Transcript here - East Midlands Councils

…help yourself to a cup of coffee!
EMC Technical Assistance
Project
Andrew Pritchard
Director of Policy &
Infrastructure
Introduction
What is it all about?
 Some background
 Your mission today…

What is it all about?



A technical assistance project led
by East Midlands Councils to
provide an evidence base for
future EU funding
To make sure that we maximise
the potential of EU investment
across the East Midlands
Strong support from DCLG &
Council Leaders for the project
Localisation of EU funding
Establishment of a national ‘EU Growth
Programme’
 LEPs to develop EU investment strategies
 Each LEP to be given a ‘notional
allocation’ of EU funding to prioritise
 Payments to be made centrally
 Notional allocations will be reviewed
against performance from 2017 onwards

“Show me the money”
EU Growth Programme = €6.2 billion
 UK Local Growth Fund = £2 billion

In and around the EM
D2N2:
GLLEP:
LLEP:
NEP:
SEMLEP:
GC&GP:
€249.7
€133.5
€126.3
€55.0
€88.3
€75.5
UK Local Growth Fund
New Homes Bonus
LA Major Transport Scheme
Local Sustainable Transport Fund
Integrated Transport Block
Further Education Capital Fund
ESF Skills Match Funding
£400m
£819m
£100m
£200m
£330m
£170M
Emerging UK Priorities
•Innovation
•SME Competitiveness
•ICT
60% + of ERDF
•Climate Change
•Environment
•Sustainable Transport
No Minimum spend
•Employment
•Skills
•Social Inclusion
80% + of ESF
•Low Carbon Economy
20% + of ERDF
Also…



Minimum 20% of combined
ESF/ERDF on ‘social
inclusion’
Gender equality, equal
opportunities & nondiscrimination
Sustainable development
Programme Timescales
 September
2013: Draft
LEP EU Investment
Strategies
 January 2014: finalise
strategies
 March 2014: new EU
Programme starts
 2017 – first review of
notional allocations
Current Experience



Spend under the current
ERDF Programme has been
slow
Too many small projects difficult to see a strategic
impact
Original operational
programme did not fully
meet local needs - e.g.
Broadband
Future Challenges



1 region replaced by 7
LEPs – 4 overlapping
Pressure for early spend
on projects that will deliver
clear outcomes
LEP notional allocations to
be reviewed in 2017under-performance could
be penalised
Threats v Opportunities
What are we going to do?
Facilitate a series of consultation events
 Develop an evidence base (or ‘socioeconomic framework’) to inform both the
UK Growth Programme and individual LEP
Strategies – working with NTU.
 Highlight potential areas of collaborative
activity that can maximise strategic impact
and reduce ‘transaction costs’

Events Diary
1st July: Greater Lincolnshire LEP
 5th July: Leicester & Leicestershire LEP
 9th July: Competitiveness Round Table
 16th July: NEP/SEMLEP
 22nd July: D2N2
 25th July: Green Economy Round Table

Project Timescales
 End
of July 2013: Interim
Report
 September 2013: draft
Framework
 December 2013 – final
Framework
 January - June 2014
Awareness raising
Key Outcomes
“It’s the economy, stupid”
More Jobs
 Less Worklessness

Your mission today…



To think about how best
EU funding could be used
to improve SME
competitiveness
To highlight areas or
issues where wider
collaboration might be
helpful.
To ask if you do not
understand.
East Midlands PA3 Project
Socio-Economic Evidence –
SME Competitiveness:
East Midlands Regional Roundtable
9th July, 2013
Chris Lawton
Nottingham Business School
Project Rationale and Objectives
• The project aims to provide socio-economic evidence
to help identify synergies, linkages and common
challenges across LEPs within or overlapping the East
Midlands
• To identify opportunities for collaboration across the
themes identified in the ‘Europe 2020’ strategy
• The UK Government would:
“like to see Local Enterprise Partnerships working with each
other to deliver a bigger impact… and achieve economies of
scale wherever possible”
Source: HM Government, April 2013. ‘Technical Annex: Preliminary guidance to Local Enterprise
Partnerships on development of Structural & Investment Fund Strategies.’ paragraph 2.8, p. 4.
Introduction
• This presentation provides contextual evidence for the EU Thematic
Objectives 1 and 3, Innovation and SME Competitiveness
• Objectives for today are to discuss how to address ‘market failures’
affecting the extent and nature of:
• private sector spend on research and innovation (innovation
inputs)
• the commercialisation of novel products and processes
(innovation outputs)
• business start-up and survival
• access to investment
• We will also provide evidence on the importance of skills and
infrastructure to business start-up and high-growth businesses
• Thematic Objective 4, Low Carbon, will be discussed at a further roundtable on the 25th of July
Market Failures Affecting Innovation
and Enterprise
• Market failures can occur because of :
– Risk/uncertainty (due to time lags between up-front costs and
future benefits) – e.g. return on investment is uncertain
– Information failure (insufficient information on the benefits of a
given activity) – e.g. information on likely returns is incomplete
– Externalities (where some of the benefits ‘spill-over’ to affect
parties other than those involved in the original activity) – e.g.
other parties may benefit from the returns
• Time lags and externalities particularly affect innovation
– Firms can incur large up-front costs for uncertain future reward
– It can be difficult for a firm to recoup a sufficient proportion of
the benefits (due to spill-overs to other firms and society more
widely)
Local Enterprise Partnerships within or overlapping the East Midlands Region
Contains Ordnance Survey data © Crown copyright and database right, 2013.
Economic Context
Chart 1: UK GDP Growth (NIESR modelled monthly estimates), 2008-present
compared to previous recessions
GDP % change
0.1
1930-1934
0.08
1973-1976
0.06
1979-1983
0.04
1990-1993
0.02
2008 to present
0
-0.02
Months from start
-0.04
-0.06
-0.08
-0.1
Source: NATIONAL INSTITUTE of ECONOMIC and SOCIAL RESEARCH, November 2012. ‘Monthly GDP Estimates’, www.niesr.ac.uk
Economic Context
Chart 2: Headline GVA per head indices (UK=100) NUTS2, 2011
140
130
120
110
100
90
80
70
60
50
40
2008
Source: ONS Crown Copyright, 2012. ‘Regional Gross Value Added, 2011’.
2011
Economic Context
Chart 3: Employment rate (% working age residents), 2012
80
78
76
74
72
70
68
66
64
62
2008
2012
Source: ONS Crown Copyright, 2013. ‘Annual Population Survey’, January-December 2008 and January-December 2012. From
NOMIS [accessed 24th June, 2013].
EU Thematic Objective: SME
Competitiveness
• The SME environment remains difficult, but some signs of
improvement:
– Business death rates have fallen since 2009 and business
birth rates have increased
– But survival rates for new businesses have significantly
decreased since pre-recession
– Small businesses (<50 employees) have been more likely to
retain staff but cut/freeze wages and investment, with
resulting lost productivity
– Large businesses (>250) more likely to cut staff whilst
maintaining investment and productivity levels
– Overall productivity has fallen in recent years (and unit
labour costs have increased)
EU Thematic Objective: SME
Competitiveness
• SME environment continued:
– Weak wage growth may have contributed to higher
employment, but may also means that SMEs are
substituting cheap labour for investment
– Lenders report that demand for credit remains low
– Despite some structural improvements, firms seeking
credit continue to report difficulties in the supply of
finance
– Exports have been growing moderately in recent
months, in both manufacturing and services
– Chambers of Commerce QES surveys suggest an
increase in business confidence and investment
prospects
EU Thematic Objective: SME
Competitiveness
Chart 4: Business Births and Deaths (as a % of end-of-year count of active
enterprises), 2011
12
10
8
6
4
2
0
Birth Rate
Death Rate
Source: ONS Crown Copyright, 2012. ‘Business Demography 2011 – Enterprise Births, Deaths and Survivals.’
SME Competitiveness: Business Birth Rate (as a % of endof-year count of active enterprises), 2011
Source: ONS Crown Copyright, 2012. ‘Business Demography
2011 – Enterprise Births, Deaths and Survivals.’
Contains Ordnance Survey data © Crown copyright and
database right, 2013.
EU Thematic Objective: SME
Competitiveness
Chart 5: Two year business survival rate from year of birth (%)
84
82
80
78
76
74
72
70
UK
East Midlands
68
2006
2007
2008
2009
Source: ONS Crown Copyright, 2012. ‘Business Demography 2011 – Enterprise Births, Deaths and Survivals.’
EU Thematic Objective: SME
Competitiveness
SME competitiveness not just about start-up and
survival, but also about fostering the conditions for
‘high growth companies’:
• High growth companies:
– Accounted for 7% of business stock but around 50% of
employment growth between 2002 and 2008
– Are more resilient (less likely to become insolvent)
– Are found across urban and rural areas, across sectors,
and can be small or large, new or established firms
– Are innovative (the one common characteristic)
EU Thematic Objective: SME
Competitiveness
• High growth companies have common needs:
– Access to finance for growth
– A skilled workforce
– Infrastructure that allows for the flow of ideas and
knowledge and collaboration
– A demand for innovative products and processes,
stimulated through procurement activities
Employment, Social Inclusion and Skills: Resident Adults
Qualified to a Level 4 (first degree) and above (%), 2012
Source: ONS Crown Copyright, 2012. ‘Annual Population
Survey’, January-December 2012. From NOMIS [accessed 17th
June, 2013].
Contains Ordnance Survey data © Crown copyright and
database right, 2013.
EU Thematic Objective: Innovation
•
Innovation commonly defined as:
“the commercial exploitation of new ideas in the form of new products and
processes, new organizational techniques, new markets and new sources of
supply”
•
•
•
•
Innovation includes:
– radical innovation (new product/process)
– incremental innovation (an improvement to an existing product/process)
– novel innovations that are new to the market and those that are new to the
firm, which reflects the diffusion and transfer of knowledge
It is a process, with inputs (e.g. investment in R&D), outputs (e.g. patents etc.) and
outcomes
Outcomes include an increase in competition, with new entrants displacing
incumbents, enhancing the quality of an area’s business stock
This churn is part of the way in which the market allocates resources towards more
efficient firms and is a feature of high-performing local economies
Source: C Oughton and M Frenz, 2005. ‘Innovation Policy Position Paper’, Birkbeck and University of London.
EU Thematic Objective: Innovation
Chart 6: Innovation inputs: Business Enterprise Investment in R&D (as a % of total
workplace GVA), 1999 and 2009
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
United
Kingdom
North East
North West
Yorkshire
and the
Humber
East
Midlands
West
Midlands
East of
England
London
South East
South West
1999
2009
Source: Department for Business, Innovation and Skills, 2012. ‘Regional Economic Performance Indicators
– Live Tables’.
EU Thematic Objective : Innovation
Chart 7: Employment in High and Medium-High Technology Industries (% workbased employment), 2011
6
5
4
3
2
1
0
Source: ONS Crown Copyright, 2012. ‘Business Register and Employment Survey, 2011.’ Data accessed
from NOMIS [17th June, 2013] and analysed under Chancellor’s Notice Ref NTCBRES11-P0537.
Innovation: Employment in High and Medium-High Technology
Industries (%), 2011
Source: ONS Crown Copyright, 2012. ‘Business Register and
Employment Survey, 2011.’ Data accessed from NOMIS [17th
June, 2013] and analysed under Chancellor’s Notice Ref
NTCBRES11-P0537.
Contains Ordnance Survey data © Crown copyright and
database right, 2013.
EU Thematic Objective: Innovation
Chart 8: Innovation outputs: Turnover attributable to new and improved
products (%), 2006
40%
35%
30%
25%
20%
15%
10%
5%
0%
UK
East Midlands
Source: Department for Business, Innovation and Skills, 2012. ‘Regional Economic Performance Indicators
– Live Tables’.
EU Thematic Objective: Innovation
Chart 9: Innovation outputs: Turnover attributable to new and improved
products (%), 2009
40%
35%
30%
25%
20%
15%
10%
5%
0%
UK
East Midlands
Source: Department for Business, Innovation and Skills, 2012. ‘Regional Economic Performance Indicators
– Live Tables’.
Summary Points
• Signs of improvement in the business environment: indicated by increased
business births/decreased business deaths and more positive survey
responses
• But SMEs continue to face significant challenges: indicated by lower
survival rates and continued difficulties in accessing finance
• High growth businesses are responsible for a disproportionate level of
new jobs and are more resilient
• Innovation is the key common characteristic amongst high growth
businesses
• However, they are very difficult to identify before they attain high growth
– its is important to create a supportive environment
• These businesses require skills, growth finance, an infrastructure that
supports innovation and knowledge transfer, and demand for innovative
goods and services
• Manufacturing accounts for a large proportion of innovation spend and
outputs, but this can be concentrated in a small number of large firms
• North-south or east-west (depending on topic) divides across the region
have been exacerbated by the recession – strengthening the rationale for
joint working for some LEPs
How Can we use EU Funding to…




Increase private sector
spend on R&D
Deploy innovation more
widely amongst SMEs
Increase business start up
& survival
Increase access to
investment by SMEs
Thank you for coming and have
a safe journey home!