Written evidence submitted by the Western Gateway (IGR0035)

Science Innovation & Technology Select Committee: Innovation, Growth and The Regions - Western Gateway Partnership response

About the Western Gateway Partnership

 

The Western Gateway is the pan-regional partnership for South Wales and Western England.

 

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We are made up of Local Authorities, one Mayoral Combined Authority in England, two Corporate Joint Committees in Wales, and working with Governments in both Cardiff and Westminster, together covering a population of 5 million people and a combined economy worth £130 billion.

 

We have been working collaboratively with industry and academia to ensure our area collaborates at scale to support the work of the UK and Welsh Governments in driving growth across the whole UK in a way that benefits all our communities. Through this  collaboration, we are ready to overcome barriers, to add at least a further £34billion to the UK economy.

 

The Western Gateway is unique in being the first pan-regional partnership to build political and economic connections between two countries within our union.  With support from across the area and local political backing, we are working to help the UK with its national mission to create economic growth, whilst also bringing our nations together to build on our potential to be world leading in green energy and AI.

Summary

Response

 

Q1. How does the Government drive research and innovation in our regions?

  1. The current approaches to driving research and innovation are patchy in application and haphazard in their effect.  The combination of measures: funding via grants, tax breaks, regulation, standards etc is complex and not conceived in a systematic way making it hard to navigate for people not used to the systems. The complexity of this landscape is a barrier in itself to an ecosystem’s entrepreneurs.

 

  1. Devolution has little direct role to play, as innovation and research can happen anywhere through any means and local government, in particular, is unlikely to have a strong handle on it. At times, it has acted as an administrative barrier where – perhaps due to the aforementioned complexity - grant applications default to Mayoral Combined Authorities. This restricts clusters’ abilities to form across administrative borders to create exceptional regional economies from strong existing tech clusters.

 

  1. However, devolution can be used supportively if the areas of the UK have an active and solid template to work to and are viewed as parts of a whole.  For example, the Western Gateway region has been independently identified as having one of the strongest cyber security clusters in Europe – it is responsible for one third of the cyber security patents that are issued from within the UK.  This extends across research and development, innovation and application, with the region presenting as a ‘whole’ technology economy which is underlined by the presence of significant public and private anchor institutions. With such strong existing ecosystems, new grants or encouragement to set up similar in other parts of the UK are likely to be costly and ineffective at best, actively damaging to our potential as firms/individuals exploit the competition for personal gain with no advances made.

 

  1. Our research shows that, despite its strengths, the area receives around half of the public funding other areas receive.  So far as we can determine this is attributable to disproportionate focus on other areas and, the ‘old adage’ of success (in grant writing) breeding success.

 

  1. Growth is an area local authorities could help with, if they were not over-burdened in their statutory duties.  As each area has its strengths, and thereby its priorities, they could tailor basic DBT related courses and support to those strengths.  Growth hubs could be supplemented with targeted plans for scale-ups and more attention could be given to bringing in Universities for the research-commercialisation work. This is an example of something Western Gateway has been doing with success in the hydrogen and cyber communities.  SetSquared is a firm partner and a wonderful example of success in regards to spin-outs.

 

  1. Place-based innovation funding works, but it works best where specific interventions are applied to an existing area or region’s strength. Plexal, the innovation ecosystem specialists, assessed that Government can expect six times the economic impact from companies that participate in specific interventions (e.g. accelerators) rather than those that just place themselves in innovation centres. They concluded that ‘place plus innovation’ is the answer, rather than just using capital to construct new buildings. The Western Gateway Partnership has interpreted this as a clear argument that moving beyond imposed borders to respond where activity is happening delivers. Drawing on different devolved actors who understand the wider geography can deliver to a significant degree, and a singular focus on only one part of a functioning economic market area – even for an intermittent period – will accelerate any existing regional inequality.

 

  1. During the Autumn Budget 2024, the government announced that it was "minded to" cease core funding for pan-regional partnerships, such as the Western Gateway[1].

 

  1. While we recognise the government's stated preference for Metro Mayors across England as tools for regional investment, as set out in the English Devolution White Paper, we note that there are currently no plans for comparable Mayoral bodies on the Welsh side of our border, and current discussions on the future of Devolution are not currently focused on how to support economic growth in areas where economies naturally cut across the borders of the UK nations.

 

  1. Should core funding for the Western Gateway cease, there are concerns that efforts to promote the Western Gateway’s cross-border economy will be undermined. With local government funding cuts on both sides of the border, many of our member Authorities have found they have had to reduce their economic development teams, reducing capacity to promote investment opportunities, and making it unlikely that any one Authority would be able to lead or replicate the work of the existing Secretariat.  This will significantly impact our regions’ ability to support and foster innovative organisations across our geography.

Q2. How does research and innovation in our regions drive growth and prosperity in those regions?

  1. We feel confident in answering this question, as the Western Gateway, innovation is at the heart of our identity, whether in culture or our economy. Independent economic reviews have forecast the Western Gateway economy to grow more than all other comparable areas given our exceptional innovation sectors. Our economy is projected to grow by 1.4% annually between 2024 and 2029, and we already contribute £129 billion in GVA to the UK economy. The CBI identified the Western Gateway has having very strong localised clusters, and the lack of wider state support means we can credit our local cluster organisations, such as Cynam in Cheltenham, Tramshed across south Wales, TechSpark in Bristol & Bath etc, as having been key drivers in offering support, membership, community space and events, for innovation business to collaborate. This is bolstered by strong working with research-focused universities who are active in their ecosystems, and a solid foundation of anchor institutions across the region.

 

  1. As a result, the region’s cyber security sector exceeds the national average in productivity for the sector by 25%. Local actors have been critical to the region’s success, and in 2020, capital investment in ICT assets, relative to GVA, was higher than in any of our comparator areas, accounting for £8.70 for every £1,000 of GVA.

 

  1. The Western Gateway provides an excellent example of the utility of a synthesised approach to mapping innovation clusters. While we work closely with local actors and their localised expertise, the region as a whole is characterised by innovation clusters, many in close proximity to one another. Strength in cyber security is a constant across all of these clusters, but a regional analysis – which pan-regional partnerships are best placed to provide – has shown that each cluster has its own distinct tech cluster – e.g. Quantum and AI in Bristol and Bath, health tech in Swansea, fintech in Cardiff, renewable energy tech in Stroud – shown as a whole, this is a ‘complete’ technology economy and has been able to be presented as such by looking outside of administrative boundaries, while working in collaboration with those within them. We recommend drawing on existing expertise from community to regional level to map out these economies, while drawing on an existing and extensive evidence base.

 

  1. This expertise should also be utilised to inform policy-making decisions in Whitehall, there is clear value in drawing this input for the National Industrial Strategy. The UK is a complex country with a varied economy, there will not be a ‘one size fits all’ solution to maximising its potential. Rather, the active and willing ecosystem and thought leaders in the regions should be able to work closely with Government to ensure that their existing strengths are bolstered, and their unique challenges are addressed.

 

  1. In treating each region, and indeed locality, as its own distinct economy, the Government will also have a much clearer picture on how the particular qualities of this region can bolster the wider UK as opposed to encouraging inward competition with each place chasing the same sectors.

 

Q3. How is research and innovation diffused or supported to drive productivity and growth in the regions, wherever it may come from?

  1. Investment in innovation requires a cross-departmental approach, and there is an opportunity in the forthcoming National Industrial Strategy (and its implementation) to map out this process effectively.

 

  1. As mentioned previously in this submission, the landscape for innovation investment is complex, and many of the sector’s businesses are small with limited time and expertise to tackle this landscape. The National Industrial Strategy offers the opportunity for Government to streamline grants, with either fewer calls or grants via fewer sources, but at larger value to result in a sustained difference felt at the heart of our places.

 

  1. Local actors are also well positioned to advise the Government on the inclusion of set measures for productivity and contribution to growth, where that is viable and appropriate.

 

  1. We have seen Catapults to be extremely helpful and productive in bolstering local innovation economies, with examples of the High Value Manufacturing Catapult in the west of England and the Compound Semi-Conductor Catapult in Newport. However, many of these catapults are not active enough in the areas to which they align and can resultantly miss opportunities for wider regional expansion, and consequently wider (international) recognition. Pan regional partnerships can assist with these opportunities, but the relative lack of a Government presence in the Western Gateway where compared to London, the north or Scotland means there is a fundamental lack of recognition at a national level. A strong DSIT presence in a proven exceptional technology economy, with effective collaboration with HMT and DBT, would ensure we are not missing potential and driving a lack of investment.

 

16 January 2025

 

[1] Sion Berry, “Cross-border Western Gateway Partnership facing loss of £1m core funding from the UK Government”, Business Live, 12 December 2024, URL: https://www.business-live.co.uk/economic-development/cross-border-western-gateway-partnership-30573540