The New Local Enterprise Partnerships

Memorandum submitted by the Forum of Private Business

Summary

Given the economic difficulties faced over the last two years and the projected cuts in public spending, the future success of the UK’s local economies will be dependent on the ability to deliver local services in the most cost-effective manner possible.

The Government’s proposed Local Enterprise Partnerships (LEPs) will be important to cost-effective economic growth, driven in no small part by cooperation between the public and private sector.

The Forum sees the some of the key functions of all proposed Local Enterprise Partnerships as the following:

· Localised business support

· Effective delivery of local services

· European regional funding distribution

· Regional infrastructure investment

The central Government will need to ensure that LEPs fulfil these roles in a cost-effective manner, providing a ‘toolbox’ of framework services and budgetary oversight for each LEP. The Government should also ensure that every LEP is engaging effectively with all sectoral and small business interests in their area.

About the Forum of Private Business

The Forum of Private Business is a proactive, not-for-profit organisation, providing comprehensive support, protection and reassurance to small businesses.

The organisation aims to deliver an exceptional service to its members, adding value through the provision of practical, tailored solutions that promote business success, and by being their voice in government.

The New Local Enterprise Partnerships

The key purpose of the Government’s proposed Local Enterprise Partnerships (LEPs) should be to encourage economic growth in their region and to deliver public services in the most cost-effective manner possible.

That will mean strong leadership from the private sector, including a balanced and small-business focused Board of Directors for each LEP. Much of the success of individual LEPs will depend on the quality of engagement with businesses of all sectors and sizes.

The functions of the new Local Enterprise Partnerships and ensuring value for money

Functions

The Forum is conscious of the Government’s intention that the LEP bid process should be used to drive innovation in local and regional administration, particularly where economic growth is concerned. They are hoping to prompt new ideas by leaving as many options as possible available through the bidding process, refusing to put limits on what LEPs can and cannot be expected to do.

There are a few public services that will be important for promoting economic growth and that we feel naturally fit within the bounds of Local Enterprise Partnerships. While they may not be considered necessary by all LEPs, the Government should ensure that they are at least considered by bidding authorities.

Those services include, but are not limited to:

· Localised Business Support

· Supplier Matching and Inward Investment (coordinated by UKTI)

· Export Preparation

· Regional Infrastructure Investment

· Skills & Training Information and Promotion

With a focus on these key services, we believe the Government’s flexible approach to bids will encourage a diverse set of potential partnerships, but we must also recognize that there is an element of risk involved. If every LEP is pursing similar goals for the economic development of their area, but without similar guiding principles or mechanisms to achieve those goals, there is a significant risk of inefficient use of funds and a lack certainty for businesses.

We feel the delineation of responsibilities for the Local Enterprise Partnerships versus local authorities and central government departments will be necessary to provide some clarity and consistency across the UK about the roles and services of LEPs. The best way to achieve this may be to make a ‘toolbox’ of services available to LEPs, with a set of mechanisms gleaned from bidding process.

Those mechanisms could provide LEPs with the frameworks to engage with UKTI on export or inward investment, to provide local business support services, to help set up a green business hub, or any other role that fits naturally into the space vacated by the RDAs. Provided the toolbox is flexible enough to allow partnerships to implement the plans in their own way and will not constrain them by holding them to a particular method or minimum service, it will also take some of the guesswork out of the process of developing new services for the LEP, allowing them more freedom to customize beyond the required minimums.

Reporting & Value for Money

We anticipate the most direct mechanism for ensuring that LEPs are fit for purpose will be through their funding streams from central Government. LEPs will need to agree contract terms through the bidding process, probably on a three to five year basis, and then shoulder the responsibility for reporting on those terms to central Government.

With regard to measures of success, the ultimate gauge must be on regional contribution to GDP, with particular regard for the sustainability of sector-specific growth in key areas. This should be supplemented by business start-up numbers, as well as investment and business growth figures within the LEP.

The Government should also consider developing an audit mechanism for LEP performance as a check against the delivery of individual partnership targets. If delivery of local services in an area has declined rather than improved, then the Government should retain the right to consider remedial action, up to and including re-drawing the contract of an LEP with different partners.

Structure and accountability of LEPs

Structure and Private Sector Engagement

From the Forum’s perspective, increased private sector involvement in Local Enterprise Partnerships has the greatest potential to improve local delivery of services and economic coordination over the current system of Regional Development Agencies (RDAs).

The challenge of the dual public/private approach, however, will be to involve the right mix of business sizes and types in the relevant sectors to truly represent the local economies supported by the LEP. The RDAs have, in some cases, created artificial clusters around those businesses they engaged with regularly, rather than expanding their private sector partners to include as many businesses and sectors as possible.

The easy option will be open for LEPs as well - to only engage with large employers who may generate a disproportionately high percentage of the area’s employment and wealth. This will leave those smaller businesses and under-represented sectors out in the cold while decisions are made about the priorities for economic growth and how local services are delivered.

To combat that tendency, we believe that all LEP bids should demonstrate support from the spectrum of businesses within their catchment, as well as details of how they plan to engage with smaller businesses that may not be directly represented. The Government should consider these proposals as necessary criteria for approval for any LEP bid, and set up a system to regularly monitor that engagement over the life of the proposed body.

The Transitional Arrangements for Converting RDAs to LEPs

One of the most critical current functions served by the RDAs is that of business support. This will be critical for LEPs as well, as they seek to promote growth within their constituent business community. As such, ensuring the continuity of those support functions must be one of the highest priorities for the transition between the two structures.

Given the uncertainty around the Government’s plans for business support, managing a smooth transition will require as early notice as possible for LEPS with a guiding set of principles from central government around the structure and goals of the public offering. This should specify the future of the BusinessLink brand, how existing BusinessLink services will be wrapped up, and a clear delineation about what will be handled centrally and what will be handled locally under the new structure.

The Government should be prepared to keep in mind the lessons of the Business Support Simplification Programme that finished last year. Local and regional business schemes should be consistent across the country, with easily recognizable programs and clarity on requirements for interested businesses.

A second function of RDAs that will need effective management is the distribution of European Regional Development Funds (ERDF). Distribution of these funds is one of the most critical tasks for businesses and communities around the country, and some certainty should be provided for those constituents through the transition period.

Arrangements for coordinating regional economic strategy · Government proposals for ensuring co-ordination of roles between different LEPs

Coverage

The current flexibility of proposals on size, disposition and remit of individual LEPs is encouraging for the development of fit-for-purpose partnerships, but as referenced earlier, a fragmentary approach to the establishment of LEPs may create challenges as well. If, as speculated, a region such as the Northwest were to be broken down into a number of smaller LEPs, there would be questions asked about how well-placed those partnerships were to make decisions for the whole of the region.

The Government has yet to take a decision on whether LEPs will be allowed to overlap each other, and how flexible they will be with regard to size. Though this would certainly give businesses engage at a regional level on economic decisions, the establishment of multiple tiers of LEPs with varying remits and services could create further confusion within businesses and Government about the best level for engagement. Broadly-inclusive LEPs with similar coverage to the system of RDAs containing smaller LEPs established around local economies may also create unnecessary levels of bureaucracy.

If regional LEPs are ultimately considered unwieldy, then some of the functions that such a body would serve may be best facilitated by structured cooperation between smaller, distinct LEPs. This may be particularly relevant for large regional projects such as power generation, flood prevention or high speed rail links. The Government would then have a role in setting out what it considers to be good practice for any organizations considering partnerships with economic or environmental implications.

Coordinating Services and Enforcement

As mentioned earlier, it is also important that UKTI remains the principal point of contact for export support services for businesses and inward investment into the UK, and does not hand responsibility for coordinating those down to the local level.

UKTI will, of course, need to work with LEPs on internal investment and supplier-matching services. But it has developed a strong reputation as a competent body both abroad and in the domestic market, and most Forum members who have used its services have very positive experiences. The LEPs should be able to develop their relationships with UKTI to bid for internal investment contracts or to draw on its expertise to help develop local services.

As the Government has undertaken a review of the Local Better Regulation Office as part of its work on the localism agenda, it is worth considering how the establishment of LEPs will impact on the enforcement and compliance regime. The use of the Primary Authority mechanism should potentially be considered as a mechanism to coordinate enforcement across a Local Enterprise Partnership’s constituent authorities, with the aim of producing more consistent and effective compliance.

Underrepresented Areas

The discussed numbers of LEPs and early indications from proposals seen by the Forum of Private Business indicate that not all local authorities will be covered by a form of economic partnership. This presents a risk for those authorities who remain unrepresented within the LEP structure, due to a lack of suitable proposals in their area or even their own intransigence. What does this mean for peripheral economies and the communities they support?

The Government may wish to consider a system by which an unrepresented local authority or council could elect to join an LEP after its establishment if the authority was discovered to be struggling with access to services.

13 August 2010