The New Local Enterprise Partnerships: An Initial Assessment - Business, Innovation and Skills Committee Contents

Written evidence from the British Chambers of Commerce


  1.  The British Chambers of Commerce (BCC) welcomes the opportunity to respond to the Business, Innovation and Skills Committee's inquiry into the Government's proposal to establish Local Enterprise Partnerships (LEPs) for economic development in England.

  2.  The BCC is a powerful and influential network of 55 Accredited Chambers across the UK. No other business organisation has the geographic spread or multi-size, multi-sector membership that characterises the Chamber Network. Every Chamber sits at the heart of its local business community, providing representation, services, information and guidance to member businesses and the wider local business community.

  3.  While there is a wide array of views within the Chamber Network on the appropriate structures for sub-national economic development in England, the BCC and its member Chambers are committed to making LEPs work. We are also committed to ensuring that the wealth-generating private sector plays a pivotal and central role in delivering comprehensive and transformative economic change in towns, cities and counties across the UK. LEPs, fundamentally, must be about challenging the status quo—and creating a stronger enterprise culture in local areas across the UK.

  4.  Accordingly, the BCC has been working with Ministers, Whitehall and town halls on the transition to LEPs. In recent weeks, we have:

    — Set out what LEPs should aim to achieve: productivity growth, private-sector wealth creation (which in turn generates jobs), and local economic diversity. Each area's journey to achieve these will be different. This has been shared with ministers and Whitehall by the BCC, and used by individual Chambers of Commerce to structure debate in their local areas [see slides attached];

    — Actively assisted Chambers of Commerce and Local Authorities in a number of areas on locally-specific proposals for transformative economic growth. This process of engagement has included everything from private meetings with local leaders to business summits with 200-plus in attendance; and

    — Worked with the leadership of the Local Government Association to ensure that LEP proposals are developed as real public-private partnerships, rather than just a public-sector-led approach.

  5.  Given the extensive track record of Chambers of Commerce and their members in driving local economic development we are confident that Chambers will continue to play a central role in the implementation of LEPs. We stress, however, that LEPs must be transformative—with an innovative and clear vision for local economic change, driven jointly by private and public sector actors. If LEPs simply become a new vehicle for "business as usual", either as consultative talking-shops or day-to-day delivery bodies, they will fail to deliver the fundamental shift toward private-sector-led growth that so many areas across England require. This response therefore deliberately focuses on purpose, structure, and strategy, and responsibility for setting funding priorities—rather than on delivery. The BCC believes that delivery will require a mixture of bodies—with the private sector involved as far as possible—but that the mix will differ from area to area.


  6.  The BCC is concerned that discussion on the functions of LEPs has preceded careful thinking about why they are being created in the first place. LEPs must have a clear purpose from which their functions, geography, and governance arrangements logically flow. As noted above, LEPs' fundamental role must be to set out a clear long-term vision for the growth of the private sector across a clearly-defined geographic area—which would remain even if the structures developed by the LEP approach are reformed by future Governments. This vision should be accompanied by a short-term delivery plan that emphasises pragmatic, achievable actions by public and private sector bodies operating on the ground. While LEPs may set that delivery plan, they need not necessarily be the day-to-day delivery bodies. In fact, LEPs should be "strategic commissioning bodies"—rather than direct delivery agencies.

  7.  In each area of England, the BCC believes that LEPs should develop their own tailored proposals to:

    — Raise local productivity levels;

    — Increase private-sector wealth creation (which should, in most areas, translate into jobs growth); and

    — Deliver greater economic diversity (in areas that are over-dependent on a single sector for growth) and sustainability (in all areas, including those that have been relatively successful at delivering private-sector growth in recent years).

  8.  To achieve these objectives there are some clear functions that LEPs should co-ordinate to improve the local business environment. Setting a small number of clear functions will demonstrate LEPs' value to local businesses, who are often rightly sceptical of new governance arrangements and initiatives. Key functions should be to focus on:

    — Setting a clear, shared long-term vision for enterprise growth for their area—including a realistic analysis of the area's comparative advantages and its opportunities for private-sector growth. This must not be a repeat of the experience with RDAs, which identified far too many "comparative advantages", many of which were unrealistic and unspecific (eg the oft-cited aspiration to create biotech and creative industries sectors, which featured in every RDA strategy);

    — Identifying existing barriers to business growth—eg in terms of land use planning, infrastructure, skills/labour market—and the actions required to remove these barriers; and

    — "Selling" the area, by taking responsibility for bids for central government funding (eg the Regional Growth Fund) as well as levering in private sector resources to support priority local infrastructure projects.

  9.  The lack of clarity about LEP functions is also hindered by Ministers' reticence to publicly set out the criteria they will use for determining which LEP proposals will be given the go-ahead. While we do not believe that a prescriptive and top-down approach is required, business wants an assurance from Ministers that no LEP will go ahead unless its purpose is to address the core economic priorities described above. Business also wants to be assured that critical government departments beyond CLG and BIS, such as DfT and DWP, are fully "bought in" to this approach. Otherwise, it is possible we could have LEPs approved which are simply not credible propositions.

  10.  We believe Ministers should make it clear going forward that they will not approve LEP proposals that:

    — Do not have the local business community at the heart of their development, and are supported by businesses and respected business organisations in their areas, including Chambers of Commerce;

    — Are not of an adequate size or scale to reflect genuine functioning economic areas (rather than existing local political boundaries). We would suggest no more than 40 LEPs to ensure appropriate scale;

    — Are seeking a very broad number and range of functions which lack a clear relationship to the LEP's core economic role; and

    — Are based on unrealistic resource expectations.


  11.  While the BCC supports some of the principles articulated in the Government's Regional Growth Fund consultation—including a focus on transformative capital investments, and a more open bidding process that allows for private-sector as well as local authority involvement—we also have concerns regarding the proposed approach. We have attached the BCC's draft response to the Government consultation response on the Regional Growth Fund, which explains our rationale in further detail.

  12.  We believe that the project funding approval process should:

    — Be based upon the three core objectives we have set out for LEPs (as above);

    — Prioritise public/private bids that will improve the local business environment, with a particular focus on transport infrastructure, premises, and skills (only in those cases where existing skills initiatives are failing to deliver against business needs); and

    — Support bids which will deliver high levels of absolute growth (eg in the South), as well as bids that enable greater private sector diversification in areas of the country that have become over-dependent on the public sector (eg the Midlands and the North).

  13.  The BCC believes that the Fund must be a long-term initiative, rather than simply a two-year grant-making scheme. It would be incongruous for the Government to have different cycles for the Regional Growth Fund, local government finance settlements, and its Council Tax and Business Rate Bonus schemes—as this would help areas to maximise the impact of public money. If the Fund proves successful, and is able over time to offer returns on loans and equity investments, the Fund could expand to include private-sector capital (eg from pension funds) and local authority investments (eg from reserves, of which there are tens of billions in council accounts).

  14.  The Fund could also be the vehicle for bidding for and delivering European Union competitiveness funding from 2013 onward. We make further comments on EU funding in section 27 below.

  15.  Given the limited resources available through the Regional Growth Fund, and the need to focus its resources on a relatively small number of capital projects, we do not believe that LEPs should expect significant grants from the Fund for their revenue operations. As local government revenue funding will continue to be squeezed over the medium-term, LEPs must be realistic about the scale of resource available—and both councils and local businesses will have to find innovative ways to contribute staff time and resources in a way that maximises value for money. It is therefore critical that:

    — LEPs look carefully at the possibility of "under-arching" support structures—pooling resources and sharing functions where appropriate;

    — Ministers veto LEP plans based on unrealistic resource expectations; and

    — LEPs make use of available private sector capacity, as well as the information and experience gathered by RDAs prior to their dissolution.


Co-ordination across LEP areas

  16.  The Government's stated desire to devolve power away from the centre over the course of this Parliament—including the abolition of RDAs, regional planning, and the Government Offices for the Regions—means that LEPs will become the key intermediary between Whitehall and Town Hall in the years to come.

  17.  However, our experience to date suggests that a "patchwork quilt" of LEPs is likely to emerge over the coming months—with focused and effective partnerships in some areas, less-effective LEPs in other areas, and still further areas with no LEP at all. This variation means that clarity over the division of labour between central government, LEPs, and any other economic development bodies must be delivered over the coming months.

  18.  Businesses want LEPs to be of sufficient scale to avoid the need for a wide range of coordinating structures between them. We accept, however, that LEPs should work together across their boundaries on a mutually beneficial project basis. This could be for transport projects linking multiple centres, (eg the connection between Manchester and Leeds or road connectivity between Dorset and other parts of the South West), to collect important economic data, or to focus on particular inward investment interests (eg renewable energy in Norfolk/Suffolk, or advanced manufacturing in the West Midlands). Such activity might vary in form from informal close-working to a more formalised contractual basis, but should not require the creation of additional branded, overlapping structures that are difficult for businesses to understand.

Functions to be nationalised

  19.  In their June letter to local councils and business leaders, the Secretaries of State for Business and Communities specified that a number of activities previously administered regionally will now be nationally-led, including international trade support, inward investment, innovation, sector development, major infrastructure, European funding, access to finance, business support, and tourism.

  20.  There is significant discontent in the Chamber Network about the "nationalisation" of some of these functions—with local business leaders stating a clear preference to retain certain functions at a sub-national level in some areas. Many Chambers in the North and Midlands (including the North East, North-West and Yorkshire and the Humber) believe that there is a continued need to retain control over some of the strategic economic functions presently exercised by RDAs, notably around inward investment and place-marketing. Similar points have been made in the South West, particularly with regard to tourism. And a number of areas commented on international trade—and expressed concern that "nationalisation" of this agenda could work to their area's detriment.

  21.  Enabling sub-national co-ordination and delivery of certain functions where there is a compelling case should not, however, stretch to the maintenance of regional offices overseas—which the BCC commented on in a previous appearance before this Committee. It would be preferable to have a single "sales force for UK plc" overseas that fully understands regional opportunities and niches.

  22.  Whilst there is not a clear consensus in the Chamber Network regarding the functions that should be "pan-regional" and the functions that could be "nationalised", it is important that areas are given the opportunity to co-ordinate functions where there is a consensus that they are needed. Government should not pre-determine what functions be centralised, but allow LEP bids to demonstrate capacity for delivery of certain functions at sub-national level and to commit to delivering certain outcomes for both their own area and UK plc by doing so. Government should then approve or reject these proposals on their merits, taking into account the need to ensure LEPs collectively do not engage in wasteful competition.


  23.  It is important that LEPs are strategic bodies, which set an economic vision and delivery plan for their areas. With limited resources, they will require a chair, a board structure and a small secretariat, but should not hold statutory functions to fulfil this remit. They could, however, hold responsibility for transferred assets, and for submitting funding bids—so that the public-private partnership takes the lead in prioritising economic development resources.

  24.  LEPs need to unlock the economic dynamism and enterprising spirit in local communities and bring in real business experience and representation into the heart of their decision-making. Equally local authority leaders will need to be more strategic in many areas—and work across a geographic area that represents a functional economy, rather than the ward or council area that they were elected to represent. The BCC therefore believes that:

    — LEPs should set the economic strategy for the area, with local authorities responsible for the delivery of any statutory functions on the ground. They may also lead bids for funding, and/or be accountable for certain assets or funding streams being used in the sub-region. Local private sector companies could also play a key delivery role.

    — LEP Boards must be chosen in an open and transparent manner. They must have at least 50% private-sector members, a respected and high0level business chair, and they must be chosen to ensure that each area's most dynamic and visionary businesses are represented. In order to ensure that business members enjoy the support of their peers, it may in some cases be possible to 1) require nominations to be seconded by a representative sample of local businesses, and/or 2) subject these nominations to a "business vote" of some sort, with electors drawn from Chambers of Commerce and other business representative organisations active in the area.

    — In order to ensure that LEPs are considered the top economic strategy bodies for their areas, council leaders—not back-benchers—should be the public-sector representatives. No alternates should be allowed. This will give the business community—which is often sceptical of the value of new partnership structures—greater confidence to engage.

    — LEPs must put in place rigorous processes to review their own performance in progressing towards meeting their delivery plan outcomes.


  25.  The speed at which the Government is moving towards converting from RDAs to LEPs represents a big change of pace for both business and local authorities. Many are concerned that the short timeframe for LEP proposals, the Regional Growth Fund and the Decentralisation and Localism Bill run the risk of creating a system that has not been well thought through. For what are likely to be major changes to a whole range of functions that will affect business, there is a need to take time to get this process right, rather than rushing to get it done quickly. Businesspeople are enthusiastic to engage—but given the inherent time and resource pressures they face, the timeframe is proving challenging.

  26.  There is also a real risk that during the transition period will there will be a policy and delivery vacuum at the sub-national level. As RDAs are wound up it is probable that the capacity, staff, expertise and information that they have built up will gradually wane, with little more than a skeleton service available by the time of their abolition. Government should set out a more detailed public timetable for the transition, and proposals for how capacity gaps will be managed prior to the new arrangements being in place.

  27.  The Government needs to set out how existing assets, liabilities and spending commitments will be managed during the transition. Where RDA assets are not deemed to be strategic national assets, LEPs should be given first refusal on taking on ownership, provided they can demonstrate capacity to manage them and to generate sufficient returns. This would then create revenue streams to support major projects and to lever in private sector investment. Given the lack of public funding likely to be available to LEPs, it would be a missed opportunity for the value of the sites to go back to HM Treasury when it could be used to help unlock local economic development.

  28.  As a matter of urgency, the Government must also set out arrangements for an orderly transition of existing European funding programmes. This is a major cause for concern expressed by business leaders in many areas of the country—where private-sector investment is often contingent upon the completion of EU-funded projects, and in some cases RDA match-funding. For example, the North West Development Agency have already cancelled a planned development for business office space in Liverpool, and £250,000 support for a business to move into to new premises in Cornwall has also been pulled. A lack of clarity on transition arrangements for EU funding programmes could jeopardise resources during the current Budget period, and complicate the UK's position for the negotiation of the new 2013-19 EU Budget round.


  29.  The overall BCC position is therefore as follows:

    Overall Summary of the BCC position

    Chambers of Commerce are excited to play a central and proactive role in LEPs—but our business members are clear that they must be transformative bodies, focused on delivering enterprise growth. They must be a real partnership led by the private sector.

    Too much of the discussion on LEP functions has preceded careful thinking about their purpose. Chambers believe that LEPs must have a strong economic focus—on productivity, private-sector job creation, and economic diversity. They must then set a clear vision, identify barriers to growth, and propose how to remove those barriers and foster investment confidence.

    While the Chamber Network supports the principle of a Regional Growth Fund, resources must be tightly prioritised on packages of investment that improve the local business environment—particularly infrastructure—and deliver clear economic benefits.

    In order to achieve effective co-ordination between LEPs, it is critical that central government provides greater clarity over the division of labour between Whitehall, LEPs, and any other economic development bodies. Questions over functions set to be "nationalised"—especially around inward investment and international trade—must be resolved as a matter of urgency.

    LEP Boards must be private-sector led, with at least 50% business members—plus a dynamic and respected business Chair. BCC believes that LEPs could develop a nomination and selection process for business members that captures the interest of local businesspeople. Council leaders—not back-benchers or Cabinet members—must be the public-sector representatives, to deliver legitimacy and confidence.

    The Government must ensure that the appropriate time is taken to get the transition towards the new system right, putting in place a clear timetable with arrangements for the transition of RDA assets and European funding, both of which are a critical part of the funding mix in many areas.

13 August 2010

Annex 1



  1.  The British Chambers of Commerce welcomes the concept of a Regional Growth Fund, which will enable innovative private-sector led growth bids to challenge and compete with more established approaches to economic development. However, we would like to record some concerns about the haste with which the Fund is being established—as well as the need to use its incredibly limited resources to support a relatively small number of projects with the potential to spark substantial private-sector growth.

  2.  Business leaders across the UK are clear that any future efforts to grow local and sub-regional economies must be based around a clear and innovative shared vision—and a desire to fundamentally re-shape the way that local economies operate. There is a danger that the Fund could become little more than a new way to finance "business as usual" in economic development—with resources being spread thinly across the country to satisfy political and geographical considerations, and investments focused on relative, rather than transformative, economic improvements.

  3.  Our summary view is that the Fund must make a real and demonstrable difference to existing activity on the ground—and not simply used to pick up executive staff from Regional Development Agencies and other bodies that are undergoing transition and closure. The Fund's criteria must require clear, transparent plans that show how the funds are going to hit the ground—and deliver improvements to local productivity, private-sector job creation, and economic diversity. This is especially important as the Fund will have significantly less resource at its disposal than the RDAs. Our responses to the individual consultation questions can be found below.

Q1)  Allocation of Funding

  4.  BCC strongly supports the bid principle articulated in initial Government statements on the Regional Growth Fund, and subsequently referenced in the consultation document. We believe that the only way for the Government to spur innovation in economic development—and to break out of the grant mentality that has predominated in many areas in recent years—is to allow a wide range of bidders (private, public, voluntary, and hybrid) an equal opportunity to demonstrate how their proposals can deliver the biggest economic boost for an area.

  5.  We believe that at least 80-85% of the resource available under the Growth Fund (£400-420 million pa) should be allocated on a bid basis to support capital investment. The bidding process should be flexible—eg the Government should encourage bids for loans, equity investment, and grant funding on an equal basis, rather than split the fund into separate tranches.

  6.  The remaining 15-20% of the Fund (£80-100 million pa) could be used to support LEPs on a grant basis—to ensure that each LEP can fund the revenue costs associated with bringing local infrastructure projects forward. Business leaders across the country repeatedly emphasise the importance of small amounts of revenue funding in order to lever in significant capital investment, whether from the public or the private sector. This funding must not, however, simply be used to fund recruitment of senior executive staff—as noted above.

Q2)  Type of activities

  7.  The BCC has set out three fundamental principles that we believe represent the core mission for all Local Enterprise Partnerships. Allocations from the Regional Growth Fund should mirror these. Accordingly, the Fund should only be used to support projects that deliver:

    — Increases in productivity/private sector economic activity in a LEP area; OR

    — Increases in the number of private sector jobs in a LEP area; OR

    — Improvements in economic diversity (where the LEP area suffers from sectoral imbalance) or economic sustainability (where the LEP area needs to invest to maintain existing strong sectoral mix).

  8.  We agree that a level of flexibility will be required in determining whether the activity proposed in a given local area fits with the above objectives. However, given the business community's consistent calls for greater investment in local transport infrastructure and premises for private-sector growth businesses, and the limited amount of resource available under the Fund, the BCC believes that "package" bids that improve an area's physical business environment must be prioritised over other interventions (eg back-to-work initiatives that offer fewer short-term prospects for visible local economic growth, despite their clear social benefits).

Q3)  Criteria for assessment

  9.  The BCC is concerned that the two high-level objectives for the Fund—leveraging private-sector growth and reducing public-sector dependence—may not always both be covered by a single bid.

  10.  Accordingly, the Government should think further about how it will differentiate between bids that deliver high levels of absolute growth (eg a project in a successful area levering in significant new private sector investment and large number of private-sector jobs) and those that deliver greater diversification and transformative potential (eg a project in a less-successful area that "creates a marketplace" for substantial private-sector investment).

  11.  In addition to the criteria set out in the consultation document, BCC believes that no bid should go forward to the Independent Approval Panel for consideration without the express endorsement of the local Chamber of Commerce—to ensure that there is a real unity of purpose between local private—and public-sector actors. We believe that this would also cut down on the number of poor-quality or hastily-considered bids received by the Panel.

  12.  The BCC also believes that bids to the Fund must demonstrate how the capital received would integrate with other public-sector investment within a locality—so that private-sector led growth is best aligned with limited Government investment.

Q4)  Two-stage bidding process

  13.  We understand the Government's desire to hold two rounds of bidding, one for 2011-12 and one for 2012-13. However, we would question whether robust bids can be brought together by December 2010 for the first round. Many bids made at that time will simply be existing "off-the-shelf", public sector-led projects that have been delayed or cancelled due to RDA and local funding constraints. Additionally, this tight timescale might "crowd out" potential private-sector bidders, who will need to invest significant time and resources to develop innovative new bids and partnership arrangements with councils and other local actors. We would suggest a date for the first round that coincides with the start of the 2011-12 financial year—eg 6 April 2011.

  14.  The BCC strongly supports the principle of a two-stage bidding process—with outline bids followed by the development of a full business case. This will prevent the wasting of time and resource, both by local authority economic development departments (which are likely to be smaller and even more under-resourced in future as councils' budgets become even more constrained), and by any putative private—or third-sector bidders.

Q5)  Longer-term role for the Regional Growth Fund

  15.  Economic transformation—whether local or national—is a long-term undertaking. The British Chambers of Commerce believe that in order to be successful, the Regional Growth Fund must be a sustained initiative. Otherwise, it will be viewed as an unstable, short-term source of grant funding—rather than a long-term enabler of critical local infrastructure projects.

  16.  A long-term Fund will help to build up business and investor confidence—thereby delivering the private-sector leverage that the Government wants to see as a result of the Fund's pump-priming investment.

  17.  Chambers of Commerce would also support mechanisms to recycle money into the Fund over time—eg from loans and equity investments, in a manner similar to the European Investment Bank's JEREMIE initiative, which already operates in a number of areas of England.

  18.  We would also encourage the Government to explore the possibility of direct private-sector and local authority investment in the Fund over the longer term. Please see the attached paper, written in 2008 by the BCC's Director of Policy, Adam Marshall (while at the Centre for Cities think-tank) for some further ideas on how this could be encouraged.


  19.  We would be happy to discuss any of the points made in this response with Ministers or officials in further detail, if that would be helpful. Please contact Adam Marshall, Director of Policy and External Affairs, on 020 7654 5815 or

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