Memorandum from One North East (NE 11)
SUMMARY
— The North East economy has seen significant
growth in recent years, above the national average, however the
downturn has negatively impacted on businesses activity across
sectors.
— One North East (ONE) has played a key
role in supporting industry and innovation in the region, vital
to meeting ambitious growth targets, particularly through:
— Improving the competitiveness and efficiency
of existing businesses, including through the MAS NE programme,
access to finance for firms and wider support provided by Business
& Enterprise North East (BENE); and
— the growth of new industries building
on industrial and academic strengths providing a platform for
future growth, including the leadership of the Innovation Connectors
bringing together physical regeneration, inward investment, business
support and skills activity around a scientific and technological
area of excellence.
— The Agency has taken responsive and decisive
action refocusing £46 million into support for regional businesses
during the current economic downturn, including an extension to
the Transitional Loan Fund, R&D scheme, business health checks
and initiating and chairing multi-agency Response Groups.
— ONE's strategic leadership and influencing
role in the skills agenda continues to be important in ensuring
the region's workforce has the skills necessary for a dynamic,
diverse and competitive economy.
1. INTRODUCTION
1.1 One North East (ONE), the Regional Development
Agency, has made a significant contribution to the economic growth
and regeneration of North East England. There has been major progress
in the growth of the region's economy, but there remain significant
challenges, not least those caused by the current recession.
1.2 This submission sets out the role ONE
has played in the region's growth, particularly through activity
in the areas of innovation and industry.
2. REGIONAL ECONOMIC
STRATEGY: AMBITIONS
FOR GROWTH
2.1 The Regional Economic Strategy (RES)
provides the strategic framework for sustainable economic growth
for the North East, and sets the region's economic aspirations.
2.2 By 2016, to increase the GVA per head
to 90% of the national average, from the 80% it was in 2006.
With the following underpinning targets:
— the creation of between 18,500 and 22,000
additional new businesses; and
— employment for between 61,000 and 73,000
more people.
North East Economy
2.3 In the last few years the North East
economy has made positive progress with some encouraging signs:
— growth in GVA between 2005-07 was the
highest of all UK regions;
— business stock has grown faster than
the national rate for the last five years;
— significant regional employment growth
over the past decade; and
— more diverse economy and the region's
image has improved significantly.
2.4 However there is still some way to go
if we are to meet the ambitions of the region:
— the economy of the region performs at
a relatively low level: GVA 79% of the national average;
— number of VAT registered businesses remains
low: 61% of the national rate in 2008; and
— the region still has a lower rate of
employment: 71.5% compared to 74.5% nationally.
2.5 The recent downturn has also had an
impact on the region, across all sectors, with weakening demand
for goods and services regional business activity has been contracting
since June 2008. However the rate of contraction has eased with
a slower fall in activity than the UK average for the second month
in succession during March.
Strong track record
2.6 ONE has a strong track record in delivery,
consistently meeting financial and output targets and is committed
to a business-led approach that allows us to be flexible and responsive.
Our success in supporting business has been recognised in the
evaluation of our business programme, which highlights that £4.50
was put back into the regional economy for every £1 spent
on business-related activities. This investment will continue
to produce returns for the economy and the figure is likely to
rise to over £8 as the impact of the initial investment develops.[34]
3. SUPPORT TO
EXISTING BUSINESS
Existing businesses are the source of economic
growth and employment creation. ONE has developed a number of
support measures and activities to maximise their contribution
to the regional economy.
Access to Finance
3.1 Access to finance has been identified
as a key driver of growth for small and medium-sized enterprises
(SMEs), and is particularly critical in the current economic difficulties.
As a result ONE established the Access to Finance programme, which
ranges from micro finance (loans up to £15,000) to larger
equity investments up to £1 million.
3.1.1 During 2008-09, 234 investments totalling
£35.4 million were made from ONE investment funds, compared
to 87 investments totalling £14.3 million the previous year,
reflecting the introduction of new funds. Total invested from
publicly supported funds since 2004 is £85 million with significant
leverage of private funds demonstrating the North East's reputation
for SME opportunity and ONE's ability to utilise public funds
to lever in private sector monies.
3.1.2 The Proof of Concept Fund (convertible
loan for early stage investment) was one of the first in the country
to invest rather than grant fund. It has been successful in identifying
and supporting entrepreneurial activity and also preparing businesses
for the next stage of investment. The continuum of funding has
removed barriers to many entrepreneurs and SMEs in the region
and the structure has allowed public funds to be delivered in
a more private sector approach, helping to reduce grant dependency.
3.1.3 To build on Access to Finance ONE is working
with the European Investment Bank and Government to develop a
£125 million holding fund, with significant levels of external
finance, under the European structural funds JEREMIE (Joint
European Resources for Micro to Medium Enterprises) model in order
to provide further investment funds from late 2009.
3.1.4 The Grant for Research & Development
Scheme supports a range of activities from developing new
products or processes to assessing the commercial feasibility
of new technologies and has offered 32 companies support during
the year, to a value of £2.4 million. Initially suffering
as result of the downturn, interest has returned demonstrating
confidence in the scheme and commitment to R&D.
MAS North East
3.2 Launched in March 2009 MAS NE was created
by joining three successful programmes:
— Manufacturing Advisory Service (MAS);
— the North East Productivity Alliance
(NEPA), embedding best practice lean manufacturing techniques
to improve efficiency; and
— Energy Resource Efficiency (ERE), providing
energy management skills and interventions.
MAS NE will continue to strengthen the region's
manufacturing sector by improving its competitiveness, safeguarding
3,740 jobs, assisting over 2,150 businesses and training 8,500
people, whilst saving over £50 million and reducing carbon
emissions by 25,800 tonnes.
Strategic Account Management (SAM)
3.3 ONE engages directly with 500 key businesses
in the region to understand their investment decisions and support
their current and future priorities. This year the engagement
has resulted in over 130 business supports and 28 capital investment
projects, including safeguarding projects such as Cheviot Foods
and expansion projects such as Convergys, in total creating nearly
700 jobs.
Inward Investment and Aftercare
3.4 In 2008-09 the Agency secured 53 inward
investment projects; 45 foreign direct investments and eight from
UK companies. In total, 4,260 jobs were created or safeguarded
representing over £200 million of capital expenditure into
the region. In addition, the Agency successfully facilitated 33
global partnership agreements between overseas academic and research
organisations and their counterparts in North East England.
Business & Enterprise North East (BENE)
3.5 BENE is the main route for all business
support into which ONE will invest £150 million between 2007-12.
In 2008-09 BENE supported over 20,000 businesses and created over
4,000 businesses and 5,400 jobs, including through:
3.5.1 2,170 business "health checks"
to 16 April, which have included maximising cash flow, accessing
lending for working capital, retaining customers and identifying
new markets.
3.5.2 From April 2009 the Agency assumed responsibility
for Train to Gain with funds of £2.1 million per annum
provided by DIUS, delivered through BENE. The activity supports
employers of all sizes to improve the skills of their employees
as a route to improving their business performance.
3.5.3 Innovation Vouchers, into which
£2.4 million has been invested, Knowledge transfer Partnerships
(KTPs), supported by £1.2 million Single Programme and
£4m from the Technology Strategy Board (TSB), and Collaborative
Innovation Partnerships (CIPs) encourage collaboration between
businesses and knowledge base institutions, allowing businesses
to improve their competitiveness and efficiency by increasing
innovation and exploiting new ideas.
3.5.4 The North East England Investment Centre
(NEEIC) assists existing and emerging businesses by subsidising
external business advice and expertise to support business start
up and growth. NEEIC simplifies the application process by allowing
businesses to access a range of funding for a variety of needs
through a simple online application process. It is considered
by BERR to be a good example of business support simplification.
3.5.5 NEEIC currently administers grant funding
provided by Single Programme, ERDF, RDPE, LSC, ESF and Office
of the Third Sector. During 2008-09, investment totalled over
£12 million to more than 6,000 businesses and pre-starts,
leveraging investment of a further £7 million from business.
Response to the recession
3.6 Through the Agency's close relationship
with business and the utilisation of flexible single programme
resource ONE has taken forward a number of targeted measures to
alleviate pressure faced by businesses, refocusing £46 million
on this activity, including:
3.6.1 An extra £2.5 million into the Grants
for Business Investment to help firms expand. Since September
133 companies have benefited, with grant payments made just over
£12.4 million. This investment will support the creation/safeguarding
of 2,887 jobs and leverage of £162 million.
3.6.2 An additional £6.25 million into the
North East Investment and Co-Investment Funds to give vital
finance for growing firms, which is expected to encourage around
£9.5 million of additional investment funds in the region,
creating/safeguarding 270 jobs, and assisting 28 businesses. Since
2004 ONE has invested £23 million, with leverage of £39.2
million.
3.6.3 Transitional Loan Fund: extended
from £2.2 million to £9.9 million, due to interest,
the fund provides short term loan finance for large and small
companies. 64 loans have been drawn down with a loan value of
£6.9 million to date.
3.6.4 £2.4 million into a business led collaborative
large company R&D scheme, which matched by private
investment could generate £20 million sales over three years.
Four to five schemes are currently being investigated for full
application.
3.6.5 Responding to economic shocks: throughout
2008-09 the Agency has instigated 94 large scale redundancy response
groups, an increase on the 33 cases handled in 2007-08, highlighting
the impact of the downturn on the region. In situations where
there is wider regional impact the Agency will chair a public
and private sector Response Group, as it has done with Northern
Rock, Nissan and recently with Corus.
Response Groups work closely with plant management
to ensure every directly affected employee and the wider supply
chain has the best possible chance of finding new work and opportunities.
Redeployment rates are in the region on 70%-80%, which is in line
with rates in a normal economic climate, and the Agency is striving
to maintain these in the current circumstances.
Physical Infrastructure
3.7 As well as direct support for business
ONE ensures its capital investment, £140 million in 2008-09
reducing to £86 million in 2010-11, is aligned with our business
priorities and supports the industrial base, boosting private
sector investment and developing strong market opportunities for
growth. Innovative Public-Private Partnerships, Buildings for
Business and ONEDIN, have been developed to manage the Agency's
portfolio of industrial property, drawing on private sector expertise
to drive regeneration and enable re-investment in the portfolio
for refurbishment and redevelopment.
4. INDUSTRIAL
STRENGTHS AND
DRIVING INNOVATION
Science, innovation and creativity are key to
driving improvements in the North East's competitive advantage
in global markets.
4.1 Over recent years the region has seen
considerable growth in its science, technology and engineering
related activities. The process industries have been reborn and
while some elements are facing difficulties currently, prospects
in other parts, such as industrial biotechnology, are excellent.
The region has established a new energy industry, attracting new
inward investment in such areas as offshore wind technology and
biomass. There has been an increase in the development of new
life sciences businesses.
Strategy for Success
4.2 In 2001 ONE's Innovation Strategy &
Action Plan (ISAP) identified innovation as being fundamental
to improving the region's prospects through structural economic
change.
4.3 Two key programmes were developed to
take forward these priorities, the North East Productivity Alliance
(NEPA) and the Strategy for Success (SfS). SfS focussed on the
development of new businesses and new industries, building on
existing strengths in the region, in particular the research base.
It was recognised that while the region had limited private sector
research capability, there were considerable strengths in the
region's universities. ONE, working with Arthur D Little, reviewed
potential strengths and five were identified: Process Industries,
New and Renewable Energy, Digital Media, Healthcare and Life Sciences,
and Nanotechnology.
4.4 In 2004 SfS was reviewed and although
good progress had been made, there were opportunities for further
development, in particular experience of market opportunities
demonstrated variations in the potential of the selected industries.
Consequently, it was decided to focus activities on industries
where the North East can achieve world leading competitive advantage
and provide a strong platform for future growth:
— process industries (underpinned by nanotechnology);
— new and renewable energies; and
— healthcare and health sciences.
Innovation & Physical Regeneration
4.5 Utilising the Agency's strength in bringing
together physical regeneration with science and innovation, wider
business support, and skills provision into a single location
ONE has developed a number of schemes focussed on particular areas
of scientific strength, with the aim of stimulating regional growth
at the same time as regenerating deprived communities: Innovation
Connectors.
To maximise the impact of Agency investment
in these innovation programmes ONE has aligned the ERDF 2007-13
Programme funding under Priority 1: Enhancing & Exploiting
Innovation, £135 million.
Energy—New and Renewable Energy Centre (NaREC)
4.6 Established in 2003, NaREC is a world
class renewable energy centre, which specialises in creating routes
to market for new energy technologies. Based in Blyth, Northumberland,
NaREC offers the latest techniques to support energy technology
developers with the creation of the next generation of their products,
including turbine blade testing. As a consequence, NaREC's facilities
are utilised by many of the large international wind turbine companies
to develop their next generation of offshore technologies. This
has transformed perceptions of the region as a centre for renewable
energy, attracting inward investment by global renewable energy
companies such as Clipper Windpower.
Process Industries—Wilton
4.7 The Wilton Innovation Connector brings
together several existing capabilities at the Wilton site, including
the Wilton Centre, a commercial, multi-tenanted site providing
companies from the process industries with office, laboratory
and pilot plant accommodation and Wilton International, the site
encompassing the large scale industrial base. Heavy investment
has taken place to expand the range of companies and assets located
at Wilton, most of which has been led by the private sector. Collectively,
the research and technology community there is now one of the
most significant in the UK, hosting the largest private sector
research and development concentration in Europe.
Centre for Process Industries (CPI)
4.8 To support the sector and open up future
market opportunities, the Agency established CPI. CPI has focused
on identifying the innovation needs of process industry businesses,
and establishing major facilities and projects to meet these needs.
It is host to the National Industrial Biotechnology Facility (NIBF),
Nanocentral, Plastic Electronics Centre (PeTEC) and the Low Carbon
Energy Development Centre.
CPI has made a central contribution to the renewed
growth with major new investment in Tees Valley leveraging £178
million in investment in R&D and related innovation projects
over the last three years.
North East Process Industry Cluster (NEPIC)
4.9 Set up by ONE, NEPIC represents 500
companies from across the region's Process Industries and the
supply chain, providing a focal point for companies to share best
practice, discuss and coordinate planned investment, access training
and skilled employees. Efficiency improvement programmes brokered
through the Cluster have helped the region secure jobs and deliver
millions of pounds of bottom line benefits to members. NEPIC was
also instrumental in the North East's success in hosting the National
Skills Academy for the Process Industries. These companies and
their supply chains are a significant contributor to the region's
economy and the sector itself will invest around £7 billion
into the region by 2015.
Health Care and Health Sciences—Newcastle
Science City
4.10 ONE, with Newcastle University and
Newcastle City Council, are investing around £75m in Newcastle
Science City; developing the former Scottish & Newcastle Brewery
site, now known as "Science Central", to bring science
and business together. The project will develop mechanisms to
commercialise research, particularly in strengths including, stem
cells and regenerative medicine, molecular engineering and energy
and environment. Over the next 15 years the project aims to create
500 high-growth science and technology businesses, in excess of
3,500 jobs and attract significant investment to the city.
Additional and underpinning areas of industrial
strength and academic excellence are being supported through similar
developments, including:
4.11 NETPark encourages the development
and growth of plastic electronics, microelectronics, photonics
and nanotechnology businesses. These represent major opportunities
for new and existing businesses, based on the regional strengths
of the Universities, the process industry and electronics and
electrical engineering businesses.
4.12 Northern Design Centre, Baltic
Business Quarter, Gateshead Quays, will increase design capacity
and capability of regional businesses by acting as a physical
hub, focusing on product development and innovation, and fostering
interdisciplinary working between business and the knowledge base.
4.13 Sunderland Software City is
a developing initiative which has already created a strong network
across the public, private and voluntary sectors. The project
brings together the expertise of Sunderland City Council, Sunderland
University, the North East Business Innovation Centre and the
software industry network in the region to establish a regional
innovative and sustainable software industry centred in Sunderland.
4.14 Digital City comprises two main
strands, the Digital City Innovator based at the Institute of
Digital Innovation, managed by Teesside University and Digital
City Business, managed by the Middlesbrough Council. Digital activity
and support will create a vibrant, successful and self-sustaining
cluster in the Tees Valley based on the digital technologies,
digital media and creative sectors.
Future Opportunities
4.15 Innovation is central to the capacity
of the region to emerge successfully from the current economic
difficulties. The work of the Agency in this area is in line with
Government's emerging "Industrial Activism" approach:
supporting high growth industries to establish opportunities in
accessing growing global markets.
And the region must continue to drive progress
and technological innovation to grow new industries. One such
area is low carbon vehicles which brings together work supported
through NEPA and the SfS, and which will now need a wider range
of activities to be aligned if the full potential is to be achieved.
Other key areas of focus are likely to include printable electronics,
offshore wind, industrial biotechnology and new forms of healthcare,
particularly for an ageing population.
5. TRAINING AND
SKILLS
Given the clear economic importance of the skills
of the region's workforce it features prominently in the RES.
With relatively small level of resource, £29 million between
2009-11 ONE plays a strategic leadership role, influencing larger
levels of funding from key partners such as LSC.
5.1 Regional Co-ordination and Partnership
5.1.1 Leading the Regional Skills and Employment
Partnership (RESP), the regional forum for joining up skills and
employment across the region, to ensure that all major funders
of skills and employment activity align investment to regional
priorities.
5.1.2 Leading the regional Skills and Employment
Response Group (SERG) which ensures that the key regional agencies
involved in providing support to people and business in the current
economic downturn are co-ordinated and aligned.
5.2 Strategic and Catalytic Activity
5.2.1 Leading the creation and implementation
of the Regional Employability Framework, which aims to improve
the focus and impact of resources for employability and produce
a more coordinated and coherent service for employers and individuals.
5.2.2 Incentivising the delivery of more
flexible and responsive provision that meets regional need through
the High Level Skills Capacity Fund.
5.2.3 Increasing the number of young people
and adults participating in STEM (Science, Technology, Engineering
and Manufacturing) learning and employment, to increase the capacity
of skilled individuals at a range of levels in areas of economic
importance, including energy and manufacturing.
5.2.4 Helping key sectors retain talent
and skills through the Talent Challenge programme, designed to
support those with high level skills and leadership potential
and who are newly redundant (and for whom Jobcentre Plus does
traditionally not have a specific offer).
34 One NorthEast Impact Evaluation Follow Up Analysis:
Stage One Report, SQW Consulting, February 2009. Back
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