Memorandum by Scottish Enterprise (FCS
4)
INTRODUCTION
The purpose of this paper is to provide the
Scottish Affairs Committee with information relating to the Millennium
Link and in particular, to progress on the achievement of the
projected economic outputs deriving from the project.
BACKGROUND
The Millennium Link is a £78.3 million
project being undertaken by British Waterways to restore the Forth
and Clyde and Union Canals and recreate a Link between them at
Falkirk—the Falkirk Wheel.
The Scottish Enterprise Board approved a contribution
of up to £16.5 million to the project in October 1996. This
approval was subject to a number of conditions, including the
provision that British Waterways progress a Capital Allowances
scheme.
In order to complete the £78 million funding
package, the Scottish Office put in place in 1998 a guarantee
of £7.8 million. SE has funded £2.2 million of the guarantee
as reported to the Scottish Enterprise Board in April 1998. The
total Scottish Enterprise contribution to the project is therefore
£18.7 million and this contribution has now been fully committed.
However, in many ways this is the starting point
for Scottish Enterprise. The decision to support the project was
founded on independent economic assessments that forecast significant
potential economic outputs, both direct and indirect. (See Appendix
1 which summarises the overall projected outputs from these assessments.)
It was recognised from the outset that in the main these outputs
would materialise over a number of years following completion
of the physical infrastructure work. Arrangements have been put
in place to help secure these benefits and these are outlined
later in this paper.
PROJECT PROGRESSBritish
Waterways, who are responsible for managing the project, awarded
the first construction contracts in late 1998. Works started on
site on these contracts in March 1999 and are drawing to a conclusion
across Central Scotland. The final major piece of infrastructure
work, The Falkirk Wheel, is now substantially complete and is
scheduled to open in spring 2002.
As an addition to the £78.3 million Millennium
Link project, British Waterways are in the process of constructing
a £4.0 million Visitor Centre at the Falkirk Wheel site.
ERDF funding of £1.28 million towards this cost has been
secured with the balance being provided from British Waterway's
own resources. The contract for the Visitor Centre is currently
well advanced and the building will be complete at the end of
2001. In addition, a further £2.6 million project to introduce
much improved access and parking at the Wheel Site and "park
and ride" linkages is in the process of being implemented
under a funding package made up of Transport Challenge Funding
from the Scottish Executive with further contributions from Falkirk
Council, Scottish Enterprise Forth Valley and the private sector.
PROJECT FUNDING
The total project cost on which Scottish Enterprise's
funding was based was £78.3 million. A funding shortfall
of £7.8 million arose due to a lower than anticipated award
of EC funds. In order to enable the project to proceed, the Scottish
Office put in place a guarantee for the £7.8 million, split
amongst the project partners as follows:—
| Scottish Enterprise |
£2.2 million |
| Local Authorities | £1.8 million
|
| British Waterways | £3.8 million
|
The guarantee has been drawn down and the full Scottish Enterprise
contribution committed.
In the interim, Scottish Enterprise has worked closely with
British Waterways to secure additional funding for the infrastructure
work. British Waterways has, with assistance from Scottish Enterprise,
secured a Capital Allowance deal, which is forecast to generate
in excess of £10 million—however none of the benefit
will be available before 2007. It is a condition of Scottish Enterprise's
legal agreement with British Waterways that the first £4
million of available funds from the Capital Allowances scheme
will be returned to Scottish Enterprise.
British Waterways has also now established a charitable trust,
the Waterways Trust, which is fundraising for canal restoration
work throughout the UK and which it is hoped will be able to fund
a number of added value elements to the overall project.
PROJECT MANAGEMENT
The delivery of such a significant project which involves
seven local authorities, five local enterprise companies and a
range of other interested organisations has called for close co-operation
and co-ordination in order to deal with complex practical implementation
issues. (Appendix 3 lists the partners to the project) There is
also clearly a need to co-ordinate effort, both at a local and
national level, to secure the full economic impacts arising from
the investment in the project and with this in mind a number of
structures are currently in place.
At a strategic level, the Lowland Canals Advisory Group provides
a forum for the five Local Enterprise Companies, the seven local
authorities and other partners involved in the project to meet
on a regular basis under the chairmanship of British Waterways.
The objective of this group is "to facilitate the delivery
of the wider economic, environmental and community benefits associated
with the Millennium Link and its corridor."
Internal Scottish Enterprise Network co-ordination and co-operation
is being managed through a Network Steering Group which is attended
by all five local enterprise companies together with representatives
from Scottish Enterprise dealing with finance, legal and monitoring
and evaluation issues. A representative of British Waterways also
attends. In addition, there are seven local canal development
groups—one in each local authority area. These deal with
local strategic issues and local project delivery and operate
within the context provided by the Advisory Group. Core membership
of these groups include the local authority, British Waterways
and the LEC but depending on local circumstances can include representatives
of the area tourist board and other partners.
PROJECT IMPACTS
An economic impact study carried out by DTZ Pieda for Scottish
Enterprise indicated that the Millennium Link could result in
over 4,000 new jobs being created. It is important to distinguish
between two fundamental categories of benefit. What are termed
the direct benefits arise strictly from the reconstruction and
operation of the canal and do not depend upon any investment which
is not specifically required for the restoration and operation
of the canal. They include that part of tourism relating to informal
recreation and boating activity on the canal and can be broadly
summarised as follows:
Millennium Link—Forecast Direct Employment Creation
(at the Scotland level)
| Source | Employment
|
| Informal recreation | 24
|
| Canal Users | 96
|
| Maintenance/Management | 40
|
| Canal Construction | 289
|
| Total Direct | 449
|
The term indirect has been used to describe those
benefits (and costs) that arise from the exploitation (through
further investment) of the range of development opportunities
that will be generated by the canal project. As can be seen below,
the greater part of the employment benefits will arise through
the indirect route and will take several years to emerge.
The project is not by any means exceptional in this respect.
Many infrastructure projects which are supported by structural
funds—such as site development—will not produce most,
or even any, of their benefits until a number of years after the
project has been completed. There is however already emerging
evidence of developer interest in sites along the canal and this
is expanded upon in the following paragraphs and Appendix 2. The
indirect benefits that were originally identified were as follows:
Millennium Link—Forecast Indirect Employment
Creation (at the Scotland level)
| Source | Employment
|
| Indirect Tourism | 465
|
| Other construction | 444
|
| Business Premises | 2,792
|
| Total Indirect | 3,701
|
As stated earlier, the efforts of the Scottish Enterprise
network are, and will continue to be, focused on the achievement
of these longer-term indirect benefits.
PROGRESS TOWARD
ECONOMIC TARGETS
There are early signs from the project monitoring that is
being undertaken that the economic output forecasts will be met
although clearly, with the infrastructure project not yet complete,
it is far too soon to take a precise view on the longer term indirect
benefits. In terms of the direct employment on contract work,
expectations have been exceeded with the number of jobs peaking
at over 700 in late 2000. However, the number of trainee places
originally forecast is unlikely to be achieved due to the fact
that much of the work being undertaken was skilled with little
opportunity to engage trainees.
The focus of the Enterprise Network has been on the indirect
benefits. Appendix 2 gives information on a range of projects,
initiatives and proposed developments. This information is not
exhaustive at this stage but is intended to demonstrate the nature
and quality of investment opportunities being progressed by a
range of actors at this early stage.
MONITORING AND
EVALUATION FRAMEWORK
Given the scale of the project and the diverse nature of
the organisations involved it was recognised from the outset that
a formal monitoring and evaluation system would be required to
capture progress. This is essential not only for internal Scottish
Enterprise purposes but also in order to report to the other major
funding partners, the Millennium Commission and the European Commission.
As the project sponsor, British Waterways have the lead responsibility
in this regard but Scottish Enterprise has been working jointly
with BW to agree a common framework for data gathering and this
is now substantially in place. This will be particularly important
for the reporting of indirect benefits following the post 2001
construction period and thereafter for the carrying out of an
independent evaluation of the reported outcomes.
CONCLUSION
To summarise, good progress has been achieved on the physical
infrastructure project. More importantly from an economic perspective,
the early indications are that the Millennium Link has provided
an important catalyst for development along its entirety. Substantial
private sector interest and investment has already been achieved
at variety of locations across the Millennium Link and many further
significant development opportunities (some involving brownfield
site restoration) are in the pipeline. Impetus is expected to
build with the completion of the canal and the groundwork has
been laid at local development group level to advance future investment
opportunities.
Niall McGilp
Director, Competitive Locations
November 2001
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