Mike Evans, research director and founder of industry analyst firm, Cambashi questions the motivations and strategy behind government’s Regional Development Fund and takes a look at how the fund’s money is being spent.
[Breakout]The UK Government recently announced the successful bids in the second round of the £1.4 billion English Regional Growth Fund (RGF). Enterprises made 492 applications for funding, typically from £1m to £5m, and 119 have been successful gaining a total of £950 million in aid. The claim is that this will protect or create 201,000 jobs, of which around 37,000 will be in these enterprises with the remaining 164,000 in their supply chains. The successful projects will typically trigger £5 of private investment for every £1 of public money invested.[/Breakout]
At Cambashi we are dubious about the ability of politicians and civil servants to intervene effectively to support business. We remember that Michael Heseltine promised to intervene “before breakfast, dinner and tea” but this did not result in any practical support or resurgence of British manufacturing.
Analysis of the Regional Growth Fund’s (RGF) successful bidders shows that that to get money now a project really needs to be based north-west of a line from the Severn to the Wash. Only 13% were south-east of that line, of which half were public sector bodies.
The old Business Link regional advisory service which depended on funding from RDAs has been transformed into a website providing national level content and contacts. The new concept of Local Enterprise Partnerships will address similar areas to Business Link, but will depend on different funding sources, one of which is the RGF. In this round, about a third of successful bids are from public sector bodies that may fill this gap but whole areas of the South and East of England lose out.
We observe serious inconsistencies in government policies for manufacturing. EU rules constrain some actions but other countries provide more effective support to their manufacturers. We would expect almost all of the support to go to SMEs. Analysis of the successful RGF bids shows nearly half of them are larger enterprises, such as Airbus, JCB, TRW and BOC.
We would expect significant support for companies that work with innovative materials and manufacturing processes such as high speed machining. We would expect sectors like medical devices, renewable energy and sustainable transport solutions to be supported. RGF funding supports some enterprises involved in renewable energy and innovative transport but hardly any medical device, materials or manufacturing process candidates. Aerospace and Automotive sectors are over-represented.
To effectively support manufacturing in the UK, government must assess the market opportunity and our unique strengths to meet that demand. They recognize that clusters, such as the Cambridge Phenomenon, are the way forward. However, it seems that only those outside the South East will be supported. There is no sector selection.
There are very few scientists and engineers in parliament. Only two out of 42 Civil Service permanent secretaries have a science or engineering degree. There are eleven members in the government’s industrial advisory board. Of these, ten have a background largely in finance rather than in marketing, engineering or science — is that why the cards are stacked against manufacturing?
