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Written evidence submitted by the Confederation of British Industry (LRS0017)

 

About the CBI

The Confederation of British Industry (CBI) is the UK’s leading business organisation, speaking for 190,000 businesses that together employ around a third of the private sector workforce. With offices across the UK as well as representation in Brussels, Washington, Beijing and New Delhi the CBI communicates the British business voice around the world.

The CBI welcomes the opportunity to respond to this sub-inquiry, feeding into the committee’s work on Post-Pandemic Economic Growth, focusing specifically on the role of local and regional government structures within England on delivering local growth and the ‘levelling up’ agenda. This response is the result of wide-ranging consultation with members across the country.


Our response

The CBI welcomes this inquiry and the government’s focus on levelling up. It is an important agenda for England and the UK, which must address the longstanding productivity divide, whilst focusing on the wider issues around inequalities and access to opportunities. These divides have an impact on the strength of local labour markets, access to talent, on the strength of the consumer base, and on the attractiveness of a region as a place to invest and grow. Business is committed to playing its part in supporting government, nationally and through local and regional structures.

For levelling up to be a success, it must focus on three key components. Firstly, how to develop strong local labour markets, that can respond to local demand for skills with an eye to long term challenges such as achieving net zero. Secondly on how to create vibrant places and improve access to opportunities through physical and digital connectivity. And finally, how best to attract and nurture world class businesses to all parts of the UK.


This response sets out that:

-          Government must deliver a long-term ambition for levelling up, recognising the important role that regional, sub-regional and local bodies will play in delivering this agenda.

-          For levelling up to be a success, local and regional bodies need to be empowered, and appropriately resourced to design and deliver schemes locally and regionally.

-          Business engagement must be at the heart of local and regional decision making, with the role of business clearly set out as devolution develops.


Government must deliver a long-term ambition for levelling up, recognising the important role that regional, sub-regional and local bodies will play in delivering this agenda.

Levelling up is currently an ambiguous term, and in order to be a success more clarity is needed on the government’s long-term vision. Successful levelling up must include a continued focus on closing productivity gaps within and between regions, but also the need to address economic and social inequalities without pitting regions against one another. The CBI has identified three priorities for business and government as part of the levelling up agenda. These include strengthening local labour markets, creating vibrant places by improving connectivity across the country and, doing more to attract and support world class businesses in all regions.

Local and sub-regional bodies, such as Local Enterprise Partnerships (LEPs), Growth Hubs, and Local and Combined Authorities will all play an important role in the delivery of this agenda. However, challenges remain around the complexity of existing local and regional bodies, as well as the various approaches to business engagement.

Many of these structures have grown organically, and as such vary across the country. Not all parts of the country are covered by a Sub-National Transport Body (STB), or by a ‘powerhouse’ style regional body. Feedback from businesses in regions without these regional bodies feel that they are often underrepresented when it comes to regional decision making and attention from central government. It has been noted by business that these bodies can play an important role in identifying strategic priorities for a region and are seen to have a voice at the decision-making table. They also act as a focal point for investment, both within UK budget announcements, but also for inward investment.

Businesses seeking to engage find the number of different bodies, the overlaps within them and the lack of clarity of roles challenging to navigate. For example, roles and responsibilities often overlap between city deals and devolution deals. Where city deals have been agreed, these often pre-date devolution deals. As such, strategies, developed and agreed in close consultation with businesses as part of city deals have in some instances been put on hold whilst new devolution agreements are planned and consulted on within the Combined Authority (CA). This lack of joined up approach between two overlapping regional bodies has delayed short term interventions, despite them have widespread business support.

Businesses welcomed the direction of travel by government on devolution in England, including the move towards unitarisation of local authorities to help overcome the complex, multi-layered local government structures, as well as the wider ambition on devolution. For regions without a devolution deal the LEPs remain critical in acting as a voice for the region. It was noted that those without a Mayor and CA felt they had less profile within government, with one business stating that their operating sub-region felt like the ‘poor relations’ of the region, with investments flowing instead to the neighbouring CA area.

Businesses consulted stated that regional policy would benefit from a long-term strategy. There’s a risk that non-strategic decisions may further add to the complex landscape of local and regional stakeholder bodies. Using the north as an example, there are a range of regional and sub regional bodies, including the government led Northern Powerhouse, NP11 (the coordinating body between the 11 LEP chairs) and Transport for the North, alongside the existing 11 LEPs, seven CAs, five of which are Mayoral and the recently established Yorkshire Leaders Board. All of these have been tasked in some way with delivering or supporting initiatives to drive economic growth across the region. Most recently a new body - the Northern Powerhouse Growth Board was announced by the Prime Minister though it’s not yet clear how it will interact with existing bodies.

Recommendations:


 

 

 

 

 

 

 

In order for levelling up to be a success, local and regional bodies need to be empowered, and appropriately resourced to design and deliver schemes locally and regionally to support enabling every place to reach their full economic potential.

Consultation with businesses has consistently highlighted the valuable role local and regional bodies, such as LEPs, Growth Hubs, Local Authorities (LAs), and CAs play in the design and delivery of schemes linked to regional economic growth. However, the overwhelming feedback from business has been around the lack of powers and resource that these bodies have to deliver schemes to the highest standards possible.

Continuing progress on devolution in England will be key to supporting local and regional bodies in levelling up and responding to local needs. It gives areas the accountability to make economic and social decisions and provides a clear point of contact for businesses. As devolution deals develop and further powers and funding are devolved, consideration must be made for how to measure the success of the deals.

For areas without a devolution deal, more must be done to ‘level up’ LEPs. This means ensuring that LEPs have the resource and analytical capacity to develop and deliver robust plans for the regions they represent. As highlighted within the Industrial Strategy Council’s recent assessment on local decision making, capacity varies across LEPs, for example the Marches LEP has only 10 employees, vs 50 in the North East LEP.[1] This resourcing challenge is particularly felt in rural LEPs, who struggle to obtain funding, compounding challenges around resourcing and delivery.

In addition to a lack of resourcing, local and regional bodies are often left uncertain as to long-term funding streams. For example, following the decision to leave the EU, the UK government announced in their 2017 manifesto that they would replace EU Structural and Investment Funds (ESI) with a UK Shared Prosperity Fund (UKSPF). Since that announcement in 2017, the government has yet to formally consult, or provide clarity on, the future of the UKSPF. The ESI funds will end in 2020. With no clarity on the future of the UKSPF, projects are likely to have to be put on hold. On top of this, when further clarity is given as to the future of the fund, there will be a lead time where new projects have to be planned, creating a gap in the pipeline of projects that could support ‘levelling up’ the country.

Funding uncertainty is felt across all layers of local and regional government. This is in part due to the unpredictability and short-term nature of project funding, which requires local areas to bid for pots of funding against competitive criteria. Whilst developing a bid can ensure projects are well thought through, resource cuts have seen local and regional bodies, particularly local authorities rely heavily on consultancies in developing these bids. As noted by the Industrial Strategy Council this brings its own issues, with consultancies often lacking the good knowledge of local economies, as well as bringing ‘template approaches’ to the process.[2] Between 2016-19, 82% of the short-term funding made available by government required councils to make a competitive bid. It was found that the typical cost of bidding for a £5m project is between £35k and £94k.[3] In one council area between 2018-19 they won seven out of the 12 bids they made and secured on average £3m per bid. Constant bidding has been found to create uncertainty, making it difficult to plan resources and staffing efficiently. Some have suggested it’s a ‘deadweight loss’[4], diverting resources from more productive activities. Finally, short term funding tends to provide capital funding, but not revenue funding. This has left local transport and highways authorities, for example, with funds to deliver capital investment but struggling to fund the resource to operate and maintain new facilities, or plan and prioritise new schemes.[5]

 

 

Recommendations:

 

Business engagement must be at the heart of local and regional decision making, with their role clearly set out as devolution develops

Productive, well engaged businesses play a key role in driving local economic growth - investing in R&D and skills, delivering public services and infrastructure, and helping the country meet its net-zero targets. There is not a one size fits all approach when it comes to the role of local and regional bodies in achieving levelling up, but success was often found where there was strong engagement, with business, academia, risk capital, and importantly with entrepreneurs. It is important that when devolution develops across England, business engagement in the development of local and regional plans remains strong, whether led by the LEP or the CA.

Business engagement with local and regional stakeholder bodies has by-and-large been positive but does vary across the country when developing priorities. For some LEPs there are well established networks of advisory boards that help shape and feed into the decision-making process. Taking the Local Industrial Strategies (LIS) as a recent example, LEPs and CAs worked to engage the business community. However, the lack of consistency of approaches, whether on the types of forums, the timescales, or the format feedback was required in, created added complexity for businesses operating across multiple regions.

Whilst it is not for government to dictate how LEPs should consult, it is important that alongside the ‘levelling up’ of LEP resource, the LEP review is fully embedded to address some of the imbalances within different LEP approaches. Existing bodies, such as the LEP Network should continue to encourage collaboration between LEPs and gather best practice to support them in developing their approaches to stakeholder engagement.

Government, however, could do more to facilitate a consistent approach in providing more long-term policy certainty. Timelines for the LIS have shifted throughout the process and it has been suggested that support from different government departments varied. Successful development and delivery of the Local Industrial Strategies requires buy-in from all departments, particularly as the strategy will have different asks of each. This must be a collaborative process, with LEPs bringing local and regional insight to departments to shape successful policy making. For those LEPs and CAs still due to publish in the ‘third wave’, timelines have changed as plans progressed. Some LEPs found themselves having to draft and consult on plans in significantly compressed timelines in response to government decisions, whilst others were left unsure of next steps, having consulted widely with businesses in their regions. As has been noted by the Industrial Strategy Council, consultation fatigue is being felt by businesses[7], who have spent time and resource supporting LEPs and CAs develop well evidenced LISs. Clarity is therefore needed on the future of the Industrial Strategy, ensuring it is still fit for purpose and delivered at pace.

 

 

 

 

Recommendations:

-          The LEP review must continue to be fully embedded in all LEPs, with a focus on resolving boundary issues to avoid overlaps, where possible aligning LEP boundaries with CAs, and ensuring strong private sector representation on LEP Boards.

-          The LEPs and Combined Authorities across the country should consider how best to engage with the business community, particularly as devolution in England progresses.

-          There are five principles they should consider when developing business engagement plans:

-          The government should provide long-term clarity on the future of the Industrial Strategy, revisiting what elements of the strategy should be strengthened considering the impacts of Covid-19. They should then clearly articulate a vision to unite stakeholders behind the strategy, galvanise action, and deliver at pace.

 

August 2020


[1] Industrial Strategy Council (2020), Understanding the policy-making processes behind local growth strategies in England https://industrialstrategycouncil.org/sites/default/files/attachments/Understanding%20the%20policy-making%20processes%20behind%20local%20growth%20strategies%20in%20England.pdf

[2] Ibid

[3] Urban Transport Group (2020), The Local Transport Lottery, https://www.urbantransportgroup.org/system/files/general-docs/Urban%20Transport%20Group%20-%20The%20Local%20Transport%20Lottery%20FINAL_0.pdf

[4] Ibid

[5] Urban Transport Group (2015), The Revenue-capital Mismatch https://www.urbantransportgroup.org/system/files/general-docs/Revenue-capital%20mismatch%2002032015.pdfT

[6] Industrial Strategy Council (2020), Op Cit

[7] Industrial Strategy Council (2020), Op Cit.