Written evidence by Cornwall Council, Council for the Isles of Scilly and The Cornwall and Isles of Scilly Local Enterprise Partnership (PEG0023)

July 2020

Cornwall Council is a unitary authority with a resident population of 569,578 [Mid-Year Population Estimates, 2020] and an enterprise business count of 24,450 [UK Business Counts, 2019]. Cornwall is primarily a microbusiness economy with eighty eight percent of enterprises employing 0-9 employees. Cornwall only has 70 large employers with over 250 employees [UK Business Counts, 2019].

There are 2,260 people living in the Isles of Scilly, with the lowest population density at 137 per km2. The islands have seen a population decline of 0.9% from 2012 to 2017. 25% of the population are 65+ and only 16.6% are between 20 and 34 years old.  Most of the workforce both live and work on the islands, but it is difficult to attract younger families; there is a shortage of available housing, house prices are 15 times that of annual household income and 26% lack central heating.

Tourism is the biggest sector, employing about 800 people, making the islands very vulnerable to changes in visitor trends/demographics and an ambition to continue to recover from a previous decline, to grow, thrive and sustain a strong visitor economy.  The islands are also vulnerable in respect of transport; there is a single sea transport provider, the Isles of Scilly Steamship Company, and bad weather effects sea travel with a reduced service in the Winter months.  For air links there are two providers, the Isles of Scilly Steamship Company provide a fixed wing service and Penzance Helicopters are aiming to provide a rotary wing option from the summer of 2020.  Getting people, including those in need of medical attention, produce and waste on and off the islands is therefore costly. They are also vulnerable in respect of a secure and constant supply of electricity from the grid, which is provided via a single connecting cable.

The Cornwall and Isles of Scilly Local Enterprise Partnership (LEP) was launched in May 2011. Private sector-led, it is a partnership between the private and public sectors and is driving the economic strategy for the area, determining local priorities and undertaking activities to drive growth and the creation of local jobs.  The LEP is business-driven and our board includes 15 appointed representatives of the private sector, 3 nominated Cornwall Council representatives and 1 nominated representative from the Council of the Isles of Scilly. Our mission is that by 2030, Cornwall and Isles of Scilly will be the place where businesses thrive, and people enjoy an outstanding quality of life.

Executive Summary

The economic impact of COVID-19 in Cornwall and the Isles of Scilly has been wide ranging and profound for many parts of our economy and society and, as the evidence outlined below demonstrates, we have been one of the hardest hit areas in the UK in terms of economic impact.  Whilst this presents significant challenges, there is also the potential to enact a programme of recovery and renewal that delivers a step change to the way we live and work and establish a new future for our businesses, residents and visitors. Our recovery programme will include supporting the development of a new economy with renewables, space, data and advanced manufacturing playing a much larger role as well as remodelling and reframing our core industries and businesses to improve their performance.  All actions will need to be underpinned by an embedded culture of inclusive growth and a significant skills agenda for all of all ages that will help our residents to get back into work.

COVID 19 Economic Impact Summary is outlined in the table below.

Our emerging recovery and renewal programme is therefore set in the context of this impact and outlines how we intend to use this opportunity to address our longer-term strategic economic transformation and resilience.  A summary of our key responses to the BEIS inquiry are outlined below with more detailed evidence and responses in the subsequent pages.

1. In setting guiding principles, the Government should prioritise devolved decision making and delivery to the local level to address regional inequality and variations in economic contraction in its recovery package. We therefore offer Government a model to test the role that further devolution to rural areas can play in the “levelling up” agenda.  The systematic bias in national policy and funding decisions toward cities can only be levelled up by targeting LEP areas and regions lagging behind and varying policy approaches according to the differing nature of the local areas and their challenges. In addition, the three CIoS Local Industrial Strategy metrics; productivity gap, quality of life and carbon neutrality, are good measures of equitable clean growth and should be adopted by Government. 

In order to deliver on the “levelling up” agenda our clear ask is for our current EU programmes (ESIF, RDPE, EMFF) to be replaced by a UK SPF that invests at least £700 million into CIoS in a fully devolved fund over the next 10 years. Through the publishing of the Devolution White Paper in the Autumn of 2020 Government should ensure that the focus remains on levelling up regional inequalities through devolution to non-metropolitan areas.

2. Consumer confidence at national/society level is influenced by a number of factors that are outside the control of local areas.  However, improvements in consumer confidence at business level will result from clearly devolved and appropriate economic investment and support programmes. Businesses will be required to ensure their overall business model and performance moves towards “best in class” from a public health point of view in addition to necessary improvements from a social, economic and environmental perspective.  By building on our Growth Hub[2] provision and our LEP led “Better Business for All” initiative[3] we will work with businesses to rebuild the confidence in their customer base to speed up recovery and renewal.

3. In line with Cornwall Council’s declaration of a climate emergency, a higher priority should also be given to environmental goals in future support programmes recognising the need for urgent action to address the climate crisis, restore nature and promote green business practices (e.g. Green Tourism). The CIoS draft Local Industrial Strategy echoes this ambition for carbon neutrality by 2030 and the Great South West’s ambition to be the first net zero carbon region in England both create the policy and strategy alignment required to deliver the necessary change. 

4. There is no ‘one size fits all’ solution to lifting productivity. The productivity challenge in CIoS is multi-faceted, requiring orchestrated and long-term action across the foundations of productivity. Therefore, the focus for recovery should not be on national priorities for certain specific sectors but on the challenges, goals and vision for the future economy at a local level. If Government focuses on the Five Foundations of productivity at national level, local areas can then define how these relate to their local economy, sector mix, etc. Conditions attached to future support should also focus on the delivery of “outcomes” required for sustainable growth for the identified local area rather than arbitrary outputs.   

5. The importance of skills in the growth agenda and on social mobility and overall inclusive growth cannot be underestimated. Government needs to create opportunity and stimulate the economy through a green economic recovery that has employer-led reskilling and upskilling embedded at local level. Future government immigration policy is also critical to the labour market for many of our key sectors as they are reliant on seasonal labour for much of their workforce. The further and higher education sector is also vital and therefore negotiating future access (as a “third country”) to the EU’s Horizon Europe and ERASMUS programmes is of great importance.  If access to these schemes cannot be agreed, then alternative UK provision will need to be put in place.

In addition to general skills provision schemes to tackle long term unemployment and promote inclusive growth are vital for any long-term recovery.  Young people and those furthest from the labour market may find themselves crowded out by the more recently unemployed during the early stages of recovery.

6. Post COVID 19, the real Grand Challenges (as outlined in the Industrial Strategy) should be localised within a national framework and should consider climate change, regional imbalances/the levelling up agenda and measures to reduce inequality/social inclusion. The Government’s Industrial Strategy should therefore be refreshed to include consideration for wider social and environmental factors that are now in play post COVID 19 by building on all of England’s Local Industrial Strategies.

7. Our LEP’s coverage area is coterminous with the areas covered by Cornwall Council and the Council of the Isles of Scilly (both are Unitary Authorities) and no further reform of the structures is required here.

Furthermore, the Cornwall and Isles of Scilly Leadership Board is our rural alternative to a Combined Authority and delivers strong Place Leadership. The emergency response to COVID 19 has provided repeated demonstration of the effectiveness of local solutions over “one size fits all” central schemes.

We need to get the geographical footprint right in order to effectively reduce disparities between regions and therefore we believe that further devolution to Cornwall and the Isles of Scilly is key to addressing the challenge of Post Pandemic economic growth and the wider “levelling up” agenda. 

8. Recovery provides an opportunity to build on the positive changes experienced to date, keep hold of good practices and to continue the trajectory to Net Zero through devolved decision making and implementation. Government must therefore ensure that the right conditions are created to enable the green jobs necessary for the Net Zero transition and to retrain local workforces to fill them. This will inevitably provide export opportunities and added benefits beyond job creation including better health and disposable income outcomes which will benefit the public purse.

Floating offshore wind (FLOW) is amongst the quickest growing renewable energy technologies in the world.  We are spearheading an opportunity to trailblaze this technology through a regional initiative to build-out FLOW in the Celtic Sea with a roadmap of projects and an ambition of 2.5GW in the Celtic Sea by 2030.

9. Resetting the relationship between central and local government is vital with more responsibilities and budget devolved to local authorities and/or LEPs to support future resilience. COVID 19 has demonstrated that some critical supply chains are fragile and whilst not advocating a wholesale shift to “on-shoring” all production and manufacturing to the UK, a review of critical supplies is warranted with support granted to bolster UK production of key goods.  This will help to build resilience, aid the levelling up agenda (if targeted correctly) and help to reduce the carbon impact of goods and service provision. To help deliver this aim significant acceleration the universal coverage of 4G and 5G, especially in rural areas, and full fibre connectivity to every property by 2025 is required.

At society level personal resilience and indebtedness, food poverty, prevalence of zero hours contracts and the health of the general population has been brought into sharp relief by the pandemic. The national curriculum should be adjusted to encompass better coverage of key life skills such as budgeting, cooking, personal well-being, etc.

10. Rapidly facilitated changes to the high street (via a range of policy and fiscal means) are required to diversify the use of buildings (increased residential and workspace) and respond to the decline of retail and fragility of town centre economies and the employment opportunities they provide in order to increase the number of people living and working in our towns. 

11. The COVID19 crisis has exposed some of the vulnerabilities of UK exports, including export of fish and shellfish to the EU which has been decimated by the lock-down. Greater understanding of export patterns must be translated into a greater emphasis on local supply chains.

The current situation lends itself to a twin track approach with ‘near-shoring’ enhancing trade links and opportunities for trade with our near neighbours together with opening up trade links with non-EU countries further afield, noting that those further away will impact on carbon emissions.  A one-size-fits-all policy is too prescriptive. Recognition of the protections awarded under the various Protected Name Schemes (PGI and PDO) are also essential to protect the quality of goods such as the Cornish Pasty, Cornish Clotted Cream and the Cornish Pilchard. 

The opportunity that a green COVID 19 recovery brings, means that CIoS can share its knowledge and equipment with the rest of world, not only benefitting the CIoS but also the UK economy, but also establishing our place in the world by increasing climate friendly technology across the globe.

12. Post-pandemic economic recovery has to provide a supportive environment that not only re-frames the narrative around ‘the central and the local’ but grants regions such as Cornwall and the Isles of Scilly a greater level of control over their own policymaking, development and delivery.  A place-based approach is required not only because of the place-based variation in the size of economic contraction caused by the pandemic, but also because different regions have different strengths and opportunities.

We believe therefore that Government should set the general principles of post-pandemic economic growth, but allow for locally led, place-based variation in how these are executed. 

It is therefore in this context that we respond to the questions posed by the BEIS inquiry and our responses are outlined below.

Impact of COVID 19 on Cornwall and the Isles of Scilly – Detailed response.

On the ground the Cornwall and Isles of Scilly (CIoS) economy is experiencing a severe shock due to the COVID-19 infection risk which, due to the social distancing measure that have been introduced (often referred to as “lock down”), has radically shifted consumer demand, the visitor economy and the closing of non-essential businesses. The economic shock is felt across the local economy with instant and deep shocks to tourism, hospitality, fisheries, retail and cultural sectors, which are significant employment sectors in CIoS. 

A LEP business survey has given a valuable insight into the real time impacts of the lock down on local businesses.

It is estimated that quarterly GVA is down with 34% in Cornwall[4] and that as many as 72,800 jobs[5] are at risk of being lost due to lock down. This constitutes 27% of all jobs in Cornwall. Universal credit numbers for March and May confirm this worrying picture with an overall increase of 91% more people on Universal Credit across Cornwall (JSA has also risen by over 120% in the same period) with some local areas faring significantly worse as can be seen from the maps below.

The monitoring undertaken by our COVID 19 Business Cell has also clearly demonstrated that Cornwall and the Isles of Scilly have been disproportionally impacted due to the high proportion of self-employed (23% of total workforce compared to 16% nationally) and the number of micro and small businesses in our business mix. Evidence of the impact can be seen in the uptake of the Coronavirus Job Retention Scheme and the Self Employment Income Support scheme.

The significance of the tourism sector/visitor economy to our overall economy has also exacerbated the negative economic impact of the lock down. The estimated loss to the tourism sector by the end of June 2020 is £630m, and this does not consider the strong linkages between the wider visitor economy and other sectors such as food and drink, farming businesses that have diversified into tourism and the maritime sector that are experiencing significantly reduced demand.

An additional piece of research undertaken by Tortoise Media on the impact of reduced consumer spending on towns across the UK concludes that “Cornwall may be the biggest economic British loser from the lockdown”[6]. The data compares sales with the equivalent week in the previous year. This analysis identifies a number of Cornish towns seeing a very high drop off in sales and therefore a high economic impact due to COVID-19.

The Centre for Towns have also published a report that takes the at-risk sectors in turn identifying the towns (in England and Wales) with the highest proportions of employees working in each sector and therefore seeing a high impact from COVID-19.

In the context of the impacts outlined above our responses to the questions posed by the BEIS inquiry are outlined below.

1. What core/guiding principles should the Government adopt/prioritise in its recovery package, and why?

Regional inequality is one of the key factors that determine the UK’s overall productivity performance, and growing inequality indicates that regions are not supported to deliver on their full potential. Place-based variation in the size of economic contraction, requires a place-based recovery response. 

A collaborative publication led by Cornwall Council entitled ‘Britain’s Leading Edge’ shows that there is a systematic bias in national policy and funding decisions toward cities that, in turn, deprives more rural regions of investment and thereby limits their ability to contribute fully to the national economy. In this context, CIoS is not currently delivering its full potential.  The Centre for Cities report on levelling up concluded that “The different nature of the challenge in each place means that the policy approach must also vary”.

There are a number of challenges that existed pre-pandemic that will remain or be exacerbated post pandemic in CIoS.  These are climate change, regional economic imbalances and social inclusion and these should all be core considerations for Government to consider in its recovery package.  It is very important to the people of CIoS that economic growth and recovery is not at the expense of the environment and that recovery does not exacerbate social exclusion. 

Metrics such as GVA and GDP, are key metrics in measuring economic success but are insufficient alone to measure economic progress and/or recovery.  Therefore, alternative measures should be considered.  CIoS offer to test and trial these alternative measures as part of our recovery package.

We recognise the role of national level interventions can have (e.g. in sectors such as aviation and automotive) but local impacts need local interventions and we believe that CIoS is the most appropriate level of delivery as this also matches our LEP area boundaries.  Therefore, the guiding principle of devolving decision making and delivery to local level should underpin the COVID 19 recovery package. 

In addition, through the work we undertook to develop our draft Local Industrial Strategy we believe that the three CIoS Industrial Strategy metrics; productivity gap, quality of life and carbon neutrality, are good measures of equitable clean growth and should be adopted by Government. 

Reflecting the strong and important sense of place and identity that people feel in CIoS, our draft Local Industrial Strategy has also been developed with four key principles of design that we believe should form part of the Governments core principles of recovery planning. These principles are as follows: -

• Inclusive growth: Enabling as many people as possible to contribute to, and benefit from, economic growth.
• Environmental growth: Reversing environmental degradation, restoring nature, and seeking to protect businesses and communities from the impact of climate change.

• Creative economy: Using our cultural distinctiveness and creative expression to improve productivity through innovation, ideas, creativity and digitalisation.’ 
• Clean and circular economy: Using our unique opportunities to transition to a circular and regenerative economy and identify natural solutions and innovations to meet the challenge of climate change.

The CIoS Draft Local Industrial Strategy is underpinned by a robust independent evidence base and extensive stakeholder engagement, providing a strong basis for local delivery of a recovery plan and we believe that Government should adopt our LIS as the basis of our recovery plan.

2. How can the Government borrow and/or invest to help the UK deliver on these principles?

Prior to the COVID 19 outbreak the OECD had already published research indicating that the UK was the nation with the greatest regional disparities (see chart below) and these are likely to increase once the true impact of the COVID 19 outbreak becomes apparent.  To deliver the principles and the necessary recovery package there is an urgent need for the UK government to continue to invest in areas and regions across the UK in order to address regional inequality.

Within the UK there is also a marked difference in economic performance at regional/local level and even before the COVID 19 pandemic these were increasing.  The maps below indicate the areas of the UK where the biggest need (pre-pandemic) exists to “level up” the economy.  

In GVA per head terms the chart below also demonstrates the need for continued intervention to help “level up our economy. 

Whilst COVID 19 will have had a negative impact on every area in the UK those areas that were furthest behind before the pandemic are likely to be hardest hit and take longer to recover post pandemic.  The “trickle down” effect of promoting growth at national level in the hope that this will benefit all areas equally has been proven not to work and a different approach is now required.  The productivity gap that currently exists between the prosperous South East of England on the one hand and the rest of the country on the other must therefore be levelled-up by investing in the LEP areas and regions that are lagging behind.

As outlined in the Conservative manifesto and reiterated by Government Ministers and the Prime Minister in an interview with the BBC the investment required to help “level up” should happen through an adequately funded and appropriately devolved UK Shared Prosperity Fund (UK SPF). As the current EU regional and rural development/cohesion EU programmes come to an end the significant funding they invest to stimulate the levelling up of economies is at risk and must therefore be replaced on a like for like basis in focus (raising productivity, skills, inclusion and growth) and in budgetary terms so that their work can continue.

In 2017 Cornwall and the Isles of Scilly’s productivity was 70% of the UK average[7] and this is in the context of CIoS receiving EU funding as a Less Developed Region. Great strides have been made for the CIoS economy including the rollout of superfast broadband, investment in a higher education presence, skills and business support programmes and state of the art workspace. However, significant challenges remain in terms of improving productivity and to address the issue of how to foster inclusive growth to the benefit of one and all in CIoS.  Our clear ask is therefore for our current EU programmes (ESIF, RDPE, EMFF) to be replaced by a UK SPF that invests at least £700 million into CIoS in a fully devolved fund over the next 10 years. This UK SPF investment must be specifically targeted to replace current levels of EU funding that are aimed at addressing regional inequality within the UK and should be additional to any mainstream government funding for infrastructure such as roads, hospitals, schools and other

Government funding (i.e. they must deliver additionality). 

In addition, the UK Governments recent decision to not participate as a third country in the 2021 to 2028 EU INTERREG programme will stifle regional co-operation with other areas of the EU and possibly other regions of the UK.  Regional Co-operation must therefore be eligible for UK SPF support or an alternative funding mechanism should be created to enable UK regions to partner with EU regions for mutual benefit.  We are appending our full proposal for a UK SPF delivery model in CIoS in Appendix 1.

We believe that COVID19 has exacerbated regional inequality and that the crisis has had a disproportionate negative impact on CIoS.  This conclusion is backed up by an analysis conducted by Grant Thornton’s Place Analytics tool which demonstrates that in their COVOD19 vulnerability index Cornwall is ranked as the Local Authority area most at risk of a severe economic downturn.

It is estimated that quarterly GVA is down 34% in Cornwall[8] and that as many as 72,800 jobs[9] are at risk of being lost due to lock down. This constitutes 27% of all jobs in Cornwall. Universal Credit numbers for March to May 2020 confirm this worrying picture with an overall increase of 91% during this period.  JSA claimants have gone up by 120% in the same period.  Cornwall and the Isles of Scilly has also been disproportionally impacted due to the high proportion of self-employed (23% of total workforce compared to 16% nationally).

Our geographic location, with sea on three sides of Cornwall and four sides of the Isles of Scilly, a dispersed settlement pattern and no agglomeration benefit of a City Region will also require us to develop bespoke approaches.  The significance of tourism and the wider visitor economy has also exacerbated the negative impact of the lock down. It is estimated that in Cornwall 1 in 3 private sector jobs are linked to the visitor economy and on the Isles of Scilly this figure is higher. 

The estimated loss to the tourism sector in Cornwall by the end of June 2020 as a result of COVID 19 is £630m. This figure is for accommodation and visitor attractions only and does not consider the strong linkages between the tourism sector and the wider visitor economy.  The COVID19 crisis has clearly demonstrated the importance of a strong understanding of the local economic context, the need for responsiveness at a local level in order to support people, communities and businesses and has highlighted the importance of future UK SPF investment to be devolved and agile enough to respond to sudden shocks to the economy. Another clear lesson from the COVID19 crisis is that the repurposing of existing EU funding (e.g. Re-opening the high street fund) whilst welcome, has been clunky and slowed down by centralisation of these funds and the diverging approach taken by different Managing Authorities.

3. What measures and support will businesses need to rebuild consumer confidence and stimulate growth that is sustainable, both economically and environmentally?

Consumer confidence at society level is influenced by a number of factors that are outside the control of local areas.  Media coverage, national and local infection/death rates, the “R Value”, peer pressure and personal confidence levels will all influence how and when consumers return to “normal” spending patterns and there is some doubt whether they ever will (i.e. the new normal). 

However, at local level businesses will need to do their part to ensure that their premises and operating model provide consumers with the confidence to use them.  For those that can trade on-line improving the quality and functionality of their on-line presence will be key and for all businesses the need to ensure that their overall performance moves towards “best in class” from a public health, wider social, economic and environmental perspective will be a key part of stimulating growth and delivering long term recovery. 

Through the work undertaken as part of developing our Local industrial Strategy it was identified that the businesses and economy of CIoS face a range of prolonged and distinctive challenges as outlined in the table below.  Post COVID 19, in addition to the immediate challenges caused by the pandemic, these key challenges remain in place and therefore addressing them alongside immediate recovery interventions is vital to our long-term recovery and to deliver the “Cornwall and Isles of Scilly we want”.

Although reflecting greater stability, the growth of new businesses was below average and far fewer start-up businesses achieve scale up status.  Our incident growth rate of high-growth firms is only marginally lower than nationally.  The number of businesses in CIoS in relation to our population is average; however, they are much more dispersed, providing fewer opportunities for peer-to-peer support, collaboration and knowledge transfer. Pre-COVID 19 the business churn rate was lower in CIoS than the UK average, with the highest business survival rates of all LEP areas over the last five years.

The LIS consultation suggests that there is demand for suitable workspace to enable networking opportunities and access to specialist equipment and facilities. In addition, there is demand for industrial space and high-quality sustainable sites all with good access and connectivity. Ensuring that as part of the delivery of these investments as much of the spend is localised as possible and that people benefit from the construction phase (e.g. job creation, apprenticeships, return to work programmes, etc) will be key in to reduce the “leakage” of spend from our economy and aid recovery.  This will also help to deliver our circular economy ambitions.

Digital infrastructure and connectivity are also a greater necessity than ever before and whilst our full fibre connectivity is far higher than the UK average and mobile 4G coverage is higher than the national average overall Superfast Broadband coverage is slightly below the UK average.  In addition, whilst average download speeds surpass the UK average for rural areas it does fall short of the overall UK average.  There is therefore a need to invest in full fibre coverage to improve speed and remove barriers to deliver full coverage of 4G and accelerated of 5G in rural areas.

Other measures of support required to stimulate improved business performance and growth in Cornwall and the Isles of Scilly are outlined in our draft Local Industrial Strategy and include: -

• Long term and holistic business support provision that draws on the skills of the private sector and is targeted at recovery, achieving best in class performance in all businesses and the scaling-up high quality companies.
• Support to attract relocating businesses and inward investment as part of a holistic package designed to increase the role that FD&I can make to our future prosperity.  This should also include improved links with DiT in order to develop and deliver a localised trade and investment policy which gets our businesses exporting (e.g. targeted support from the food and drink export accelerator).
• Creative and collaborative workspace, especially on the high street, industrial units and spaces to grow.
• Long term investment in skills provision (not just qualification based) that develops a culture of lifelong learning and career pathways that focusses on getting people of all ages back into work as well as enabling people to progress their careers throughout their life.
• Appropriate Centres of Excellence and cluster development in suitable locations that support our niche and high productivity sectors to grow alongside working with our existing business to improve their performance.

4. Whether the government should give a higher priority to environmental goals in future support?

In January 2019 Cornwall Council declared a climate emergency, recognising the need for urgent action to address the climate crisis and restore nature. The CIoS Draft Local Industrial Strategy shares the Councils ambition for carbon neutrality by 2030.  Improved environmental performance is also enshrined in the Great South West prospectus with an ambition to be the first net zero carbon region in England. 

Our distinctive natural capital is the fundamental asset that shapes the people and economy of CIoS.  Our landscape and habitats, temperate climate, fresh air and clean water and the wildlife on both land and sea are intertwined with our sense of place and therefore recovery plans must deliver environmental growth as a key priority for any activity.  Our natural capital provides CIoS with food and medicines, energy, flood defences, construction materials and other strategic minerals (e.g. Tin and Lithium) in addition to providing recreational spaces for residents and visitors. Three-quarters of CIoS residents visit greenspaces at least once a week and visitors to CIoS cite the landscape as their number 1 reason for their trip.

We believe that the low-carbon transition and improved efficiencies will create new global market opportunities and drive productivity in the existing business base.  One of the benefits of the COVID 19 lock down has been proving to businesses and employees that commerce and “work” can continue unabated via home working and this is something that we wish to continue and expand as part of our recovery package. A recent report by Smart Growth Analytics Ltd regarding the contribution made by Home office Professionals estimated that “Professionals who work from home, whether business owners, self-employed or employees, are highly competitive and productive workers and make an estimated GVA contribution in excess of £100 billion per annum to the national economy of England. This represents some 6% of national GVA with just 4.4%, 1.3 million, of its workers”. It also reported that “CIoS was ranked in the top 16 LEP areas by percentage of home workers in the resident population” and concluded that “Growth in Home office professionals has helped drive national economic growth and will continue to make a significant contribution over the next 20 to 30 years”.   

Post COVID 19 if more people can choose to work from home, where they choose to locate their home base becomes more to do with where they want to live rather than where they currently reside.  The quality of life that CIoS can offer could be an important factor in their decision-making process.  Conversely if employers are more confident in having their employees working from home undertaking national roles from CIoS opens up an increased opportunity for the residents of CIoS to fulfil these roles where traditionally they would have had to move to do so.  However, we also recognise that homeworking is not an option for everybody, so we have to consider the future off all work in our plans.

CIoS has some unique and unrivalled energy resources and a track record of driving and delivering low-carbon innovation and natural solutions. There has been a transformation of our energy sector that now provides around 37% of our electricity from renewables but progress has stalled and without intervention barriers will stop CIoS from achieving carbon neutrality. Economic opportunities will be missed if CIoS does not build on its successes and fail to keep products and materials in use.  Without intervention the environmental challenges of CIoS will increase; more homes and business will be at risk of flooding, the coastal paths will erode, the soil quality will degrade, more areas will fail air quality standards and habitats will continue to decline. Long-term damage would affect access to food and clean water, the ability to attract visitors and provide recreational spaces, and opportunities to protect the communities of CIoS.

5. Whether the Government should prioritise certain sectors within its recovery package, and if so, what criteria should it use when making such decisions? What conditions, if any, should it attach to future support?

The productivity challenge in CIoS is multi-faceted, requiring orchestrated long-term action across the foundations of productivity to deliver the right mix of interventions – there is no ‘one size fits all’ solution to lifting productivity in the region. Aligning capital, revenue and skills support at project/business/place level is key to success and this is best achieved by devolving decision and delivery to local level.  Analysis of our economy undertaken as part of our work on our Local Industrial Strategy identified four broad groups of businesses that share common economic characteristics and therefore also fall into groups with regard to actions to improve productivity, recover and grow.  See table below.

Post COVID 19 the four-broad group of sectors identified above will remain but in the immediate/short term there are businesses within more traditional sector classifications that have been hit harder by the COVID-19 crisis than others.  Recovery plans need to be localised and flexible enough to take this into account.

For example, there is a real possibility that many of our hotels, restaurants and attractions that have normally operated on an all year-round basis may well decide to close at the end of October 2020 and make the vast number of staff they employ redundant.  This would protect their cash position as most breakeven or trade at a loss during the winter period.  This could in turn result in an additional rise in direct unemployment as well as the knock-on impact to businesses that trade with them in their supply chains though to April 2021.

Therefore when considering a chance to reset the economy and create a ‘new normal’ that is resilient and addresses broader government priorities and global challenges, the focus should not be on certain sectors but on the challenges, goals and vision for the future economy with targeted support aimed at those businesses that have been affected most by the pandemic (e.g. an extended Job Retention Scheme or some form of wage subsidy support to take on new staff) as this would keep people employed and reduce the demand on Universal Credit.

When considering “conditions” that should apply to any support provided they should focus on the “outcome” required (e.g. improvements in productivity/profitability, career progression, accessing new markets, etc) rather than arbitrary outputs (e.g. number of businesses supported, number of people trained).  By working with key businesses that are already best in class and capable of growth, developing new high value sectors and businesses that link to our key strengths alongside redoubling our efforts to work with the existing businesses in our foundational economy to achieve best in class performance, we can accelerate the recovery period considerably.  Ignoring our existing business base will only continue to act as a drag on our economic performance and reduce the effectiveness of our recovery plans. 

We therefore believe that rather than Government focussing on specific sectors at national level they should focus on the Five Foundations of productivity and allow local areas to define how to deliver them in their areas. 

Our work on the LIS articulated our ambitions for these foundations as follows: -

• Place - A thriving network of connected and innovative businesses, equitable communities and productive systems, all capitalising on the strengths and opportunities of our cultural assets and natural capital.
• People - A skilled, healthy and inclusive workforce that feels inspired and valued, enjoying quality of life and pride of place.
• Business environment - Prosperous and creative businesses and pioneering start-ups, working together to broaden CIoS capabilities and retain value from a circular economy.
• Ideas - An entrepreneurial culture nurtured by our anchor institutions, embedding R&D, creativity and innovation in business to improve productivity.
• Infrastructure - A connected, and fully accessible environment, economy and a low carbon, built environment; all powered by a zero carbon, smart grid.

The LIS process has also identified distinctive opportunities that can be delivered in CIoS and align with the vision, principles of design and success metrics. As part of the CIoS LIS development the LEP has planned to lead on the development of CIoS frameworks and toolkits for the principles of design (set out above) to help develop interventions and evaluate the extent to which investment proposals contribute to them.

Alongside the work of the LEP Cornwall Council’s organisation recovery will be underpinned by a decision-making ‘wheel’ and an outcomes-based budgeting programme. The decision wheel, based on the ‘Doughnut Economics’ model developed by Kate Raworth, has been deployed for Cabinet decisions since September 2019, a decision which Amsterdam recently followed having adopted a similar approach based on the doughnut model for their response to the economic challenges brought about by COVID-19.  Each policy, programme or project has to undertake an analysis of how the planned activity will impact on the key spokes of the wheel so that decisions can be informed by environmental, social and economic considerations.  Where negative outcomes are identified re-design to minimise them is encouraged alongside the inclusion of mitigating factors.

Cornwall Council Climate Change Decision Wheel

6. How can the Government best retain key skills and reskill and upskill the UK workforce to support the recovery and sustainable growth?

Despite low unemployment before the COVID 19 crisis, there were challenges to recruitment in CIoS and a shortage of both skilled and unskilled workers. The Cornwall Manufacturing Group report that 60% of engineering companies in CIoS expect to have shortages of skilled labour over the next five years. The 2016 CIoS Smart Specialisation Skills Framework concluded the key areas of skills shortages and gaps across five sectors were STEM skills, engineers at all levels and in particular technicians, software engineers and programmers.   Likewise, the agri-food sector, especially on farms and in the fishing sector, tourism and care sectors rely on significant numbers of migrant/seasonal workers. Future government immigration policy is critical to these sectors as without the ability to access sufficient numbers of workers the sector may contract.

Whilst improvements have been made there continues to be a number of people without a full Level 2 qualification or who possess a level 2 qualification in a discipline not related to their current employment.  This position is in turn strongly linked to low pay, limited progression and insecure employment. A much higher proportion of CIoS residents have no qualifications or are low skilled (but a much lower proportion on the Isles of Scilly) and more of our 16-17-year olds are not in education, employment or training. 22 of our neighbourhoods are in the UK’s top 10% most deprived for education and training in children and young people.

CIoS is one of only two LEPs nationally not to receive any capital funding to improve its further education offer. However, since 2002, over 6,500 higher education places have been created in CIoS, which has led to vitality in areas where the ageing population has historically dominated, and a sizeable contribution to economic activity across the LEP area. Before COVID 19 there was a higher than average percentage of people who were not in work or actively looking, are temporary sick or long-term sick, and this figure has risen by 9% in the last five years.

The importance of skills in the growth agenda and to people’s social mobility and overall inclusive growth cannot be underestimated, having the key and necessary skills opens opportunity for many, increases economic productivity and changes individual life prospects. CIoS has the lowest proportion of working age people (aged 16 to 64) for any LEP in England at 58.4% so measures designed to get as many of these people into quality employment as possible is vital to our future economic prospects. 

We believe the Government needs to create opportunity and stimulate the economy through a green economic recovery that has employer led delivery embedded at local level. The United Kingdom has the opportunity to invest wisely in a variety of areas in order to create both skilled jobs and meet its net zero climate commitments.  Areas such as low carbon retrofitting of the UK housing stock, digital infrastructure (ultrafast broadband, 4G & 5G) and renewable energy generation (floating offshore wind, deep geothermal) provide opportunities for growth that can be realised quickly.  For example, CIoS can increase the export of green energy quickly if grid constraints are removed. 

A report by the Energy Efficiency Infrastructure Group estimates that 150,000 skilled and semi-skilled jobs would be created if the government committed to upgrading the energy efficiency of the entire UK housing stock to an EPC rating of C by 2030[11]. Such an investment would also have a wider effect on areas other than employment seeing lowering household costs, fewer winter deaths, protecting the environment and boosting sector supply chains.

Creating new jobs is one thing but there is also a need to reskill and upskill the existing workforce so that they can help drive productivity gains in the businesses where they are employed. The challenge of upskilling the UK workforce is significant and requires a multifaceted approach involving; back to work programmes (e.g. wage subsidies and apprenticeships), mentoring, work-based training (linked to the skills required to do the job rather than just the achievement of qualifications), apprenticeship schemes, graduate support programmes; skills hub support networks and careers advice.   It is therefore a significant concern for Cornwall and the Isles of Scilly that the UK Shared Prosperity Fund (the replacement for the current EU Programmes ESIF, RDPE and Fisheries) has yet to be consulted upon or announced.  From a skills point of view the loss of the current ESF funding leaves skills investment and career support programmes with an uncertain funding future at a time when it could be argued it is most required.

The economic impact of COVID-19 on young people has been disproportionate with young people seeing a larger impact on their livelihoods. The Resolution Foundation found that: “One-third of 18-24-year-old employees (excluding students) have lost jobs or been furloughed, compared to one-in six prime-age adults, with these experiences also more common among employees in atypical jobs.”[12] There is a real risk that the without significant intervention and investment the crisis could set back a whole generation which in turn will further hinder the levelling up agenda.  For areas such as Cornwall and the Isles of Scilly which has sea on three sides, has a low population density, has a large proportion of very small businesses, a low number of large businesses and does not have the agglomeration impact of a City Region how we address the skills agenda of our residents will be key to our recovery.

It is therefore vitally important that Universities and Colleges are supported through this crisis. The loss of further and higher education provision in Cornwall and the Isles of Scilly would be a disaster for local people as well as the wider economy. We therefore urge the government to help the further and higher education sector as much as possible including negotiating future access to the future Horizon Europe (formerly Horizon 2020) and ERASMUS funding as they are a key source of income for universities. If future access to these EU schemes are not accessible to UK Universities, then Government should consider creating similar funding programmes that are of the same funding magnitude. 

Finally, it is worth remembering that whilst it is important to support those who have lost their jobs as a result of this crisis it is also important to continue to support those who were excluded from the labour market before the COVID 19 outbreak. After past economic shocks the immediate focus has often been on those who lost jobs as a direct result of the shock.  As a result, those already furthest away from the job market and the benefits of economic growth were left behind.  This included the long term unemployed as well as the most deprived in society who as a result were further disadvantaged. Schemes to tackle long term unemployment and promote inclusive growth are vital for any long-term recovery without such measures there is no such thing as a sustainable inclusive recovery.

7. Is the Industrial Strategy still a relevant and appropriate vehicle through which to deliver post pandemic growth?

The Industrial Strategy sets out Grand Challenges to put the UK at the forefront of the industries of the future, ensuring that the UK takes advantage of major global changes, improving people’s lives and the country’s productivity.  The four Grand Challenges are focused on the global trends which will transform the future of the UK economy.  In considering how these Grand Challenges apply at place level our Draft Local Industrial Strategy suggests the following: -

• Clean growth: CIoS is committed to carbon neutrality and has many of the resources, assets, R&D capabilities and expertise, including FLOW, to support the clean growth agenda. It can build on recent innovative projects such as Smart Islands, Cornwall Local Energy Market and the United Downs Deep Geothermal Power project.
• Ageing society: CIoS is ahead of the curve in experiencing the challenges of supporting older people to have healthier lives and this makes it a potential test bed for healthy ageing initiatives. It can build on R&D expertise and projects such as EPIC, Smartline and Kernow Health CIC
• Future of mobility: CIoS can support the transition to zero-emission vehicles by providing low-carbon, sustainably sourced lithium for EV batteries and developing a supply chain of locally produced biomethane. It can build on the CIoS mining expertise and partnership, working with geothermal developers and the Energy Independent Farm project.
• Artificial intelligence and data: CIoS can play a strategic role in offering access to the ‘Environmental Intelligence Accelerator’, artificial intelligence expertise and assets such as Goonhilly Earth Station and Spaceport.

However, without a refresh, we do not believe the Governments Industrial Strategy to be completely relevant to the current situation as it does not include any consideration for wider social and environmental factors that are now in play post COVID 19.  Rather than start from scratch though we would urge Government to build on the work undertaken at local level to develop Local Industrial Strategies as these are for the most part either agreed or in final draft form across the country.  Using existing policy and delivery strategies will speed up Post COVID 19 recovery.

Since starting the process of developing our LIS last summer, it has been felt that the focus on the Grand Challenges may not be as relevant as first thought or as set out in the LIS guidance, and although the concept of driving up productivity is a sensible approach, to focus primarily on productivity without adequate consideration to the climate emergency, environmental growth and social inclusion was an approach that was not supported locally before COVID 19 and is definitely not the necessary/sole focus required Post COVID 19.

The Grand Challenges set out in the Industrial Strategy are challenges set nationally, and are opportunities believed to be of national importance and significance. Post COVID 19 we believe the Grand Challenges should be localised within a national framework and should consider climate change, regional imbalances/the levelling up agenda and inequality/social inclusion. Empowering local economies to find the solutions to these local, national and global challenges, whilst supporting and driving innovation, investing into infrastructure, and training and education will ultimately give local economies an opportunity to build on their local strengths and natural resources to develop solutions that will be exportable and improve both local and UK productivity. 

The process by which LIS’s are developed has been inclusive and our draft LIS is very much a place-based strategy for improving productivity and delivering growth.  It is based on a robust and independent robust evidence base and extensive stakeholder and expert engagement. Although it is accepted that the CIoS LIS will need a review, to reflect the impact of COVID 19, there is a consensus locally (Local Authorities, LEP, business organisations) that COVID19 hasn’t fundamentally changed the priorities outlined in the LIS.   The draft CIoS LIS (see below) articulates the importance of moving to a carbon neutral economy with measures of success that move away from GDP and embrace ‘wellbeing’, quality of life and social inclusion.

8. How should regional and local government in England, (including the role of powerhouses, LEPs and growth hubs, mayoralties, and councils) be reformed and better equipped to deliver growth locally?

Whilst we recognise the challenges caused by overlapping areas and organisations in England we believe that (as Cornwall Council as a Unitary Authority was formed out of significant local authority reform in 2009, the fact that the Council for the Isles of Scilly is also a Unitary Authority and the fact that their coverage areas are coterminous with our LEP area, our Local Nature Partnership area and our Health and Wellbeing Board area) no further reform of the structures is required. 

All of the above participate with other local place leaders in the Cornwall and Isles of Scilly Leadership Board which is our rural alternative to a Combined Authority and which we believe delivers the strong Place Leadership required to drive recovery.

We therefore believe that further devolution is key to addressing the levelling up agenda. The emergency response to COVID 19 has provided repeated demonstration of the effectiveness of local solutions over “one size fits all” central schemes, reinforcing well-rehearsed arguments for decentralising power and equipping local place leaders with the tools and levers to improve outcomes. It is vital that Cornwall and the Isles of Scilly secures the necessary powers and funding to drive forward our recovery, and our shared vision for renewal. We need to get the geographical footprint right in order to effectively reduce disparities between regions.

Our experience has clearly showed that Cornwall and Isles of Scilly has proven to be the right footprint to, on the one hand, capture regional disparities, while on the other being a big enough footprint for strategic planning.

Cornwall Council has gone on to establish an exemplary track record in using our existing devolution deal to deliver lasting benefits.  For example Transport for Cornwall, a rural first for full integration of public transport journeys, has delivered more frequent, better quality and cheaper services.  Independent reviews have highlighted Cornwall’s strong place governance, with a unitary authority providing single democratically elected leadership for Cornwall alongside a Unitary Authority covering the Isles of Scilly. 

9. What opportunities does this provide to reset the economy to drive forward progress on broader Government priorities, including (but not limited to) Net Zero, the UK outside of the EU and the ‘levelling up’ agenda? What should the Government do to ensure that delivering on these priorities does not exacerbate the vulnerability of businesses, consumers and communities/workers that have been impacted by COVID-19?

The changes made in response to the crisis, such as reduced travel, have shown to have a major positive impact on the environment, air quality and global Green House Gas emissions.  Many people and businesses have quickly responded to the crisis, adapted and diversified in ways that many thought impossible only a few months ago.  IT systems have been installed and work patterns made more flexible, to enable huge numbers of people to work from home and students to take part in online lessons. Recovery provides an opportunity to build on those positive changes, keep hold of good practices and to continue the trajectory to Net Zero.

Alongside changes to existing business practices there is now an opportunity to create the green jobs necessary to deliver the Net Zero transition and to retrain local workforces to fill them. It is a chance to funnel invest into RD&I to develop technological solutions that will help meet the global challenge of climate change. This will inevitable provide export opportunities alongside regional levelling up/ balanced regional economies. Investment into programmes such as Whole House Retrofits will have added benefit beyond job creation; it will result in improved quality of life for many people suffering fuel poverty, fewer winter deaths and could put more money into the pockets of bill payers to spend in the local economy.  Increased levels of Green Energy export can quickly be delivered with the right support and in addition to the direct benefit of lower emissions and energy sales there are opportunities to export technology and expertise to a global market place. 

By empowering local and regional government to deliver local growth that would be of national importance provides an opportunity for local economies to make best use of local resource, strengths and opportunities whilst also benefitting the UK economy. For example, Floating offshore wind (FLOW) is amongst the quickest growing renewable energy technologies in the world, with a potential market at least double that for conventional offshore wind. As yet, there are no FLOW world leaders. Cornwall & Isles of Scilly Local Enterprise Partnership (CIOS LEP) has been leading a regional initiative to build-out FLOW in the Celtic Sea, including through the development of a Celtic Sea FLOW Regional Business Plan with a roadmap of projects and an ambition of 2.5GW in the Celtic Sea by 2030. 

CIoS are well equipped to deliver local growth as set out above. Local decision making and autonomy led to investments, that would not have ordinarily been made under the current EU programme, into two geothermal projects. These investments will hopefully deliver direct local and international benefits and indirect national benefits associated with the production of low carbon heat and power, and now related to the sustainable extraction and processing of lithium evident in the geothermal waters that flow beneath Cornwall.

Ministers Simon Clarke (MHCLG) and Paul Scully (BEIS) met South West LEPs on 22 May 2020 and confirmed the Devolution White Paper will focus on levelling up regional inequalities through devolution to non-metropolitan areas. The economic case for CIoS to be one of the areas targeted for “levelling up” support is outlined earlier in this response and so does not need repeating here.  However, it is important to reiterate that “levelling up” in an England context is much more than just a North/South divide.

Encouragingly, the Government remains committed to publishing its Devolution White Paper in the Autumn of 2020 and we urge Government to reset the relationship between national and local Government in this White paper with increased levels of devolution (budget and decision making), especially to non-metropolitan areas such as CIoS. The emergency response to COVID 19 has provided repeated demonstration of the effectiveness of local solutions over “one size fits all” central schemes, reinforcing well-rehearsed arguments for decentralising power and equipping local place leaders with the tools and levers to improve delivery and outcomes.

It is therefore vital that CIoS secures the necessary powers and funding to drive forward our recovery phase. We therefore need Government to deliver on its promise that “no area will be worse off as a result of Brexit” and commit to a “like for like” replacement for our current EU programmes (£700 million over 10 years) and that the focus of these funds remain targeted at “levelling up” and not be mainstreamed into other Government funding programmes and pledges.

The COVID 19 pandemic does not alter CIoS dependence on trade with the EU. In 2017 55% of CIoS exports went to the EU market compared to 48% of exports across the UK. The COVID 19 crisis has exposed some of the vulnerabilities of local exports, including export of fish and shellfish to the EU which has been decimated by the lock down. It is important that this greater understanding of export patterns is translated into a greater emphasis on local supply chains. Trade with the EU is always going to be important to the UK economy and as such should be continued within the context of a comprehensive free trade agreement between the UK and the EU. Brexit based on WTO terms would present a significant shock to the CIoS economy at a time when recovery will only just have started.

The UK should also take the opportunity to review state aid rules, including a renewal of the regional aid map and a greater use of regional state aid block exemptions for those areas that are furthest behind as a tool to promote levelling up. If this is implemented (as it was under previous EU programmes e.g. 2000 to 2006 Objective One Programme) it provides these areas with the ability to increase the scope and scale of interventions alongside their additional per capita financial allocations.

Future alignment with EU state aid rules will also be important to ensure that a level playing field exists between UK and EU businesses. The COVID 19 pandemic may affect state aid in the terms of economic recovery in the EU, and the UK needs to adapt its own state aid rules to coordinate with changes in EU.

10. What lessons should the Government learn from the pandemic about actions required to improve the UK’s resilience to future external shocks (including – but not limited to – health, financial, domestic and global supply chains and climate crises)?

• Addressing the resilience of the UK to future pandemics is a very complicated issue that requires a range of different interventions and approaches.  Some of these will need to be solved at national level (e.g. business interruption scheme, furlough scheme, etc) but most are best delivered at local level where local stakeholders can be more responsive to local need (e.g. payment of business rate grant scheme).  Therefore, one key action required as part of post COVID 19 recovery is resetting the relationship between central and local government with more responsibilities and budget devolved to local authorities and/or LEPs.
• The speed, depth and severity of the impact across the economy demonstrates that the UK’s reliance on the service economy, global supply chains for many goods (e.g. 60% self-sufficiency in food, the just in time delivery of car components and health supplies) puts us at greater risk than many advanced economies.  Whilst not advocating a wholesale shift of on-shoring all production and manufacturing of goods that are currently sourced via global supply chains a review of critical supplies is warranted with support granted to bolster UK production of key goods as this will help to build resilience and if this new production is located in areas of the UK where the economy is lagging it will also contribute to the levelling up agenda .
• At society level personal indebtedness, food poverty, prevalence of zero hours contracts and the health of the general population (e.g. levels of diabetes and obesity increasing) has been brought into sharp relief by the pandemic.  The sharp increase in the use of food banks, calls to the Citizens’ Advice Bureau about personal debt and the increase in people seeking support from the Universal Credit and Job Seekers Allowance schemes demonstrates that the individual’s ability to be resilient during a time of economic shock is at an all-time low.  To counter this, lessons in topics such as personal budgeting, household finance, debt management and cooking should be re-introduced into the national curriculum.
• The economic impact of the pandemic has highlighted questions over the security of supply chains, raising the option of increasing ‘near-shoring’ to ensure that an element of supply is closer to home. The potential for ‘near-shoring’ could have significant implications for the UK economy.
• Another key lesson is the significant increase in home working that has occurred during the pandemic.  Whilst it is important to note that not every job can be carried out at home and that not everybody has the physical space to set aside part of their property into a home office set up (important for long term physical health), the pandemic has proven to many that working from home is a viable option with little or no downside.  

However, as things return to the “new normal” whilst some will choose to return to work and some will be encouraged to return to work by their employers many will choose to work from home for at least some of the working week for the foreseeable future.  In part this is driven by proven productivity benefits (less travel time and fewer interruptions), environmental benefits (less commuting so lower GHG emissions) and financial benefits (lower costs of commuting) but is also driven by quality of life improvements gained from flexible working.  The revolution in home working generated by the pandemic can only be sustained and expanded with a significant improvement in broadband connectivity so we would urge Government to support full fibre connectivity to every property by 2025 and significantly accelerate the universal coverage of 4G and 5G, especially in rural areas.  Lack of digital connectivity is a key barrier to unlocking the home working revolution.

• The pandemic has also highlighted the fragility of the high street and its over reliance on a traditional retail offering.  Therefore, Government needs to facilitate changes to the high street (via a range of policy and fiscal means) to diversify the use of buildings (increased residential and workspace) in order to increase the number of people living and working in our towns. 

11. What opportunities exist for the UK economy post Brexit and the pandemic for export growth?

It is first important to separate this question into different parts, one surrounding the opportunities post Brexit and another for post COVID 19. CIoS has low exports compared to the rest of the country ranking joint 38th out of 41 NUTS 2 regions in terms of exports as a share of GDP. It is an aim of CIoS to increase exports, outlined in our draft Local industrial strategy (LIS) and Vision 2030. It is therefore important that whatever the situation, that CIoS look to capitalise on any opportunities presented to increase its exports. 

In terms of the importance of exports to CIoS services exports are more important than goods. In relation to GDP, goods exports equal 6%, while service exports equal 9.5% of GDP. It is estimated that only a smaller percentage of businesses are engaged in exporting goods with 4% of exports going to the EU and less than 3% of exports to non-EU countries. Nevertheless, CIoS had a positive trade balance of 1% compared to a UK trade deficit of -17%.

There are certain areas which are more dependent on exports than others. In relation to turn-over the figures are ‘Chemicals & related products’ 89%, ‘Machinery & transport equipment’ (80%), ‘Crude materials, inedible, except fuels’ (67%).  Fish landings in 2018 equalled £45 million. Of this it is estimated that £27.5 million or 61% was exported to EU countries. In 2018 our main trading partners continue to be relatively stable over time with the US continuing to be the biggest single export destination for CIoS and with Ireland, France and Germany as 3rd , 4th and 5th biggest export market.

In 2017, the total value of service exports from Cornwall and the Isles of Scilly was estimated at £1,015 million. The main component of service exports was ‘Accommodation & Food Services’, which accounted for 36% of the total. The composition of CIoS Service exports also differ from the GB average. CIOS is therefore more dependent on ‘Accommodation & Food Services’ than any other region being ranked 1 out of the 40 NUTS 2 regions in 2017.

There is a real risk that any future travel restrictions due to COVID 19 as well as reduced tourist confidence, will damage our tourism related exports. However, as Europe begins to ease lockdown measures, with the relevant control measures in place CIoS see the opportunity to promote air bridges from European countries with low infection rates. COVID 19 could therefore change attitudes relating to long haul international travel in favour of destinations closer to home which could lead to increased visitor numbers from the EU.  Ensuring “air bridges” include regional airports such as Cornwall Airport Newquay is therefore vital to ensure that the benefits of this growth in visitors from the EU is shared across England in order to assist with the “levelling up” agenda.

It is important that CIoS continues to trade closely with the EU. 57% of our exports go to the EU. Trading with our nearest neighbours is important for CIoS and the UK for many reasons, one being that the closer the trading partners are, the lower the carbon emissions relating to the transport of goods will be.  Increasingly important to CIoS exports is our agriculture, fishing and food and drink production, much of which is perishable and has limited time to get to market before degrading. The close distance to the EU market (with direct ferry access from Plymouth for many products) is very important for us and it must be a vital part of post Brexit ambitions.   With the trade war between the USA and China likely, if not already underway, it gives us an opportunity to explore these markets.

Cornwall’s biggest export market is the USA accounting for 10% of all export of goods. A post-Brexit free trade deal with the USA is likely and would benefit elements of the Cornish economy.  However, how agricultural products are dealt with within that trade agreement could have a significant negative impact on our economy if food and drink products are allowed to enter the UK which have been produced to lower standards as they would undermine domestic production.   Failure to recognise the protections awarded under the various Protected Name Schemes (PGI and PDO) would also risk undermining the quality of good such as the Cornish Pasty, Cornish Clotted Cream and the Cornish Pilchard. 

A post Brexit trade deal with the USA is estimated to boost the British economy £3.4 billion which is 0.16% of GDP in the next 15 years and boost UK exports by 4.3%. However, when looking at this opportunity it must be noted that transatlantic trade will increase emissions from increases in transport distances and that the benefits derived from new trade opportunities and the negative impact from lost markets will not be equally shared across all areas of the UK.  This could exacerbate and increase the disparity in performance between regions if the “levelling up” agenda is not considered.

China is also a market in which the UK is looking to increase trade. With the rising middle class in China, there is higher demand for higher quality products, especially food and drink products. CIoS produces high quality food and drink and there is an opportunity for CIoS to increase the levels of supply to China considerably.  With high quality produce (especially dairy, drinks and shell fish) forming part of future DIT trade activity designed to increase trade with non-EU members CIoS can contribute to measure designed to boost export trade and reduce the trade deficit.  To achieve this DIT needs to be tasked to specifically work with local areas to identify export ready businesses who are ready to grow (who may by their very nature be small or micro businesses) in addition to working with the existing group of large businesses they already support.  Specific targets relating to how they are contributing to the “levelling up” agenda within their departmental plan would also be worth considering.

Although COVID 19 has stressed the importance of local and smaller supply chains, there is still an opportunity to increase CIoS exports. Items such as pharmaceuticals and medical supplies which have seen rapidly increased domestic production could provide scope for expansion.  Businesses like West Pharmaceutics in St Austell, have the resources to sustain high levels of production and could therefore potentially export on an international scale once the pandemic is over. 

CIoS have high climate ambitions and our geography means that renewable energy sources such as wind, hydro, geo thermal and solar provide opportunities that do not exist elsewhere in England.  We believe there is an opportunity for CIoS to become a world leader in exporting technology, skills and provision of services in renewable energy and storage and that COVID 19 provides an opportunity to recover in a way which is more climate friendly.  Research projects and programmes such as Marine I, Wave Hub and Propel, have shown that CIoS have the resources and capabilities to lead the world in marine energy. The opportunity that a green COVID 19 recovery brings, means that CIoS can share its knowledge and equipment with the rest of world, not only benefitting the CIoS and UK economy, but also establishing our place in the world by increasing climate friendly technology across the globe.

12. What role might Government play as a shareholder or investor in businesses post-pandemic and how this should be governed, actioned and held to account?

Post-pandemic economic recovery has to provide a supportive environment that not only re-frames the narrative around ‘the central and the local’ but grants regions a greater level of control over their own policy making and development. Initiatives such as Tourism Innovation Zones (an ask contained in the Great South West Prospectus), Energy Innovation Zones (focussed on our existing Enterprise Zones and other key locations in order to take advantage of planning simplifications) can be accelerated with increased Government Investment.  Our Spaceport proposal is of national significance and therefore should been seen as part of wider national space related infrastructure rather than a local initiative.

National Government investment (as a shareholder or equity investor) should be reserved for nationally important businesses, many of whom will have satellite facilities across the UK.  Local areas should be tasked to identify any strategically important businesses to their area that may require Government investment and then through dialogue with Government decide whether equity/shareholding investment is warranted at local or national scale. Utilising the financial acumen of organisations such as the British Business Bank at national level and organisations such as the South West Investment Group at local level will be key as they are experienced in managing the financial arrangements and are FSA approved.  Government capital support to these organisations for them to fulfil this function will be required.

In closing our response to the inquiry, we urge Government to support a more place-based approach to recovery.  This is in part due to the place-based variation in the size of economic contraction, but also due to the fact that different regions have different strengths and different opportunities.   We believe government should set the general principles of post-pandemic economic growth, but allow for locally led, place-based variation in how these are executed to ensure regions such as CIoS can exploit their strengths to the benefit of the wider national economy.

End

July 2020