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


Written evidence from Gatwick Diamond Initiative

EXECUTIVE SUMMARY

  1.0  The Gatwick Diamond Initiative (GDI) welcomes the opportunity to submit written evidence to the Committee on the new Local Enterprise Partnerships ("LEPs"). The GDI believes that while there is limited published information from government on the scope and functions of the new LEPs, the concept of enabling business, rather than politics and boundaries, to identify and drive priorities for local economic renewal and development has potential if approached adeptly.

  1.1  The joint letter of 29 June from the secretaries of state for Business, Innovation and Skills and Communities and Local Government invites local groups of councils and business leaders to come together to consider how to form new LEPs; with clear strategic leadership and vision; effective governance equally split between the private and public sector; and reflecting functional economic areas.

  1.2  The Gatwick Diamond Initiative is already a successful collaborative business led public/private partnership which aims to facilitate, coordinate and lead the actions necessary to create the right environment for business growth in the area surrounding Gatwick Airport—an area geographically covering three district and borough councils in East Surrey and three in North West Sussex. This initiative has grown from a response to a request from businesses to give the area an identity to support a vibrant economy which crosses traditional county boundaries and follows the natural economic geography of the area. Set up in 2003, the GDI aims to take the economic performance of the sub-region from good to excellent. The GDI is led by two business champions, Paul Gresham of KPMG, and David Butcher of FD Outsourcing, who are leading thousands of businesses which are determined that the business voice will be heard.

  1.3  Our vision is: "To become a world class internationally recognised business location achieving sustainable prosperity". That vision is shared, owned and driven by the two county councils and six district councils, two further education colleges and neighbouring universities, Gatwick Airport and many corporate, large and small businesses who have freely collaborated to identify and build consensus around the key deliverables that will enable the area to realise its vision. We have already achieved much and have a clear vision as to what we intend to achieve in the future.

  1.4  Our strategic priorities of "Inspire, Connect and Grow" tackle planning, housing, transport, infrastructure, employment, skills, enterprise, tourism and green economy issues whereby businesses advise local authorities of barriers to growth and how needs are prioritised and best met within limited budgets.

  1.5  Gatwick Diamond businesses believe that the collaborative strategic leadership already provided through the GDI in partnership with local authorities means that it is well placed to meet the requirements of a Local Enterprise Partnership as known so far.

THE GATWICK DIAMOND

  1.6  The functional economic area, at the centre of which is Gatwick Airport, geographically stretches in the north from Leatherhead and Redhill in Surrey, to Burgess Hill and Haywards Heath in West Sussex to the south. Close economic links also exist with Croydon to the north and Brighton to the south along the A23/M23 corridor.

  1.7  Two county councils and six district and borough councils are active members of the Gatwick Diamond: Surrey County Council along with Reigate and Banstead, Mole Valley and Tandridge councils and West Sussex County Council along with Crawley, Horsham, and Mid Sussex councils. Both Croydon and Brighton and Hove councils are also supporters.

  1.8  Our aspiration is that the area becomes a primary destination for high value added investment from the most advanced and successful companies, home grown and from outside the region. Achieving such status relies on the area safeguarding its many valuable assets which must be combined with new assets to offer citizens, businesses and future investors a truly unique proposition.

  2.0  The Gatwick Diamond area has a GDP of £13.3 billion with a population of 600,000 and workforce of 343,000. Eighty per cent of the workforce is in employment. The transport network is vital to the business community with regional hubs at Gatwick and Redhill. Access to international destinations from the Airport and the surface transport network provides excellent connectivity to central London (using the Gatwick Express) and beyond by rail and to the motorway networks via the M23 and M25. At the centre of the Gatwick Diamond is the UK's second largest airport with the world's busiest single use runway, transporting 33 million passengers per annum to 200 destinations in 90 countries on long and short haul flights, employing 23,000 on-site staff and generating a further 13,000 jobs.

  2.1  It is already a base for many successful businesses including HQ offices for ExxonMobil and Unilever in Leatherhead, and Thales and the European HQ for Group 4 Securicor in Crawley for example. The area is a key regional centre for the professional services sector attracting companies such as KPMG, PricewaterhouseCoopers, Deloittes, BDO Stoy Hayward, Grant Thornton, Thomas Eggar, ASB Law and a number of banks regional headquarters. The other key sectors are Advanced Manufacturing, Environmental Technologies, Health Technologies (provision and service), Tourism, Travel and Hospitality and Creative Industries.

  2.2  Major private sector investments are being made in the area. Gatwick Airport is spending nearly £1 billion of capital improvements; Thales, the French-owned aviation and defence conglomerate is midway through the implementation of its Project Sapphire, which consolidates activities from a number of locations around the UK into new facilities in Manor Royal, Crawley. And Ceres Power is developing its new innovative cell technology for domestic use taking its first step towards full scale production by securing a 50,000 sq. ft. manufacturing base in Horsham.

  2.3  Globalisation and our world class vision demand better performance and benchmarking against high performing international business locations reveals much more work is needed to safeguard the area's economic vibrancy and way of life. Relative to other European and North American airport focused international business locations the area is mid ranking or lower.

  2.4  There is a deficit in knowledge economy related assets and levels of investment and there is a need to improve the education, learning and skills profile of the area to meet future business needs. In an area where there is no university but two excellent further education colleges, a university centre is required to provide significantly improved levels of higher education aspiration and participation and responding to employer engagement needs and opportunities.

  2.5  The area's towns do not have the identity and quality of place that will attract and retain the talented people needed to secure high added value growth. The area needs to improve its infrastructure to grow sustainably and connect the economy to global value chains.

  2.6  Gatwick Rail Station is already the busiest airport rail station in the UK with over 12 million users in 2009. However, the GDI is currently campaigning to government ministers that the Gatwick Express remains a dedicated and non-stop premier service for international and local business travellers, commuters and tourists. In addition, funding had already been agreed in a £53 million private/public sector initiative to upgrade the very tired and inefficient track, platform and station at Gatwick. This funding is now under threat, which contradicts government's stated aims of increased public access to the airport, especially with the impending traffic implications from the Olympic and Paralympic Games in 2012. Continued investment will be a major factor for businesses to invest in the Gatwick Diamond. While private sector investment will continue to be leveraged, it is essential that the area secures adequate public sector investment too, particularly in respect of the transport infrastructure.

  2.7  All of which we must achieve with minimal impact on our environment in an area which has a significant part designated as an Area of Outstanding Natural Beauty.

  2.8  The Gatwick Diamond is an excellent example of a public/private sector partnership providing strategic leadership to achieve its vision in a time of minimal funding and we would commend this model to the Select Committee for consideration.

RESPONSE TO THE NEW LOCAL ENTERPRISE PARTNERSHIP CONCEPT

  2.9  The letter of 29 June from the secretaries of state and the parliamentary select committee internet pages suggest some topics to which we respond now with our knowledge and experience.

  3.0  Role—"LEPs will wish to provide strategic leadership setting out local economic priorities". In 2008 the Gatwick Diamond Initiative developed a "Futures Plan" which provides strategic leadership and direction following a four step, consultative and collaborative process:

    3.1 First, an assessment of the current economic situation in the areas was undertaken. The key economic, social and infrastructure attributes were reviewed and benchmarked against high performing business locations, mainly airport based.

    3.2 A mapping exercise was completed with key stakeholders using "themed meetings" to assess planning, transport, business support and education and skills issues, opportunities and challenges.

    3.3 Ideas and concepts for how the vision could be realised were discussed through workshops with the stakeholder businesses, local authority CEOs and leaders.

    3.4 Finally, the partners worked together to define its overall direction, strategic initiatives and the actions to be taken to deliver the Gatwick Diamond vision. The local authorities, businesses and FE colleges then committed to working together across county boundaries to achieve a world class vision. The Futures Plan sets out a route map to develop a modern knowledge economy based on smart working and sustainable growth to improve global competitiveness.

    3.5 The GDI would strongly recommend that full consultation with large and small businesses takes place as early as possible in the process of setting up a new LEP. Over the years there have been too many public/sector partnerships which have failed because of lack of evidence from the private sector and lack of leadership from the public sector. There is an inherent conflict of interest amongst many council members who want to restrict business growth to satisfy their constituents not realising that with business growth comes improved quality of place to live, work and do business.

    3.6 The GDI would also recommend that the businesses themselves have a principal role to play in strategic leadership. Local Authorities need to be guided and led by businesses and the partnership needs to be continually tested for business support.

    3.7 Strategic Leadership is not about inviting businesses to six monthly events to consult. It is all about local authority executives and members regularly seen to be out in the business community talking on a one to one basis to small business owners as well as CEOs of corporations. Businesses far prefer this type of interaction in place of group discussion events which are perceived as talk shops. Business needs to identify the barriers to growth, lead the discussions and drive the agenda.

  4.0  Governance—"an equal representation of business and civic leaders …with a prominent business chair." The governance of the Gatwick Diamond is clearly defined with agreed terms of reference and is recommended to the Select Committee as an effective model:

    4.1 Chaired by a senior partner at KPMG, the business-led Overview Forum is made up of large and small businesses, Gatwick Airport, colleges, Local Authority leaders and their CEOs. It meets every six months and reviews progress against the actions from the Futures Plan.

    4.2 The Management Group, chaired by a local businessman, and populated by business and council representatives meets every two months to oversee the operational management and coordination of activities.

  There are also four thematic workgroups, the membership of which is 50% businesses:

    4.3 Chaired by a neighbouring university senior executive, the Inspire Group brings together key agencies and businesses to develop knowledge assets and encourage links to universities and colleges, to raise educational aspirations creating a talented workforce driving innovation and enterprise. Its priority is the visionary development of a university centre based in Crawley. A bid in 2009 to HEFCE for £2.6 million funding to provide infrastructure for 250 students was one of only six successful nationally but public sector funding was pulled at the last minute. The plan is now to expand current HE provision in a "virtual" university centre environment at the two FE colleges in Crawley and Redhill and to continue to seek foreign and private sector funding for a new university centre on a medium to long term basis.

    4.4 A District Council CEO chairs the Grow Group, which is primarily concerned with creating the conditions to support and encourage appropriate physical development that will meet the needs of existing and future employers and communities. Its members are both private sector developers and planning authorities united around a common set of goals, capitalising on the identification of Redhill as a New Growth Point. The six local planning authorities have aligned their local development frameworks for the first time. Following a recent stakeholder and business workshop, the councils are working towards the launch of an integrated strategy which will cover all relevant land use, infrastructure and economic development issues allowing proper consideration of potential strategic business locations This will form the statutory basis for land use planning within the Gatwick Diamond and all local development frameworks will have to reflect its provisions. The Grow Group is also responsible for developing a more comprehensive approach to energy conservation and alternative supply opportunities.

    4.5 Chaired by a county council executive, the Connect Group's role of maintaining and improving connectivity, both transport and broadband, is of critical importance to achieving the ambition to be a globally competitive economy. Actions include progressing and ensuring the delivery of planned major transport projects, upgrading and transforming Gatwick Airport Rail Station; addressing east/west public transport access to Gatwick and Redhill following the introduction of the FastWay bus rapid transit network linking Crawley with Gatwick Airport and Horley; further successful implementation of the "Easit" voluntary travel planning pilot with large employers and improved transport hubs at Three Bridges, Crawley and Redhill; ensuring that Gatwick Airport fulfils its potential as a single runway two terminal airport linking the Gatwick to increasingly more key business destinations worldwide; and working with the private sector supporting the development of the broadband fibre infrastructure to provide super-fast high speed connectivity both in the commercial centres and rurally.

    4.6 The Marketing and Communications Group's role is to build confidence in the local business community to encourage inward investment and to develop a position of influence with local, regional and national government and public agencies. Chaired by a marketing specialist from the private sector, this group has developed a stakeholder newsletter, delivered a monthly PR programme, sponsored the Gatwick Diamond Business Awards, and a Meet the Buyer event, and is currently organising an inward trade visit from 10 business representatives from Atlanta, USA. This trade visit is unusual in that local companies will be paying for the whole trip, including flights, rooms, dinner and transport to businesses; and local authorities have provided human resource to assist. It is an excellent example of leveraging private sector funding to benefit the area. It is hoped to continue this formula with further inward investment trade visits from the current and future new route destinations offered by Gatwick Airport.

    4.7 The GDI is neither a membership nor a political partnership and therefore at all times acts impartially and only for a positive economic future of the business and wider community. Neither is it a membership partnership which would compete with the important roles played by local membership organisations such as local business forums, Chambers of Commerce, and the Institute of Directors. Indeed these membership organisations are key partners in the Gatwick Diamond. The GDI would recommend that party politics play no part in the new LEPs.

  5.0  Size—reflecting functional economic areas. The Gatwick Diamond Initiative is an excellent example of a "perfectly formed" public private sector partnership of six district and borough councils, which sits within two county council areas, and recognises the economic relationship with two neighbouring councils.

    5.1 It is a clear economic area with predominant sectors, with Gatwick Airport at its heart. Considerable evidence regarding transport movements and modes, education choices, community and business hubs has been collected which clearly identifies the geographic parameters of the area, notwithstanding the critical relationships with both Surrey and West Sussex economies and Croydon and Brighton. Crawley alone, on 2% of land area, provides 37% of the business rates for West Sussex for example. The boundaries of the Gatwick Diamond while clearly defined should also be regarded as global with the airport at its centre accessing the world for business and tourism.

    5.2 The Gatwick Diamond brand is now well recognised after only seven years of use by the business community. Punching Gatwick Diamond into Google currently comes up with 155,000 results. A decision was made early on that the logo would be offered free of charge to any business for use in its marketing and recruitment. This open and low cost marketing policy is a good example of how to promote an area for inward investment with little money because businesses own the brand and they promote it to their benefit. Examples are as diverse as the Gatwick Diamond Rotary Club and Gatwick Diamond Investigations.

    5.3 The GDI does not have a large back office which uses up funding. Currently a part time Director is the sole employee making use of the resources of the public and private sector partners to effect change. The GDI recommends to the Select Committee that back office costs are kept to a minimum in new LEPs. When collaboration and partnership is truly effective, as is the case in the Gatwick Diamond, the councils already have all the back office resource and specialist expertise required for housing, transport, infrastructure and planning.

    5.4 The preference of businesses in the area is to maintain the Gatwick Diamond brand which is promoting and growing the economic area and has created a strong identity. However, it is recognised that in the minds of the government a Local Enterprise Partnership may prove to be a larger economic area than the Gatwick Diamond. Should that be the case we would emphasise that the Gatwick Diamond Initiative has always worked hand in hand with and been supported by both Surrey and West Sussex county councils. This is a relationship we would want to continue whatever optimum size a LEP should become and whatever part the Gatwick Diamond plays within it. However, it is critical that the Gatwick Diamond remains recognised as a functional economic area and is not disadvantaged by being forced to be part of other economic areas which do not easily fit with this airport led economy.

  6.0  The Regional Growth Fund:

    6.1 Are there benefits from allocating the different elements of the fund in different ways? The GDI firmly believes that it would be more appropriate to the economic geographies of areas to allocate the fund in different ways. Decisions must be made at a local level meeting local needs. In the Gatwick Diamond funding from a Regional Growth Fund would be used to match fund with the private sector to achieve the stated goals which may very well not be the same goals as another region. Flexibility will be key and should be granted.

    6.2 What type of activities should the fund support? The GDI believes that funding should be used to encourage private sector enterprise to support joint projects which deliver the growth for which they are looking. For the Gatwick Diamond, the upgrade of the Gatwick Airport Rail station is an excellent case in point, as are the many stalled and much needed town centre developments as well as the formation of a new university centre of excellence which would provide some of the higher education aspirations needed by the young in the area.

    6.3 Are the criteria right for assessing bids? The GDI agrees with the bid criteria being appropriate. However, what should be at the top of any criteria is the actual impact of funding provided. The impact has to be significant which will often mean that it should not be time limited. Impact could include: how many more private sector jobs provided? How many more people educated to Level 4? How many more journeys made by public transport? How many more businesses started up in innovative green technologies? How many more employees living locally and not commuting?

    6.4 Do you think we should operate a two stage bidding process? The GDI concur that a two stage bidding process could be appropriate. Government should recognise, however, that where projects are not started until 2013 in the second stage that it could be a five or even 10 year window before any impact is realised. Previous government regimes have favoured short term "stop start" funding. This has been proven to be ineffective and intensely frustrating for the private sector who are used to investing for the long term.

    6.5 Should a Regional Growth Fund become a long term means of funding activity that promotes growth? There are many partnerships which have failed because they relied too heavily on public sector funding and could never be sustainable. The private sector will invest when they see the public sector investing but they will quickly back off when they see funding which is clearly not going to benefit their businesses. This is not an unreasonable stance when businesses have private shareholders to satisfy.

  7.0  What should be the functions of the LEPs and how will value for money be ensured? Based on the Gatwick Diamond Initiative model, the functions of the new LEPs should be identifying, influencing and lobbying by the business community and sharing in the decision making with the councils to allocate funding to the projects most appropriate for business needs ensuring economic growth. The new LEP should co-ordinate the efforts of all the private sector and public sector stakeholders to maximise the effect of their existing budgets benefitting the local economy. Businesses should identify those barriers to growth where limited public sector investment will unlock significant additional investment from the private sector. An example of this for the Gatwick Diamond is the matched funding from Gatwick Airport to develop the rail station.

  However, it is proposed that once the business led decisions have been made, the actual implementation of funding in those infrastructure, planning, housing and transport projects should remain with the local authorities. Back office costs in the LEP itself should be kept at a minimum further ensuring value for money. Big offices and high head counts are absolutely unnecessary when the shared public/private sector LEP role should be largely voluntarily led. Businesses are prepared to invest time and energy in decision making which will help grow their economy, as long as they feel that real benefit is being achieved as a result of their efforts, that bureaucracy and process does not get in the way of common sense and that the public sector is making a corresponding financial investment.

  8.0  What will be the funding arrangements for the Regional growth fund under the LEP system? Funding arrangements need to be kept as simple and transparent as possible. The local authorities should be awarded the funding and allocate sufficient, and as agreed with the business community, to the LEPs to enable a simple structure of governance. This will provide the accountability necessary to influence decision making according to business needs. New LEPs should not be set up with huge financial back offices when the rigour of process can be provided by the local authorities. Otherwise there is a risk of duplicating back office functions and creating a chain of funding where more and more "sticks to the sides" as it flows through.

  9.0  How will coordination of roles between LEPs be ensured? This could be in a similar way to the current Local Government Association coordination of roles. In addition, a neighbouring LEP should ensure that a representative sits on adjacent LEPs to share knowledge, best practice and minimise duplication. What the GDI does not consider useful is another layer of bureaucracy between economic needs and funding.

  10.0  What arrangements will there be for coordinating regional economic strategy? Again this could be along the lines of the Local Government Association on a regional basis as currently. There is no need for another additional structure as seen by regional partnership boards. Whatever the structure, businesses from each of the LEPs need to sit on such regional coordinating structures to ensure the business voice.

  11.0  What will be the structure and accountability of LEPs? The Gatwick Diamond Initiative would recommend that the LEP is a limited by guarantee company. Its articles must ensure that any public funding obtained will return to the Local Authorities and/or government in the case of closure. As earlier explained in section 4.0, the successful governance structure adopted by the Gatwick Diamond is a model that could be followed elsewhere. Each LEP should be accountable straight to the Department of Business Innovation and Skills providing a good balance with the Local Authorities reporting to the Department of Communities and Local Government

  12.0  What should be the legislative framework and timetable for converting RDA's into LEPs, the transitional arrangements and liability of RDA's? The timetable needs to be quick for both legislation and for the transition, although appropriate time needs to be spent designing the new LEPs. The current uncertainty is having a detrimental effect which will only get worse until the position is clarified and a long delay will discourage business interest. Implementation should be achieved as rapidly as possible. A possible idea would be to set up a group at BIS with experienced representatives from successful public/private sector partnerships seconded in to design a model.

  13.0  How will funds be procured from outside bodies under the new arrangements? LEPs should be able to bid for funding from the EU, and other sources independently and in collaboration with other LEPs depending on the project. Those funding bids needs to be clearly appropriate to the area's objectives and business needs because LEPS should not become 100% fund seekers in their own rights. This drives inappropriate behaviour by not for profit organisations trying to ensure sustainability. LEPs must be strong enough to survive without the expectation of public sector funding "bailing them out". Hence the importance of keeping back office costs minimal.

CONCLUSION

  14.0  The Gatwick Diamond Initiative is excited about the prospect of the new LEPs but given the scale of ambition in the proposals and the vacuum that currently exists in public sector activity, it is critical that the government comes to decisions and provides more information publicly and urgently. Businesses need and want to understand the government's direction regarding economic growth as quickly as possible because investment decisions for them may take them out of the UK altogether.

13 August 2010





 
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Prepared 9 December 2010