The news last week that the development of the Haymarket site in Edinburgh is to receive £9.6 million worth of funding from the Scottish Partnership for Regeneration in Urban Centres (SPRUCE) to be used for preparatory work at the site, including strengthening two railway tunnels and archaeological excavations, highlights that Joint European Support for Sustainable Investment in City Areas (JESSICA) funds are increasingly being used to fund projects which may otherwise fail to get off the ground due to lack of funding.

JESSICA funds are a combination of European Regional Development Funds (ERDF) money supplemented by Government or local authorities’ money placed into an Urban Development Fund (UDF). The UDF is managed by a private sector fund manager and can also raise additional funding from other private sector sources. The fund manager uses the money to make equity investments in, or provide debt funding to, projects with a specific focus to achieve the policy aims of the local authority investing in the UDF. Examples include, energy efficiency, waste reduction, urban regeneration, and funding high-tech, high-growth SMEs. To date, SPRUCE’s focus has been on urban regeneration achieved through funding real estate development projects. The investments are intended to be sustainable and require an exit strategy in order for the UDF to repaid and use the monies to fund further projects.

Other examples of projects which JESSICAs have funded include the funding of office developments on a purely speculative basis and the funding of energy efficiency schemes in London. Although in most cases JESSICA funds are lending where banks are not, rates can be cheaper than traditional lenders and loan tenors beyond those being offered by banks.

At the moment, not all UK cities have access to JESSICA funding. Additionally, in order to maintain a diverse portfolio, the JESSICAs tend to lend no more than twenty per cent. of the fund into any one project, limiting the size of the projects they can invest in. However, with the 2014–2020 round of ERDF funding on the horizon, fund managers expect the coverage and size of JESSICA funds to increase substantially, meaning many more projects which are currently finding it difficult to attract funding, may get off the ground with the assistance of JESSICA investment.