Will the government step in if LEPs falter?

‘Placing ownership of enterprise development and partnership where it belongs’… ‘engaging the commitment of local businesses to fostering enterprise in their local communities’… Both of these soundbites could have come from recent government policy communications on local enterprise partnerships (LEPs). However, they relate to the aims of a previous government white paper (Employment for the 1990s).

Back in 1990/91, the Conservative government transferred responsibility for delivering the training and enterprise programmes to a network of independent, employer-led, local training and enterprise partnerships, sorry, councils (TECs). Their aim was to ‘place the “ownership” of local training and enterprise needs with local employers’; and typically covered local functional economic areas/ travel to work areas.

All sound a touch familiar? Perhaps the fact that they each had between £15m and £55m to devote to local training and enterprise partnership work sets them apart from what we have emerging today. Perhaps it’s an unfair (arguably unrealistic?) comparison. And, while lessons from national TEC evaluation provides a mixed opinion on their efficacy and impact (accountability, return on investment, tackling employer skills needs etc.), it still begs the question that with comparably little/no funding, what will be different this time around for local economic development?

New Start examines the challenges ahead for LEPs in its latest In Focus. There are many questions to be answered. Will LEPs become a radical, locally based initiative, bringing innovation and lasting transformation to economic development? Or will they prove to be merely the latest failure in a long line of attempts to ‘upgrade’ the nation’s enterprise performance? Perhaps an even more serious point is, what will be done if they start to fail?

‘LEPs provide a clear opportunity
to “work with the grain of the market”. The allocation of funds must not be distorted by a lack
of understanding on how local markets work, or by political and not economic considerations.’ LEPs are not, and should not be seen as, a quick fix. They will need time to be able to have an impact. Many of the inter-generational employment and skills issues – and linked local enterprise and productivity challenges faced by many locations across the UK – will take longer than a single government term to resolve.

This is not an excuse for inaction. LEPs must deliver both quick wins and longer-term actions requiring commitment from both public and private sectors to resolving the ingrained challenges of raising productivity and long-term economic performance. This is particularly the case in terms of planning and reaping the rewards from business investments. Many venture capitalist funds take years to mature. A 10+ year commitment from local officials, policymakers and investors should be a pre-requisite.

LEPs must also move away from a ‘scattergun’ approach – trying to support investment in all aspects and areas of local economies – to one that is properly focused on maximising the impact of their limited resource. LEPs provide a clear opportunity to ‘work with the grain of the market’. The allocation of funds must not be distorted by a lack of understanding on how local markets work, or by political and not economic considerations.

They must set out a value-added strategy that focuses collaborative effort on interventions which will drive forward private sector led economic growth. But they must ensure that residents are able to benefit from and contribute to this growth. Clearly, faster-growing, more productive towns and cities will be a better places to live, with more dynamism and innovation in the good times and also more resilience in the bad times.

As well as assessing an area’s challenges and competitive advantage – and getting a critical consensus on the area’s USPs to build on in future – LEPs should nurture the attributes commonly found in successful partnerships. These include strong leadership and an outward-looking approach to forging strategic links across administrative boundaries; a commitment to supporting local economic intelligence to inform strategic decision making; and an emphasis on being action and outcome focused. LEPs must demonstrate that their actions are contributing to improvements in quality of life. Here cost-benefit analysis and impact evaluation must become commonplace.

So, back to my initial question: can the government afford to let LEPs fail? The scale of the challenge and opportunity is too great to allow that to happen. However, the elephant in the room is clearly a lack of funding, or more precisely how sources of funding, such as Regional Growth Fund (RGF) and EU development funds, will be used to dovetail with LEP priorities; and how will LEPs facilitate the development of investment instruments to finance future development? Here, the private sector will have a role to play in advising, investing and supporting projects that will generate income/returns.

Government support for new vehicles such as tax increment financing (TIF) – local authorities borrowing against predicted growth in their locally raised business rates to fund key infrastructure – is another positive step.

However, my own experience of working with LEPs (and their constituent local authority areas) points to an immediate concern that some places are better placed than others to: a) work with local partners to submit proposals to funding sources such as RGF and European funds; b) have the capacity across the partnership to help with the development of innovative financial vehicles, and advise on the risks and returns from these investments; and c) are better resourced to design, manage and implement formative evaluation that helps to shape delivery and assess the impact of projects.

Without mature local partnership working and the capacity to understand local economies and draw in sources of investment, LEPs will surely be hamstrung and begin to show the signs of strain and potential failure. If that happens, how is government likely to react? Perhaps the timing of such outcomes will coincide with the run up to an election and maybe an urgent re-think on how LEPs are resourced; and possibly coincide with the timing of ‘repayments’ from some of HMG’s banking ‘investments’, enabling a rethink on how local economic development is resourced.

It could also bring other areas of activity to the fore. Can the Work Programme and local skills providers play more of a role in supporting LEPs (similar to the types of innovative activities developed within some TECs) as they have now got a financial driver to help create jobs and work closely with employers? Equally, how best can local colleges and welfare to work providers support businesses to create jobs so that they have vacancies for their clients to go into? Perhaps the question is whether (or how quickly) providers will realise this challenge and start investing.

Finally, and in the words of Colombo, ‘just one more thing…’

If LEPs (and the RGF) are judged by the total number of new jobs they support, then the strategic process for optimising locations for investment and the attitude of local authorities to any new development/growth centres is likely to be a critical factor in their success. The ‘best’ LEPs will be those that can galvanise all potential partners to support them in that. Equally, LEPs must give sufficient attention to ensuring that the local workforce are sufficiently skilled to take advantage of the job opportunities delivered by major developments.

The main risk, given the current job market, is that job opportunities are filled by skilled labour from outside the local area. According to a rather dusty copy from the CLES library, displacement was clearly one of the major lessons learnt from the Inner Cities Research Programme – Evaluation of Enterprise Zones Experiment report back in 1986.