WRAP spokeswoman Elisabeth Ribbans said: “We are looking at the big gap between the demand for recycling services required to meet British recycling targets and the funds available.” WRAP has estimated that 23 million of equity funds will be needed by small and medium sized recycling enterprises by now and 2018, but says the shortfall in investment is likely to be 17 million.
Difficulties
WRAP considers that small businesses have difficulties getting the funds from the traditional sources. Through the Pilot Equity Fund, worth about 5 million, it is hoping to provide some leadership to the investment companies and show the returns that can be made in what is not a well-established market.
A city expert commented on the potential of the fund: “There is no dedicated funding process for recycling start-ups trying to bring their business plans to life, which seems like a lost opportunity. Banks need to support them early on so they can grow in house.”
And he predicted: “An entrepreneur will come in and revolutionise the recycling or composting industry with something that makes things 25% more efficient.”
Returns
WRAP would be the sole contributor to the fund and although the returns on the loan will not be as high as on a commercial loan, it hopes to make enough to plough money back into more recycling ventures.
The fund will run for 10 years from 2003: the first three years will be spend distributing funds and the remainder harvesting investments. And although WRAP is confident of having its government funding extended beyond its current end date of March 2004, but the fund will be unaffected by the organisation's fate because as a subsidiary, it could be passed on to the treasury or DEFRA.
WRAP is now looking for a specialist fund manager – such as a bank – to manage and develop the fund. The successful candidate will decide how the fund will be structured.
The fund is due to launch in spring 2003, but WRAP is still waiting to secure state aid and Treasury clearance, Ms Ribbans said.
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