Written evidence from the CBI
The CBI is Britain's leading business organisation,
representing 240,000 firms of all sizes covering all sectors and
located across the UK. We therefore have a strong interest in
economic development across all the English regions and welcome
the opportunity to comment on the development of Local Economic
Partnerships.
The CBI believes strong local and regional economies
across the UK are an integral part of UK competitiveness. We have
always argued that there are a number of issues which can and
should be addressed at a sub national level but above local level.
We have never favoured any particular structure or title, but
are concerned that in the rush to abolish Regional Development
Agencies (RDAs) and elicit bids for Local Enterprise Partnerships
(LEPs), there is a risk of throwing out the baby with the bathwater.
This matters far more than the details of structures or titles.
We are not wedded to the existing RDAs network, which had weaknesses
as well as strengths, but we will judge the success of LEPs on
whether they are:
— Focusing on sustainable economic growth;
— Driving genuine workable strategic partnerships
in the pursuit of growth between business leaders and local authorities;
— Avoiding the risk of fragmentation of
effort and structures which would inhibit growth, increase "running
costs" and undermine efficient delivery; and
— Enabling the articulation and delivery
of a business-led regional growth agenda in parts of the country
where there is a genuine desire for this.
The rest of this submission sets out the issues
LEPs will need to address to deliver the outcomes set out above,
by:
— focusing on the right microeconomic growth
priorities;
— delivering the right functions at the
right level; and
— achieving the right scale and governance.
FOCUSING ON
THE RIGHT
MICROECONOMIC GROWTH
PRIORITIES
A focus on sustainable growth must be at the
heart of the new arrangements, with the detailed priorities varying
from area to area. But the overall economic context provides the
backdrop against which the new arrangements must work. The Coalition
Government has rightly made cutting the deficit its overall priority.
The first significant economic challenge that follows from this
is whether the private sector can expand far and fast enough to
offset the contraction that is about to hit the public sector.
The second is whether private sector growth will help rebalance
the economy by strengthening manufacturing.
Private sector growth will not happen without
sound, stable macroeconomic policies. But setting the right priorities
for microeconomic policies is also important and is the context
for any sub national structures. Key microeconomic priorities
to help drive private sector growth include:
— Promoting enterprise: The focus should
be on growth-orientated SMEs, with provision of advice and support
for new/growing SMEs, for example, relating to local/regional
markets, funding opportunities and availability of premises;
— Enabling manufacturers to take advantage
of the improving economic context for exports (such as sterling
depreciation, the recovery in Asian markets, and the strong productivity
position of many manufacturers stemming from productivity gains
before the recession). Securing market share in high value-added
fields is especially important, which in turn shows the importance
of innovation support;
— Maintaining UK's strong record in Foreign
Direct Investment (FDI): Ernst & Young data shows that the
number of FDI projects in the UK in 2009 almost matched the level
in 2008, despite the recession, so the UK has a strong basis on
which to build. While the promotion of the UK abroad as an investment
location must be led by national Government through agencies such
as UKTI, there is a need to provide regional/local linkage for
foreign investors who have decided to invest in UK with practical
help and support;
— Creating new low carbon energy infrastructure
to enable economic growth to be compatible with carbon reduction
targets. Such infrastructure will offer opportunities to UK engineering,
construction and manufacturing firms in the supply chain;
— Improving transport links: Recent OECD
reports have repeatedly urged the UK to increase investment in
transport to help improve the flow of goods and people into and
around the UK economy to bolster long term economic prospects.
Transport strategy requires a strong business input at all levels:
local, regional and national; and
— Improving skills levels: Ensuring secondary,
further and higher education are key partners and can respond
flexibly to local employer demand. This is vital to make sure
employers have an available skilled workforce able to take up
job opportunities from future growth. Skills funding should respond
to employer demand with training providers having the freedom
to put together responsive training packages.
These economic priorities provide a basis for
assessing the priorities for LEPs themselves, provided LEPs have
sufficient geographical scale to be able to think and act strategically.
A recent CBI survey of its members in the English regions supports
these priorities, with the four areas for possible LEP activity
getting most support being "employment and enterprise",
"transport and infrastructure", "inward investment"
and "business support".
DELIVERING THE
RIGHT FUNCTIONS
AT THE
RIGHT LEVEL
With regard to functions, the joint letter from
BIS and CLG Secretaries of State of 29 June 2010 proposed a split
approach, with some functions devolved to LEPs and others "led
nationally". For this to work successfully, some programmes
which are nationally-led must be delivered at regional/local level.
This particularly applies to activity around business support,
innovation and business investment. But programmes in these areas
need to be assessed on a case-by-case basis in terms of whether
regional/local knowledge would add value. It is also critical
that once the scope of LEPs is established, it is not allowed
to grow incrementally (as happened with RDAs), either through
mission creep from the LEP itself or by central or local government
loading additional initiatives onto LEPs. To avoid this, LEP delivery
and effectiveness should be reviewed regularly and LEPs should
commission private sector partners to ensure cost-effective delivery
of functions.
We set out below our thinking on the right level
for vital functions:
— Innovation/business support: These are
critical functions for improving economic growth. Programmes should
be led nationally by BIS, but some should be delivered at a regional
level where this would add value. The Manufacturing Advisory Service
is a good example of this, whereas the innovation vouchers scheme
could probably be run directly from BIS (given that the purpose
of the scheme is to connect firms with relevant academic institutions
and expertise regardless of where that expertise might lie);
— Inward investment: We do not believe
we need any overseas promotion other than that led by UKTI. However,
once an investor has decided to invest in the UK, UKTI should
work with either the LEPs or a pan-regional body in an iterative
process to decide on the best location for the investment and
then to "account manage" the inward investor. UKTI regional
directors could be co-located either with LEPs where they are
operating at regional scale, or with a "regional coordinating
body" where this had been established across a number of
sub regional LEPs. UKTI, through its regional directors, would
work with the LEPs or a "regional coordinating body"
to decide appropriate bodies through which its contracted services
would be delivered on the ground;
— Transport: Transport is an issue that
is relevant at every level, from local (eg bus services) to national
(eg High Speed Rail). LEPs should play a key role on local transport
issues, but the new arrangements must find a way of replicating
the ability of RDAs at their best to provide a business sense
of priorities across the regional level transport agenda, ensuring
for example that when schemes crossed local authority boundaries
(eg strategic routes to ports, rail freight facilities) they were
given due prominence;
— Planning: The revoking of Regional Spatial
Strategies (RSSs) risks creating a policy vacuum above local level.
This is because while the Government has focused on the housing
target element of RSSs, in practice they set out policies and
spatial priorities for a wide range of vital economic infrastructure
such as waste and energy. Local Development Frameworks would then
cross-refer to these RSS priorities. RSSs had flaws, but in their
place we need a regional business perspective to articulate infrastructure
priorities and influence relevant local plans and planning decisions;
and
— Funding: We recognise that LEP funding
will and should be much less than aggregate current RDA funding
given the need to cut the deficit. It is also clear that disseminating
funding for some national programmes to a regional level has hindered
economies of scale (eg running costs of regional venture capital
funds tend to be relatively high). The Regional Growth Fund however
will be a source of potential funding, and LEPs will need to focus
on leveraging in private sector funding. Accessing EU funding
is also important, and LEPs will need to be able to operate at
the scale needed to do this.
ACHIEVING THE
RIGHT SCALE
AND GOVERNANCE
In terms of scale, all boundaries are artificial
to some extent, and it is true that RDA boundaries did not necessarily
reflect natural economic geographies. However, business is concerned
that in the rush to put together LEP bids and the understandable
temptation to use existing sub regional bodies (ie local authorities
and existing sub regional business bodies/fora) as the building
blocks of such bids, there is a risk of fragmentation. A post-RDA
system of large numbers of small LEPs could lead to an over-focus
on very local issues and too much competition between LEPs. This
is borne out by our recent CBI regional member survey:
It is clear that in many regions, there is a
strong desire amongst CBI members for some form of body with a
pan-regional perspective. This could happen either through a LEP
which has a regional boundary, or "a regional coordinating
body" complementary to a small number of sub-regional LEPs.
Either model could be effective. The key issue is that where there
is a business wish for a regional element, this is met.
In terms of governance, achieving the right
level of business involvement in a LEP is crucial. In the challenging
economic climate, business people are inevitably busier than ever.
It is also generally true that those who have the experience,
strategic perspective, and skills to add most value will be the
busiest (and the most in demand. We are hearing of a number of
senior individuals within CBI member companies who are being approached
by several competing LEP bids to get involved). High-calibre business
people will be prepared to support an organisation if they are
convinced it will be truly focused on economic growth and has
the scale, scope and structure to make a genuine difference. Delivering
on the model of a 50:50 business and local government split on
the LEP board, with a business chair having the casting vote,
will be vital to boost confidence in the LEPs ability to deliver
and attract high-calibre business participation. Furthermore,
more thought should be given to real engagement with the broader
business community to ensure robust two-way communication channels
are established to help local businesses shape LEP decision-making.
23 August 2010
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