29 November 2016
Dr Norman Price, OBE, Chair of Birmingham Science City and Chair of Regional Finance Forum
Access to Finance is a perennial need and challenge for small and medium sized enterprises (SMEs). This post summarises the current status of access to external finance (not grants) of less than £2million and associated activity for SMEs both at the Local Enterprise Partnership (LEP) and West Midlands regional level. This summary has been put together with members of Regional Finance Forum (RFF) and the Cross-LEP Finance Group, and draws on the reports mentioned at the end of this blog.
This document must not be seen as totally comprehensive and authoritative as it is a complex and changing scene. Web provided throughout this blog are a good and necessary check if any approaches or schemes are to be pursued.
1. Banking relationships and products:
- Normal lending. Bank lending is still tight for SMEs. There is recognition by Government that banks are having difficulty lending to SMEs, affected by the new capital rules and the prevalence of risk adjusted credit assessment. Supply dropped in spite of initiatives designed to reduce these constraints, but recently there has been some improvement. The small business community believe that beyond banking weaknesses there is real inherent market failure in this space which needs public intervention. This will be worse now that Brexit is imminent as EU money was crucial in helping to fill the market failure gap. ( see reference).
- Banking Referral. The Chancellor announced that from 1 November 2016 ‘refusing banks’ must refer requests to 1 of 3 broker mechanisms accessing other finance, namely Funding Options; Funding Xchange; Business Finance Compared. This new referral system which is statutory after an unsuccessful voluntary arrangements, is being overseen by British Business Bank and its web site shows more detail. It has developed from government consultation with small business, particularly the Federation of Small Business (FSB). We all encourage this approach with interest.
- Bank of England are studying small firm funding, amongst other things, and ran a regional forum in October 2016 in Birmingham which was attended by many individuals active in the market. RFF members contributed and have also had separate meeting with officials.
- Other Banks. There is recognition by intermediaries that different banks are operating differently, with varying degrees of appetite and imagination, and a range of personal approaches; this variation is not always explicitly acknowledged. The RFF believes that there are many companies constrained by cash and the issues are that banks do not wish to lend without security, or at rates that get nearer to the actual risks, and are affected particularly by the risk constraints imposed by official regulation and their shortage/cost of local competence to make detailed assessment. Trust of banks is still low, reinforced by recent Royal Bank of Scotland disclosures.
- Guarantee schemes. Enterprise Finance Guarantee (EFG) Scheme continues supporting the main banks while two local CDFIs (see definitions and detail below): BCRS and CWRT are accredited and ART and Impetus are in course of accreditation. The offers nationally are now at the reduced rate of around £300m/year. Whilst there are many complaints particularly around the demand for personal guarantees as well as the EFG, it is still an important option for companies, in particular where security is scarce. It has full national distribution (nominally), is one of the largest public interventions and is a real recognition of the inherent market failure possibilities, as it is also in other countries. There has been publicity about Banks miss-selling but actually the situation is much more complex, with arguably the government restrictions and demands being the main issues.
- Asset backed investment. Normal Invoice discounting (with modern variations), and factoring continues to grow and in spite of the reservations of ‘traditional accountants’ can be extremely valuable in funding working capital growth. Fixed asset leasing schemes are endemic and supplied by most lenders. There are also some schemes for government support run through the banks with support for asset investment to the extent of 10/20%, and it goes well alongside normal asset based lending.
- Exporting. Support for this is a national and company concern. Positively, there is now interest by government in helping exports, including SMEs, with a new EFG scheme, though the 60% guarantee is not widely exploited. For further information refer to the Government UK Export Finance pages.
2. Non Bank Loans:
- New entrants. National emphasis is continuing to encouraging new entrants of all kinds into the market. The new referral legislation, as above, could be a very significant move in this respect as they will now have new guided access to existing banks’ customers.
- CDFIs (Community Development Finance Institutions) These institutions with some public support are crucial to dealing with market failures below around £150k. They lend after a bank decline as an additional source of finance. BCRS business loans, based in the Black Country , extended into Staffordshire and Shropshire over the last few years, lending up to £150k. It now lends across the West Midlands including specific targeted local funds, such as Worcestershire with a new Business Loans fund up to £50k from September 2016. ART Business Loans originally active in the Birmingham area has also extended to the wider region in the last three years on loans up to £150k. CWRT Business Loans in Cov/Warwick CDFI is active and lending up to £75k and Impetus Business Loans in Pershore also lends throughout the West Midlands but mostly in Worcestershire and the Marches. There is strong concern about government negative attitude to agreed and contracted recycling which is currently denuding the CDFIs of expected cash.
- Other public funding. Finance Birmingham are still lending in the £100k to £1m space now expanded to the whole Greater Birmingham LEP area, including Solihull. A government Start-Up Loan Programme also targets businesses up to two years old with soft loans of up to £25K delivered by local and national partners.
- Internet Based/peer to peer activity. General sites identified, include Zopa, Funding Circle, Lending Works, Ratesetter, Assetz, and Funding Knight, all with their merits. The major local player is Business Loan Network’s Thincats, whose lending is now above £200m and continuing to develop with larger loans up to £500k. The whole market is growing fast and there are many different models for reducing risk including credit reference, security, and sometimes like Thincats, knowledgeable assessment and combinations of all these. Rates are high (above 10%?) and mostly security is required but they lend when banks will not or are not trusted. There is some concern that new regulations might constrain, and most established lenders have applied for FCA approvals. Financial intermediaries are now starting to understand them and specialise in recommendations. The market activity is an exciting development, and is often now close to traditional lending with less inherent costs. However it is generally still expensive and security based for clients. Peer to peer for equity including crowd funding is not so established and there are more doubts about its viability.
- Supply chain funding. Advanced Manufacturing Supply Chain Initiative (AMSCI) was mainly from West Midlands LEPs run nationally by Birmingham City Council/Finance Birmingham. It originated locally to help the automotive supply chain serve growing automotive development and tooling but has expanded to a national scheme. Broadly it supplies grants/ loans of minimum £200k for the local scheme (total available was £25m), or £2m for the national scheme (total available £100m). For more information talk to Finance Birmingham.
3. Specific Regional Venture capital (VC) and support
Lack of VC is very rapidly becoming a priority throughout the region as the former-Regional Development Agency established funds, from single pot and also European Regional Development funding is starting to run down (see reference). The region has also not been too successful in accessing regional growth funds for this gap. In detail, remaining sources are:
- Midven is continuing to run many early stage companies but is virtually out of new money.
- Mercia Fund Management, run out of Henley in Arden, has recently had very significant changes in its operation, to make it arguably the most significant national fund for high tech spin-outs nationwide after Imperial Innovations in London. Most of the money can be used anywhere but it has expressed a policy of concentrating on the Midlands and North of the UK, with Universities a focus. Currently/ recently Mercia (i) continues to run its original evergreen fund for spinouts supported continually by ERDF investments although money is short until realisations; (ii) floated on Aim in December 2104 with the support of well known investors including Neil Woodford formerly of Invesco and has since acquired Enterprise Venture group which operated mainly in the North; (iii) raises Enterprise Investment Schemes (EIS) and Seed EIS of over £1m per year, using the latest government tax benefits to support early stage businesses carrying on the practice of the last 4 years; (iv) has Funds under management of £228m and direct investment capability of around £50m available for start ups, follow on and other investments; (v) broadly provides a ladder of investment from start up to maturity with experienced staff to help identify, control and develop technological opportunities.
- Advantage Early Growth Fund received more ERDF to match with angels at point of investment and is still investing but at very low level.
- Finance Birmingham has a comprehensive set of funds available to Greater Birmingham LEP area but also sometimes to the rest of the West Midlands and others. These include: High tech /early stage companies, £50k up to £500k; Creative £50k to £500k; Equity £250k to£1m; Loan £100k to £1m; Mezzanine to £2m.
- National funds. There are many national and other commercial venture capital providers in the region, some part of British Business Bank (BBB), but generally are interested in investments larger than £1m.
4. Angel/ Start up activity
- Tax relief for private individuals, investing by Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are very generous with over £1.5B raised nationwide in the last year at a cost to the exchequer of over £500m in lost tax. Mercia has funds, as above and there are others operating on a smaller scale. Minerva with HQ at Warwick Science Park, but presence throughout the region and beyond, is the major independent regional Angel network with 22 investments in the last 3 years. However a recent report (reference below) has calculated that SMEs in the West Midlands use less than a third of EIS UK average per SME. The RFF was very keen that focused encouragement of angels should be part of the Fund of Funds (now Midlands Engine Investment Fund – see below) development as there are issues with network costs but it was not accepted. Thus further initiatives are still required – potentially each LEP could develop its own Business Angel networks either independent, linked to larger players in funds, or to others using the Business Services community.
- Science Parks. Many of the science parks have incubation centres, both actual and virtual, which can provide signposting to finance people and services to help, often with the support of public funds and are considered amongst the best in the country. These include the Innovation Birmingham Campus at Birmingham Science Park Aston, the University of Birmingham’s Bizz Inn, Warwick Science Park, Keele University Science and Innovation Park, Malvern Hills Science Park; Coventry University Technology Park and Wolverhampton Science Park, and new ones are emerging. They normally specialise in particular technologies.
- Support through Local Enterprise Partnerships (LEPs) and Growth Hubs. There were formerly ERDF funded activities in virtually every LEP area in support of start-ups. In the new programme it is not so clear as but the local Growth Hubs are the best place to start to identify LEP-level programmes of support.
- Proof of concept. There were formerly funds in various geographies – they still exist in Worcestershire and Coventry and Warwickshire, and could be replicated elsewhere.
5. Fund of Funds/Midlands Engine Investment Fund( MEIF)
The Regional Finance Forum identified the need for a ‘fund of funds’ mechanism using recycled AWM and ERDF funds, and European Investment Bank borrowings, when AWM closed, and has been researching and developing the idea with all the 6 West Midlands LEPs and national government departments since 2012. It is a game changer in the amount of funds available and is to be delivered by the British Business Bank (BBB) in cooperation with all the local LEPS. The MEIF/ Fund of Funds will have the following characteristics, as announced by the BBB on 17/20 October 2016.
- Approximately £250m has been allocated from ERDF, EIB, BBB, and RDA legacy funds over approx 5 years, across the whole Midlands i.e. including East and some South East Midlands with the Midlands Engine Investment Fund (MEIF) label.
- The funds are in the procurement stage in late October 2016 with the objective of being available in the market from February /March 2017.
- Four lots are being procured (see BBB web site) (i) Equity: initial allocation of c £80m; 20% below £250k. (ii) Debt: initial allocation of c £120; 25% below £200k; 70% below £500k. (iii) Small business loans of c £30m; 25% below £50k; 70% below £75k. (iv) Proof of concept/ early stage funds; initial allocation of c £20m; 50% below 250k.
6. Further reading
- A full independent review, driven by RFF, of West Midland’s access to finance, by Regeneris under the supervision of European Investment Bank (EIB), for consideration by EIB and DCLG in potential use of EU funds 2010-2020 is a fact based background reference for this paper – this is very enlightening.
- The Business Finance Guide is a new helpful national publication on sourcing finance and other support that has just been issued, written by the ICAEW.
By Pam Waddell, Director of Birmingham Science City
The Leader of Birmingham City Council recently described Greater Birmingham and the West Midlands as ‘the mother of invention and the father of enterprise’ and the Chair of the Midlands Engine talked about ‘the start of a golden decade for the Midlands’ – a sign of growing confidence, particularly in our potential for innovation fuelled growth. At the same Conservative Party Conference Fringe Event the Prime Minister anticipated that ‘with the election of West Midlands mayor … we will fire up the Midlands Engine, we will make sure that this economy truly does work for everyone.’
The layers of Midlands geography may seem complex, perhaps a barrier to realising these ambitions, but they are in fact highly complimentary, offering different scales and specialisms for investment and action. A summary of the layers is given below:
At each layer of geography, the role of science and innovation in driving increased productivity is given prominence:
Greater Birmingham and Solihull Local Enterprise Partnership (GBS LEP) is a business-led partnership of private, public and academic centres, that works to deliver economic growth in ‘Greater Birmingham’ and raise the quality of life for its 2 million residents. The GBS LEP Strategic Economic Plan is included as one of its three priorities ‘to be a world leader in innovation and creativity’, with a particular focus on stimulating demand led innovation.
The West Midlands Combined Authority (WMCA) is a legal body that brings together GBS LEP and neighbouring LEPs in the Black Country and Coventry & Warwickshire. The West Midlands Mayor (from 2017) will have devolved powers and budgets allowing big issues to be tackled more effectively and coherently. The Strategic Economic Plan of the WMCA, which complements and supports the LEPs’ individual plans, has innovation as one of its underlying principles, threading through the eight priority actions.
The Midlands Engine is a collaboration involving 11 LEPs (including the three WMCA LEPs), 86 local authorities, 27 universities and 25 science parks – a geography of 11.5 million people. The Midlands Engine is a banner to promote the region, and a collaboration of such scale to allow direct bidding to government for programmes and projects. The Midlands Engine prospectus states innovation as one of its five priorities.
There is, therefore, clear commitment to stimulating science and innovation as a driver of the economy and quality of life at all our layers of geography. There is also consistent commitment that an evidenced approach to prioritising investments and actions, in keeping with the definition of Smart Specialisation adopted by the UK government:
Smart Specialisation seeks to ensure that proposed actions are based upon sound evidence that properly reflects the comparative advantages of the physical and human assets of particular places in the global economy. It emphasises the need to ensure that activities are fully integrated in the local economy and its supply and value chains.
In the light of this commitment the Midlands Engine embraced the opportunity to be in the first wave of Science and Innovation Audits (SIAs) in England, backed and published by by BEIS (Department for Business, Energy and Industrial Strategy; formerly BIS). The Midlands Engine SIA report was successfully submitted in September for publication by BEIS, as above, after an intense summer of data analysis, extensive stakeholder consultation and debate amongst business, LEPs, universities, science parks, Catapult centres and network organisations. The report presented a new framework for prioritising interventions in innovation to drive productivity – we are awaiting publication of the SIA reports by BEIS at the time of writing, but it will be the subject of a future blog post on this site. It moved our thinking on from sector based, to a framework where four market-driven priorities and three enabling competencies have been identified where investment will bring the greatest impact, based on our existing strengths and future opportunities. The process, as well as the findings, of the Midlands Engine SIA will be hugely beneficial. It has fostered new relationships, identified synergies, and helped to identify, develop and embed both the concept and content of the Midlands Engine innovation ecosystem.
There is recognition that the SIA forms only the first step to develop a competitive and integrated innovation ecosystem for the Midlands Engine, and its constituent areas, so more detailed and comprehensive action planning work will continue. Immediately, a supplementary piece of work is planned to identify in more detail the science and innovation strengths and opportunities in the WMCA and its three individual LEPs. This WMCA SIA will follow the same principles as the Midlands Engine report, to ensure that decisions and priorities for innovation at the LEP, WMCA and Midlands Engine geography, each at the appropriate scale, can complement each other.
As the Industrial Strategy for the UK develops (see previous post on this site) , it is clear that understanding the science and innovation strengths and opportunities of different geographies will be critical to optimise local action to exploit them to improve productivity. In a recent speech on the matter Greg Clarke stressed the importance of ‘Building upon … a powerful record on science and innovation’ and his view that ‘any successful industrial strategy has to be local’. In the approach we have been taking in Greater Birmingham and the West Midlands Combined Authority, with partners across the wider Midland Engine, we have been positioning ourselves to exploit our science and innovation assets and opportunities to become a major driver of productivity for the UK.
by Andrew Sleigh, Chair BSC Chief Technology Officers Group
This is a somewhat expanded version of the introduction I gave at the Birmingham Science City CTO Group breakfast meeting on 13th September. The aim is to provide some initial ideas to stimulate discussion about what an Industrial Strategy should mean for the West Midlands.
One of Theresa May’s more interesting recent announcements was the need for an Industrial Strategy. So far, there has only been limited discussion by government or the media about what this might mean. The first meeting of “Cabinet Committee on Economy and Industrial Strategy”, chaired by the PM, indicates the objectives as being:
- Part of the aspiration to “deliver an economy that works for all”
- As “arresting a decades-long decline in Britain’s manufacturing sector by helping firms tackle the challenges posed by globalisation without blunting the market forces that make them competitive”,
- And “playing to the country’s strengths while also creating an economy that is open to new industries, particularly those that will shape our lives in the future”.
So what might this actually entail, what should it mean for the West Midlands (a region with diverse, globally competitive manufacturing strengths), and what can we do to steer it in the most effective direction?
To prise open this argument, I highlight four items that have been published over the summer:
- An article in the FT by Professor Marianna Muzzacato “A strong industrial strategy has many benefits”.
- The EEF article “What Next for Britain and the EU” and their campaign concerning Industrial Strategy.
- NESTA “Back to the future: Industrial Strategy in 2016”
- The draft Greater Birmingham and Solihull LEP “Strategic Economic Plan 2016-2030”
Professor Muzzacato’s article makes the case for the state to engage in new types of public-private partnerships, to work together to solve problems across sectors with public agencies. She argues against the 1970’s approach of reviving zombie companies, or incumbent companies winning unwarranted favours with government, or the state trying to drive growth, but by mission oriented investments in partnership with the private sector. She argues these are more effective than instruments such as tax credits and subsidies. As in her book, her thesis is governments should act in an entrepreneurial way in partnership with the private sector, providing the demand-led investment and impetus for cross-disciplinary innovation (she used the iPhone as an example).
The EEF, “The Manufacturers Organisation”, as expected has a wide range of material on its website relevant to an industrial strategy, but so far does not have specific policy recommendations. It sets out generic principles, much directed at future trading relationships post Brexit, and has a campaign page specifically dedicated to industrial strategy. These highlight easy access to international markets, skills development and reducing the costs of doing business, but the EEF recommends ‘grandfathering’ the most current EU legislation and regulation into any future UK scheme.
One of the more interesting aspects exposed is the importance of embracing 4IR, the 4th Industrial Revolution, essentially the deep integration of digital and cyber technologies into all aspects of manufactured products. Indeed, what we mean by manufacturing is broadening with service-based contractual arrangements, 3D printing and products providing platforms for an eco-system of Apps offering additional features.
What is clear is that the EEF has an important place in this debate, and we should track and contribute to its thinking.
NESTA has a wide range of relevant material, including papers on the importance of innovation in promoting growth, the collaborative economy, and has recently added a page on Industrial Strategy. This echoes the government statements, but adds the importance of a sophisticated understanding of the strengths and future direction of the UK economy, seeking the creation of a ‘strategic brain’ at the heart of government, the need to take a long term view of how we replace declining sectors with new opportunities and the skills that go with them, and also the opportunity to excite the public about innovation, with an honest discussion about the risks and drawbacks as well as benefits. NESTA will be looking at the big questions around Industrial Strategy, and this must be an important activity to watch.
Closer to home the GBSLEP Strategic Economic Plan sets out a number of objectives that look like a sound basis for an Industrial Strategy for the wider West Midlands Region. It is significant that the first priority in the economic plan is “To be a world leader in innovation and creativity”.
The strategy emphasises stimulating demand-led innovation by developing a supportive environment bringing together the innovator, entrepreneur, universities, science parks, large companies and public sector organisations. This focus on enabling demand to interact imaginatively and constructively with innovators is potentially a very powerful model. It speaks to a Midland Engine investment fund, supporting scale-up programmes, developing mid-sized business support, attracting foreign investment to key growth and regeneration opportunities. It aims to enhance cultural and creative assets.
WHERE FROM HERE?
Greg Clarke (SoS for BEIS) gave a speech to the IoD on 27th September outlining the government’s thinking on Industrial Strategy. This adds substance to the objectives, but still says little about the actual measures to be implemented. He speaks of the need for a long term approach to tax, infrastructure, research, education and skills, avoiding race to the bottom. He advocates a tax system that encourages entrepreneurship. He notes the need to support the integrated supply chain of smaller, specialist firms, not be the protector of incumbency but create the open conditions for new competitors. Many policies will be cross-cutting, not about particular industries or sectors. And he emphasises the need for a different approach in different places, no one size fits all. From my perspective, this is all helpful sounding positioning. The question is, should steps be taken locally and nationally to realise these ambitions.
I hope this blog can initiate a focused dialogue on what we think should be the actual implementable planks for an Industrial Strategy for the West Midlands. We have a strong, globally integrated manufacturing capability with much potential for growth. The proposals set out by the GBS LEP look a reasonable basis, but is it complete and what can we do to bring this to reality?
Some questions to consider include:
- What is meant by ‘industry’ and by ‘manufacturing’? Most products now involve a substantial digital element that plays across service-based offerings where so much value generation can lie. With so much activity outsourced on a services basis, ‘industry’ has tentacles well beyond normal sector definitions.
- How can demand-led innovation and ‘the entrepreneurial state’ be realised, how can we bring about the public-private innovation Professor Muzzacato argues for, or the cross-cutting creative partnerships the GBS LEP is suggesting?
- Does manufacturing include business that design and develop IP in the UK, has production abroad, but still generates its value added in the UK?
- Large companies, mid-cap businesses and SMEs have different needs, but it is clear they have strong inter-dependencies on each other. What elements of strategy will help generate these relationships and enable them to flourish?
- Complex supply chains feature in much advanced business activity, especially in the West Midlands. What elements of an Industrial Strategy can support supply chain growth, locally, in relationships with EU business, and globally?
- Most high volume products are made in a very small number of huge plants, where the benefit of high investment and concentrated accumulation of skills is what drives globalisation rather than low wage rates. Will we see manufacturing bifurcate into such high volume global centres on the one hand, with more complex, flexible production on the other? Can the UK play a part in both?
- If the part of the objective is to promote the “everyone” agenda, then how does that square up with advanced manufacturing, which is notable for its small employment footprint?
There have been a plethora of reports and announcements nationally and locally that will have a bearing on the Innovation for Growth agenda over the coming months. Here is a brief summary of each:
Dowling Review of Business-University Research Collaborations, the headline findings are:
– Public support for the innovation system is too complex
– People are central to successful collaborations
– Effective brokerage is crucial, particularly for SMEs, and continued support is needed for activities that help seed collaborations
– Pump-prime funding would stimulate the development of high quality research collaborations with critical mass and sustainability
– Technology transfer offices need to prioritise knowledge exchange over short-term income generation, and further work is required to improve approaches to contracts and IP agreements
– Government strategy on innovation needs to be better coordinated and have greater visibility
The ‘Productivity Plan’ – a 15-point plan that the government will put into action to boost the UK’s productivity growth, centred around two key pillars: encouraging long-term investment, and promoting a dynamic economy. The most relevant points to innovation are the following:
– A highly skilled workforce, with employers in the driving seat
– World-leading universities, open to all who can benefit
– High quality science and innovation, spreading fast
– Financial services that lead the world in investing for growth
– Resurgent cities, a rebalanced economy
Jo Johnston, Minister for Science, ‘One Nation Science’ speech on 16 July, layed out his views on the importance of investment in science for productivity, the need to drive of innovation nationally and locally (citing the Dowling report and ‘Productivity Plan’, above), and increasing diversity in STEM .
Framework and set of indicators to compare local innovation at LEP level . The report summary starts ‘The importance of ‘place’ to science, innovation and economic growth is increasingly recognised but under analysed and not yet fully understood. This report seeks to provide a consistent body of evidence of comparative innovation strengths in the 39 LEP areas to help LEPs and their partners to marshall their innovation assets to best effect using European Structural Funds and other funding streams.’ In brief, the report largely confirms the strength of our local research base, but highlights poor local business investment and performance in innovation, with the exception of Coventry and Warwickshire.
There is a clear expectation that the above report should form the starting point for local audit of innovation strengths by each locality (at LEP and/ or larger level). Regions that have already conducted some for of Smart Specialisation Strategy as part of their European Structural and Investment Funds Strategies will already have some of this in place. Black Country and Coventry and Warwickshire has done some of this work, but not Greater Birmingham.
Innovate UK new 5 Point Plan has been launched by the New Chief Executive, Ruth McKernan, , which she spoke about on 30 June at Venturefest West Midlands. This is being more fully developed into a strategy to be published in the autumn. The five points are:
1. Accelerating UK Economic Growth by nurturing small, high growth firms in key market sectors
2. Building on innovation excellence throughout the UK, investing locally in areas of strength
3. Developing Catapults within a national innovation network
4. Working with the research community and across government to turn scientific excellence into economic impact
5. Evolving funding models to help public funding go further and work harder
The West Midlands Combined Authority was launched on 6 July by the leaders of the sever Metropolitan Councils. The other Councils in the three LEP areas are invited to join. The launch statement ‘Growing the UK Economy through a Midlands Engine’ was published. It is currently expected that Councils, LEPs and the Combined Authority will co-exist, with issues being dealt with at the appropriate geographic level.
Budget announcement on 21st July that: “City regions that want to agree a devolution deal in return for a mayor by the Spending Review will need to submit formal, fiscally-neutral proposals and an agreed geography to the Treasury by 4 September 2015. The Treasury and DCLG will work with city regions to help develop their proposals.”
Proposals are in development that fit the above criteria and expresses the ambition and appetite for growth, productivity and reform – and the devolved settlement we will need with government to achieve the greatest benefit for citizens, businesses, the economy and the Exchequer. Innovation is part of this, and discussions are underway about what might be included.
The Birmingham Smart City Alliance May Steering Group meeting: digital leadership, choices for healthy lifestyles, a new Smart Cities demonstrator and the importance of personal dataMay 18, 2015
May’s steering group meeting of the Birmingham Smart City Alliance, held in Baskerville House thanks to the generous hospitality of Birmingham Science City, was an energetic meeting that welcomed four exciting new initiatives in the West Midlands.
A neighbourhood scale Smart City demonstrator
Digital Birmingham described a new neighbourhood-scale Smart City demonstrator project that is being put together with local and national stakeholders under the guidance of the Smart City Commission. The project will tackle issues including sustainable passenger and freight travel; citizen engagement; health and wellbeing; civic enterprise; and digital skills. The next shaping workshop for the project will be held on 2nd June. Please contact Digital Birmingham for more details, or make contact with the Alliance by commenting on this blog or through the Alliance’s Linked In group.
We discussed a new “Digital Leaders” programme for individuals and organisations across the UK involved in delivering sustainable and innovative digital transformation. The programme is intended to promote digital expertise and the adoption of technology, and is led by Cabinet Office. An Alliance member is taking a national role to support the programme and looking for collaborators to support it in the West Midlands. For more details, make contact with the Alliance by commenting on this blog or through the Alliance’s Linked In group.
Supporting Healthier Food Preferences
We also learned about “Supporting Healthier Food Preferences“, a new healthy eating initiative supported by “The Lancet” medical journal, intended to tackle obesity in Birmingham, including child obesity, and issues such as the saturation of many shopping centres by fast food outlets. The initiative will ask what business is prepared to contribute towards the healthy eating agenda; and what the public sector is prepared to contribute.
The fast food market has grown across the country – aided by online services such as “Just Eat” – but many local authorities are seeking to restrict them. Birmingham currently limits “fast food” usage of retail space to 10%, whilst some other authorities limit it to 5%. However, over half of Birmingham’s shopping centres are already saturated with such outlets by this measure, and many others escape these restrictions as they are classified as “restaurants”. In the meantime, child obesity is a growing challenge in Birmingham – 1 in 4 children in Year 6 are overweight or obese, and rising).
So what can we do? We will be holding a workshop to explore ideas. If you would like to join the workshop, please comment on this blog post or through the Alliance’s Linked In discussion group.
Data Citizen Project
Finally, Julia Higginbotham, Chief Executive of Rewired State, asked our help in connecting Birmingham’s institutions, particularly our Universities, to the “Data Citizen Project” Rewired State are running for the Office for National Statistics to understand the motivations and impact of the use of personal data in finance, education, health and travel. The initiative intends to develop a positive narrative for the use of personal data with consent. Again, if you or your organisation has something to add to the initiative, please make contact through the Alliance’s Linked In group or by commenting on this blog.
Our next steering group meeting is on Wednesday 10th June where we’ll be hearing from a new business-led Skills Action Plan for the digital and technology sectors and about InnovateUK’s new £10m “Internet of Things” demonstrator competition.
Chair of the Birmingham Smart City Alliance Steering Group
The speaker at the Birmingham Science City’s Chief Technology Officers Group on 11 December 2014 was Professor Madeleine Atkins, Chief Executive of the Higher Education Funding Council for England (HEFCE). Those that braved the wet, wild morning were treated to a concise, comprehensive and current overview of ways that Universities engage with the place that they are located, and the importance being placed on this role across the political spectrum as we move towards a general election. Professor Atkins, as an old friend of the region, was quick to throw down the gauntlet for West Midlands Universities, suggesting that they were very well placed to grow their role as Place Makers.
The ways that universities can fulfil this Place Making role can be summarised as follows:
Engaging with schools has been a required activity of universities for a long time with £600m per year spent on outreach in England. This is moving from a focus on ‘whizz-bang’ demonstrations to deeper engagement in the running of schools. HEFCE is tracking the performance of university run schools with great interest.
The local skills agenda is an area all parties want universities to be more engaged with, through technical undergraduate and masters degrees as well as apprenticeships. Universities should be capatalising on the Autumn Statement announcement of student loans being expanded to Masters degrees, but they should also be exploring different models of training provision and funding that will engage SMEs and older people, for example. In some cases Universities will be a catalyst for skills development, rather than the provider.
Economic growth through university-business engagement has been funded via the Higher Education Innovation Fund (HEIF) for many years now and has made huge changes in attitudes of academics and businesses alike to the value of collaboration and knowledge exchange. Impact is now a much bigger factor (20%) in the Research Assessment Framework (REF) that contributes to determining university funding – with the new assessment due out very soon we will see how WM universities are performing by this measure. Universities should be looking at new narratives and ways of engaging with their local economic growth agendas, particularly in the context of devolution of powers.
Social Innovation and Social Enterprise is the newest area of Place Making for universities, although it grows out of a tradition of volunteering. Community based business has become a big growth area and a priority in terms of national and European funding. Some universities have established Business Parks and incubators exclusively for social enterprises, or taken over community assets such as theatres or arts centres.
Professor Atkins had a number of clear messages for West Midlands universities and the organisations that work with them in terms of further building their role as Place Makers:
• Place making is a long game with no quick wins.
• It requires being open to new ideas from inside – staff, enthusiastic students – as well as from outside.
• It requires collaboration with other universities, local authorities, businesses etc on an ongoing and dynamic basis, not just project by project.
• There may need to be recognition that with devolution to second tier cities happening, the Haldane principle of public R&D investment decisions being made solely on the basis of peer review – some decisions may be based on economic geography.
• The funding environment is likely to continue to be challenging so an encouragement to share facilities – this should be seen as an opportunity to share with other universities and business.
• There are funds available to help universities to embrace this place making role, including the Catalyst Fund and the UK Research Partnership Investment Fund, but very few WM applications to either so far.
There are people round the country, including the West Midlands, who were aggrieved by the major science funding awards for the ‘Northern Powerhouse’ announced in the Autumn Statement. But Professor Atkins argued this is the result of 10 years or more of building up relationships and a shared vision, a model which has scope to be replicated elsewhere, including the West Midlands.
With thanks to St Modwen’s for hosting the event at the Longbridge Innovation Centre and to Professor Madeleine Atkins for a stimulating talk and discussion.
Pam Waddell, Director of Birmingham Science City
Andrew Sleigh, Chair of the Chief Technology Officers (CTO) Group, cordially opened events by contextualizing the session, explaining that a primary aim of the CTO group was to bring together people who are innovation leaders in their organisation to transfer knowledge on current best practices on how to innovate and how to improve innovation practices. The session did not disappoint.
In summarizing the two excellent speeches from Dr Adrian Woolard, Head of BBC R&D North Lab and the Connected Studio Innovation Programme; and Dr David Jakubovic, Head of European Open Innovation for Procter and Gamble, several interesting themes emerged.
Both speakers stressed the importance of audience and consumer led innovation connected to technology, underpinned by testing and evaluating experiences with users and ideally, in the case of the BBC, through co-creation. Adrian went deeper into this issue by talking about the current trend in innovation thinking of harnessing constructive failure based upon encouraging teams to rapidly learn through prototyping and building experiences. His passion for building ideas was encapsulated in his quote, “ a prototype beats a 1000 meetings”.
Connecting with and attracting external talent, eg from universities and other businesses, was a common driver in achieving collaborative innovation. Creative talent was seen as crucial in helping organisations to define rather than just solve problems. But both speakers articulated, in different ways, that their respective organisations had to focus very hard on defining world-class problems and or challenges in order to stimulate the best creative talent to collaborate with them.
Understanding and articulating the opportunity space was seen as a key driver in helping to foster successful innovation partnerships. However, both speakers stressed that without the ability to establish a common language and shared objectives a win-win relationship was difficult to achieve.
IPR was also discussed. This is where clear differences could be seen due to the nature of industries and activities that their respective organisations were engaged in. Adrian expressed the need within his sector to be flexible but underpinned by clarity, where David spoke of the need for a more formalized approach.
Summary by Professor Simon Bolton, Birmingham City University, of a discussion that was part of a Business Afternoon at the British Science Festival on 8 September 2014