Regeneration

Regen 08

Written evidence submitted by Furness Enterprise

1. Introduction

Furness Enterprise is a local enterprise partnership of the public and private sector set up in 1991 as a response to the massive loss of jobs in the Furness area, SW Cumbria, from the local shipyard and other key manufacturing employers. Its focus is on the regeneration of the Furness economy through job creation, job safeguarding and helping local unemployed people to access jobs. This activity is very challenging in a deprived community (Index of Deprivation 29) with high levels of worklessness, particularly with significant numbers of Incapacity Benefit claimants. Furness is an Assisted Area and consequent grant schemes such as Grants for Business Investment have enabled Furness Enterprise to help businesses create some 9,700 jobs, safeguard 3,500 jobs and help over 1,000 unemployed people access jobs. Its focus on "people" based regeneration has been very effectively complemented by "place" based regeneration carried out by the local Urban Regeneration Company, Barrow Regeneration, and the local authorities. It is this highly successful approach to regeneration which won the Barrow area the only ‘Green Flag’ award in Cumbria in 2009 for its work on worklessness where improvements in the infrastructure of the area, e.g. new business parks, was integrated with incentives to business to create new jobs and help given to unemployed local residents to get jobs.

Recently the House of Commons Business, Innovation and Skills’ Select Committee in its report "The New Local Enterprise Partnerships-An Initial Assessment" identified Furness Enterprise as an organisation which offers a track record of successful co-working between local authorities and business.

2. Summary of Submission

Regeneration in the new era will depend very much on private sector job creation and the involvement of the private sector. While the new "localism" approach of the Government is welcome, the ending of the Grants for Business Investment scheme (GBI) will severely impact the ability of deprived areas, especially Assisted Areas, to create private sector jobs. Its withdrawal will also be further disincentive to businesses to be involved in regeneration.

Enterprise Agencies have an important role in providing support to enterprises within functional economic areas such as Travel to Work Areas.

3. Regeneration-Details of Submission

We welcome the Government’s commitment to localism and potentially providing local people, authorities, and businesses with the means to drive growth and improve the social and physical quality of their area.

The British State is considered to be one of the most highly centralised within the advanced industrial economies and because of this, any Government finds it very difficult to accommodate local differences which are critical to the successful pursuit of regeneration. This centralising approach brings with it the "dead hand" of excessive bureaucracy which stifles innovation and enterprising thinking. Regeneration becomes ‘process driven’ powered by a tick box mentality. Hence an attitude of ‘localism’, if matched by an appropriate level of resources will be much more effective at solving local regeneration challenges and maximising local opportunities.

However to make a success of a ‘localist’ based approach to regeneration there has to be a relevant level of resource consistently applied recognising that some areas regenerate easier than others due to such factors as good communications and access to markets attracting new investment. Other areas find it difficult to adjust to major structural changes in their economic base because of the scale of the change involved, and the lack of inbuilt success factors in the local economy such as a high business density, good skill base and good access to markets. This has been recognised to a certain extent in the way that certain areas have been designated Assisted Areas, i.e. needing additional support.

The future of regeneration activity in the UK given the major cutbacks in public funding and the demise of Regional Development Agencies will depend on private sector job creation. Particularly in those deprived areas which have suffered a major loss of employment in a key industry such as shipbuilding, coal mining or steel, much regeneration has depended on the public sector both for physical regeneration and job growth. To replace public sector job losses in these areas, due to public sector expenditure reductions, with private sector jobs would be very challenging even in buoyant economic conditions. Hence it is very hard to understand why the Government has eliminated in England the Grants for Business Investment (GBI) scheme designed specifically to encourage investment and job growth by all sizes of companies in Assisted Areas and small to medium sized companies outside of Assisted Areas. Over the last six years, GBI and its predecessors have provided £428m in grants to 1,787 projects in order to support £3.9bn of investment helping to create/protect 77,000 jobs in the English Assisted Areas alone. Scotland and Northern Ireland retain their versions of GBI and Wales their modified version.

It is extremely challenging in any case to get the meaningful involvement of employers and business interests in regeneration activities. Businesses particularly small to medium sized enterprises feel regeneration processes are dominated by public sector interests and delivery mechanisms that operate slowly and stifle initiative, enterprise and risk taking. Businesses are interested in focused interventions when they can see a clear and immediate benefit. The GBI scheme provided a clear regeneration mechanism focused on business needs and designed to encourage them to invest in plant and jobs particularly in the Assisted Areas. Getting businesses involved in regeneration will be made even more challenging in difficult economic conditions and with the lack of incentive previously provided by the GBI scheme. The Smith Institute’s ‘Rebalancing the Economy: prospects for the North’ published on 14th March 2011 called for greater support for declining industrial areas, including a new Grant for Business Investment scheme, to provide a simple way of supporting firms in areas of economic disadvantage, in a way compliant with EU rules on State Aid. The newly formed Local Enterprise Partnerships (LEPs) will likewise struggle to get business engagement unless they can provide clear benefit to the business community.

The new Regional Growth Fund (RGF) is seen by the Government as replacing the incentive to invest to businesses in deprived and Assisted Areas currently dependent on the public sector. However RGF is a much less flexible, less attractive, less certain scheme for the vast majority of businesses, particularly small to medium sized ones. For example the minimum under the Regional Growth Fund is £1m; the minimum grant under the GBI scheme is £10,000.

In summary, with the Government’s "new" approach to regeneration, while its emphasis on "localism" is welcome as is the focus on private sector job creation, it is extremely difficult to see how private sector led regeneration will occur in deprived areas. One clear action the Government could take to signal its understanding of this difficulty would be to restore the Grants for Business Investment scheme. Regeneration of areas with high worklessness can only be solved by the supply of jobs that can be accessed, allowing for any appropriate re-skilling and up-skilling. Those jobs in the new era of regeneration will depend very much on the private sector.

The Government’s 10th March 2011 Coalfields’ ‘Why a Special Approach is Still Needed’ policy paper highlighted the key role enterprise agencies can play in supporting smaller enterprises in the new business improvement landscape. Together with the Federation of Small Businesses, the enterprise agencies are a reliable route for business support which needs to be adequately resourced, especially in disadvantaged areas.

March 2011