By Jane Holmes, Project and Partnership Manager, Birmingham Science City
Developing the region’s expertise in innovation was discussed earlier this month by candidates for the role of West Midlands Mayor.
Birmingham Science City invited all of the candidates to take part in hustings focused on innovation at the West Bromwich Albion football ground. Four candidates took part: James Burns (Green), Beverley Nielsen (Liberal Democrat), Pete Durnell (UKIP) and Andy Street (Conservatives). The event was chaired by Andrew Sleigh, deputy chair of Birmingham Science City.
Each candidate gave an open address to the audience, highlighting their views on the topic. Every speaker praised the West Midlands for its continuing record in delivering cutting-edge work and products, and preparing itself for the future of science and technology.
Funding was raised as a key issue, with the West Midlands needing to attract more investment into science and innovation. Street noted that there needs to be an economic solution to improve the region’s productivity – such as investing in infrastructure and skills development. Meanwhile Burns proposed that support for SMEs should be consolidated, a West Midlands bank should be set up to provide more capital, and community development financial institutions should cater for those without capital.
Nielsen proposed the creation of a £1 billion innovation fund, while Durnell agreed that some of the region’s towns needed more finance and mentoring.
Each candidate also welcomed the West Midlands Combined Authority’s Science and Innovation Audit (SIA), which is currently underway, as identifying areas of excellence and new opportunities for the region.
Further devolution to the region would have a positive impact on the West Midlands according to Burns, allowing the region to explore its untapped potential – a comment echoed by other candidates. Street also noted that innovation was not locked into the governance of the West Midlands Combined Authority yet, but felt it needed to be.
While health isn’t part of the mayoral remit, the speakers were asked to comment on how innovation in the NHS, and reform through its Sustainable Transformation Plans (STPs), could make it more economically sustainable. Nielsen recognised that health is a massive area of opportunity, with the West Midlands able to become a health innovation lab. Street noted that sharing best practice would be vital to promoting innovation and encouraging greater efficiencies. Health was also an area for concern, with Durnell raising issues over cuts to the NHS, while Burns mentioned a lack of transparency around STPs.
The candidates were also told that there is a severe lack of available power in the region – so how would they provide enough power for innovative companies? Both Street and Burns emphasised the importance of energy efficiency, with Burns pointing out that a localised resilient supply such as a local community energy company could plough back profits into generating more energy. Nielsen and Street both highlighted the need for innovation in areas such as housing, with Nielsen also wanting to secure more funding for battery storage or Combined Heat & Power (CHP) systems, building on local research and development.
Another question focused on promoting the region as young, digital and diverse, and a number of the speakers emphasised the importance of digital skills in the West Midlands. Nielsen stated that more money should be invested in digital inclusion in less deprived and privileged areas. Digital skills are critical, explained Street, who proposed a ‘Digital Boot Camp’ with Further Education colleges. Durnell explained how he supported the roll-out of broadband and educating people about how to use it best.
To round off the discussion, Andrew Sleigh asked the candidates about the role of public services as an early adopter and a driver for innovation. How can the Mayor re-architect how public services adopt and procure services?
Street and Durnell responded by highlighting the importance of working with, and learning from, the private sector. Burns explained that cross-sector working would be crucial for this issue, while Nielsen would use procurement to drive the multiplier effect and help to grow SMEs.
The event was very well attended, with all candidates agreeing that hustings focused on a topic like innovation allowed them to take part in some in-depth discussions and thinking.
By Ravi Kumar, Project and Partnership Manager, Birmingham Science City
The Birmingham Science City Alliance is all about partnerships and collaborations across the local innovation ecosystem. Networking is an invaluable tool to help develop successful partnerships. Done correctly, it helps to create new relationships, leading to successful collaborations, new opportunities, cultivated friendships and a source of professional support and inspiration.
In the following blog I will share invaluable tips that have helped me make the most of all networking events that I attend, and point you to some innovation related events and networks that you may wish to get involved in.
1. Arrive early. It’s almost counter-intuitive, but showing up early at a networking event is a much better strategy than getting there at a later time. As an early attendee, you’ll notice that it’s calmer and quieter – and people won’t have settled into groups yet. It’s easier to find other people who don’t have conversation partners yet.
2. Have a plan. Since every person has value, it’s essential that you know what yours is. Before you attend any networking event, get clear on what talents, strengths, skill sets and connections you can bring to the table. Map out what you want to talk about, particularly how you may be able to help other people, either now or in the future.
3. Ask easy questions. Don’t wait around the edges of the room, waiting for someone to approach you. To get the conversation started, simply walk up to a person or a group, and say, “May I join you” or “What brings you to this event?” Don’t forget to listen intently to their replies. If you’re not a natural extrovert, you’re probably a very good listener – and listening can be an excellent way to get to know a person.
4. Forget your personal agenda. Remember, networking is all about relationship building. Keep your exchange fun, light and informal – you don’t need to do the hard sell within minutes of meeting a person. The idea is to get the conversation started. People are more apt to do business with – or partner with – people whose company they enjoy.
If a potential partner does ask you about your skills, product or service, be ready with an easy description of your organisation. Before the event, create a mental list of recent accomplishments, such as a new collaborations you have started, business you’ve landed or project you’ve completed. That way, you can easily pull an item off that list and into the conversation.
5. Share your passion. Win people over with your enthusiasm for your organisation, product or service. Leave a lasting impression by telling a story about why you were inspired to create your company or pursue your professional interests. Talking about what you enjoy is often contagious, too. When you get other people to share their passion, it creates a memorable two-way conversation.
6. Smile. It’s a simple – but often overlooked – rule of engagement. By smiling, you’ll put your nervous self at ease, and you’ll also come across as warm and inviting to others. Remember to smile before you enter the room, or before you start your next conversation. And if you’re really dreading the event? Check the negative attitude at the door.
7. Never dismiss anyone as unimportant. Make it your mission to discover the value in each person you talk to. Ask questions and listen with interest. Don’t make the mistake of discounting people due to their titles. Someone you meet may appear ‘junior’, but they may have valuable connections or knowledge you’d never learn about if you’d dismissed them.
Then, when the conversation ends, remember what that person has to offer as you move to the next.
8. Connect the dots. Once you begin to listen to people and learn what they can bring to the table, you’ll start realizing how one person in the room may be able to help another. Make it a point to connect people you feel have something of genuine value to each other. When you go out of your way to make those potentially promising connections, you’re doing your part to make the networking event a success.
9. Remember to follow up. It’s often said that networking is where the conversation begins, not ends. If you’ve had a great exchange, ask your conversation partner the best way to stay in touch. Some people like email or phone; others prefer social networks like LinkedIn. Get in touch within 48 hours of the event to show you’re interested and available, and reference something you discussed, so your contact remembers you.
10. Believe in the power of networking. When you believe that the true value of networking lies in helping others and you do your part, you’ll soon discover magic happening all around you. The beauty of this approach is that you never know when that magic may cast its spell on you.
On the events page of Birmingham Science City Alliance website you will find a whole range of innovation-related networking opportunities taking place in the West Midlands all the time. There are also a number of Groups and Networks regularly convened with or by Birmingham Science City, with each group contributes towards achieving our objective of building and maintaining a thriving innovation ecosystem, catalysing collaborative activity and strengthening our collective expert voice for innovation.
But perhaps the best event of the year to extend your innovation networks is Venturefest West Midlands, where 600-700 innovators, entrepreneurs and investors will be convening on 27th June 2017.
By Dr Pam Waddell, Director of Birmingham Science City
The revised Constitution of the Birmingham Science City (BSC) Alliance was adopted in December 2015, stating:
Birmingham Science City is an alliance of public, private and university stakeholders working together to stimulate and promote science and technology driven innovation for business growth and improved quality of life in Birmingham and the West Midlands.
This blog lists key achievements across the BSC Alliance in 2016 against each of the three objectives of the new constitution. Those in italics have been significantly enabled by the BSC Executive Team.
1. Building and maintaining a thriving local innovation ecosystem
- The second Venturefest West Midlands was held at the NEC with over 600 innovators, entrepreneurs and investors attending with a wide range of partners contributing to the event
- The BSC Executive ran/ co-ran over 20 Working Group, 4 Board and 4 Chief Technology Officers meetings, averaging about 15 attendees, with a presentations and wide-ranging discussion
- The BSC website was refreshed and the Blog was relaunched as a tools to inform and encourage debate on innovation strategy, support and delivery
- The Energy Systems Catapult moved into its premises in central Birmingham
- Both the i-Centrum Building (including Serendip Incubator) and the Universities Centre were opened on the Innovation Birmingham Campus
- £250m Midlands Engine Investment Fund (Fund of Funds) was approved and will launch early 2017
2. Catalysing collaborative activity that drives Science and technology based innovation
- Midlands Engine was one of first wave of Science and Innovation Audits selected by BIS (now BEIS) and audit was conducted and published. Work is underway to develop funding asks against the market-driven priorities that emerged
- A supplementary WMCA Science and Innovation Audit is underway funded by 3 LEPs
- WM Academic Health Science Network launched Meridian, an online health innovation exchange
- Nine projects are live in the Priority 1 (R&D and Innovation) strand of the current GBS LEP ERDF Programme, with 5 more approved, including Innovation Engine 2 and the Medical Devices Testing and Evaluation Centre
- The Consortium for the Demonstration of Intelligent Systems (CDIS) proposal was developed to the point that phase 1 (£5m) has started the approval process of the WM Combined Authority
- Midlands Innovation (6 universities) launched the £60m Energy Research Accelerator
- Birmingham City University secured £14m of government funding toward the STEAMHouse Innovation Centre at Digbeth working with the Creative sector.
3. The collective expert voice for innovation
- The West Midlands Combined Authority (WMCA) Innovation Working Group ensured that the WMCA Strategic Economic Plan included innovation as a strong priority
- GBS LEP formed an Innovation sub-Board (of Business Pillar Board) and an Innovation Executive post
- Innovate UK has established a regional manager post that has linked well to the BSC Alliance.
It has been a busy but successful year for the small BSC Executive team and all the BSC Alliance partners – but we look forward to more connecting, catalysing and comment in 2017!
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.