Select Committee on Scottish Affairs Minutes of Evidence

Memorandum by Scottish Enterprise (FCS 4)


  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.


  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.


  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.


  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.


  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)

Informal recreation
Canal Users
Canal Construction
Total Direct

  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)

Indirect Tourism
Other construction
Business Premises
Total Indirect

  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.


  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.


  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.


  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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