The European Commission announced yesterday that it was opening formal investigations into a state-backed venture capital fund in Northern Ireland which is supposed to encourage small and medium-sized business.

The Commission's competition department has "serious doubts" that the arrangement of the £10 million sterling (€16.19 million) Viridian Growth Fund complies with the European Union's rules on state aid.

The partners in the fund are the Department of Enterprise, Trade and Investment (£3 million), the European Investment Bank (£3.33 million), the electricity supplier Viridian Group plc (£2 million) and a number of pension funds (£1.33 million).