CEDOS May 2022 Newsletter
Chairman’s Statement
I hope all is well amongst the CEDOS family and you all had a good Easter break and didn’t overdose on chocolate eggs. This quarter has seen another CEDOS stalwart leave the fold in Mark Pembleton of Portsmouth City Council. We all wish Mark the best of luck for the future and I would like to thank him for his continual input into CEDOS over a number of years.
After thinking long and hard about what subject matter to consider for my statement this time, I decided to reflect on a bit of history. For some members my musings will evoke memories of flared trousers, tube socks and platform shoes, the Ford Cortina, shag carpets and THAT heatwave. For others it will be a mythical time before iphones and the internet, best encapsulated when a disco ball appears in a nightclub!
The 1970’s as a decade however, possibly set a template for what we may be experiencing in our more modern times and is the current debate amongst the most learned economists of the broadsheets. War in a faraway land and geo-political tensions drove an oil crisis with prices soaring 300% higher, which in turn drove a decade long inflation crisis that led to a sustained period of ‘stagflation’ (a period of stagnant growth and rising inflation, not a 1970’s cocktail!) There are many perceived similarities to the current situation and the Governor of the Bank of England has suggested inflation may hit double digits whilst similarly suggesting a recession followed by anaemic growth over the next two years.
As the 1970s rumbled on, rising prices led to a number of industrial disputes as pay struggled to keep up with rising costs and the resulting strikes sent many households to panic buy candles. All these factors combined to create a huge productivity issue for the UK. By the late 1970s, unemployment was becoming a major and persistent problem and a much clearer north south divide was growing as the country’s de-industrialisation occurred at a an ever-faster rate. The legacy of the 1970s was a balance of trade deficit and two decades of cyclical Boom and Bust – trying to curb inflation without choking off economic growth.
It all sounds very doom and gloom, however, the 1970s were also the decade of Sir Clive Sinclair and other amazing UK inventions including the Bungee cord and the Lamb Balti. The 70’s were a decade of expansion of university education and continual social change, including an increasingly progressive role for women in the economy. One of the answers to the economic chaos of the 1970’s was for the UK to apply to join what became the European Union!
Are we about to see history repeat itself? Who knows, but just in case I have a pair of bell bottoms and a tank top at the ready!
Justin Brown, CEDOS Chair and Assistant Director for Growth, Lincolnshire County Council
Lunch & Learn Network Event Recap – 25th March 2022
Our thanks go out to the Local Government Association for their input into our March Lunch and Learn session, reviewing the guidance for the UK Shared Prosperity Fund and hosting a debate on the Investment Planning processes that we are now in the throe of. The Local Government Association have developed a resource page on their website relating to the UK Shared Prosperity Fund which can be accessed via this link.
CEDOS Lunch and Learn Session – 20th May 2022
We look forward to welcoming members to our next Lunch and Learn session at 12pm – 1pm on Friday 20th May. The session will be hosted by CEDOS and will focus on recent CEDOS research into future skills needs in the economic development profession in a time of rapid change. The session will focus on the most valuable skills to Economic Development leaders, the changing nature of requirements and some of the potential solutions to skills development and recruitment challenges.
We hope you can join us for this session. Please contact info@cedos.org if you do not have a link to the session.
CEDOS Community Renewal Fund Forum
Every first Monday of the month CEDOS will be facilitating a forum to discuss issues and share practical solutions and best practice around the development and delivery of the Community Renewal Fund. The sessions will be open to members and Local Authority non-members and will now run until January 2023, at the conclusion of the fund.
Future Community Renewal Forum events will be on Monday 9th May, Monday 6th June and Monday 4th July.
Queen’s Speech 10th May 2022
Tomorrow marks the Queen’s Speech reopening parliament, with a range of measures that may be of interest to members, including the Levelling Up and Regeneration Bill which will enshrine the 12 Levelling Up missions into law and set up the process for reporting progress against them. It may also include powers to make Compulsory Purchase easier to take control of empty buildings.
It also remains to be seen if any elements of the proposed Planning Bill make their way into the Queen’s Speech – especially within the Levelling Up and Regeneration Bill. CEDOS will be briefing members after the Queen’s Speech on any relevant forthcoming legislation.
The Impact of Energy and Economic Development
In a previous CEDOS newsletter, we reviewed some of the potential longer-term opportunities for local areas coming out of the COP26 conference. The war in Ukraine and the serious and ongoing energy price spikes have probably brought forward a range of these opportunities as the UK’s energy policy has tacked towards short to medium term energy security being a much more prominent issue.
On 7th April, the Government launched of the British Energy Security Strategy, a direct response to the situation in Ukraine. The plan still sees the drive to energy security as being driven by new green British industries such as offshore wind, nuclear and hydrogen – but short-term measures to increase current supplies and reduce consumption in the short term are also now critical.
There are opportunities in the domestic sector around heat pumps and low carbon heating, insulation, solar and other renewables through a recently announced VAT reduction and some additional grants for these technologies. The energy security approach also focusses on energy efficiency.
At a wider level, there is a drive to maximise domestic gas resources and utilise carbon capture and storage in the North Sea, with maximising domestic supplies of oil and gas critical in the short term. This process will result in approvals for a range of local onshore and offshore energy projects, including rightly or wrongly fossil fuels projects. There has also been a scientific review of fracking and shale gas within the UK, which may lead to further sites being commissioned into production.
Hydrogen power in particular provides a range of opportunities for local areas as there is virtually no low-carbon hydrogen in the UK energy system and the fuel has a significant role to play in supporting the UK transition to Net Zero. The Energy Security Strategy has prioritised making the UK independent with regards to green hydrogen production. By 2023 hydrogen could be up to 20% blended into the natural gas grid and some hydrogen heating neighbourhood trials are expected to commence in 2023. There is a plan to generate hyper-flexible grid systems, allowing localised supply and demand to be matched reducing waste through transmission. This creates opportunities to develop localised smart grids, district heating systems, energy efficiency projects and local renewables production – in turn generating local jobs.
In short, minimising the impact of rising energy costs are going to be a major issue to support and enable local economic development over the next decade. Within local communities, energy costs will be a major determinant of poverty, household disposable income (which will have an impact on a range of discretionary areas of expenditure within local economies such as eating out, retail and personal services).
Increasing energy costs will expose a range of critical viability issues for businesses, especially those that are dependent on moving goods and services around ranging from personal care services to wholesale and logistics. It will be much easier for new start businesses and new commercial property developments to embed energy efficiency into their offering than for those with some element of embedded dependence on energy use. Location and property decisions of industry may increasingly move to ensuring access to (or even reliability of) more affordable energy and away from access to markets or resources.
Improving energy security will create local opportunities with regards to production, storage and transmission of a range of energy sources, opportunities to diversify energy usage and opportunities to upgrade energy efficiency. Some of the schemes launched as part of the British Energy Security Strategy and those linked to previous announcements such as the ‘Ten Point Plan for a Green Industrial Revolution’ can bring additional investment into local areas, support new growth industries and innovations in existing sectors. The link between energy security and economic development is likely to be a key feature within local economic development for some time, possibly matching the ‘Levelling Up’ agenda. As a result, ‘energy’ is likely to become an increasingly key sector in a range of economic development plans. To view the British Energy Security Strategy and an overview of current initiatives click here
Future of Economic Development
CEDOS have now completed a major research study into the future skills needs of the economic development profession and we would like to thank everyone who contributed.
The Economic Development profession has faced a turbulent few years. There has been a raft of national and local policy changes, driven by the gradual refreshing of regional economic policy no longer driven by EU investment and by tumultuous economic change. This change has been predominately driven first by BREXIT and then by the COVID-19 pandemic and its ongoing aftermath and going forwards under the directive of the Levelling Up White Paper.
The challenges of the pre-pandemic era were focussed on improving business productivity and growing key sectors, driven by the UK Industrial Strategy, and promoting wider dynamism within SMEs.
Within the labour market the emphasis was on upskilling to support the drive to improve business productivity and supporting economic inclusion and employment security. This was linked to activity such as the expansion of Universal Credit and overcoming the growth of insecure, low hours and contract-based employment.
Fast forward to 2022 and the key challenges are refocussing town centres and supporting the retail and hospitality sector adapt and survive, dealing with a constantly changing labour market that at present has a record number of vacancies, but that is still in a relatively fragile recovery and supporting businesses to try and come out of survival mode, who are further buffeted by rising energy and wholesale costs.
Driving business innovation and future growth now needs to take place with a swathe of the business base operating with impaired balance sheets, facing ongoing supply chain challenges, an energy crisis and accelerating inflation. We are also slowly seeing the return of productivity on the agenda, but largely to support certain sectors compete due to significant wage increases due to labour scarcity, rather than to drive those wage increases. This is all whilst businesses operate in uncertain markets, both domestically and internationally.
It was anticipated enterprise would flourish after the pandemic, which to some extent it has done. Going forwards the impact of increasing labour demand and wage growth, increasing flexible working and the perceived lack of support for the self-employed during lockdowns may weigh heavy on the attractiveness of starting and running a business and current start up rates may be unsustainable. These are areas that commissioners and providers of business support and growth services will have to grapple with over the next few years.
In terms of the labour market, change has been rapid and remains fluid. The forecast unemployment disaster never really materialised, not that there are not considerable individual stories of redundancies, periods of unemployment or furlough and personal hardship. Coming out of the pandemic there are a record number of vacancies and unemployment continues to fall – creating a completely different set of problems to dealing with large scale unemployment. Longer term the picture is shrouded in uncertainty.
There are now certain sectors that are struggling to recruit individuals with the required skills and as a result are having to raise wages considerably (if they could afford to do so). Many of these sectors were facing issues before the pandemic, including engineering, IT and tech industries and construction.
The labour market has been responding to a number of economic factors, including restrictions on overseas workers and a large number of people changing careers, relocating or leaving the labour during the pandemic lockdowns. Wages in some sectors are rising quickly and in others are stagnant – leading to a drift into other occupations.
These complex issues were highly visible in the food and drink and hospitality sectors, especially in the run up to Christmas 2021. These issues are prevalent in many areas of the economy that have been deeply scarred by COVID-19 and can little afford to compete in a spiralling wage market with a cost of living crisis growing.
Infrastructure investment is presently deeply rooted within the context of the Levelling Up agenda. The drive to allocate scarce resources through a Business Case process, set against delivering on a wider set of socio-economic parameters, is making the process of securing investment to improve key transport or other infrastructure a much wider and more corporate responsibility within Local Government. As a result, strong internal partnerships will be just as important as external ones for the profession.
The Levelling Up White Paper may result in deep changes in economic development structures. Whilst Local Enterprise Partnerships have had a reprieve, the structure of many will change in line with the ongoing devolution process. Much of the investment streams associated with the Levelling Up process are being directed at District/Unitary Authorities, some of whom may have significant capacity and skills issues going forwards, whilst the potential for ongoing County Deals may lead to a new tranche of Combined Authorities (with or without Mayors and in many cases across boundaries) and potentially a range of new powers and investment.
Given the legacy of the pandemic and the incorporation of health and wellbeing into the Levelling Up missions, a range of partnerships across the health sectors will be critical to fully recover from COVID-19. This includes an expanded role in supporting economic inclusion, supporting employers, public safety, stimulating regeneration and supporting a range of community-based services. How the UK exits the pandemic and its legacy on health (including any lingering social distancing or self-isolation processes) will have a bearing on labour market participation, business productivity and wider determinants of economic health.
Partnership with the private sector will clearly remain important, especially in the potential reframing of Local Enterprise Partnership’s roles which have been the key local partnerships for local business leaders to engage with the public and community sectors over the past decade or so. Many Local Authorities set up Economic Recovery Boards during the pandemic – often reinvigorating their own economic partnerships with local businesses.
These changing dynamics including the increasing importance of town and city centre renewal and need for beefed up partnerships to achieve this, the Governance of new economic programmes and a likely renewal of local Economic Strategies and Investment Planning as further detail emerges on the context of Levelling Up and UK Shared Prosperity Fund will all drive a need for stronger local public-private and third sector partnerships.
There is an increasing imbalance of how business and people relate to ‘place’, particularly in an economic sense. The growth of digital technology has significantly blurred the link between ‘home’ and ‘workplace’ within some sectors/professions, through more blended working – allowing for longer but less frequent commutes and distance working.
Business relationships with customers (in the B2B and B2C sectors) have changed through e-commerce, digitalisation of services, automation of customer services and the disruption of lockdowns. Locations with direct access to customers and footfall are less essential to some sectors as they once were. The pandemic has made people re-evaluate their relationship with their locality and how they access goods and services, leisure and open space.
This is the context within which Local Economic Development has to operate, with the pace of change accelerating rapidly. The changing context means a changing set of skills and competencies will be required to stay ahead of this change and support local businesses and residents to ensure they can obtain maximum value from any local economic growth.
Working in silos will no longer be effective and many of the old distinctions (such as those driven by what ERDF and fund and what ESF can fund, separate services covering Regeneration and Economic Development) are being broken down. As an example, despite the constraints of the programme, many providers to the Community Renewal Fund have begun to offer more comprehensive programmes without the separation of skills and business support. This process will clearly continue based on current guidance for the UK Shared Prosperity Fund.
Certain sectors were usually off limits for business support or attracting inward investment and there were frequently sectors that Economic Development have found it hard to both engage with and work with (such as developing a relevant support offer to the retail and hospitality sectors). In many ways, the pandemic has brought forward a range of new potential clients to access Local Authority and wider Economic Development services, especially those that have come forward for COVID-19 Local and Further Assistance grants. It is likely these sectors will remain distressed for a while and will require support over the longer term.
It is also important to note that the Economic Development profession itself is not immune to changes within the labour market. Our profession is trying to recruit, train, develop and retain a relevant and dynamic staff base in times of change and with skills that are highly in demand in other parts of the economy.
The pandemic has also raised the general importance of economic development across many Authorities who previously felt confident in their local economies and had relatively low levels of disadvantage. Some of these Authorities may get the chance to further enhance their capacity through UK Shared Prosperity Fund and County Deals, whilst others may have difficult choices to make if the current level of resources cannot be maintained.
These combined policy and economic changes set the tone for what Economic Development and wider services need to focus on and what resources they are likely to need.
The more detailed findings of the research will form the basis of our next Lunch and Learn session on 20th May 2022.
Extension of the Community Renewal Fund
Letters have been sent from DLUHC to all accountable bodies of Community Renewal Fund to offer an extension to the programme period. Many Local Authorities have now agreed to the programme extension until the end of December 2022.
The extension particularly helps with some key processes including
- Completing project evaluations and ensuring some of the more intangible and legacy orientated outcomes and impacts can be measured,
- For projects that had struggled to recruit individuals (mainly skills and employability projects) and
- For grant funds, that can now provide their recipients with a longer window to defray their investment.
- For projects that are undertaking feasibility studies – giving a longer period to research and test findings.
However, many projects across the country have not accepted the full extension – and this is for a range of reasons. Firstly, there is no additional budget attached to the extension, so many projects do not have the resources to finance additional delivery or project management. Some projects had planned delivery to coincide with a six-month period so do not need any additional time and some projects have accepted an extension, but primarily to capture outputs and outcomes rather than to physically extend delivery.
Extensions have been easier to enact for projects that operate on flexible budgets with less fixed costs such as salaries. This includes project that make heavy utilisation of consultants or sub-contractors on payment by results arrangements, projects that offer grant funds and projects that have used Community Renewal Fund to expand existing activity.
The extensions also create challenges for Accountable Bodies. The management fees associated with Community Renewal Fund are a fixed percentage – so Local Authorities have to manage the extended period, but with no additional resource to do this. This invariably may mean another round of interim monitoring and payment processing.
Secondly, many Authorities and partners wanted to use the learning and evaluations from the Community Renewal Fund to inform their Investment Plans for UK Shared Prosperity Fund – which is now a process that will not overlap.
One of the key comments from accountable bodies has been the design of the programme could have been very different if projects had been designed to operate over a year rather than six months.
Further UK Shared Prosperity Fund Guidance and Allocations
April has seen further guidance and information released on the £2.6bn UK Shared Prosperity Fund (UKSPF), including the launch of the Investment Plan platform. The window for submitting Investment Plans is open between 30th June 2022 and 1st August 2022, with first payments to Local Authorities expected from October 2022. The programme will initially run to March 2025.
The vision for the fund is based around the following objectives:
- Boost productivity, pay, jobs and living standards, especially in those places where they are lagging.
- Spread opportunities and improve public services, especially in those places where they are weakest.
- Restore a sense of community, local pride and belonging, especially in those places where they have been lost.
- Empower local leaders and communities, especially in those places lacking local agency
The fund has an overarching objective of building pride in place and increasing life chances, covering three Investment Priorities, Community and Place, Supporting Local Business and People and Skills. These priorities are then linked to the ‘missions’ contained within the Levelling Up White Paper.
Allocations have been made across all lower tier and unitary Local Authority areas and Authorities now need to develop their Investment Plans, which includes identifying and prioritising investments and outcomes across the range of three Investment Priorities – rather than these being set centrally. This is a positive step forward from EU Structural Funds, where priority axis allocations were largely set centrally.
The development of individual interventions will still draw from processes similar to ESIF, including developing a Theory of Change and a Logic Model and project application processes.
The guidance strongly encourages localities to work with their neighbours when commissioning people and skills activities, including with Upper Tier Authorities who have responsibility for the Multiply programme. The emphasis is to achieve better outcomes and value for money. In reality, the same pragmatic approach could be applied to the Supporting Local Business priority which may benefit from some aggregation.
Most of the UKSPF will be revenue funding, with the core offer being 90% revenue in 2022/23 and decreasing to 80% revenue in 2024/25 – although Local Authorities can express a preference for their funding mix within their Investment Plans.
Accountable lead Authorities will manage their area’s allocation, assess and approve applications (which suggests a significant departure from previous ESIF programmes where appraisal was undertaken centrally – which was also a feature of the Community Renewal Fund) and monitor individual projects and process payments.
The budget for this administration is 4%, which is double the amount allocated to the Community Renewal Fund (for which the 2% has proven to be inadequate to cover the actual costs of programme management). It remains to be seen whether this will be a sufficient amount to cover the longer term management requirements of the UKSPF.
Investment Planning
In developing an Investment Plan, a range of local stakeholders covering the investment priorities will need to be engaged in a meaningful way on a Local Partnership Group. The timeframe for engagement is over a relatively short period of time before the plan needs to be submitted. Ministers have the right not to sign off Investment Plans where no local engagement and consensus has been reached. It is stated that projects can start from 1st April 2022, but delivery will be at risk. It is not clear how this will work in practice (except where there is a need to sustain ESF provision) especially as Investment Plans are yet to be developed. Also, as part of the consultation process, the local Member(s) of Parliament need to be consulted (which has also been a feature of the Levelling Up Fund) and the MP needs to be invited to sit on the partnership group.
The programme has a total of 41 pre-determined interventions that can be funded through the programme, but there is scope to look beyond these measures with appropriate justification. These interventions come with a set of pre-determined set of outputs and outcomes against which they will be measured.
Replacement for EU Structural Funds
The UK Shared Prosperity Fund, as a replacement for EU Structural Funds, can be viewed as either a positive or negative change from the status quo depending on your point of view. The 7-year investment cycle of EU Structural Funds provided some element of continuity, compared to what is likely to be only two and a half years for UKSPF. There has been a tendency for long term projects with continual investment under this process – but again this can be seen as a positive in terms of continuity of provision, or a negative in terms of lack of innovation and responses to cyclical economic change.
Within the context of EU projects, a focus was firmly placed (particularly in business support projects) on quantity at the expense of quality. Business generally received 12 hours of support and extended projects could not restart the clock for businesses they had already supported. This has meant a focus has been on the ‘output’ within delivery rather than the ‘outcome’ or the ‘impact’. It remains to be seen how this process will play out in the UKSPF, especially with further prescribed sets of measures for each activity. Further guidance will probably be forthcoming and a focus on ‘causal’ evaluation processes could take a number of different angles.
EU Structural Funds, under the last round of investment, removed much of the postcode lottery for receiving allocations of investment (although actual amounts varied considerably) and this is something that has been continued by UKSPF. The ‘priority places’ approach of all recent funds continues, resulting in different levels of allocations not directly tied to population. The UKSPF has also brought lower tier Authorities much more central to the process, while the EU Structural Funds, with a LEP area focus, often relegated the role of District Council’s in particular.
However, like with the Community Renewal Fund before it, the timeframes placed on Accountable Bodies to develop their proposals and solicit applications are very tight. Whether these timeframes are upheld by Government in approving Investment Plans will be a critical decider on timeframes. The approvals process for Community Renewal Fund led to significant delays.
Partner Activity
The Institute of Place Management will present the findings from the High Streets Task Force on town transformation across the UK. This focused webinar will relate these findings to the Shared Prosperity fund, to provide learning and approaches for those compiling SPF investment cases, and for those keen to participate in SPF investment and local projects.
The webinar will:
- Present findings from the High Streets Task Force on local strengths, weaknesses, barriers and opportunities to transforming towns and cities
- Help place leaders to understand how these findings relate to the Shared Prosperity Fund, its structure and priorities.
- Provide expert guidance on place governance structures, which can also help deliver SPF impact
- Present practical approaches to prioritising interventions in your place and developing the right place strategy
- Present considerations on local capacity for delivery which should be factored into future strategy and funding.
The webinar is suitable for any individual involved in local place transformation, but particularly for those with a role in shaping the use of Shared Prosperity Funding or considering future funding where similar investment cases must be prepared.
Registration for the event is below. This is an external event to CEDOS and there may be a charge for non-IPM members.
https://www.placemanagement.org/news/posts/2022/may/shared-prosperity-fund-webinar-25th-may/
What Works Growth (Centre for Cities) are conducting a survey of people working in economic development (including insights/research teams) about evidence and evaluation use in local economic policy-LAs, MCAs, LEPs, and subregional transport bodies. This survey will both inform their future resources, training and support, as well as provide anonymised insights they can share with central governments about the capacity in local places.
What Works Growth would be grateful if those of you working in relevant organisations could take the time to complete the survey. It should take about 10-15 minutes to complete. It’s primarily multiple choice questions, designed to capture current practice, and obtain feedback on capacity, time pressures, or other barriers.
The survey can be accessed by the following link https://www.surveymonkey.co.uk/r/B7LSPNS. The deadline for the survey responses is 13 May.