16 September 2010

BPIF calls for support funding for sectors alongside new Regional Growth Fund

The BPIF has responded to the Government's recently published consultation document launching a £1 billion Regional Growth Fund.  Announced by Deputy Prime Minister Nick Clegg at the end of June this year, the Fund is designed to provide support for projects that offer significant potential for sustainable economic growth and can create new private sector employment. Much of the Fund will be accessed by new Local Enterprise Partnerships (LEPs), for which the Government invited bids following the announcement that Regional Development Agencies are to be abolished next year.

In its response, submitted ahead of the closing date for comments of 6 September, the BPIF notes that it is intended that local enterprise partnerships will tackle issues including planning and housing, local transport and infrastructure, employment, enterprise and supporting business start-ups, and that other roles currently carried out by the RDAs, such as inward investment, sector leadership, business support, innovation and access to finance, will be led nationally. The BPIF welcomes this change, which it says will help manufacturing sectors such as printing that are to be found in every town and borough and make a significant contribution to the UK economy nationally, but which fall "below the radar" in many regions and localities because they are not dominant in the particular geographical area concerned. However in order to ensure that the economic development of nationally significant sectors is supported in parallel with the growth of local areas, the BPIF is recommending that a Sectoral Growth Fund should be established and administered by the Department of Business, innovation and Skills (BIS), in parallel with the new regional fund. This would enable funding for business support programmes at sectoral level and on a national basis.

Corporate Affairs Director Andrew Brown comments: "Previous sectoral business support programmes funded by the Government, such as the pump-priming funding that allowed Vision in Print to become established, have already proven their worth as a public investment in terms of the financial return they have brought to sectors and to the wider UK economy. We will therefore be writing to Nick Clegg to press the case for a Sectoral Growth Fund to be established in parallel with the new regional fund. Such a Fund would enable support to be provided to economically important sectors such as printing on a consistent basis throughout the UK, as opposed to the 'postcode lottery' that prevails under the RDA-led funding regime, which has left most print companies out in the cold so far as receiving business support funding is concerned".

With regard to the Regional Growth Fund itself, the BPIF argues that a proportion of funding should be allocated on a grant basis in order to allow LEPs to support projects based on the needs of their areas and their previous experience and what works well locally in terms of investment in economic development. However it stresses that this allocation should be supported by an evidence-based economic assessment of need and of expected return. The BPIF says that an element of funding should be allocated in response to bids, but warns that competitive bidding processes can absorb considerable time, effort and expense on the part of both bidders and assessors, and the lack of any guarantee of success may deter some potential bidders from putting forward worthwhile applications that might offer real benefit. It therefore urges that care is taken to ensure clear and simple criteria are adopted, with a consistent and uncomplicated process for application and assessment put in place. 

The BPIF recognises that the Government's aim in establishing the Regional Growth Fund is to help areas and communities that are currently most dependent on public sector employment, given that they will be most affected by public spending cuts. However it is concerned that this policy risks disadvantaging those areas with a well-established manufacturing base that would benefit from additional public investment. Prioritising areas with a weaker industrial presence risks losing the opportunity to generate additional tax revenues and to sustain employment in the private sector, it points out. The BPIF also argues that this sits at odds with the Government's stated intention of rebalancing the economy by supporting wealth-generating activity.       

With the overall budget for regional and local economic development being significantly reduced, there are likely to be many competing claims on the Fund. The BPIF therefore urges that Local Enterprise Partnerships are given a wide measure of discretion with regard to how the Fund is deployed, provided their activities meet the Fund's overall objectives. The involvement of business in the future development of local economies is vital, says the BPIF, meaning that local business leaders need to be fully engaged in defining needs and priorities for their areas in order to ensure a strong focus on private sector growth, job creation, and the development of balanced local economies.

With 56 bids to establish LEPs submitted to the Government by the closing date on 6 September, the BPIF is concerned that the overall number of LEPs in England should be limited in number. This will enable each to be able to take a strategic view of their area's needs and to be large enough to put forward projects that can secure funding on a scale that is sufficient to make a real difference to the communities they cover. The BPIF says that the bidding procedure for the Regional Growth Fund should seek to ensure outcomes that benefit those localities most likely to benefit from the support of the Fund. Bidding criteria will need to reflect this it stresses, and bidders should be required to provide solid evidence that the funding sought will generate real returns for the community concerned which will have a lasting benefit on the local economy. The BPIF warns that particular care needs to be taken to ensure that resources do not shift from deprived areas to more prosperous ones. 

The BPIF welcomes the fact that both private bodies and public-private partnerships will be able to bid for a share of the £1 billion during the two years 2011/2012 to 2012/2013. However it is disappointed with the overall amount of funding to be allocated to the proposed Regional Growth Fund. The nine RDAs have a budget in the current financial year of around £1.5 billion (£0.8 billion less than in the previous year), while the proposed Regional Growth Fund is some £1 billion over two years with no certainty as to what funds will be available after 24 months. Although it understands that economic pressures necessitate severe funding constraints, the BPIF regards this level of reduction as a huge cut in business support funding that will mean that there will be significantly less resources to support private sector growth going forward. While the BPIF accepts the crucial importance of tackling the deficit and fully supports the Government's efforts to reduce it, it argues that investment in business development must also remain a key priority - especially in those areas of the country that have not seen significant private-sector growth hitherto. The BPIF calls for a 'strategy for growth' that recognises the vital role that businesses play in driving economic recovery at local level.