To approve the creation of a Joint Venture company between the council and the University of Wolverhampton to deliver and operate the Centre for Cyber Security at Hereford Enterprise Zone, with associated legal considerations and financial contribution from the council.

The cabinet member economy and communication introduced the item. He reminded cabinet members that provision had been made in the council’s capital programme in July 2018 to deliver the proposed cyber centre. The present report set out the intended terms of the joint venture and financial arrangements between Herefordshire Council and the University of Wolverhampton. The university’s representative, Nigel Birch, was welcomed to the meeting.

Key points of the project were noted:

·        Herefordshire had a low wage economy and the cyber centre would generate higher paid jobs in the county;

·        the cyber security industry was growing and Herefordshire was well placed to form part of the second largest cyber security cluster outside London;

·        the University of Wolverhampton had significant experience in this field, the facility would offer training for other companies, incubation space for start-ups and research and development facilities;

·        funding would be provided through a loan from the council and a package assembled by the university which included funding from the Marches LEP and European Structural and Investment Fund;

·        the proposed shareholding agreement would ensure that the core purpose of the joint venture company would not be changed without the unanimous support of both the council and the university;

·        in the event that the council wished to exit the joint venture at some point in the future it could sell its share, this would not impact on the repayment of the council’s loan to the company.

In discussion of the item it was confirmed that:

·        the proposed lease was part of the package which would result in an asset against which the company could borrow, the permitted use clause would regulate the future usage of the building;

·        the advantage of the proposed company structure was that it would bring clarity to transactions and the exit strategy should the council wish to withdraw at any point;

·        the structures would be designed so as to future proof the company, with investments made at arm’s length as loans and the shareholders agreement ensuring unanimous decision making on key issues;

·        it was not expected that the company would return a significant profit to begin with, priority would be servicing the debt but if profits were made then the company could pay a dividend to the shareholders, including the council;

·        a business plan had been produced and was being refined, board members would review performance of the company going forward, nomination of board members would be through the outside bodies process.

Group leaders were invited to express the views of their group. There was broad support for the proposal but it was noted that:

·        sound business arrangements needed to be in place with clear targets against which success could be measured;

·        as this was a growing sector it was possible that there would be a lot of competition from other organisations.

The ward member expressed his support for the project but highlighted concerns about the need for greater security on the site, citing examples of vandalism on the cycle path.

It was resolved that:

(a)         the council establishes, as a private company limited by shares, a joint venture company with the University of Wolverhampton to construct and operate a Cyber Security Centre at Hereford Enterprise Zone;

(b)        the council acquires, for £1 per share, a shareholding in the new company of 19% with the remaining 81% shareholding to be acquired by the University of Wolverhampton;

(c)         the council provides a capital loan, on commercial terms, to the new company of £3.5m;

(d)        the council grants to the new company a long term lease of the site identified on the attached redline plan at the South Magazine in the Hereford Enterprise Zone for best consideration and on commercial terms;

(e)         The Acting Director of Economy and Place, following consultation with the Chief Finance Officer and the Cabinet Member Economy and Communications, be authorised to determine, in accordance with the recommendations (a) –(d) above, the terms of the loan, lease, shareholders agreement and other company documents, the extent of the council’s representation on the Board of Directors and to approve the name and incorporation of the company;

(f)            The joint venture company is added to the council’s register of strategic partnerships and list of outside bodies; and

(g)        The Acting Director of Economy and Place be authorised to take all operational decisions necessary to implement the recommendations (a) – (f) above.