Written evidence from the Work Foundation
1. SUMMARY
1.1 Local Enterprise Partnerships (LEPs)
are an important step towards ensuring that local areas have a
successful, decentralised economic development structure which
reflects local needs and distinctiveness. However, they will face
considerable challenges—the need to stimulate growth while
cutting public spending, to combat high levels of unemployment
and to address entrenched disparities between UK cities.
1.2 Cities will be vital to the recovery,
and they require successful LEPs to ensure they can contribute.
To be successful, Local Enterprise Partnerships will need:
(1) The flexibility to adapt to distinctive local
circumstances.
(2) Ability to shape local innovation ecosystems.
(3) Influence over local skills policies.
1.3 The government needs to ensure there
is clarity of structure, powers and funding for LEPS. They need
to ensure that areas with weaker economies do not have weaker
LEPS and sufficient incentives are in place to ensure that LEPS
collaborate with each other.
2. INTRODUCTION
2.1 It is vital that the UK both reduces
public spending whilst as the same time stimulating growth. Neither
of these goals can be achieved without taking action at the regional
and local level. This requires strong, effective governance structures
for economic development at a local level.
2.2 This submission is grounded in the evidence
base developed by the Ideopolis team at the Work Foundation. The
Work Foundation's Ideopolis team provides strategic insight into
how the changing economy affects places for national, regional
and local leaders.
3. THE FUNCTIONS
OF LOCAL
ENTERPRISE PARTNERSHIPS
3.1 LEPs will have a number of challenges
to contend with over the coming years: adapting to ongoing structural
change; addressing high unemployment; contributing to a low carbon
society; as well as driving efficiency and managing public expenditure
constraints.[127]
LEPs will have to respond to these challenges whilst also trying
to meet the expectations of citizens and businesses. LEPs will
face some common challenges but the solutions will undoubtedly
need to reflect local circumstances. In order to support LEPs
address these challenges, the government should aim to create
an environment that encourages innovative approaches to policy
and delivery at the local level.[128]
Learning from past experiences and knowledge sharing between partnerships
and organisations should be encouraged.
3.2 It is crucial that LEPs have the flexibility
and resources to prioritise actions based on local context and
circumstances. This means LEPs having flexibility in terms of
function. Funding allocations should take account of the different
routes to achieving sustainable economic growth.
3.3 In order to "create the right environment
for business and growth in their areas", LEPs need to have
influence over support for innovation within the functional economic
area. Many of the processes and activities necessary for innovation
and the diffusion of innovation take place at the local level.
Cities in particular provide the proximity, density and variety
that support both the development and exchange of knowledge and
ideas—particularly knowledge that requires face-to-face
interaction to be transferred. Cities provide access to a range
of institutions and actors that form part of the innovation ecosystem.
These institutions will include financial intermediaries, innovation
specialist driving institutions, supporting infrastructure and
knowledge service intermediaries, and other civic, cultural and
intellectual institutions. Proximity and connectivity amongst
these actors and with business networks increases the flow of
innovative ideas and the exploitation of innovation. It is also
important to recognise the indirect support for innovation that
cities provide, through transport and communications infrastructure
for example.
3.4 A strong focus is necessary on strategies
for improving firms' access to skills in order to lever in private
sector investment in an inclusive and sustainable way over the
longer term. LEPs potentially provide an opportunity for a more
integrated, locally focused approach to skills. The Work Foundation's
analysis of the drivers of economic growth found that a more highly
skilled workforce is strongly related to both wage and employment
growth.[129]
For some local areas more than others, creating a more balanced
skills mix—fewer people with low or no skills and more people
with higher level skills—remains a challenge. These findings
echo those of Henry Overman's work for the Manchester Independent
Economic Review.[130]
His analysis shows that at city level access to workers with NVQ
level 3 and 4 qualifications raises productivity. Variations in
access to economic mass and skills were found to be far more important
to variations in access to the transport networks in terms of
the productivity differences between cities and regions outside
the Greater South East.
3.5 Clarity is needed over how LEPs relate
to local labour market interventions. Labour market interventions
will be most effective if they are informed by a subtle understanding
of what is happening in a city/regional economy. There needs to
be clarity about how labour market policy links to LEPS.
3.6 For some areas connecting communities
to areas of opportunity may be a priority. Evidence shows that
places that are isolated from areas of economic scale and strength
are increasingly falling behind. It is important to also recognise
that the degree to which an area is isolated can be dependent
on a number of factors, including skills, transport, housing and
quality of place. This will require LEPs to work jointly with
other, nearby LEPs.
3.7 It will be vital that Local Enterprise
Partnerships have clarity of purpose, strategies and powers. This
may mean defining what is not included under the remit and responsibilities
of LEPs as well as what is.
3.8 Effective strategic leadership and prioritisation
will require a subtle understanding of conditions for sustainable
economic growth within a local area. This not only means understanding
the needs of local businesses but also local residents—this
will be particularly important if LEPs are to address the needs
of the local community and support sustainable economic growth.
An intelligence function will therefore be crucial to the effectiveness
of LEPs.
3.9 Effective partnership working in order
to achieve sustainable economic growth will also involve understanding
of the different roles that places within a LEP play. Research
at the Work Foundation has found that the development of stronger
and more complementary economic relationships between local areas
can generate higher levels of sustainable economic growth and
development. Achieving higher levels of sustainable growth then
requires recognition of the roles of different places and understanding
the dynamics of these relationships and how to support them, combined
with resources to do so.[131]
4. STRUCTURE
AND COORDINATION
OF ROLES
BETWEEN LEPS
4.1 The unique histories, characteristics,
assets and relationship structures of local economies will require
flexible models of governance and partnership arrangements. The
emphasis on LEPs being created around functional economic areas
is an important one that means partnerships are likely to be more
effective and avoid wasteful competition.
4.2 In considering the functional economic
area that a LEP should cover, it is important not only to consider
labour market movements but also firm relationships and supply
chains at the local level. Our research has shown that whilst
labour market relationships are the strongest indicator of the
links between places, firm relationships in certain sectors also
shape the links between places.[132]
4.3 The structure of LEPs should be based
on the distinctive assets and dynamics of local areas. It may,
for example, be more appropriate for LEPs to be based on the functional
labour market area. On the other hand, there may be potential
for partners to work together to capitalise on the opportunities
created through the firm links between embedded sectors or other
distinctive assets. In this sense it is important that form follows
function. It may also mean that it is more appropriate for some
local authorities and partners to form separate LEPs and to then
work collaboratively with other partners and LEPs where necessary.
4.4 It will be necessary for LEPs at times
to work with local authorities and partners beyond their LEP administrative
boundaries, and with other LEPs, as some issues will require collaboration
on a larger spatial scale. It will be crucial that there is a
level of regional coordination to ensure effective wider collaboration.
4.5 Consideration is needed over whether
traditional partnership areas still reflect functional economic
areas. Analysis of employment sites over time demonstrates that
functional economic areas are not fixed entities. For example,
employment in knowledge-intensive, high value firms is becoming
increasingly clustered in the south of the Manchester sub region
including Macclesfield which lies outside the ten local authorities
represented by AGMA.
4.6 It will be important to ensure that
local institutions, which act as "anchors" in the local
economy, are linked to LEPs in order to align activity, improve
efficiency and maximise effectiveness. LEPs will be business led,
but in many cities the business sector is weak. Anchor institutions,
however, such as universities, museums, hospitals or sports teams
are often vital for the local economy in these cities and provide
an opportunity to generate employment, potentially support private
sector growth and form part of the local innovation system.[133]
For example in Mansfield, West Nottinghamshire College worked
with the construction company SKANSKA to provide local people
with work on the redevelopment of the Kings Mill Hospital. In
the United States, universities often play more active roles in
the local community than in the United Kingdom, and this relationship
must be strengthened. This makes it important that anchor institutions
are included early in the planning for LEPs and LEPs need to consider
these implications when they are being formed. However an important
tension may be created where key anchor institutions, such as
universities, have to deal with a number of LEPs.
4.7 This is not to suggest that LEPs should
develop as "universal catch all partnerships" however.
It is important to retain focus and clarity of objective. It may
be necessary to involve wider partners at a later point in their
development.
4.8 LEPs should build on the successful
work of previous structures and partnerships. In the same way
LEPs should build on skills and expertise that already exist at
the local level.
5. THE REGIONAL
GROWTH FUND
AND FUNDING
ARRANGEMENTS UNDER
THE LEP SYSTEM
5.1 The recession has exacerbated the challenges
that some of the UK's towns and cities have faced over the longer
term. Our research shows that the recovery is likely to widen
the gap between more successful local economies and those that
have lagged behind over the last decade. In these areas there
may be greater demand for regeneration initiatives. It will be
vital to ensure that LEPs are equipped to support these areas.
5.2 There is a danger that business-led
LEPs provide the worst services in exactly those local areas which
need them most, whereas areas with strong economies and private
sectors create strong partnerships. The process of competitive
bidding for the Regional Growth Fund with bidders required to
demonstrate that they have the financial backing of the private
sector may mean that areas with weak private sectors may have
weak LEPs. It is also important to recognise the time costs involved
in lobbying for funding and investment. The government needs to
consider providing additional support for LEPs in areas where
the local economy is weak.
5.3 At the same time in order to ensure
effective allocation of funding and avoid "jam-spreading",
it is necessary to recognise the roles that the UK's largest and
most successful cities play as driver of growth. It may be necessary
to review alternative financial mechanisms to overcome the constrained
public expenditure. This also applies to business access to finance:
only 3% of all bank lending has gone to manufacturing over the
last 10 years.[134]
The government must encourage a more diverse range of financial
institutions across the UK.
13 August 2010
127 Hutton, W and Jones, A (20200) Driving Economic
Recovery: the Core Cities-a new partnership with government,
Core Cities, The Work Foundation, Oxford Economics, Shared Intelligence Back
128
Lekhi, R (Research Republic LLP) (2007) Public Service Innovation:
a research report for The Work Foundation's Knowledge Economy,
The Work Foundation Back
129
Clayton, N and Lee, N (2009) Supporting Sustainable Economic
Growth in the West Midlands: a report prepared for Advantage West
Midlands, The Work Foundation Back
130
Manchester Independent Economic Review (2009) The Case for
Agglomeration Economies, Manchester Back
131
Jones, A Clayton, N Tochtermann, L Hildreth, P and Marshall, A
(2009) City Relationships: economic linkages in northern city
regions, The Northern Way Back
132
Jones, A Clayton, N Tochtermann, L Hildreth, P and Marshall, A
(2009) ibid Back
133
Morris, K Jones, A and Wright, J (2010) Anchoring Growth: the
role of "Anchor Institutions" in the regeneration of
UK cities, The Work Foundation, The Northern Way Back
134
Brinkley, I Levy, C and Morris, K (2010) The Jobs Gap,
The Work Foundation Back
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