Written evidence from South East Midlands Local Enterprise Partnership (ISG 117)

1.0  Introduction

1.1               The Business Innovation and Skills Committee has invited written submissions on a set of questions concerning the Government’s intention to adopt and promote an industrial strategy for the country.

1.2              SEMLEP, the Local Enterprise Partnership for the South East Midlands (now including the whole of Northamptonshire) is pleased to offer its views and evidence on a sub-question under Question 6, namely: “How should the industrial strategy work with local authorities and Local Economic Partnerships, reconciling a UK-wide strategy and local, regional and devolved nations’ priorities?”

1.3               By way of context, the SEMLEP area sits at the heart of the Cambridge-Milton Keynes-Oxford Growth Corridor, is part of the Midlands Engine, and is a high growth area relative to other parts of England, in terms of GVA, population and housing[1]. The area includes some highly productive economies (Milton Keynes has the fourth highest GVA per worker of all British cities[2]), and can act as a hub for growing productivity more widely, including by bridging the economies of the South East with those of the Midlands.

1.4               The area’s priorities are to continue to pursue such high growth across the board, by nurturing all economic activity, as well as to focus on some specific ‘showcase sectors’ within the wider business growth being realised. These ‘showcase sectors’ – namely High Performance Technology, Manufacturing and Advanced Technology, Logistics, and the Cultural and Creative sector – are those which have wide-reaching supply chains and which have been identified as having the capability, assets and greatest potential for particularly rapid growth.

1.5               This submission is thus broken down into two main sections: the first sets out some key information on the ‘showcase sectors’ that SEMLEP has identified; while the second provides an overview of some of the growth-enabling activities that we believe Government should support in order to reconcile a UK-wide strategy with local-level priorities.

2.0  SEMLEP’s Showcase Sectors

2.1              High Performance Technology (HPT)

2.1.1         This sector encompasses a number of industries, including the automotive and aerospace sectors (which were recently namechecked by the Secretary of State for Business, Energy and Industrial Strategy as being among the country’s “most successful industries”)[3].

2.1.2        Between 2009-2014, employment in the HPT sector grew by 25% in the South East Midlands, versus 6% for England as a whole. The HPT sector accounted for 3.3% of total employment in the South East Midlands in 2014, up from 2.8% in 2009. Over the same period, the HPT sector stayed constant as a % of total employment in England, at 2.9%.

2.1.3         An important component of the South East Midlands’ HPT strength is its Enterprise Zones. The new Luton Airport Enterprise Zone will create over 7,200 direct jobs, including in aerospace businesses and advanced engineering, while the Northampton Waterside Enterprise Zone is home to companies such as Cosworth, Mahle Powertrain and GE Precision Engineering. Meanwhile, Aylesbury Vale Enterprise Zone incorporates Westcott Venture Park – a strategic employment site which has significant space propulsion and environmental engineering capabilities – and Silverstone Park, a technology park next to the Silverstone Grand Prix Circuit which specialises in engineering, innovation and business development.

2.1.4        Indeed, a High Performance Technology and Motorsport (HPTM) Cluster based around Silverstone (and extending across Southern England) has been identified, with a SQW report[4] concluding that the cluster is “mature” in relation to motorsport and “developing” in relation to mainstream high performance technology. The report stated that: “This has growth potential in the context of a fast-emerging industrial paradigm, driven by regulatory changes in the ambit of carbon emissions and big data, and focused around cleaner/greener, low carbon and energy efficient products and solutions. In taking this fully into the mainstream – of automotive, aerospace, marine, defence, medical devices, sensors, etc. – the potential is vast.”

2.1.5        The South East Midlands has a very strong aerospace, aviation and transport presence. While other places in the UK can boast a strong aerospace supply chain, this area uniquely boasts a strong overall aircraft and aviation community, taking account of the combination of airlines, airports and platform integrators and academia. Cranfield University epitomises this capability with its combination of skills and facilities contributing to world leading learning and research programmes. It is the only University in Europe with its own airport and runway, positioning it at the forefront of defining and delivering aircraft of the future, airports of the future, airspace management of the future and airlines of the future.

2.1.6        The area, with Cranfield, should be seen as the UK centre for 'high value design' and the nexus for aerospace and aviation research in the UK. Furthermore, with key assets such as the Aerospace Integration Research Centre[5], the Aerospace Technology Institute, and Millbrook Proving Ground, the South East Midlands is at the forefront of work into ‘Next Generation Transport’. Such work includes the ‘greening of transport’, advances in autonomous vehicles, and the development of intelligent, integrated transport systems, including the UK Autodrive project in Milton Keynes (in collaboration with JLR, Ford and Tata), which is testing driverless cars in a real city environment, and a new, government co-financed, test facility for connected and autonomous vehicles at Cranfield, enabling research, development, testing and showcasing in a multi-user environment inclusive of regular road users and pedestrians.

2.1.7         Meanwhile, the Open University’s Materials Engineering Group – which supports the aerospace, transport, nuclear, energy and high value manufacturing sectors – is internationally renowned for its work on developing and applying the Contour method of residual stress measurement in complex engineering components. It is currently exploring the opportunity to build an international stress engineering centre (in collaboration with the Science and Technology Facilities Council) at Harwell, which would allow local industry the opportunity to access state-of-the-art advanced engineering facilities.

2.1.8        Although Standard Industrial Classification (SIC) codes are not fully comprehensive in their coverage of the HPT sector, they do provide an indication of the South East Midland’s dominance in this field, as exemplified by a number of sub-sectors with particularly high Employment Location Quotients (LQs)[6] in the South East Midlands area. These include the manufacture of: military fighting vehicles, electronic industrial process control equipment, engines and turbines, loaded electronic boards and fluid power equipment[7].

2.2              Manufacturing and Advanced Technology

2.2.1        This sector encompasses a number of manufacturing sub-sectors, but is particularly focussed in the SEMLEP area upon food and drink manufacturing, with strong local presences by employers such as Weetabix, Ryvita, Carlsberg, Mondelez and Unilever.

2.2.2        This is reflected in very high Employment Location Quotients (LQs) for the South East Midlands in a number of sub-sectors, including (2014 LQs shown in parentheses for each):

• Manufacture of breakfast cereals and cereal-based foods (12.4).
• Production of coffee and coffee substitutes (6.8).
• Grain milling (5.6).
• Manufacture of condiments and seasoning (2.9).
• Manufacture of beer (2.6).

2.2.3        The area’s strengths in this sector are supported by the Aylesbury Woodlands site of the Aylesbury Vale Enterprise Zone – which builds on links to the Arla super dairy to support agri-food businesses – and by two important assets in Central Bedfordshire: a Food Enterprise Zone, and Colworth Science Park. The Food Enterprise Zone is set to create around 2,000 jobs and up to 30 new businesses by 2020, while Colworth Park is home to Unilever’s Global Development Centre for ice cream and beverages, Unilever R&D, its Patent Group and its Global Safety and Environmental Assurance Centre, as well as labs and office space to rent to start-up and small businesses involved in the food, health and wellness sectors.

2.2.4        Alongside food and drink manufacturing, another particularly noteworthy sub-sector in the South East Midlands is the footwear industry, which includes prominent companies such as Church’s, Jeffrey West, John Lobb and Cheaney, but also a growing group of new entrepreneurial companies, such as Stamp and Chancery, which are focused on high quality boot and shoe production for a growing export market. The 2014 Employment Location Quotient for the manufacture of footwear was 16.0.

2.2.5        As with the HPT sector, the Manufacturing and Advanced Technology (MAT) sector has realised significantly higher employment growth in the South East Midlands area than in England in recent years (5% growth between 2009-2014, versus 1% for England over the same period).

2.3              Logistics

2.3.1         Logistics is a very important sector for the South East Midlands, accounting for 9.5% of total PAYE and VAT-registered enterprises in the area in 2015, versus 6.8% of such enterprises in England, and for 12% of all employment in the South East Midlands in 2014, versus 7.4% in England.

2.3.2        Meanwhile, between 1997-2014, GVA in the ‘GHI’ Industrial Sectors[8] in SEMLEP[9] grew by 116%, as compared to 82% for all LEPs over the same period.

2.3.3         The South East Midlands’ location offers a natural comparative advantage in the Logistics sector, given its proximity to London and Birmingham, and its position in the centre of the Oxford-Milton Keynes-Cambridge Growth Corridor. It has excellent road and rail links to the north and south, plus international links through Luton Airport, and easy access to European high-speed rail routes from St. Pancras. Improved East-West transport links would support further growth in this sector.

2.3.4        There are important synergies between the Logistics and Food and Drink sectors, with brands such as Booker, John Lewis, Coca Cola, AG Barr and Sainsbury’s all having distribution centres within the South East Midlands area, while wholesalers such as Medallion Foods and Bedford Continental also have their national base within the South East Midlands.

2.3.5        As with the other showcase sectors, there are also important links between the Logistics sector and universities in the South East Midlands area. For example, Cranfield University developed a reverse logistics toolkit to enable companies in the retail sector to better manage the flow of surplus or unwanted products returned by customers, and Halfords was able to reduce its returns by 40% as a result.

2.4              Cultural and Creative Sector

2.4.1        The cultural and creative sector – which encompasses a diverse mix of industries, including advertising and marketing, design, digital, sport and the visitor economy –  is well-represented in the South East Midlands area, accounting for nearly 12% of total employment in 2014, and for nearly 17% of total PAYE and VAT-registered enterprises in 2015, with the sector dominated by private micro businesses[10]. The rationale for focusing on all these industries together is because they represent a collective offer to the economy. For example, the arts, heritage and sports industries make a vital contribution to the visitor economy, as well as providing a platform for the creative sector to grow and collaborate with these sectors.

2.4.2        Within this broad cultural and creative grouping, the digital sector is particularly important to the South East Midlands, with the publication of computer games and development of business and domestic software both displaying Employment Location Quotients of over 1 in 2014. The Open University’s Knowledge Media Institute is at the forefront of the converging areas of Cognitive and Learning Sciences, Artificial Intelligence, Semantic Technologies and Multimedia. For example, the CORE software system[11] provides access to critical research information for software developers, libraries, repository managers, academics, researchers, life-long learners, funders and business users.

2.4.3        The area is also at the forefront of advances in the use of ‘Big Data’, with the MK:Smart initiative, led by The Open University in partnership with BT and Milton Keynes Council, established as an internationally prominent smart city programme. MK:Smart has  created a state-of-the-art ‘MK Data Hub’ which is  supporting business growth and service innovation  around the city by helping to acquire and manage vast amounts of data relevant to city systems from a wide variety of data sources[12]. As part of this, the Innovation and Incubation Centre (IIC) at University Campus Milton Keynes (UCMK) provides training in data-driven business innovation and the digital economy, as well as hands-on support for business development, demonstration facilities, and an incubation space. Milton Keynes has the second highest proportion of Small and Medium Enterprises in the high-tech and digital sector of any city in the UK[13].

2.4.4        As a further example of the South East Midlands’ importance in the growing field of Big Data, a Cranfield University-led consortium (involving the University of Cambridge, Newcastle University, and the University of Birmingham) has established the Centre for Doctoral Training in Big Data and Environmental Risk Mitigation, which aims to produce a cohort of researchers who can use large or complex datasets to understand and ease the risks posed by a range of societal and environmental changes[14].

3.0  Reconciling a UK-wide strategy with local-level priorities: the growth-enabling support that we think Government should provide

3.1               SEMLEP believes that a UK-wide industrial strategy can most easily be reconciled with priorities at lower geographical levels by prioritising support to general ‘growth enablers’, which are critical in driving local productivity. In particular, we believe that resources need to be targeted at transport links, skills provision, housing, land for business growth, digital and mobile connectivity, and research and its commercialisation. Each of these is set out in a bit more detail below, along with some accompanying information on what support in these areas could mean for the South East Midlands:

3.1.1         Transport links: while there are already strong North-South transport links throughout the SEMLEP area, there is scope for significant improvements to East-West links. Indeed, better East-West transport links could help foster a globally-significant ‘tech corridor’ across the South East Midlands between Oxford and Cambridge. At present, despite there being strong HPT presences across the area, and despite distances between settlements in the South East Midlands and Oxford and Cambridge being relatively small, a lack of East-West transport infrastructure means that only 1.7% of the resident workforce in the South East Midlands area works in Oxford or Cambridge[15]. By way of contrast, the excellent connectivity in the Thames Valley corridor[16] attracts very high productivity, knowledge intensive industries and facilitates significant agglomeration benefits.

3.1.2         Skills: there is an extensive University and College presence throughout the South East Midlands but, if the area’s full growth potential is to be realised, continued support to these establishments is necessary to ensure that skills provision keeps pace with business expansion and innovation. This includes support for a proposed new technology university in Milton Keynes (MK:IT) to help drive further growth in knowledge intensive jobs. With 16% of business establishments already experiencing some form of skills gap[17], this is a critical issue to be tackled.

3.1.3         Housing: employment and housing growth are mutually reinforcing. The South East Midlands is already delivering over 6% of England’s housing[18], and there is a strong local commitment in the area to deliver more[19], which is unparalleled in a greater South East context, providing much needed and affordable homes for the fast growing population, as well as the overheated markets of London, Cambridge and Oxford. However, more could be done to support the provision of infrastructure for large-scale growth, which is critical if the planned-for numbers are to be realised.

3.1.4         Land for business growth: if the Government’s industrial strategy focusses on either attracting inward investment and/or developing sectoral clusters, then it is necessary for sufficient land to be made available. Across the South East Midlands, local councils are releasing substantial quantities of land for employment generation and business growth, and these efforts should be supported, in practical delivery terms, both in this area and elsewhere.

3.1.5         The advancement of digital and mobile connectivity: thanks to Government/BT investment in the current programme of Superfast Broadband, homes, businesses and business parks in the SEMLEP area are becoming increasingly connected. However, further investment is needed if the area is to improve operating speeds and close some of the existing gaps in telecoms provision.

3.1.6         Support for research and its commercialisation: the South East Midlands is engaged with the “Eight Great Technologies”[20] that the coalition government identified as having the greatest potential to propel the country to future growth by stimulating and expediting the transfer of innovative projects from the laboratory into the marketplace and from scientific discoveries to commercial applications. The area’s advanced technology businesses and pioneering institutions already have particular strengths in Big Data, Satellites, Robotics, Synthetic Biology and Advanced Materials[21], but there remains scope for new alliances and projects in all of the eight fields. In this regard, SEMLEP and HPT bodies in the South East Midlands have been instrumental in the preparation of the Science and Innovation Audit for the wider Midlands Engine area, and are also working with a variety of partners, including the Department for International Trade, to look at future possibilities for the aerospace sector across the east of England. The area is also leading the way in pioneering the realisation of ‘smart cities’ and the use of Big Data to drive public sector transformation.

27 September 2016