Written evidence submitted by the Institute of Directors (LRS0040)

We appreciate the opportunity to participate in this inquiry. We are constantly receiving feedback from our members on the priorities for business and the economy after Covid. As this is an evolving issue, where we have not directly responded to a question in your terms of reference we will provide further updates in due course.

About the IoD

The IoD was founded in 1903 and obtained a Royal Charter in 1906. It is an independent, non-party political organisation of approximately 25,000 members. Its aim is to serve, support, represent and set standards for directors to enable them to fulfil their leadership responsibilities in creating wealth for the benefit of business and society as a whole. The membership is drawn from right across the business spectrum, with 70% consisting of directors from small and medium-sized enterprises (SMEs).

The IoD’s broader views on this theme are outlined in our recently published report Connected Economies, People and Places, from which this response is largely based. We would urge the committee to consult the report for an in-depth assessment of the challenges – and potential policy solutions – for the UK’s regional growth agenda

 

Inquiry Terms of Reference

Local structures/ Stakeholder engagement

The UK’s regional development policy currently lacks coordination. The central responsibility for regional growth policy is fragmented between several departments. With the loss of Regional Development Agencies, powers, responsibilities and funding allocations meanwhile have been differentially devolved to Local Authorities, Local Enterprise Partnerships (LEPs), and Combined Authorities, with varying central-local deals. The somewhat hodgepodge process of devolution so far has created a vacuum between the centralised decision making in Government departments and devolved deliberation in sub-national structures which can harm the agenda to improve regional imbalances

Gaps in regional oversight as well as incoherence in national agendas makes it harder to integrate policies across local jurisdictions. The regular chopping and changing of devolved institutions with different governments has also stifled long-term progress and institutional knowledge building. Moreover, some areas lack the dynamism to respond to the local economic impact of global, national, and technological change. This includes the loss of a major employer, which can impose a significant burden on localities without the resources to mitigate the risks. 

Methods to improve the local-national coordination of regional growth policy could include:

 

 

 

Targeted regional investment

R&D

Accelerating R&D investment could help support the UK’s economic recovery from Coronavirus. The Government ought to consider the crucial role of place as part of its long-term ambition to raise R&D spending to 3% of GDP. Innovative activities not only spur growth, drive knowledge spillovers and create high-skilled jobs; they also only emerge in areas that have the business infrastructure to support it. Developing innovative business hubs and innovation centres outside London will also be a key part of improving graduate retention outside the Southeast.

This should be supported by:

Business Investment

The Government ought to consider how it can provide a nudge for growth, innovation, and entrepreneurialism to support underdeveloped regions (particularly those badly affected by Coronavirus) while ensuring any actions comply with the relevant state aid framework where value for money can be demonstrated, this includes:

 

Regional funding

The Government should follow through on its intention to guarantee and eventually replace ESIF with a UK Shared Prosperity Fund, beginning by consulting soon on its design. It should, at the very least, match what the country already receives from the EU. The funding allocations should also place greater emphasis on developing areas with high unemployment and low productivity (alongside supporting competitive areas), and improve upon current application procedures for EU regional/ structural funds.

It should ideally be coordinated in collaboration with local areas, drawing on regional national government deliberations and the proposed taskforce’s recommendations, to ensure funding also helps to connect neighbouring local economies with differing levels of devolutionary support. The ultimate design and delivery of funded initiatives should be driven by local authorities where possible.

The UK more generally needs to find the finances to replace EU funding streams which may be closed off in future, and raise further investment, which should involve assessing new funding channels, including by:

 

Tej Parikh

Chief Economist, IoD

Florent Sherifi

External Affairs Manager, IoD

 

September 2020

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