Written evidence from SEEDA
(i) The South East of England is the engine
room of the UK's economy, making a net contribution to the Exchequer,
some £18 billion in 2006-07. This is critical to supporting
public spending and investment across the UK.
(ii) However the South East's global competitiveness
is not guaranteed. Tackling the twin challenges of driving economic
growth and addressing economic vulnerabilities will require public
investment and strong national agencies/offers eg UK Trade and
Investment linked effectively to excellent LEPs.
(iii) SEEDA has played a key role joining up the
many partners and integrating interventions critical to business,
economic and employment growth, set in the context of the Regional
Economic Strategy. SEEDA is committed to working with local and
national partners to ensure a smooth transition to new arrangements.
Based on the experience of delivering economic development in
the South East over the last 11 years, this submission identifies
key factors that SEEDA believes must be tackled in moving forward.
1. SEEDA is pleased to be invited by the BIS
Select Committee to submit evidence to its inquiry. The South
East of England is the "engine room" of the UK's economy,
contributing over 15% of national GDP, some £182 billion.
It is the UK's second largest manufacturing region by value, marginally
behind the North West, and has the UK's largest high technology
manufacturing sector, employing more than 150,000 people. The
South East contributes some £18 billion
more to the Treasury than is spent on public services in the area.
London and the East of England are the only other net contributors
to the Exchequer. This is redistributed to support public spending
and investment in other areas of the country. The UK's overall
financial welfare and competitiveness is inextricably linked with
the South East's continued success.
2. The South East is much more than simply a
commuter suburb of London. Although part of the London global
city region, the South East is a polycentric and diverse region
of over eight million people; the globally-connected economic
strengths of the Thames Valley contrast sharply with the economic
challenges and deprivation in many poorly-accessibly coastal towns.
3. Significant market failures affect both the
better and lesser performing economies of the South East and affect
global competitiveness. These include an over-stretched transport
network and lack of affordable housing for workers. Equally, public
investment and intervention is often required to catalyse opportunities
for private sector innovation and growth. For example, the growth
and success of the Thames Valley as a major concentration of high
technology manufacturing and international headquarters functions
has been driven by Government policy and funding decisions surrounding
the development of London Heathrow airport and defence research
facilities. However businesses are increasingly concerned that
the area's future success is threatened by problems such as transport
congestion and lack of access to high speed broadband.
4. Furthermore, ensuring the environmental sustainability
of the South East's success is a key issuealthough improving,
the South East's ecological footprint is still too large. In the
move to a national low carbon economy, the scale of the South
East economy offers a key challenge and opportunity, but one which
will require significant investment and joint working nationally
5. The South East economy competes globally
rather than nationally. There is already evidence that although
the South East's absolute performance remains good, its global
ranking is slipping due largely to increased competition from
emerging economies. The latest World Knowledge Competitiveness
shows that after improving in the global ranking table from 77th
place in 2003 to 55th in 2005, the South East slipped to 74th
in 2008. Investment in the South East will encourage businesses
to locate in the UK rather than Europe, the US or the Far Eastfailure
to invest will drive businesses overseas rather than to another
part of the UK.
6. The South East has a key part to play in
continuing to build recovery from recession. Improvement in the
economies of other parts of the country must not be at the expense
of declining investment and performance in the South East economy
if the UK economy is to revive. Driving economic growth and addressing
economic vulnerabilities will be critical to achieve this. Major
global businesses say that that difficulties posed by congestion,
resource and utilities overload, expensive housing and skills
shortages mean that their continued investment in the South East
and therefore the UK is already in doubt.
7. The South East economy's inherent strength
means that it has the potential to recover from the recent economic
crisis faster and stronger than any other UK region. However this
is not guaranteed and requires sustained public investment and
effective delivery arrangements.
8. Businesses say that in a diverse region with
74 local authorities operating in a predominantly two-tier county
and district system, SEEDA's ability to facilitate coordinated
action between the private and public sectors, locally and nationally,
set in the context of the Regional Economic Strategy, has been
9. The changed circumstances of in-year budget
cuts and transition to closure mean that SEEDA has adopted the
following four priorities:
Delivering for the region through the
£80 million Single Pot budget and nearly £40 million
of other programme funding during 2010-11, as well as through
advice, interventions and deal-making activities.
Contributing to shaping the economic
development model for the future, through advice sought by national
and local partners and through responding to consultations.
Transitioning those functions which are
valuable to the South East and are valued by partners, both local
Carrying out an orderly transition to
closure, including through new activities to ensure legacy of
knowledge and expertise, as well as delivery, is not lost.
10. With the forthcoming abolition of RDAs,
the South East's global economic competitiveness will be dependent
on LEPs and national agencies working effectively together to
tackle in particular the following key issues:
(i) Innovation and growth.
(ii) Global competition for foreign direct investment.
(iii) Transport and other key business infrastructure.
(i) Innovation and growth
11. The South East has world class clusters
and opportunities for innovation and growth such as advanced engineering,
aerospace and healthcare. However these opportunities often exist
in emerging sectors such as environmental technologies, requiring
joined-up public sector support to harness their potential. The
alignment between RDAs and the Technology Strategy Board has created
vital opportunities for regional centres of excellence to contribute
to national programmes. LEPs and national agencies will need to
work closely to seize global, national and local opportunities.
12. Maximising global opportunities will require
LEPs and national bodies to have strong intelligence of the global
economy and the unique assets that exist within the South East,
as well as strong private sector engagement. For example, having
identified the potential global opportunities of the space sector
and an existing cluster of activity in the South East, SEEDA has
brokered agreement from a cross-industry group to establish the
International Space Innovation Centre, a major global centre of
space research and expertise, at Harwell in South Oxfordshire.
SEEDA's work with UK Trade and Investment is maximising the Centre's
potential to attract high value international companies to the
13. Understanding market opportunities and how
the strengths of different localities could add greater value
working together is also critical for LEPs to maximise opportunities
for collaborative innovation and accessing funding opportunities.
For example SEEDA has established a sector consortium for healthcare
which identified the potential for developing telecare products
and services for global markets. SEEDA's experience working with
the national Technology Strategy Board helped development of a
successful bid for an International Centre of Excellence, based
in three complementary specialist centres across the South East
involving the public and private sectors. SEEDA has also funded
Innovation and Growth Teams to bring together all those supporting
innovative and high growth businesses. This approach has helped
local businesses raise £26 million in Oxfordshire in the
last four months alone.
14. Innovation can also play a critical role
in addressing economic challenges, but strong intelligence and
partnership working is required between the public and private
sectors. For example, SEEDA has worked with local and national
partners on the Isle of Wight to maximise the opportunities of
the high-growth composites sector and address the deep-rooted
economic challenges facing the island. Using its understanding
of national and local government ambitions and market opportunities
relating to the low-carbon economy, SEEDA worked with GKN Aerospace,
as part of the National Composites Network, to establish a highly
successful composites research centre. This created and safeguarded
over 300 jobs on the island. This is now encouraging other global
companies to invest, for example the Vestas Technology Centre,
leading to an estimated 400 high-tech jobs over the next two years,
which might otherwise have gone overseas.
(ii) Global competition for foreign direct investment
15. The South East is competing for businesses
which may otherwise locate elsewhere in the world, not elsewhere
in the UK. High value foreign direct investment is strongly linked
with economic performance of top global regions. It gives local
companies access to markets, innovation, capital, technology and
16. SEEDA has incorporated support for Foreign
Direct Investment as part of part of an effective economic development
strategy and developed strong relationships with UKTI, international
and local partners to implement it. It will be critical that LEPs
have a strong relationship with UKTI in the future. First quarter
2010 results shows that SEEDA's targeted and integrated approach
is working, achieving 20 new inward investments and more than
250 new jobs. 50% of investments are high value and 90% are knowledge
17. For example SEEDA worked with Quintiles,
a leading international clinical research provider, over the last
year to secure a 500 job European HQ in the UK, which might otherwise
have gone abroad. The company was considering locations in other
EU member states as their leases on three sites in Bracknell were
shortly coming to an end. SEEDA, in partnership with UKTI and
local partners in Thames Valley, was able to use its specialist
expertise to facilitate, smooth and speed the choice of a new
location in the Thames Valley.
(iii) Transport and other key business infrastructure
18. Future investment in infrastructure must
address both the challenges of economic growth and the need to
reduce our ecological footprint. Investment choices for transport
and other infrastructure must be aligned with investment decisions
made in economic development, housing, regeneration and skills.
19. Strategic transport priorities across the
South East were clearly defined by local authorities and other
partners working together through the South East Transport Board.
Prioritisation of investment is critical in a period of constrained
public funding. Local authorities in the South East have an established
track record of working together on a collective basis to agree
investment priorities. A key decision was to use two years (£339
million) of regional transport funds to prioritise the building
of the Hindhead tunnel, to address the last remaining bottleneck
on the A3, a key arterial route for the economy. This support
allowed a start to be made building the scheme after decades of
debate. As set out in its Comprehensive Spending Review submission,
South East England Councils recognises the need to review the
investment priorities for the medium/longer term and is ready
to undertake that difficult task as part of the Spending Review
20. It will be important that LEPs work together
at a critical scale across local administrative boundaries to
address business needs and opportunities. For example SEEDA has
been working with partners including Advantage West Midlands to
upgrade the rail gauge between Southampton and the West Midlands,
to allow for larger containers to be carried by rail rather than
road. This secures and enhances the efficiency, economic performance
and global competitiveness for Southampton, as well as for the
whole South East and the Midlands. This project covers a wide
geographic area and effective coordination and leadership has
been achieved through having a core partnership between SEEDA,
the port industry and Network Rail. SEEDA brokered delivery of
this scheme, developing an innovative funding package together
with the key partners in a public-private partnership.
21. LEPs and other public sector funding partners
will need to be capable of working together to provide innovative
ways to fund critical infrastructure. A key problem is where the
private sector will pay for infrastructure, but not at the critical
time when it is needed to unlock development. In response to this
a Regional Infrastructure Fund was developed by the South East
and South West. The public sector makes the initial investment,
with that investment then recovered at a later stage through the
planning system, and the investment can then be recycled to deliver
further infrastructure. Scale is a critical issue to enable effective
gathering and "recycling" of fundsSEEDA is working
with partners on the key issue of how this important fund will
be managed in the future once the RDA is abolished.
22. Although characterised by a generally buoyant
globally-competitive economy, the South East also has significant
areas of deprivation that need support if they are to deliver
economic growth and social improvements for local residents. 500,000
people live in areas that rank within the 20% most deprived areas
of the country.
Much deprivation is concentrated in coastal areas, and the intensity
of the issues makes them difficult for local partners to tackle
alone. As highlighted in the South East England Councils' submission
to the Comprehensive Spending Review,
excluding South East businesses from National Insurance discounts
ignores the need to encourage new job creation in areas of the
South East that desperately need incentives to support economically-led
23. To tackle deprivation, LEPs and other partners
will need to drive an integrated approach to economic development,
aligning investment in economic opportunities over a sustained
period of time. For example in 2002 SEEDA brought national, regional
and local partners together to form a taskforce to tackle the
failing coastal economy in Hastings and Bexhill, the main aim
being to enable long-term private sector investment. A focused
long-term action plan secured Government first-phase investment
of £57 million. Between 2001 and 2009 Hasting and Bexhill
average earnings have increased from 68% to 82% of the South East
average, business starts now exceed closures, and 1,000 jobs have
been created. The tipping point is within reach now that private
sector funding is being drawn in, and local capacity has been
built which can now be transferred to others, but this has taken
many years of concerted effort and still needs reinforcement to
24. Similarly SEEDA provided the substantial
capacity needed to address the large scale economic decline after
the colliery closures in East Kent and the dockyards at Chatham.
SEEDA led a cross-agency programme to lever funding through the
National Coalfields Programme, generating vital alternative employment
opportunities for the local workforce, providing the capacity
that local authorities in the area lacked. At Chatham Maritime
a multi-agency approach with private sector partners has created
new jobs and homes as well as the Universities at Medway campus
in the historic navy buildings.
25. Drawing from the experience set out above,
SEEDA makes the following comments on the Committee's specific
lines of inquiry.
26. SEEDA has worked closely with businesses,
local authorities and other partners for 11 years to address the
twin challenges of supporting economic success and addressing
vulnerabilities. The Government has announced that RDAs will close
by Spring 2012, although the exact timing is not yet clear. In
the future, strong LEPs, working in tandem with effective national
agencies (such as UK Trade and Investment and the Technology Strategy
Board), will be critical to addressing these issues.
27. In summary, reflecting the collective RDA response,
SEEDA believes the following characteristics will be critical
to the success of LEPs and help ensure value for money:
Business focus, and driven by pro-active
coalition of businesses and local authorities.
Coordination, integration and co-investment
with local, sub-national and national partners, with delivery
built around a shared vision.
Critical mass, with a scale of resources
and scope of remit to influence and lever other partners, in particular
Use of economic evidence and intelligence
to direct strategy and delivery for greatest impact.
Operational flexibility, including agility
to respond to urgent business needs or economic shocks eg recession/major
redundancies or natural disasters.
Informing development and helping delivery
of Government programmes.
28. To ensure conditions are right for investment
and growth, LEPs will need to prioritise and tackle a range of
issues relating to businesses, people and places. As set out in
the Ministers' letter,
these include physical infrastructure, employment and enterprise
(which businesses tell us must include skills and supply chain
development) and the transition to the low carbon economy. The
Government's commitment to localism means that it will, of course,
be for LEPs themselves to identify the specific issues relevant
in their area, but delivery will require cross-agency working.
29. Ministers have indicated that some RDA activities,
such as innovation and inward investment, will be best led nationally
in the future. Businesses are concerned to understand how LEPs
will also be engaged in these activities, working closely with
national lead bodies and other LEPs where appropriate. This is
important not only to maximise opportunities based on intrinsic
local assets such as industrial strengths and research excellence,
to attract and provide aftercare for inward investors and to provide
support for and reach into SMEs and supply chains, but also to
help align the work of different national bodies at the local
THE LEP SYSTEM
30. We know that businesses support the Regional
Growth Fund's two proposed objectives of encouraging private sector
growth, and the transition to a less public-sector dependent economy.
The Fund will enable public-private partnerships to bring forward
integrated packages to address economic needs.
31. The South East's strong economic base offers
opportunities for high returns on public investment, which will
strengthen the UK economy as a whole. Independent evaluation
of SEEDA's work has shown business development and competitiveness
interventions have achieved very high impacts on economic growth,
especially sector support (£23 GVA per £1 spent), trade
interventions (£9 GVA per £1 spent) and foreign direct
investment (£9 GVA per £1 spent). Interventions of this
sort have enabled the private sector and national partners to
develop major centres of excellence which are stimulating further
private sector investment, including the International Space Innovation
Centre and the International Centre for Excellence in Telecare.
Therefore it is essential for the future competitiveness of the
South East and the UK that the Regional Growth Fund explicitly
supports further investment of this type.
32. The coastal towns of the South East, however,
under-perform in relation to England as well as South East averages.
Many of the South East's disadvantaged areas rely heavily on the
public sector. In parts of the south coast around 40% of jobs
are in education, heath and public administration,
and across the South East some 40% of job losses during April
to June 2010 were in the public sector.
Business start-ups are also lower than national average on the
The combination of potential high exposure to public sector cuts,
high unemployment and low forecasted private sector employment
means that many areas in the South East that could be badly affected
by public sector cuts are also those where there will be limited
private sector job opportunities. They too will need access to
the Regional Growth Fund if they are to transform this dependency.
33. The consultation document proposes that
programmes should be £1 million or greater over two years.
Programmes of this scale take time to develop, and require considerable
leadership, expertise and, often, pro-active long-term partnership
working. Therefore for spend to be achieved in 2011-13 the Fund
must be accessible to programmes which are already well advanced
in their planning and, critically, have the support of business
34. LEPs should not be solely dependent on public
funding so will need to develop innovative new funding models,
such as the Regional Infrastructure Fund (see para 21), to ensure
timely delivery of projects and maximise the impact of limited
public and private sector funding.
35. The Government has revoked
Regional Strategies. We understand it will be for local authorities,
LEPs and other partners to determine where joint working on strategy
or delivery may be beneficial. However, given the scale of issues
and opportunities to address, businesses are concerned about the
potential lack of coordination between different LEPs, particularly
in the absence of an overall economic vision.
36. Although the requirement to work together
through Leaders' Boards has been removed by the Government, SEEDA
is supportive of the work of South East England Councils, and
is exploring with them and South East Strategic Leaders and SEBUS,
the business forum, how LEPs might choose to work together on
key issues of cross-boundary significance.
37. "Functional" or "natural"
economic areas should be taken into account when developing LEPs.
Across the greater South East there are a number of nested economic
areas which cross over the South East's 74 local authorities.
These include the London global-city economic area, as well as
smaller economic areas within it. LEPs will therefore need to
work together on key issues that cross boundaries; indeed in some
instances it may be appropriate for parts of LEPs to overlap if
there are different, but complementary, issues at their core.
The Government must also ensure London's different governance
arrangements do not become a barrier to effective joint working
between LEPs and the Mayor and/or London boroughs.
38. Businesses want real influence and an ability
to directly influence policy and funding decisions. To offer this,
LEPs will need ability to influence, and will need to manage and
be accountable for funds. This may require them to be established
as legal entities in their own right.
39. Business involvement is critical in driving LEPs
forward to ensure they keep a focus on real business needs and
delivering results. Businesses support Ministers' expectations
that LEPs should have a business chair. The clarity of the LEP's
business-focus will be fundamental to drawing businesses into
its work and retaining their support.
40. The Government is committed to abolishing
RDAs by Spring 2012. Given the physical scale and diversity of
the South East, and the number of local authorities, it is likely
there will be a significant number of LEPs in the South East,
operating at a very different geographic scale to SEEDA.
41. SEEDA is committed to carrying out an orderly
transition to closure in collaboration with partners and stakeholders,
so as to transfer those projects and programmes which partners
and/or Government wish to take forward after SEEDA's closure.
SEEDA also wants to ensure the best use is made of intellectual
and physical assets in moving forward to new arrangements.
42. SEEDA welcomes the joint arrangements with
Government through the BIS-RDA Transition Board. However further
significant progress on transition is dependent upon Government's
final agreement on what LEPs will established and clarity from
Government about which RDA functions will move to a local or national
level. Clarity from Government on these issues is needed as soon
as possible if risks relating to transition, in particular the
loss of momentum for business-focused activities, financial/contractual
impacts on partners, and loss of specialist expertise and relationships,
are to be minimised.
43. SEEDA is working with senior business representatives
and local authority Leaders to agree key actions to help transition.
SEEDA also has robust internal management processes to plan for
transition and mitigate against risk. This includes looking at
different transition options so they are ready to progress as
soon as there is clarity. SEEDA is contributing to work led by
BIS to address transition arrangements for assets, liabilities
EU FUNDING) UNDER
44. Businesses say that it will be critically
important for LEPs to be strong public-private sector partnerships
that are able to draw in significant public and private sector
finance. It will be important that capacity to maximise access
to European funding, including European Investment Bank, is not
lost in transition. It is clear that other parts of the European
Union will continue to operate on a regional basis, and LEPs will
need to look carefully at how to ensure they can engage at an
appropriate spatial scale.
45. LEPs will need to consider the issue of
aggregation of projects to achieve the critical mass necessary
to access some loans from the European Investment Bank. For example,
SEEDA took the lead on coordination of work by local authorities
on energy efficiency retrofitting because of the need to find
enough projects in the South East to reach the Bank's minimum
threshold of 100 million total project size.
46. A critical issue is that of business access
to finance and how this may operate in the future. Businesses
have valued how SEEDA has brought its expertise and critical mass
to this issue, working with the South East's Business Link operators
to set up Finance South East in 2002 to address market failure
in the availability of finance for growth companies, notably around
the risk capital funding gap up to £2 million. The primary
vehicle to deliver this is the South East Funding Escalator, a
series of funds managed by Finance South East and financed by
SEEDA and other public and private sector partners. Since the
launch of its first fund in 2004, funding of around £27 million
has been committed to more than 300 companies, resulting in a
further £100 million of private sector leveraged funding.
Finance South East has also developed innovative funding solutions,
including funds supporting the low carbon agenda such as the European
Regional Development Fund's South East Sustainability Loan Fund.
SEEDA is working with partners to understand how the important
work of Finance South East will fit with the Government's move
to place Capital for Enterprise Limited at the heart of publicly
backed funds nationally.
47. Given the South East's fundamental role
in driving the global competitiveness of the UK, strong LEPs working
in tandem with effective national agencies will be fundamental
to addressing the twin challenges of driving economic growth and
addressing economic vulnerabilities. SEEDA has demonstrated how
a well targeted and coordinated use of money and human resources
can make a real difference. SEEDA is committed to helping ensure
a smooth transition to new arrangements, to help ensure the best
economic outcomes not only for businesses and residents in the
South East, but also the UK as a whole.
9 ONS, 2008. Back
2006-07, latest available data (Oxford Economics). While some
of this contribution represents the link with London, almost £15
billion was directly from employment within the South East. Back
Centre for International Competitiveness, 2010. Back
Index of Multiple Deprivation, ONS, 2007. Back
Letter from Rt Hon Dr Vince Cable MP and Rt Hon Eric Pickles MP
to local authority Leaders and business leaders, 29 June 2010. Back
Impact of RDA Spending, Department for Business, Enterprise and
Regulatory Reform 2009. Back
ONS Annual Population Survey 2009. Back
HR1 redundancy notification form data via BIS/JobCentre Plus. Back
In the coastal South East during 2007 there were fewer than three
start-ups per 1,000 population, compared to the average rate across
England of 3.5 and a South East average of 3.9. Source: ONS VAT
Registrations/Deregistrations 2007. Back
Experian & Cambridge Econometrics forecasts, 2010. Back
Letter from Steve Quartermain, Chief Planner CLG, to Chief Planning
Officers, 6 July 2010. Back
Including £8.7 million of capital provided by SEEDA in the
South East Funding Escalator since 2006-07. Back
Excluding Grant for Research and Development and Grant for Business
Investment which is committed separately by SEEDA, and the future
of which SEEDA understands is being considered by Government outside
of the arrangements for LEPs. Back