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What Does The Future Hold For Economic Development And Regeneration V2


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My thoughts on LEPs, High Growth Busnesses and What they look like

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What Does The Future Hold For Economic Development And Regeneration V2

  1. 1. The future for enterprise and small business NORTH WEST LOCAL ECONOMIC ASSESSMENT MEETING: Workshop on ‘What does the future hold for economic development and regeneration?’ Preston Town Hall, Preston PR1 2RL Wednesday 21st July, 2010Presented by Ged Mirfin – Chief Data Officer, BLNW
  2. 2. Different Models of Local Economic Partnerships Centrifugal MunicipalLocal Government Influence Localism Corporatism Centripetal Business led Localism Corporatism Local Business Influence
  3. 3. Public Sector Prominence or Business Dominance? Public Sector Dominated Creation of Powerful Civic Private Enterprise Associations. Return to Civic Partnerships. Business Improvement Model with represented in an advisory Public Sector & Big Business Local Government Influence capacity. Invited/Nominated Working in True Partnership Private Sector Boards. to park, pave, assize, market, gas & water and improve. Clear demarcation between Nationally Delivered and Financed Services & Tax Creation of “Keiretsu” like Enterprise Raising and Locally Delivered and Partnerships with very high levels of Financed Services & Tax Raising. close knit co-operation cooperation National Priorities to be determined between manufacturers, suppliers, centrally but Local Priorities to be distributors, banks and local funded by enhanced Local Tax Raising government with active acquiescence Powers provided the General Public of trade unions and employer and Business can be persuaded engagement and participation politically. (Layfield Principle) Local Business InfluenceA keiretsu is a grouping or family of affiliated companies that form a tight-knit alliance to work toward each othersmutual success. The keiretsu system is also based on an intimate partnership between government and businesses.
  4. 4. Enterprise Partnerships: Business Support or Supporting Business? Local Business Support Policies Re-launch, Re-packaging, Re- tailored to fit local need. Business branding, Re-positioning of Support Products and Services will Existing Business Support reflect demand-pull from local businesses as well as local economic Products and Services under Local Government Influence need. Trade-offs will need to be made another name/guise because between the imperatives of business it is too difficult to dismantle growth and town and neighbourhood existing policy programmes. renewal National strategies will be decided Business Support Strategies will reflect and targets set and monitored the needs of the “Keiretsu” . Funded centrally with little room for Apprenticeships and Specialist Training interpretation locally. Local priorities will be High Priority. Training Regimes are and targets will be largely determined likely to reflect the needs of the Growth by budgetary constraints and political Businesses. Education and Training will administrative regulation. Initiatives become much more Business Focussed. will be agreed on the basis of There will be a much greater focus on satisficing rather than negotiated identifying and backing winners at the settlement. expense of poor performing cos. Local Business Influence
  5. 5. Spatial Geography: Competition between LEPs will accelerate the performance gaps between High Growth and Low Growth Local Economies Politicians are accountable to the Balancing the needs of Business and Electorate. Big Business is not. Society especially a Big Society will The Representative Test is in require Politicians to become more Pro- achieving Sustainable and Lasting Business even at the expense of Social Local Government Influence Economic Development which Cohesion – some geographical areas will bring prosperity to the will lose out and Business to exhibit more Corporate Social Responsibility greatest number. accepting limits to growth Government will have to make some Creative Destruction – Pursuing a High invidious choices about which high Growth Strategy is likely to hasten the growth geographies to support. This demise of existing declining industrial may result in Widening Performance sectors. Continuous Change Management Gaps between Affluent and Deprived of a High Growth Enterprise Strategy on Geographies . Disempowering Local the scale envisaged has not been Government may hasten decline in attempted since the Victorian era. There areas where support from Local are however lessons we can learn from Enterprises is already weak. recent experience Local Business Influence
  6. 6. Observations onGrowth – Lessonsfrom BLNW Data
  7. 7. Public SectorVulnerability
  8. 8. Public Sector Vulnerability: Sub- Regional View
  9. 9. Public Sector Vulnerability: Most Affected Local Authorities
  10. 10. Public Sector Vulnerability: Most Affected Towns
  11. 11. Start-Up Activity
  12. 12. Significant Growth in Turnover and Jobs will be extremely difficult to achieve within the life of a Single Parliament from Start-Up Activity First 3 to 5 Years of Trading 1% of Start-Ups have Employed >10 People Sales of more than £400k and employing more than 10 people Total Jobs in sample – approx 2500
  13. 13. High Growth Geography - Sales Top Twenty Local Authorities 20/39 Manchester 52 Cheshire East 39 Cheshire West and Chester 36 Liverpool 33 Sefton 33 Trafford 30 Stockport 28 Warrington 25 Blackburn with Darwen 24 Salford 23 Bury 21 Oldham 21 Wigan 20 Wirral 20 Chorley 19 South Lakeland 19 St. Helens 19 Rochdale 17 Bolton 15 Top Twenty Towns & Cities Preston 15 MANCHESTER 108 ROCHDALE 14 LIVERPOOL 63 WIRRAL 1420/97 PRESTON 33 SOUTHPORT 13 •Greater Manchester has the highest return 34% WARRINGTON 25 WIGAN 13 STOCKPORT 24 ST HELENS 12 •Manchester (City) has 16% BLACKBURN OLDHAM 21 CARLISLE 18 ROSSENDALE 11 11 •Top 5 Performing Post Codes BB2 (Blackburn 13) BB4 CHORLEY 16 BURY 10 (Rossendale 11) M19 (Manchester 11) PR7 (Chorley / BLACKPOOL 15 ALTRINCHAM 9 BOLTON 15 NORTHWICH 9 Charnock Richard 11) M28 (Worsley 10)
  14. 14. Entrepreneurialism is a Middle Class Phenomenon• Twice as likely to emerge from a Prosperous area• Non Deprivation Areas - 513 of which 168 are from “Prospering Suburbs”.• Deprivation Areas – 198• “Prospering Suburbs” account for 25% 0f all high growth start ups and 33% of high growth start ups in in Non Deprivation Areas.• Is Entrepreneurialism a middle class phenomenon?• Is this accentuated by the current recession?
  15. 15. High Growth In Prosperous Wards - Sales Output Area Classification Typical Traits 172 Prospering Suburbs 168 Countryside 92 Blue Collar Communities 32 Constrained by Circumstances 22 City Living 20 Multicultural 5 Not Known 2 •Manchester has the highest return with 62 companies Top 15 Sales Growth Non Deprivation areas as a %age of Total •Stockport, Rossendale, Northwich and Warrington produce moreMANCHESTERLIVERPOOL 62 29 57% 46% than 90% of their growth companies from prosperous areasWARRINGTON 24 96% •OA Classification “Prospering Suburbs” are primary drivers for High 22 100% Growth CompaniesSTOCKPORTPRESTON 21 64%BLACKBURN 15 71%CHORLEY 13 81%BLACKPOOL 11 73%WIGAN 11 85%WIRRAL 11 79%ROSSENDALE 10 91%CARLISLE 9 82%NORTHWICH 9 100%OLDHAM 9 50%SOUTHPORT 9 69%
  16. 16. High Growth - Sales of £400k+ and Staff 10+ Even Geographical Spread - only 42 businesses Easier to grow in Cumbria 16% of high growth companies5 3 achieve more than £400k & 10 people, only 3% achieve this in Greater Manchester, 6% everywhere else 34 Vast Majority turnover less than £1m Total Jobs in sample – approx 2500
  17. 17. High Sales Growth (£5m+) Companies Employing more than 10Even Geographical Spread of businessesVery Few Companies achieve this sizeAlthough Sales Volumes are good employment ispredominantly in the 10 – 49 bracket Employing – 445 with sales of £125m aprox
  18. 18. Business Activity Matrix - Start Up 0.07% Companies and Growth* 0.32% Annual Turnover < £90k £90-£400k £400k - £2,5m £2.5m+ 100 - 250+ 0 0 0 2 50 - 99 0 2 0 7 B d n a 10 - 49 11 13 29 6 0- 9 1433 626 598 43 H o n u d e a c t 75.20% 24.40%•There are few companies that make the leap up the high growth curve!•Turnover and Number of Employees are mutually interdependent•Growing employee base beyond 9 is very difficult and requires turnover ofmore than £1.0m•From start up to high turnover and employment in a 3 year window is veryrare *Where Turnover Data Available (2,770 Businesses or 65% of Total)
  19. 19. The High Growth Programme
  20. 20. Some geographies have higher growth potential than others
  21. 21. Some sectors have higher growth potential than others …the Digital & Creative Sector will become increasingly important but let’s not forget the importance of older more traditional sectors (including retail!)
  22. 22. How dependent have we become on Financial Services?…but don’t forget the importance of theEngineering & Aerospace industry in the NW!
  23. 23. How much untapped high growth potential is there amongst older businesses?51.65% of the Businesses on the High GrowthProgramme are >7 Years Old & 59.70% are >5 Years Old
  24. 24. The future is bright the future is SME! 94.67% of Businesses on High Growth Programme Employ <50 Staff
  25. 25. Business Support:BLNW Interventions with High Growth Businesses
  26. 26. Can Local Enterprise Partnerships identify High Growth Companies?Can they support them to the extent that they ought to be in order to generate the levels of growth and number of new jobsthat will grow the Private Sector to absorb Public Sector Job Losses?Given that Growth in Turnover and Growth in Employment are not Mutually Interdependent should this be an explicit aim of Policy?
  27. 27. Hunting Gazelles Prominent Markings to look for: Scientists and/Young (Late 20s/Early or Academics30s), Highly Educated Independent Business Owners Businesses High Technology Entrepreneurial Knowledge –Based Businesses Niche activities orSpecialised Product Advanced Offerings within Manufacturing Newer BusinessesOlder or Traditional using Precision do not have SIC Industries Technology Codes Opposite Ends Risk Based on Specialist Spectrum 75% Low/ Industrial Parks & 25% Very High Risk Technology Centres
  28. 28. BLNW Action Plan Statistics Action Plan Themes: Intensively Assisted GazellesTheme Occurrences % Theme Occurrences %Sales & Marketing 18 12.68% Export 6 4.23%Training, Skills & WorkforceDevelopment 16 11.27% Staffing, Recruitment & HR 4 2.82%Supply Chain Membership &Network Access 15 10.56% Graduate Placement 3 2.11%R&D, Innovation & NPD 12 8.45% Environmental Directives 3 2.11%Business Diagnostics, Knowledge TransferBenchmarking & Planning 12 8.45% Programme 2 1.41%Raising Finance, CapitalExpenditure & DebtRefinancing 10 7.04% IPR 2 1.41%Leadership, Management &Business Coaching 8 5.63% Subsidiaries 1 0.70%Process Improvement, Efficient& Lean Manufacturing 8 5.63% Health & Safety 1 0.70%CRM & Database Management 7 4.93% IT 1 0.70%New Market Entry & MarketResearch 6 4.23% Succession Planning 1 0.70%New Premises, New Build &Business Relocation 6 4.23% Total 142 100.00%
  29. 29. The difference with Gazelles is not the type of question they ask it’s the complexity of the issue they face…Category of Assistance Gazelle Specific ExampleR&D, Innovation and NPD Collaborating with local Higher Education Institution in Grant Funded R & D Knowledge Transfer ProjectSales & Marketing Market Scoping Research Project on Need for Specialist Footwear for those who suffer general foot discomfort in order to offer products into the mainstream marketTraining & Skills Training of Specialist Staff working in the construction, manufacture and assembly of equipment in the Nuclear IndustryNew Machinery, Process Improvement, Retooling Improvement Production Processes in Specialist Marine Manufacturing Company producing products for the offshore oil extraction industryCapital Expenditure Access to Finance for Relocation Precision Manufacturing PlantRelocation & New Premises Consolidation of Manufacturing Plant on Single Site Location including relocation Welsh Manufacturing Plant to North WestExport JV in Eastern EuropeRelationship Management, Networking, Membership Obtaining Membership of and Maximising NetworkCluster Organizations/Networks Opportunities through the Northwest Aerospace Alliance
  30. 30. Issues• Gazelles require complex kinds of support placing much higher levels of demand on Public Sector Agencies• Gazelles are “Elite Businesses”.• Supporting them is resource intensive requiring prioritisation at the expense of existing Business Sectors!• Can We Afford To Be Doing This?• Can We Afford Not To?• Raises broader questions about the structure of the UK Economy and the place of High Growth Companies within it?