Lep network metro dynamics report

Leading the way A report to the LEP Network October 2016

Contents 1

Introduction ........................................................................................................................................... 1 Methodology .......................................................................................................................................... 1

2

Shared mission – different approaches ...................................................................................... 3

3

Business Engagement and Representation ............................................................................... 5 Engagement ........................................................................................................................................... 5 Representation ..................................................................................................................................... 7

4

Devolution and Governance ............................................................................................................ 9

5

Industrial Strategy ............................................................................................................................ 12 Engaging businesses around industrial strategy .................................................................. 14 Enterprise Zones and Growth Hubs ........................................................................................... 15 Skills ........................................................................................................................................................ 16 Housing and Regeneration............................................................................................................. 18

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Where next? ......................................................................................................................................... 20 Future role and funding .................................................................................................................. 21

1 Introduction 1.1

This research has been commissioned and undertaken in a period of significant policy change and economic uncertainty. The referendum decision to leave the European Union.

The subsequent change of Prime Minister and sweeping changes to the composition of the cabinet. New Government departments and Secretaries of State with new and evolving responsibilities. The lengthy process of calibrating and then negotiating the nature and terms of an EU exit. All these will have an impact on future economic growth and the business environment. A vast number of forecasters, think tanks and experts have and will continue to seek to predict or understand what these implications might be. The reality is that no one knows for sure. But in terms of a Local Enterprise Partnership (LEP) response, it is safe to assume that economic growth and improved productivity have just become even more important policy goals. Both are core aims common to all LEPs. In the years ahead, the job which LEPs were set up to do will be more central to the success of the economy than ever before.

1.2

All the factors above produce significant short-, medium- and long-term uncertainty in a number of policy areas that matter to this core LEP purpose. This gives LEPs and the businesses they work with an important opportunity. Government will, understandably, take time to decide the details of its next moves on fiscal and industrial policy, devolution, business rates retention, replacing EU funding and future trade. Government has difficult choices to make and LEPs should be proactive in helping that process, so that what emerges meets the needs of businesses and the communities in which they operate.

1.3

The conversations we have undertaken as part of this research confirm that LEPs can play an important role in developing and then delivering national policy over the coming months. But to do so effectively they must work together and with other business groups.

LEPs need to present a cohesive argument to Government, validated by business, which shows how they can help deliver the Government’s emerging desire for an economic and industrial policy that is effective both locally and nationally. This report is one of the products of our work, alongside a presentation of emerging findings, two facilitated sessions for Chief Executives and Chairs respectively and a short paper to aid communication with Ministers in the run up to the party conference season. It is designed to capture examples of the contribution that LEPs already make, and to propose options for LEPs to consider about the future. The examples and conclusions it contains should also help illustrate how LEPs can be central to the drive to ensure that local businesses succeed and that local places and people benefit from future economic growth.

Methodology 1.4

Metro Dynamics was asked by the LEP Network to structure our research around three areas of critical importance to LEPs and then consider how LEPs were looking to the future and the contribution that they could make. Our work has therefore covered: 

Business Engagement: the ways that LEPs engage and work with local businesses;



Devolution: LEPs’ work to date on devolution, how LEPs have been involved and what future roles are emerging;

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1.5

1.6



Industrial strategy: how LEPs can contribute to a national industrial strategy, and how they can engage with business and Government to do so most effectively;



The Future: what LEPs are proposing in terms of new approaches and their role going forward, what they might need from, and what they can offer, Government.

Our approach has been to: 

carry out a structured survey of LEPs on the above four issues;



hold either meeting or telephone interviews with every LEP, and a number of follow up discussions with both individual and small groups of LEPs;



hold informal discussions with Business Representative Organisations (BROs) and national and local government organisations;



attend a workshop on 13th September which involved feeding back the initial findings of the research and leading a series of discussions on topics relevant to LEPs, including: skills, place promotion, enterprise zones & growth hubs, decision-making process, and sectors and industrial strategy.

This report brings together the main findings from our work, particularly some of the approaches that LEPs have taken and different ways in which they are leading many aspects of economic development in their places. This report is intended to provide a flavour of what is happening across the country but is by no means exhaustive or the end of the conversation. There are important milestones coming over the next six months, including the Autumn Statement and associated policy and funding announcements, and the Budget in March 2017.

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2 Shared mission – different approaches 2.1

Most other developed economies have a more structured and long-standing system of local business involvement in economic growth and development activity than the UK. LEPs have developed rapidly since they first started operation in April 2011. Collectively they are responsible for £7.3bn of local growth funding, expected to rise to £12bn over the period to 2021. But it is a cliché to say that they are all different. LEP chairs and boards have indeed developed approaches that reflect differences in place, population, economics and business base. Organisationally this manifests itself in different structures, board composition and capacity. All this is well rehearsed but overlooks the extent to which LEPs share the common purpose of improving growth and productivity in their local economies. That LEPs should choose to pursue this goal in different ways across different areas with different challenges is a considerable strength.

2.2

LEPs have a number of attributes which make them particularly well suited to the current economic and political climate. All these attributes are valuable and reflect considerable progress compared to previous local economic development bodies: 

LEPs are 1business-led, with most being chaired by business people and having a private sector majority on their boards. This enables them to directly input the business perspective into local investment decisions.



LEPs bring together public sector partners across a local area, with a focus on growth. Whilst LEPs derive considerable strength from the fact that they are business-led, LEPs also benefit from bringing local government, higher and further education together in a strategic way. LEPs become a place where business and public sector leaders can work together on the key challenges of their areas.



Leadership of LEPs is largely voluntary. Only a small proportion of Chairs and Board members are paid in any way for the work that they do. This is an incredibly valuable contribution that LEPs ‘leverage’ from the private sector by virtue of what they offer to these business leaders – i.e. the ability to contribute to the growth of the local economy of their place. It also gives LEP leaders real credibility when speaking to businesses in their area, which other parts of the public sector may lack.



LEPs in many cases reflect the real economic geography of their places.

Whilst there are some exceptions, it is generally true that LEPs reflect the economic geography of England better than either local authorities (generally too small) do or Regional Development Agencies (too big) did. This enables LEPs to operate strategically, looking past local administrative boundaries and instead focussing on the key drivers of growth across a place.

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With the exception of London

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

2.3

2.4

LEPs are lean organisations. Whilst in some cases it is true that LEPs’ lack of resources can be a hindrance and the lack of forward budget certainty is a particular problem, LEPs’ relative leanness is also a strength. It helps maintain focus on their core purpose and compared to current and historic organisations with similar or even smaller budgets LEPs are much less open to accusations of bureaucratic excess or waste.

An important conclusion is that LEPs represent the achievement of a number of approaches which are highly consistent with Government aims: 

leveraging in extensive private sector participation;



emphasising a private sector perspective and encouraging public-private collaboration;



concentrating on genuine economic geography and places rather than administrative boundaries;



minimal budget overheads and bureaucracy.

The next sections explore specific examples of how LEPs are approaching aspects of their core mission.

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3 Business Engagement and Representation Engagement 3.1

The ability to work directly with local businesses and engage them on both strategy and specific issues or decisions is one of the most important things that LEPs offer Government.

Other organisations have roles representing their membership or lobbying on behalf of specific business types or sectors. But LEPs can and do work across the local business base to engage them in decision-making and developing solutions, with innovative and creative examples.

3.2

LEPs engage with businesses for two main reasons: 

to understand the needs of local businesses and to help them grow and be competitive;



to bring the voice and input of business in to local economic development decisionmaking.

3.3

Most LEPs view business engagement and being representative of business views as a key part of their role. They do this in a number of ways, using business surveys, business boards, engagement with BROs and holding business and public meetings and workshops.

LEPs see Growth Hubs as the most consistently effective method.

3.4

It’s also interesting to note that a small number of LEPs weren’t convinced that business engagement was central to their role. For them, the function of the LEP private sector board members as a focussed body able to make strategic decisions was more important than wider engagement with the views of businesses in their area.

London: London 2036

3.5

In 2014 the London Enterprise Panel launched a significant business-led consultation project to develop proposals to help drive jobs and growth. ‘London 2036, an agenda for jobs and growth’ was a robust, data-driven plan which identified economic priority areas for London. The project was project managed by London First, the influential business membership organisation with the mission to make London the best city in the world to do business.

3.6

To ensure that their findings commanded broad and deep support from London’s business community and other key stakeholders, the LEP-led partnership convened a wide-reaching advisory group as well as a comprehensive number of interviews, meetings and roundtables.

As findings emerged, these were tested with stakeholders to ensure buy-in throughout the process. During the project over 400 stakeholders from across London were consulted, including leaders of small, medium and large-sized businesses, further education institutions and public authorities as well as the third sector, economists and urban experts.

3.7

This example demonstrates how LEPs can lead high-profile, evidence-driven exercises that support economic strategy. Some Strategic Economic Plans have often been driven more by Government timetables than a reflective consideration of what an area needs for economic growth, which is why London 2036 is an important example of how LEPs can develop

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strategy outside the LGF process, in a way which opens the conversation up to businesses and other key stakeholders.

Cumbria: Flood Recovery 3.8

Cumbria was particularly badly affected by floods in late 2015. The LEP played an important role in engaging businesses to understand their immediate needs and providing a voice to businesses in the aftermath. Working with the County Council, the LEP made available £5m in flood recovery grants, with SMEs able to claim up to £10,000 to support business recovery. The LEP also worked to publicise to businesses other forms of aid that they might be able to access, such as a DEFRA scheme for agricultural businesses affected.

The LEP and the County Council also worked together to lobby Highways England to increase the priority of repairs on major local roads which are an essential link for businesses.

3.9

This example shows how LEPs can be important advocates for their business base, can speak directly to Government and can be responsive to business issues in their area as they arise.

Worcestershire LEP: Communities of Interest

3.10

The LEP was engaging lots of businesses but was struggling to get the balance right. There was lots of representation amongst professional services firms, but there was a need to go both deeper and wider with engagement. The LEP decided to pursue this using an approach modelled on the concept of ‘super users’ – that is, finding passionate people in each sector who could drive forward activity and discussion in each sector. These people are essential to establish credibility.

3.11

The entire terms of reference of the Board has been changed to communicate the strategy to businesses and get feedback from businesses on pipeline ideas. Off the back of this, the LEP began engaging businesses in a much broader group of sectors, including: aerospace, kinetic, advanced automotive, fibre, and technology sectors. Proactive engagement of firms in these target sectors is supported by regular newsletters and communications. The LEP also holds an annual conference which attracted 400+ attendees last year.

3.12

For the future, the LEP recognises that stakeholder management is important to keep people engaged, and that there is a risk that without some thought, this could become dull and businesses could lose interest. The LEP is communicating back to businesses the results of their input and projects in their respective sectors. This stakeholder management is also used to get ongoing contributions of time and effort from participants.

3.13

The work of Worcestershire LEP demonstrates the need for LEPs to have a strategy for engagement and communication with businesses, to attract support and maintain interest.

The same principles used to attract prominent business people to LEP Boards (i.e. the ability to influence the economic growth of their areas), can be used to engage people in specific sectors.

Humber LEP Private Sector Investment Panel

3.14

The Humber LEP’s private sector Investment Panel consists of eight individuals with a range of business experience and expertise who all volunteer around 1½ days a month to review and make decisions on business grant and loan applications. The panel has responsibility for Growing the Humber (£4m Local Growth Fund capital grant programme) and administered a successful £30m Regional Growth Fund programme. The LEP is aiming to secure additional funding that will enable the programme to be continued.

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3.15

The Business Loan Fund utilises the LEP’s Growing Places allocation to offer loans ranging normally between £100k and £1m to facilitate good quality stalled infrastructure projects in need of a flexible finance option.

3.16

Members between them have knowledge of commercial law, banking, accounting commercial property and business management and are able to employ these perspectives in deciding how funding is best allocated. They understand the challenges faced by business and aim to be flexible but fair in their approach. So far, they have awarded over £25m in grants and more than £6.5m in loans to projects which are expected to create over 4,000 jobs across both sides of the Humber. This is a good example of LEPs’ ability to leverage in valuable private sector knowledge and experience.

Leicester and Leicestershire LEP: Business Festival

3.17

The inaugural Leicester Business Festival (LBF) was set up in 2015 by the LEP. Featuring 80 events over two weeks, 25 of which were sold out, the 2015 LBF was an important success for the LEP. With 85% of the events completely free, the festival was open to everyone from top CEOs to budding entrepreneurs. In total, nearly 7,000 people took part.

3.18

The LEP is holding the festival again in 2016 and aims to increase the numbers of businesses participating and secure a national profile for the event. It will be an opportunity to showcase local and national businesses across a wide range of sectors, to explore the possibilities of accessing new markets, and for businesses to understand innovative ways to reach their full potential. A wide range of companies have pledged their support to the festival by hosting events that showcase the diverse nature of the local economy.

Representation 3.19

Most LEPs are not membership organisations, and the extent to which they seek to directly represent business views in a formal sense, rather than working with them on strategy and delivery, varies. The approach often depends on the role that more formal BROs play locally. These vary from direct business membership schemes, to incorporating businesses directly into decisions about the composition of the Board, to communicating business views to national bodies.

3.20

Unsurprisingly, many LEPs work closely with BROs on these issues. It is widely known that both the capacity of BROs and relationships with LEPs varies, and that some BROs are concerned with potential encroachment by LEPs on what is seen as BRO ‘core business’.

The following two examples are not typical of LEPs, but illustrate the wide variety of approaches.

Buckinghamshire Thames Valley: Local Business Membership

3.21

Buckinghamshire Business First (BBF) is the local business group which sits behind the private sector element of the BTVLEP. With a membership of over 8,500, BBF is the largest business representative organisation in the county. The membership (almost 3 times as many as all other BROs combined) covers all sectors, all sizes and a vast array of trading models, and has strong representation in all the growth sectors named in the LEP’s Strategic Economic Plan.

3.22

Private sector Board members are recruited through an open recruitment process which culminates in first and second interviews. They are chosen for their sector, size, expertise

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and willingness to get involved to support the local economy. Directors stand for election every two years. There are 10 non-executive BBF board directors – five sit on the LEP board and the other five act as their deputies to cover for illness, holiday or other non-attendance reasons. They are provided with Exec Support from the Buckinghamshire Business First team as required.

3.23

The success of BBF demonstrates the potential for LEPs to combine their typical mandate with a more direct business representation function. This can be helpful as it gives LEPs a direct, local form of legitimacy and more clearly makes them the voice of business. It can be a source of information, and it can even help finance some parts of the LEP’s operations (see Devolution & Governance section). Clearly, though, this is a very long-term process and requires much effort from the local business base. It is also clear that this is less desirable in parts of the country where existing BROs are strong.

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4 Devolution and Governance 4.1

LEPs have been fully involved in most of the proposals for devolution in England, including major roles in negotiation with Government and setting the strategy for the Combined Authority. In some places LEPs have played a particularly important role in getting local public sector organisations around the table to develop potential devolution deals. Even in areas which aren’t exploring devolution deals, LEPs in some parts of the country are playing a leading role in debates about public sector and potential local government reform, providing an important business perspective to these discussions.

4.2

Unsurprisingly, the role of LEPs varies substantially depending on the nature and extent of local plans for devolution. But interestingly a number of models and possible approaches do emerge. One conclusion we draw is that in places which have negotiated a strong devolution deal and where implementation appears to be most successful it is noticeable that the LEP has played a strong role in working with local government to set a growth focussed strategy. In terms of what has happened so far, we found there were three basic models, all of which appear to be enabling LEPs to maintain their impact. These are described below. As we would expect with 38 organisations these do not all fall neatly into one category, and some are navigating between competing approaches to devolution itself between their local authorities.

4.3

Many LEPs, particularly those in two-tier areas, are driving a strong growth strategy by influencing and working well with local government, but maintaining a clearly independent role and providing a distinctive, non-political local voice. Many of these areas are not pursuing the current approach to devolution. But, in those two-tier areas which are

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pursuing mayoral devolution deals, the LEP has also played a pivotal role in bringing partners together and building a sense of common purpose around growth and productivity, but doing so as a distinctly business-led organisation.

4.4

Where there are more well-established systems of local authorities working together LEPs feel that there is a risk that new combined authorities and mayors might reduce the role and influence of LEPs. This is perhaps most likely where a single LEP operates on the same geography and is fully integrated into the Combined Authority machinery. But mayoral candidates are also likely to value the role that business leaders can provide in influencing and advocating decision-making locally. So we expect much of the current uncertainty in this regard to resolve itself as mayors are elected and establish their mandate and approach.

4.5

A small number of LEPs are seeking to maintain their independence and also to clearly take ownership of both strategy and delivery. This is perhaps particularly relevant where more than one LEP is working in a CA area. The combined capacity of more than one LEP and their Chairs is clearly a significant resource locally.

New Anglia and Greater Cambridge and Greater Peterborough LEPs

4.6

New Anglia and GCGP LEPs have been at the forefront of developing devolution proposals for East Anglia. Both LEPs have worked closely with local and national political leaders to both structure and amend deals and to maintain a focus on growth and productivity. Both LEPs played a pivotal role in agreeing the move away from an East Anglia wide deal and both provided the economic rationale and underpinning for the very substantial deals that were negotiated, particularly in terms of the relationships between growth, infrastructure and housing. Providing a clear business voice, and mobilising business opinion was instrumental in both securing the support of Ministers and in increasing levels of political support locally.

West Midlands

4.7

The three West Midlands LEPs (Black Country LEP, Coventry & Warwickshire LEP and Greater Birmingham and Solihull LEP) have collaborated to ensure that the new CA is underpinned by a robust and credible economic strategy which puts ongoing business growth at the centre of the West Midlands’ future investment plans. They have also worked intensively with central and local government to ensure that the region makes the most of national investment in HS2, both in terms of the infrastructure but also local job and skills development opportunities. This combination of landing national projects locally and driving local strategy is one of the major roles that LEPs can play.

Buckinghamshire Thames Valley: Crowd-Funded Governance Review

4.8

Buckinghamshire Business First (BBF) is the local business group which sits behind the private sector element of the BTVLEP. BBF facilitates a group called The Buckinghamshire Business Group which acts as a consultative group for some of the local authorities in their budget consultations. In 2013 it became apparent to businesses present that local government budgets were creaking under the strain of income reductions and burgeoning vulnerable Adult and Children’s Social Care budgets. To provide some evidence to support a broader conversation about governance reform, BBF organised a crowd-funding exercise to raise the £25,000 needed to commission Ernst & Young to do an independent review.

4.9

The £25,000 was raised over a period of four months in 2014 and the report was published four months later. The business message was that change was essential – drawing on the evidence of the report which signposted savings ranging from £6m to £20m per annum,

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depending on the model adopted. The elections in 2015 delayed discussion and it is only in the last 12 months or so that the subject has come back into the arena.

4.10

Nonetheless, this is an important example of how LEPs can provide a perspective on the efficacy of public sector governance. It demonstrates that LEPs are able - as strategic bodies focussed on economic development – to hold a mirror up to other organisations that have an influence on economic development in their places and provide a constructive challenge when things are not working as they should.

Greater Manchester

4.11

From its inception in 2010, the Greater Manchester (GM) LEP has become an important component of the wider set of public and private partners operating at the regional level.

Central to devolution in Greater Manchester has been the reality of a functioning economic area, with coherent travel to work patterns. It has helped that the LEP is fully aligned with this geography, along with other delivery organisations such as the Clinical Commissioning Groups. The GM LEP now sits at the heart of Greater Manchester’s governance arrangements, ensuring that business leaders are empowered to set the strategic course, determine local priorities and drive growth and job creation across the city region. It is part of the wider set of partnerships established between local government, businesses and educational institutions, and the public, private, voluntary and community sectors.

4.12

The GM experience shows how major elements of a devolution settlement and strategy can be driven by LEP priorities (particularly skills, science and transport). Alongside the Greater Manchester Combined Authority (GMCA), the GM LEP jointly owns the Greater Manchester Strategy (GMS). The GM LEP Board has been involved in shaping and signing off the wave of devolution agreements alongside the GMCA, and has consequently helped ensure such deals are backed by an effective partnership and organisational structure, capable of conceiving and driving through city region priorities.

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5 Industrial Strategy 5.1

The Government’s proposed announcement of an Industrial Strategy at the Autumn Statement should not obscure the fact that England already has a large number of industrial strategies in place, in the form of the Strategic Economic Plans (SEPs) produced by the LEPs. SEPs have been produced on the basis of economic evidence, engagement with businesses, and strategic thinking on the part of LEPs to focus on the areas of the economy that are most likely to drive employment growth in their local communities. We make some suggestions about the roles that LEPs might have in developing and delivering the strategy in Section 6 below. And LEPs should consider this further in the weeks ahead.

5.2

However, LEPs are of course already putting this into practice in a number of ways and are actively working in partnership with each other and the public sector to bring their plans to fruition. LEPs are already delivering localised approaches to industrial strategy thinking and action which should not be ignored as Government develops its thinking for the future.

Nuclear South West

5.3

Heart of the South West LEP, West of England LEP and Gloucestershire LEP are working together, alongside a broader partnership of industry, academia, skills, business support and public sector stakeholders known collectively as Nuclear South West, to capitalise on the first new-build nuclear power plant in the UK for a generation and to ensure a sustainable economic legacy for the local area. The three LEPs are leading the Stakeholder Group for the project.

5.4

The construction at Hinkley is estimated to cost £18bn, with a significant proportion of that investment potentially being spent within the UK and the South West. The LEPs are not funding this investment but have been working together to ensure the area benefits from the employment, skills and supply chain opportunities that Europe's largest project will bring.

5.5

The three LEPs have developed a suite of assets to help capitalise on this opportunity. This includes:

5.6



Somerset Energy & Innovation Centre



National College for Nuclear (SW Hub)



Hinkley Point Training Agency



Hinkley Supply Chain Portal and Hinkley Enabling Team



The SW Nuclear Hub in Bristol



The Berkeley Green Skills Centre in Gloucestershire



The Professional services hub in North Somerset

The Government has since given the green light for the development of Hinkley Point C to go ahead. The efforts of the three LEPs will help ensure that the benefits of this innovative project remain in the local area.

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5.7

The role of the three LEPs in Nuclear South West demonstrates that LEPs are able to work together on complex long-term projects and provide a point of contact for major investors.

They are able to look at opportunities and use their funding powers to leverage additional benefits for their places.

Enterprise M3: Sci:Tech Corridor

5.8

Enterprise M3 LEP has consciously attempted to focus on technology in every aspect of its operation and delivery. The SEP highlighted the importance of developing and supporting a Sci:Tech Corridor and all of the LEP’s projects subsequently have been oriented towards supporting this objective. This work has included support for the 5G Innovation Centre (5GIC) which has meant the centre can take new technology opportunities out to SMEs. The LEP has also linked up the Basingstoke Incubator to 5GIC and intends to link up more of the LEP area’s key growth towns.

5.9

Perhaps the most exciting developments have been the links that the LEP has made across the area with the result that there is a series of exciting projects with links to 5G, including: the Pirbright Centre for excellence in Animal Health, the proposed Aldershot Games Hub and the proposed Cyber Security Centre at Royal Holloway. The LEP is focussing LGF investment on technology developments in colleges and this year will focus on digital skills as well. These links extend to the LEP’s multi-site enterprise zone which has a focus on digital technology, and the Growth Hub which has a focus on high growth innovative companies.

5.10

The LEP has extended this approach into its European programmes with a number of digital projects that aim to further enhance the competitiveness of SMEs in new technology developments. To further deepen this focus, the LEP will be asking all future projects to provide a digital strategy as part of their business plan and will continue to promote the use of digital enabling technologies by all. This work by Enterprise M3 demonstrates the strategic focus that LEPs can bring to local industrial strategy.

5.11

The work that Enterprise M3 has undertaken on its Sci:Tech Corridor illustrates that LEPs are able to create long-term strategic plans that identify points of competitive advantage for their places, and then pursue these plans with a single-minded focus that other organisations promoting economic development might struggle to match.

Thames Valley Berkshire: Funding Escalator

5.12

Thames Valley Berkshire LEP has invested £8.3m of Growing Places Fund into a Funding Escalator (FE) dedicated to the financial support of early-stage, high-growth-potential SMEs. The Escalator is designed to overcome barriers of banks and financial partners unwilling to invest in perceived high risk projects. It offers non-traditional finance and is managed for the LEP by an FCA regulated Fund Manager.

5.13

There are four main elements to the FE: 

Commercialisation Loan Scheme: limited support for newly established companies to help them reach the next stage, including pre-revenue SMEs;



Expansion Loan Scheme: support to help a business scale-up and accelerate its growth;



Equity Growth Fund: support for ambitious growing businesses, available when matched with private funds;

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

Trade Finance Loan Scheme: for established SME businesses which have a short-term trade funding requirement.

5.14

Outputs as at 21 June 2016 included £6.8m of loans approved at credit committee stage for 52 SMEs; £3.7m actually loaned to 24 SMEs and just under £1m of equity investments in four SMEs, matched by £9.9m of private equity. The Funding Escalator won Alternative Lender of the Year category in the Thames Valley Business Magazine Deals Awards 2015 beating runners up Leumi ABL and Praesidian Capital Europe.

5.15

The Funding Escalator demonstrates how LEPs are able to identify gaps in national business support offers (and privately available finance) and develop locally appropriate offers. The use of a revolving fund means that funds can continue to be used over time to support growth, and can potentially even generate a return for the LEP. Hertfordshire LEP: Cell Therapy Catapult

5.16

The Cell Therapy Catapult (CTC) has chosen to build its manufacturing centre on the Stevenage Bioscience Catalyst campus, and is expected to create up to 150 jobs, generate £1.2bn of revenue by 2020 and drive economic growth in Hertfordshire. Hertfordshire LEP played a crucial role in this decision through agreeing a timely investment in road infrastructure to support the development. In this way, the area was able to secure a £55m state-of-the-art manufacturing centre. The ability of the LEP to quickly make a strategic decision of this nature demonstrates the value that LEPs can bring to local industrial strategy.

Stoke & Staffordshire LEP: Supporting Business Expansion

5.17

Gestamp is an automotive sector component company that designs, develops and manufactures a range of automotive parts. Its Cannock plant currently employs 800 workers and supplies Jaguar Land Rover. Its current premises are outdated, so the LEP supported them to identify a more suitable site to enable them to remain in the area. As a result, Gestamp has decided to invest £70m in a 50,000 sq. metre, state-of-the-art metal stamping facility in Staffordshire – helping to safeguard a large number of skilled jobs.

Again, this example demonstrates how LEPs can engage with companies across their area in a way which local government might struggle to do if it involved losing jobs to another local authority area.

Engaging businesses around industrial strategy 5.18

LEPs around the country have played a vital role in engaging with their businesses to develop prioritised investment and industrial strategies. LEPs are helping facilitate important conversations about how best to promote high value economic growth in their areas, helping secure business buy-in to this process.

Leicester and Leicestershire: Developing Sector Growth Plans

5.19

Leicester and Leicestershire LEP’s 2014 SEP outlined a commitment to develop sector growth plans for the priority sectors in the area. Eight plans were published for these sectors and over 500 businesses were engaged through workshop sessions to understand their key priorities and draw out recommendations. This process resulted in 300 actions being agreed across a broad spectrum including skills, innovation, business finance and support. Board leads and Champions were selected with the purpose of holding sector panels biannually to challenge the LEP on progress on these actions and to ensure on-going engagement with important businesses in the key sectors. This example demonstrates that

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LEPs are able to lead local engagement around industrial strategy and work with businesses to produce plans that draw on the tacit knowledge within local companies.

Cornwall & Isles of Scilly: Prioritising for LGF3 5.20

Cornwall & Isles of Scilly LEP was determined to ensure that prioritisation of LGF3 bids was made with thorough engagement of and collaboration with the business base. A rigorous assessment and prioritisation process was undertaken on all the Growth Deal 3 projects and was led by an Investment Panel from members of the LEP Board and supported by the LEP’s four driver boards, with membership primarily from the private sector. Ahead of the launch of the Growth Deal 3 Expression of Interest process, the LEP worked to raise awareness across the Cornish business community by announcing the launch at Cornwall Expo 2015. There was a strong response from the business community to the call which resulted in 75% of applications coming from the private sector.

5.21

The business community recognised the roles played by LEP board members, local authority representatives, academics and the private sector-led driver boards in scrutinising proposals to allow the LEP board to arrive at the final decision. This has helped provide vital accountability and buy-in to the final plans.

5.22

This example shows that there is significant opportunity for LEPs to work with businesses to develop investment proposals. Many SEPs have been developed principally on the basis of public sector proposals, so this demonstrates that LEPs can do more to engage with local firms to develop strategic plans.

Enterprise Zones and Growth Hubs 5.23

Enterprise Zones (EZ) are a key element of the LEP toolkit. Since being granted EZ powers

by Government, LEPs have used them to promote development and investment in key growth sectors and locations. LEPs we spoke to were especially keen to have enhanced EZ powers – such as the ability to offer more / different incentives to occupiers - and the ability to designate new EZs to support development.

Northern Gateway Development Zone

5.24

The Stoke-on-Trent and Staffordshire LEP and the Cheshire and Warrington LEP have been instrumental in driving forward the Northern Gateway Development Zone (NGDZ), which will deliver more than 100,000 new homes and 120,000 new jobs by 2040. This work began initially with a concordat between the two LEPs in December 2014, and now encompasses seven local authorities across the two LEP areas. The joint aim is to maximise the positive impacts for growth of the proposed HS2 station hub at Crewe across the wider south Cheshire and north Staffordshire region.

5.25

To date the partnership has made significant progress in developing its initial thinking and outline growth strategy. More detailed work - part funded by the Department for Transport - is now underway to develop a vision for the gateway area and specific strategy work to understand the potential impact of HS2 on demand for housing and employment land.

NGDZ has been showcased at MIPIM in the UK and France and will offer a significant inward investment opportunity and driver for sustainable growth.

5.26

The efforts of the two LEPs around the NGDZ demonstrates the potential for LEPs to work together to promote key employment locations in a joined-up way, and over a long timeframe. The concordat between the LEPs has helped pull in support from local

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government and focus local thinking on maximising the gains from this important national investment in HS2.

Cornwall & Isles of Scilly: Aerohub Enterprise Zone 5.27

In 2012 Newquay Aerohub was awarded Enterprise Zone (EZ) status and was the first EZ to have part of their zone located on an operational airfield. Over the years the Aerohub EZ has grown to accommodate eight new inward investors and the construction of a new Business Park. This sector growth led to the government extending the current Aerohub EZ site to include the Goonhilly Earth Station facility. This now allows for the zone to not only grow within the aviation industry, but to develop and deliver the LEP’s Space, Satellite and Spaceport ambitions. Goonhilly has already secured its first overseas inward investor to come to Cornwall, with numerous new clients waiting in the pipeline. This example demonstrates how LEPs have used EZ status and powers to focus investment in specific sectoral opportunities and promote investment opportunities to international firms.

York, North Yorkshire & East Riding: A Networked Growth Hub

5.28

York, North Yorkshire & East Riding LEP is geographically the largest in the country. This creates logistical challenges for engaging with businesses. The LEP’s Growth Hub has developed a model which harnesses the strength of business networks and professionals to give a comprehensive support package which is widely backed by business. For example, the LEP holds pop up business ‘cafés’ in local areas in a pub or a café, not in a public sector environment. Businesses pay for coffee and have informal conversations with other business owners as well as professional advisors. This kind of doorstep support has allowed the LEP to engage business, work with networks, and develop trust. It is also an excellent source of information for the LEP.

5.29

For a cost of approximately £300,000 per annum, the Growth Hub has engaged over 40,000 businesses, supported over 3,400, has established 50 business networks and now has 62 professional advisers – representing excellent value for money. 80% of businesses who have attended one of the Growth Hub’s pop up cafes have reported making a positive change to their business. This demonstrates the ability of the LEPs to make significant impacts through relatively low cost interventions which harness the power of networks.

Skills 5.30

Skills is a major business issue and so has been prioritised by LEPs in many areas over and above their role in managing ESIF funding. LEPs add value to skills by being able to focus strategically over a real economic geography, and by drawing in business feedback to drive skills decisions. But skills also remain a challenging area for many private sector board members to engage with given the complex nature of the landscape for skills delivery and funding. A number of LEPs we have spoken to are interested in doing more on skills, but most of these are still considering how best to increase their contribution in this area – for example: whether they want a greater role in skills commissioning.

Solent LEP: Investing In A Workforce For The Future

5.31

Availability of skills as a barrier to growth is the issue raised most frequently by businesses engaging with the Solent LEP. In response, the LEP has prioritised investment in skills and provided £26m of capital funding to bring forward three world-class, business-led skills centres in the area which will support the Solent’s position as a global leader in advanced technology and manufacturing for years to come. Specialisms include marine and maritime, aerospace and advanced materials.

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5.32

Already open and fully subscribed, supporting over 900 full- and part-time students a year, is the CEMAST centre: a state of the art advanced engineering and manufacturing training facility on the Solent Enterprise Zone. The facility is the centre for apprenticeship programmes with companies including BAE Systems, GE Aviation, Virgin Atlantic, Coopervision, Burgess Marine and Jensen Motorsport.

5.33

Building on this success, investment in two further skills centres is currently underway. In Eastleigh, LEP investment has upgraded existing college facilities and this first phase of development is complete. Phase 2 will enable the build of a new Advanced Technology block in Eastleigh which will increase the number of young people enrolling on science, technology, engineering and maths course by 10% year-on-year to 2020. The new building is on schedule to open in 2017. Also under construction and due to open within the next 12 months is CECAMM: an ÂŁ11m investment in a new specialist centre for engineering, offering education and training for around 600 students on the Isle of Wight. The project is being developed in partnership with leading island composites businesses including global engineering company GKN Aerospace.

Coast to Capital: Implementation of the Area Based Review of Further Education

5.34

Following the conclusion of an Area Based Review, Coast to Capital LEP was asked by the Department for Business Innovation and Skills to bring together key stakeholders and to provide the leadership required to support one the Further Education (FE) colleges in the area to develop a Growth Deal 3 application. If successful, this capital funding application will ensure that the college is in a position to develop its infrastructure to be fit for purpose to meet the current and future skills needs of an area of high economic importance in the area.

5.35

Coast to Capital drew together key stakeholders from business, local authority and government to drill down into the economic needs of the area, supported by the Education Training Foundation (ETF). The LEP led a time bound series of meetings which resulted in a clear steer on the skills requirements of the local businesses, including Gatwick Airport Limited. There were also several findings which resonated with national thinking about the FE sector which the college then used to shape its funding application and to inform its future strategic thinking. This was followed up with a series of structured interviews with local employers and employer representatives which were conducted and summarised by ETF on our behalf.

5.36

A major result was a greater appreciation of the FE sector's connection to and integration with place, perhaps through the formation of a skills campus, playing a collaborative part in regeneration, training for meaningful work and partnerships for local economic growth. In addition, employers reinforced a desire to have involvement in FE leadership and delivery of skills training as well as in planning and governance. Stakeholders involved in this process valued the LEP’s leadership and it shows the role that the LEP can play in shaping future skills provision in the area.

The Marches: Manufacturing Skills Hubs

5.37

Manufacturing businesses employ approximately 14% of the total workforce in the Marches LEP area. These companies are often major employers with substantial supply chains, and it is critically important for the vitality of the Marches economy that the manufacturing and engineering sector is able to thrive.

5.38

Business surveys carried out by the LEP identified that almost three quarters of all manufacturing businesses are reporting hard-to-fill vacancies with engineering being the

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most common gap in workforce skills. To address this, the LEP brought together manufacturing businesses in the LEP area - which weren’t on the LEP Board or sub-groups - to discuss skills needs and development concerns.

5.39

The businesses worked with the LEP to design a project that would satisfy the needs of these firms. Having formulated the requirements, the LEP tendered the opportunity through an OJEU tender process and received responses from training and business consortia. The LEP is now delivering a £2.8m project for Manufacturing Skills Hubs to address the workforce skills problems of this important sector for the LEP, who used their Growth Deal funding to meet their future needs. This is expected to deliver 2,500 apprenticeships in total.

5.40

This project exemplifies how LEPs can lead a hands-on business process to identify needs and design a sustainable solution which the business community will continue to have input to in moving their workforce skills forward and future-proofing their businesses.

Housing and Regeneration 5.41

Housing is an area where LEPs are able to provide an important strategic perspective that focuses on the economic importance of housing, rather than the often anti-development politics of housing development. LEPs in some places are leading this new thinking about housing from an economic perspective, and in some cases moving into housing delivery themselves in order to support broader economic growth. Many LEPs remain wary of moving this far into delivery, and are also wary of the risk of alienating public sector colleagues. But, given slow progress on local plans and low housing development across the country, it may be that LEPs have an increasing role to play in housing.

Buckinghamshire Thames Valley: Buckinghamshire Advantage

5.42

In July 2013, the Buckinghamshire Thames Valley LEP Board agreed that it would establish a delivery mechanism to enable it to deliver on the LEP’s behalf. With the existence of a legacy organisation – Aylesbury Vale Advantage (AVA) in the north of Buckinghamshire – it was proposed that this could be achieved by admitting new members to the AVA company arrangement and revisiting the Members’ Agreement, the Company Objects and the Articles of Association. In April 2014 AVA was re-launched as Buckinghamshire Advantage as the delivery vehicle for the whole of Buckinghamshire.

5.43

Buckinghamshire Advantage’s mission is to directly intervene in the land and property market to create the conditions to attract investment into the locality, realise development opportunities, secure development finance, and ensure the maximum development value is retained locally for further reinvestment. It is also in place to directly deliver development where the development community wouldn’t naturally intervene or where Buckinghamshire Advantage’s intervention is the only way to deliver the desired quality, quantum and speed of development. As such the LEP is taking an extremely proactive approach to housing development.

5.44

Buckinghamshire Advantage is currently promoting the Woodlands project in Aylesbury, which covers approximately 220 hectares, and offers the opportunity to assist the wider economic growth of Aylesbury by acting as a catalyst for the early delivery of the Eastern Link Road South (ELRS) and provide a high quality, employment-led, sustainable development.

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5.45

This case study is instructive because it shows that LEPs can go beyond being strategic bodies and can tackle challenging issues which local and national government sometimes struggle with. In this instance the LEP identified that housing was a major barrier to economic growth and took proactive steps to address this. Whilst not all LEPs will want to take this step, this is a good example of what LEPs can do if they want to take a more independent and direct stance.

Coast to Capital: Private Sector Taskforce on Housing

5.46

Coast to Capital LEP has identified that there is a lack of sufficient and affordable housing in the LEP area. As such, the LEP has established a private sector task force on housing and regeneration. The task force, which is made up of private and public experts, recently held its first meeting, and will set out recommendations to the LEP Board in a report later this year.

5.47

The task force will aim to identify any market failures or blockages in the system and recommend ways to overcome these, particularly drawing on best practice from around the country. The task force will look at the issues from a business perspective on how to deliver more homes and identify practical ways of doing this, separate to the statutory role played by the local authorities in planning housing development in their area.

5.48

This work by the LEP, whilst less direct than the Buckinghamshire Thames Valley example, is another good example of a LEP taking a proactive approach to the housing challenge. The task force will develop the evidence base which will enable the LEP and local authorities to have an informed conversation about how to tackle the housing challenge in the LEP area.

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6 Where next?

6.1

This work provides a timely reminder that LEPs are making a significant impact. There is substantial international evidence that stronger local decision-making, across functioning economic areas, does positively influence local growth and improve the success of local places. And we know that Government is seeking to define a new approach to growth and productivity. One that drives national success, but also ensures local people and places feel the benefits more directly.

6.2

England’s LEPs are organisations that are business-led, operating extremely efficiently and able to think and act strategically to support their local economies. They are also working together to support national sectors and extract maximum local benefits from national infrastructure projects such as HS2. More than this, LEPs are actively taking on issues that are outside the core remit of ‘infrastructure, skills and jobs’, and working closely with emerging mayoral authorities and existing local government leaders to ensure that growth and businesses are fully involved in efforts to strengthen local decision-making and take a more strategic approach to spending and investment.

6.3

Whilst the economic geography may not always quite match LEP boundaries, in our view the fact that there are 38 of them, with the ability to develop their own approach that meets local requirements, is a significant improvement on past solutions to the question of how to provide a business and strategic focus to local decisions. Strong local politicians value the LEP and what it can do. It helps that the LEP is not solely part of the local authority world.

Businesses and political leaders should work together to improve their local places. Whilst some would argue for a stronger, statutory role for formal business representative organisations, our conclusion is that LEPs are a good solution for the current English economic and political situation. Mayors and Combined Authorities will not be appropriate for many parts of the country, but all areas should benefit from the existence of a strategic, business-led economic development body, which is independent of any lobbying or political organisation.

6.4

There is a conundrum here for LEP Chairs and Boards. Historically, many public sector organisations have tended to gradually take on additional responsibilities, eventually reaching a tipping point at which they are perceived as too large to be sufficiently responsive to local needs, but not robust enough in terms of governance to be trusted entirely by Government or Parliament. In the understandable desire to acquire more powers and responsibilities to help fulfil the mission may lie the seeds of longer-term failure.

6.5

So far, LEPs have successfully navigated this path. A major theme of this work has been the importance of LEPs staying focussed on their core purpose of driving growth and productivity. The most successful LEPs have established their reputations through owning or driving the strategy to achieve this purpose locally, winning the support of business and political leaders by setting clear priorities based on that purpose, and using the funding they control as a strong lever to execute it, without becoming large organisations. Our view is that LEPs have most to offer and the best chance of success if they continue to tread this path.

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Future role and funding 6.6

In the weeks and months ahead Government will look to build on recent commitments to put in place a more local approach to growth and business policy. LEPs can make two very reasonable requests: 

longer-term certainty around major funding programmes, and possibly some limited additional resource funding;



a clear commitment from Government to retain local growth funding, with a strong business role in allocating it, and not subsume it all into locally retained business rates.

Both would help LEPs’ ability to provide much needed strategic economic capacity locally and align funding to economic plans.

6.7

In our view, Government should also continue to emphasise the importance of an independent business voice being central to local governance arrangements. The accountability that Mayors will bring is welcome, but it should not be at the expense of a business-like and business-led approach to prioritisation and strategy. What Ministers say on this issue will matter in setting the right tone and approach.

6.8

Whilst remaining light touch business-led organisations, there are also strong arguments to be made for LEPs (working with new mayors, combined authorities, and other groupings of councils) having a significant role in the areas outlined below. There will be other areas.

This list is designed to stimulate further discussion and debate across the LEP network: 

Strategic Economic Plans should be effective local industrial and growth strategies. As such they should address the wider determinants of growth and productivity, including housing and skills;



working with Government to build the sectoral element of a successful industrial strategy and its implementation. LEPs can focus on areas of productivity and growth within the economy, and know where key sectors and related clusters actually exist in the economy. They should work together, with Government and national business organisations to co-design interventions accordingly;



bringing more coherence and efficiency to activity and expenditure on both place-based marketing and large scale inward investment and trade activity, shaping strategy and activity;



developing further Enterprise Zone proposals and piloting new ideas such as free trade zones. As Business Rate retention is developed, local government needs to be encouraged not to stall on new EZ proposals until 2020.

6.9

At the same time, LEPs need to continue to ensure that they are known for having the best possible approach to transparency and governance in terms of decision-making and spending. Whilst it is important to get the balance right, in being expected to spend £12bn of public funding to 2021, and it is vital that accountability is, and is perceived to be, to the level required.

6.10

But it is important to get the balance right. LEPs work because they are fleet of foot and business-led, and it is important to ensure that they are not forced to become ‘mini-RDAs’

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in response to increasing national or local political demands. LEPs need to develop a clear (if not necessarily unanimous) position on the proposed business rates infrastructure precept, for example. For some LEPs this is a case of potential mission creep. Whilst for others, particularly in a Combined Authority setting, this increased role is much easier to contemplate given the role of a Mayor in making the arguments locally.

6.11

Government Ministers have made clear their intention to pursue an approach to growth and business which reflects the needs of local places and is seen to benefit local people. Like many others, LEPs will be concerned to see the detail of what this means in practice. This research shows that LEPs are making, and can continue to make, a substantial contribution to delivering the Government’s aims. The future for LEPs is not radical change, but to be given permission and encouragement to evolve in ways that reflect their local circumstances, whilst staying true to their core mission of driving growth and productivity.

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