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

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.


  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".


  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.


  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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