that since they are funded by Marketing Leeds, they have no choice but to comply with ML’s wishes and remove the rival publisher’s publication from their hotel bedrooms.

This could effectively kill the well-established visitor guide.

These taxpayer funded bodies do not have the risk of going bust. If there are private companies out there that help to boost tourism in the area, helping the local economy at no cost to the taxpayer, then surely this has to be encouraged, not squeezed out? It shows the policy approach to small businesses in the last 11 years – since the RDAs were formed – has created a harmful grey area of the public sector that is guaranteed money but operates to crowd out genuine enterprise.


With private sector dynamism needed to drive the recovery and future economic growth this kind of behaviour by a publically-funded body is flagrant abuse of taxpayers’ hard-earned cash. Solicitors for the publishing company have written to Marketing Leeds advising them that their actions are in breach of UK and European competition law.

The company is taking action, and you can too. If you know of any publically funded bodies that are squeezing out local businesses, then get in touch. Also, write to your local MP and Councillors using this website to voice your concerns.

Now that the RDAs have been abolished, we’ll be watching carefully to see that the Local Enterprise Partnerships do not become yet more bodies that recycle central Government money by dishing out grants to businesses of their choice.

In our recent paper on Regional Development Agency (RDA) grants, we showed how most of the money was given to public sector organisations, or those firmly rooted in the public sector. Some of these organisations act as pseudo businesses, meaning that they can often crowd out genuine private sector companies in the region. The difference is they are propped up with public money, meaning that they are open to far less risk than companies started through genuine entrepreneurship. Their status often means that they are not subject to the Freedom of Information Act either.

Recently an example of this came to our attention that shows not only are these organisations operating on generous grants, they are also actively seeking to compete with private business; they are taking decisions to gain commercial advantage.

A private company produces visitor guides to various cities and regions around the UK and Ireland. They are placed free of charge in the bedrooms of leading hotels in the particular city or area and are intended as a guide to visitors on eating out, shopping, attractions, nightlife, events etc. In Leeds, his company have come up against some very unhealthy competition in Marketing Leeds, a body who are funded for the most part by Yorkshire Forward, the RDA, and Leeds City Council. Many of the hotels in Leeds are members of Leeds Hoteliers Association (LHA), which receives funding from Marketing Leeds.

The publishers have now been informed by LHA that Marketing Leeds will soon be publishing their own visitor guide (including paid-for advertising) and that Marketing Leeds do not want the rival publisher’s publication to appear in local hotel bedrooms, only their own.  The publisher has been advised by LHA officials that since they are funded by Marketing Leeds, they have no choice but to comply with ML’s wishes and remove the rival publisher’s publication from their hotel bedrooms.

This could effectively kill the well-established visitor guide.

These taxpayer funded bodies do not have the risk of going bust. If there are private companies out there that help to boost tourism in the area, helping the local economy at no cost to the taxpayer, then surely this has to be encouraged, not squeezed out? It shows the policy approach to small businesses in the last 11 years – since the RDAs were formed – has created a harmful grey area of the public sector that is guaranteed money but operates to crowd out genuine enterprise.


With private sector dynamism needed to drive the recovery and future economic growth this kind of behaviour by a publically-funded body is flagrant abuse of taxpayers’ hard-earned cash. Solicitors for the publishing company have written to Marketing Leeds advising them that their actions are in breach of UK and European competition law.

The company is taking action, and you can too. If you know of any publically funded bodies that are squeezing out local businesses, then get in touch. Also, write to your local MP and Councillors using this website to voice your concerns.

Now that the RDAs have been abolished, we’ll be watching carefully to see that the Local Enterprise Partnerships do not become yet more bodies that recycle central Government money by dishing out grants to businesses of their choice.

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