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Economic development stands at a pivotal time in its future development

28 Jun 2024

In my view, the economic development profession is at a key turning point. It is clear that without strong economic growth and investment, this country will not generate the level of productivity improvement and prosperity that is required to support the level of positive societal change that everyone is so desperately calling for.

It is well documented that UK productivity has stagnated since the 2008 financial crash (UK businesses productivity lags behind their peers in all the biggest developed economies except Japan); the UK is bottom of the G7 investment table and has had the lowest level of investment in the G7 for 24 of the past 30 years; and Ipsos recently reported that satisfaction with public services in the UK has plummeted, with 76% of Brits believing that services have worsened since the last general election, with Brexit, the Covid-19 pandemic, government policies, cost pressures and poor management being cited as the main causes (although perhaps somewhat surprising to hear no mention of the need to service our national debt and burgeoning health and social care costs as root causes).

Despite the above, I have to say that in my entire working life, I don’t personally feel that the direct relationship between wealth generation and strong public services has ever been less well understood. By way of example, I find it disappointing to report that I was at a meeting recently where one senior director of a local authority stated that they had always found collaboration with the private sector somewhat challenging “as all they ever seemed to want to do was generate wealth”. Following a slight pause for me to take in the comment, I retorted with a phrase an old Chairman of mine used to regularly remind us of, “good thing really – for blessed are the wealth creators, for they inherit the bill”.

I did then also go on to point out that in my entire working years in economic development, I felt it was harder now than ever before to encourage private sector investment into trying to tackle some of the key factors of production – largely because the combination of a stagnating economy, rising costs and an increasing frustration with public sector services is serving to dampen business willingness to invest (many businesses I visit regularly complain that they are continuing to pay ever increasing taxes, but the quality of services they get is diminishing!).

Personally, I am also somewhat concerned about some of the emerging structures that I am seeing being established to drive economic development in this country and wonder whether they are ‘serious enough’ to rise to this challenge.

Over the last 20 years or so, the machinery of economic development in this country has largely been led by organisations that have operated as parallel delivery channels to local authorities (i.e. TECs, Business Links, RDAs, Economic Partnerships and LEPs), many of whom were built on strong public-private-academic-voluntary sector collaborations, which have operated by a strong ‘DO WITH’ culture.

However, more recent structures for helping to deliver the desired level of economic growth are markedly different.

Following the transfer of LEP functions to local authorities earlier this year, the language has shifted to asking local authorities to establish mechanisms for ‘capturing the business voice’. Whilst I am hopeful for those areas that have managed to retain some of the legacy of past structures (i.e. economic geographies that have had contiguous LEP and local authority structures), I am slightly less hopeful for those areas that have had to start afresh.

In many cases, these ‘new’ economic geographies are wrestling with the competing challenges of trying to build trust and strengthen the links between public sector partners (to deliver on the goals of combined authorities) at the same time as being asked to establish strong partnerships with businesses.

In my experience, in some of these places, there is a very real risk that the mechanisms for public-private sector collaboration become mere ‘Advisory Boards’ – rather than ‘Decision Making’ bodies, and that a ‘DO FOR’ – worse still – a ‘DO TO’ culture creeps in. Were this to happen, it will significantly undermine the cause of economic development quite significantly.

The way forward? Well, personally, I think the IED has it spot on, with its Grow Local, Grow National manifesto.

Giving local authorities a legal duty over economic development would establish a clearer statutory framework as to what was expected of local authorities as the organisations that have been given responsibility for turning around our economic fortunes.

It would set a more robust and consistent accountability structure, which would place a statutory duty on local authorities to consider the importance of economic growth and wealth creation across all its activities and functions. It would place the profession and the discipline on an equal footing with other vital statutory responsibilities.

Giving local authorities a legal duty for economic development could place the profession firmly and squarely at the heart of local authority service delivery, support wider opportunities for securing investment, help drive public and private sector productivity improvements and support local authorities to mature the economic development delivery model to new heights.

As far as the importance of the six pillars supporting the Grow Local, Grow National manifesto are concerned, my personal view is they are all important for the following reasons:

Devolution and Aligned Funding: in addition to providing local authorities with funding to help them deliver this new mission, I believe it is also vital that government insists that local authorities drive genuine innovation in public sector commissioning and use this devolved funding to drive improved public-private-academic-voluntary sector co-investment to stimulate increased growth, productivity and wealth creation (rather than just acting like mini-Whitehalls).
Industrial Strategy Development and Effective Delivery: I hear lots of positive talk about local authorities being asked to produce an industrial strategy, which is much needed, but not as much as effective delivery plans for achieving industrial transition. On the limited occasions in recent history when government has asked places to produce industrial strategies, they have largely failed to put any resource behind them, or (more importantly in my view) mandated that localities develop effective delivery plans to deliver on their strategies.
Funding and Pipeline Stability: I recognise it is difficult in the current fiscal environment to guarantee funding and pipeline stability, but if economic development is to be established as a fundamental cornerstone of societal improvement in the UK, we do need to achieve a more stable and long-term funding landscape. Businesses want the public sector to deliver economic stability and adopt a long-term focus to growth, and with the current periodic ‘throw it over the wall’ funding model, our ability to take this long-term approach is limited.
Net Zero: whilst the impetus for climate change appears to have softened in some national political circles of late – as fiscal challenges have increased – the level of investment that still flows into net-zero innovation (through Innovate UK and Horizon Europe programmes) still presents a significant opportunity to stimulate economic growth through place-based collaborative R&D projects, which are often wider than just net zero.
Business Development, Trade and Inward Investment: in order to drive economic improvement we clearly need to encourage and support more firms to invest in business improvement and trade internationally. It is well understood that businesses are often too busy working ‘in the business’, to find the time to work ‘on the business’. Full devolution of UKSPF and associated business development funding would enable local authorities to build sustainable and concerted structures for achieving this goal, rather than stumbling between short-term (and often last-minute) funding announcements. A clearly defined and legislatively backed forward programme of infrastructure funding would give confidence to the private sector to co-invest and pull through greater private sector investment.
Labour Market and Skills Activation: giving local authorities a statutory responsibility for assessing local skills, providing skills intelligence and devolving adult skills budgets – if combined with greater freedoms and flexibilities for actually making local labour markets work more effectively – could also help to address the somewhat woeful performance of our skills system. For me, the jury is still out on LSIPs, with it being a somewhat variable picture and there being limited evidence that they are genuinely employer led. Personally, I would like to see greater flexibility, freedoms and funding surety given to LSIPs to ensure they were able to deliver on this important mission and an increased focus on trying to get to the base of our education system to tackle social mobility, inspiration and skills improvement from early years.
Workforce and CPD: continuing to professionalise the economic development function is also vital, with unplanned and unstructured system redesigns and closures of economic development agencies over the last 12 years having resulted in many talented people being lost to the profession. This erosion of skills has also not helped every local authority make best use of the limited funds that have been placed at their disposal for economic development. In order to ensure high-quality skills are retained in the sector, and local delivery is effective, it’s vital that we continue to develop the skills of practitioners, strengthen the standing of the profession and enhance professional development routes in the industry.

Put together, the IED’s Grow Local, Grow National offers a solid foundation for enhancing the profession, and providing it with the tools, structures and resources needed to deliver the vital mission of improving this country’s economic performance. If delivered well, it could be a game changer.

Jim Sims is Head of Economic Development at Basildon Council and a member of the IED. He has over 25 years’ experience working in the sector as an Executive or Director of Oxfordshire Economic Partnership, Business Link, Buckinghamshire LEP and a self-employed consultant, with an impressive list of past clients, spanning universities, the European Commission, local authorities and LEPs.