Saturday, 30 October 2010

Local Enterprise Partnerships - review of SQW Report - 'A new era begins?'

"Everything is a design challenge," said Ashley Goodall, speaking to me at a New Statesman sponsored fringe event at the Tory Party Conference in Birmingham recently.

I was interested to hear his thoughts as Managing Director, Saatchi & Saatchi Design on the challenges of the 'Big Society'. "In terms of communities," he said, "design is about the 'interface' between communities and systems; how you relate to and engage with initiatives and activities. To enable this engagement you have to design the interface that makes sense of the activity, giving it meaning. You need to design the means of navigating the framework and the ways to engage. It's about designing an ecology that is understood and that works."

It struck me these views could equally be applied to Local Enterprise Partnerships (LEPs) in terms of the means of encouraging real engagement between business, local authorities and universities. In taking a similar approach to the Big Society the Coalition government said, "Local Enterprise Partnerships will see business and local authorities come together and set out their priorities for their area, rather than being told what is best for them".
A recent report published on LEPs by SQW concludes that significant amounts of 'partnership capital' or the track records of joint working between business, civic, knowledge and financial partners, together with a history of significant resourcing - are going to be required if we are to see successful outcomes delivered by these bodies. Will Hutton, The Work Foundation, puts it another way, "It is becoming crystal clear that no economy can get to first base unless it has all the components of an innovation ecosystem."

The SQW report states, "...the reality is that they simply do not exist in most LEP situations. Without a reasonable degree of 'partnership capital' - both social/institutional and financial - it is difficult to envisage effective delivery....Some level of resourcing and enhanced powers are important too, without this, LEPs could prove to be of limited effectiveness."

They conclude, "There is an urgent need to develop new models of economic development that reduce the overall call on the public purse. The business community must be central to this but government also has a crucial role to play...Radical remodelling of this nature goes far beyond the issues of territory and governance which have dominated LEP thinking to date. It needs some hard and creative thinking and that in turn requires a few ground rules."

Their report, published 24th September, was interesting in that it reviewed 50 of the 56 LEP submissions made to BIS for the 6th September deadline just a month back. SQW have a history of working with local authorities on economic development over the past 27 years.

LEPs, people will recall, were intended to come up with ideas to rebalance the economy towards the private sector, to create the right environment for business and growth in their area whilst ensuring accountability, reflecting natural economic geographies, being of a reasonable size and including 'groups of upper tier authorities'.

But so far there has been little clarity around the nature and scale of resources to be made available, any performance metrics required, how submissions would be judged as 'road worthy' and capable of delivering an 'orderly transition from the existing RDAs'.

Headline Findings

The SQW review uncovered a tremendous diversity of approach in the 50 LEP proposals highlighting the following issues:

• The shortest submission was 3 pages, the longest 92 pages and the average 27 pages;
• LEP areas varied from 330,000 residents in the smallest to 3.4m in the largest - the average covering 1.1m residents;
• Upper Tier authorities as signatories ranged from none in 'at least three cases' to 10;
• Six submissions defined a geography that crossed a regional boundary;
• Approaching 70 local authorities featured in more than one submission;
• 41 submissions included a vision or mission, 9 did not and just under half included targets;
• 44 submissions committed to recruiting a private sector chair.

Territory and Governance

Well over 40 made the case for the functional coherence of their proposed LEP territory. LEP submissions covered various combinations of city regions and polycentric urban areas as well as bids made by shire counties, sometimes as alliances - although many of these did not represent groups of upper tier authorities - and included rival bids. On this issue the report openly wondered if an area could become a LEP without the backing of democratically elected politicians?

Government guidelines had stated that it was 'vital that business and civic leaders work together', with this meaning that normally there would be an, 'equal representation on the boards of the partnerships and that a prominent business leader should chair the board.'

However, the SQW review shows that "the extent of business engagement and involvement...was - in general - thin. The only exception to this was those situations in which existing governance and partnership arrangements were substantially in place prior to June 2010."

They continue, "Businesses - or, more usually, business representative organisations - appear to have endorsed submissions, but rarely was there evidence that they had genuinely shaped them.
The report states, "Given...the inevitable tendency of local government to gravitate towards more politically defensible administrative boundaries, a meaningful calibration from the business community really ought to have been designed in."

LEP Priorities for Economic Development were interesting in that many of the priority issues identified differed significantly from the RDA agenda. Top LEP priorities included -
• Adult/workforce skills
• Low carbon agenda
• Transport
• Inward investment
• Employability and worklessness
• Business development including early stage finance
• Business development - innovation

The least frequently stated priorities for LEPs included energy, utilities and waste, key sectors and brownfield land.

The most frequent priority around adult/workforce skills had not been mentioned as a priority within the outline guidance, but submissions had been steered to 'work closely with universities and further education colleges.'

The LEP priorities outlined above contrast with RDA spend - 32% on regeneration through physical infrastructure; 17% on business development and competitiveness; 8% skills related activities (as outlined in an earlier PwC report).

SQW felt that the extent to which the outline LEP submissions addressed the need to rebalance the economy was 'quite limited'. They state, "particularly with regard to the shift from public sector-dependent employment to private enterprise, our observation - and concern - is that in general, LEP thinking simply has not gone far enough: 25-40% cuts in public spending over the next three years will have a significant impact on all local economies and an overwhelming one on some. Yet, in the main, LEP submissions are silent on the nature, scale and imminence of this effect and appropriate responses to it.

Fewer than half identified trade and export as a priority and very few provided any real evidence in relation to it. "More generally, the majority of LEP submissions were seriously thin in terms of issues relating to internationalisation and global competitiveness...yet it is on a global stage that businesses - and local areas - must increasingly compete."

LEPs Functional Plans

SQW state that LEPs were on the whole inclined to act as strategic leaders. A significant minority were prepared to sign up to an R&D/intelligence function, but far fewer appeared willing to commit to commissioning or project management or delivery. The report asks that given that LEPs do not seem to be "gearing up for a hands-on delivery role" and given the limited resources available how will "things be made to happen"?


SQW conclude that whilst some early progress has been made "we are some distance from a workable set of sub-national arrangements. To effect an 'orderly transition', there is an urgent need for some clarity. In our view, the business community will not engage properly without it - and a system of economic development that does not have businesses fully on board risks being 'broken' from the outset. With the possibility of major job losses arising from public sector spending cuts, this is all the more important right now."
Clarity is needed in relation to the spatial coverage of LEPs, the relationship between LEPs and Local Strategic Partnerships, the key functions to be delivered, and any additional discretionary powers which might be granted to promote economic growth.

For full SQW report: Local Enterprise Partnerships, A new era begins visit

Birmingham Post blog visit

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