Tuesday, 2 November 2010

Getting our LEP act together in the West Midlands

With Greater Birmingham, Coventry and Warwickshire and Stoke and Staffordshire named as 3 of the initial 24 LEPs announced last week I, no doubt like everyone else involved, will be keen to do whatever I can to support the work of these emerging bodies....That does not mean that I, or many others like me, believe these are the best solutions to the huge economic challenges facing our region.

Business Groups' Reaction to LEP announcements

Following last Thursday's (29th October 2010) announcements Chris Clifford, Regional Director, CBI West Midlands commented, "We welcome the clarity that the announcement brings for the wider Birmingham area and we will of course work to support the newly emerging LEP for Greater Birmingham and other LEP bids.

"We're pleased by the Coalition government's focus on LEPs that have some scale as we see this as being important to developing networks supporting business-led regional growth. As there is little new money much will have to be done through more coordinated working, cutting out duplication and having clear goals between business, local authorities and learning institutions.

"We hope the position in the Black Country will be re-assessed - if we can work together in something representing more of a travel to work region - this would be a big step forward for business.

"We are very concerned about the ambiguity raised around business rates in today's announcement, and if this means re-localising rates, we are opposed to giving local authorities power to set these. Such a change would mean that businesses would face unknown varying levels of tax across the country. The CBI is determined to retain the nationally set Uniform Business Rate."

John Rider, Chairman, Institute of Directors, West Midlands said, "The IoD will continue to support Business Voice West Midlands and its position supporting the work of the LEPs that have so far been announced. We certainly wouldn't support any one LEP over any other.

"What is great news is that the universities can have a strong influence on the situation as we seek to grow our knowledge economy across the West Midlands. We have simply got to put all the various views that we have had over the months of summer debate behind us and 'go for growth' by all working together.

"We hope the Black Country will join in with us working alongside these efforts in Greater Birmingham as they form a natural part of the Birmingham travel to work area. We have seen a lot of the vested interests associated with localism over the summer but Greater Birmingham represents the natural economic geography of the area and we look forward to working in the best interests of our businesses and wider communities."

The need for 'Partnership Capital' across the West Midlands

This announcement has been made just over two years after the world suffered the biggest economic shock in 60 years. Loosely referred to as the credit crunch anyone affected by it in business will have had the experience seared into their consciousness.

For them this was not some academic exercise, an intellectual nicety to be debated at the tax payers' expense - for the owners of many small businesses their houses were on the line, their colleagues' jobs, their businesses, their livelihood and reputation.

Of course the reasons were multiple. One inescapable conclusion was the overwhelming acceptance across the Western world of a belief in the principles of the unhindered free market and a drive for short-term returns, especially on bonus-fuelled Wall Street and in the City.

This dogma, combined with a lack of sufficient regulatory apparatus, (exacerbated by a lack of comprehension associated with the slicing and dicing of complex financial instruments being peddled around the globe in our interconnected 'knowledge economy') led to a blind spot regarding the tremendous dangers facing us at the time.

Now we talk daily about the need to reduce our deficit, to reduce the legacy of debt we are bequeathing our children and the worklessness already affecting 16-24 year olds not in work, education or training.
We seem to be slowly getting our minds around the need for greater regulation with Mervyn King, for one, pushing hard in spite of much ostrich like refusal to recognise the reality of our position by those with the greatest vested interests in the City.

We do not seem to have grasped the implications of the complexities of our inter-connected knowledge economy and how we need to tackle growth. We have not fully appreciated the need for collaborative working - making it easier for vital knowledge and innovation that will add to our competitiveness and economic dynamism being facilitated through parternship approaches between the wider public and private sectors.

David Bailey illustrated this in his lecture on the automotive sector reported last week, operating, as he said, "in the face of tough new emissions targets coming out of Europe that government will have a central role to play in helping to provide the framework to support industry growth (for example in installing electric recharging points) and incentives for investment during this period of technological transition."

Public and private sectors are not two completely separate sides of the economy but different and essential aspects of the whole.

Of course wealth creation needs to be business-led, but a knowledge economy relies on just that - knowledge and in the global context size matters together with unity of thinking and approach driving efficiencies and cutting out duplication. The LEP plans may be OK for the likes of Birmingham but what about elsewhere across the region?

In the UK the Work Foundation, NESTA and SQW amongst others have shown that economic dynamism and innovation are best nurtured when there are successful partnerships between business, civic and learning partners. These partnerships work best when they are based around larger urban economies where the scale, critical mass and diversity enable knowledge and information-sharing which economists refer to as economic spillover.

To get the best out of our regional economies, SQW recognised that a history of partnership working and 'partnership capital' needs to have been developed. They cite Manchester as having worked hard in this respect, putting aside local differences in the interests of a larger vision aimed at delivering the best results for their wider local populations - promoting a strong voice and image of their area, developing a quality infrastructure through collaboration as well as the building blocks of 'design and innovation eco-systems 'between the partners to nurture their capacity for growth.

They observed a dearth of partnership capital across the English regions outside of Manchester. "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," their report noted.

So what have we come up with in the wake of this financial tsunami - an idea loosely based on 'localism' yet masking a drive towards centralism as outlined in David Bailey's blog... An idea relying on partnership working, with the evidence here, in the wider West Midlands at least, suggesting this doesn't exist sufficiently. And with resourcing perhaps being at a fifth of the level available to the RDAs.

Well, it might be fine to experiment with economic development structures if we weren't in the hole we're in. In the West Midlands we have a GVA deficit against the average for the English regions of an estimated £16.5bn. We have seen the loss of 60,000 private sector jobs over the past decade and during the same period our knowledge economy in Birmingham has shrunk, one of only 3 of the UK's 11 core cities where this has happened. The Chartered Institute of Personnel and Development is forecasting (2nd Nov 2010) public sector job losses of 725,000 with a further 900,000 in the private sector totalling 1.6m job losses by 2014-15 on the basis of current government cuts, excluding any job losses in the current period 2010-2011.

Business Views on LEP Structures

Over the summer I did not hear one business person expressing the view to me that the changes being proposed were visionary, vital or much needed. The general tone was one of resignation summed up in the phrase, 'we are where we are'. Is this really the best we can do when we face the biggest economic crisis in 60 years, when we worry daily about debt legacies to our children?

During that time I met with a number of businesses whose interests crossed proposed LEP areas, such as Phil Riley, whose business covers the whole West Midlands footprint. As Chief Executive, Orion Media Group they own BRMB amongst other radio interests and expressed concerns about the fragmentation of the West Midlands into 6 possible LEP areas.

Phil Riley felt it would be "crazy to split the region into 6 pieces" but he did feel "strongly that Birmingham should be the 'badge' because," he said, "I believe, it's the place most people have heard of. "When we bought BRMB, Beacon, Mercia and Wyvern covering the WM there was no joint rate card so if a large corporate wanted to buy the whole region each station had to quote separately, there wasn't one unified offer. This was one of the first things we fixed when we walked in the door.

"The danger is the LEPs will be in exactly this same position, each struggling to get their voice heard, no unified position, and no strength of voice, with each one working to undermine the other in the struggle to get a deal for their patch. You do need some leadership whether in business or in regional government.

"When we're talking to listeners on each of our stations it's really important they know and understand that we're their local station, based locally and focussing on their interests - local radio with a common purpose. But when we're talking to business we want to be able to speak to them coherently in a way that makes sense for them. This is what the LEPs need to aim for otherwise we run the risk of a multitude of LEPs with no common purpose."

Having met with Paul Kehoe, Chief Executive, Birmingham Airport, just a few days before the LEP announcement he commented on LEPs saying, "We need to see the creation of a business and political block to deliver real growth meeting the wants and needs of our community - this is essential to sustainable and balanced growth in the West Midlands for the future. And looking ahead, if the total travel to work area around Birmingham had come together this could have been better solution to LEP situation, but we are where we are."

He said, "Manchester has managed to sell itself over 20 years through good team leadership at the City Council between their Chief Executive, Sir Howard Bernstein and their Leader Sir Richard Lees. They have created international links by appreciating that you can sell 'Greater Manchester' more effectively than Wigan, Salford, or Stockport on their own. When you get to use the Mercator scale map you can only see big places. Whilst Walsall, Dudley and Wolverhampton are very important they do not appear on that Mercator map. Together they may represent a 1m population block but we sell the opportunity that is the Midlands' 1 hour travel time catchment more effectively.

He concluded, "Given Manchester's strong performance and leadership, I'm hoping that Birmingham can benefit by leveraging from the Lib-Con Coalition government mirroring our own City's Lib-Con coalition in place over the past 6 years."

In light of the huge challenges facing us is this not the moment to come up with a plan that we genuinely celebrate and believe in? Should we not be setting aside old rivalries, rolling up our sleeves and working for the longer term good of our children and their children?

Getting our LEP act together - A Community Interest Company

Earlier in the summer John Rider, Chairman IoD West Midlands, said, "the LEP journey thus far in the West Midlands has been characterised by embarrassing displays of vested interests and 'localism' of the worst kind with various bodies pitching for LEPs, largely based on existing local authority boundaries.

"Bids have been made to control the revenue and assets from the demise of AWM, but interestingly, no one wants the 'toxic assets' - the land with problems. The assets held jointly with private sector organisations will also take some unscrambling. Currently, the government plans to centralise much of the (reduced) future support for the regions back to Whitehall.

"Most clear-thinking people recognise that 'Greater Birmingham' is the natural economic geography of the West Midlands and our travel to work and supply chain patterns can easily demonstrate this point. People criss-cross the region as they go about their work and we have members whose businesses straddle local authority areas (sometimes more than one) and many hospitals and schools operate with porous boundaries.

"I have major concerns that the proposals coming forward do not have the necessary size, credibility, and logical economic geography to lead the economic renaissance required. The economic challenges that face us are massive and we deserve much better. Fragmentation, short-termism and promises that 'we will all work together' will not work.

"Business confidence is very fragile and the private sector has been challenged to create the much-needed jobs to replace the circa 80,000 public sector jobs predicted to go soon in this region...The latest scenarios indicate that regional employment may not return to pre-recession levels until 2030.

The proposed Community Interest Company would, he stated, "provide focus and leadership within our area as we strive to tackle our deep-seated economic problems. Such a company - with about 40 specialist staff (AWM has around 380) would be ideally suited to carry out the RDA legacy role and to support LEPs cost-effectively."

The CBI, IoD and others through Business Voice West Midlands lobbied long and hard over the summer for the creation of an 'overarching mechanism' able to coordinate the activities of the LEPs where strategic interests might cut across LEP areas - for example planning decisions, inward investment or skills investment and development plans.

As their bid was not for an overarching LEP but for the creation of a Community Interest Company, it is still possible that something may come of this idea, it may even be that we can make it happen between us. It may be just what is needed to help us to develop our own version of 'partnership capital', bringing coordination required for strength and unity of voice and agreed strategic priorities... The vital ingredients if we are to succeed in highly competitive global markets in the best interests of our wider communities and businesses.

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