5. WORCESTERSHIRE INFRASTRUCTURE AND GROWTH PLAN 2020 – 2040

WLEP BOARD RECOMMENDATIONThe WLEP Board is recommended to:

a) Note the approach adopted to develop the Worcestershire 2020-2040 Infrastructure and Growth Plan requirements to inform a project pipeline.

b) Recognise the parallel work programme underway across District Councils in reviewing their Local Plans.

c) Acknowledge that the location of key employment sites and relevant housing options is central to securing further growth in the county, but the high quality natural environment is a competitive advantage to the county that needs to be maintained.

d) Note that this strategic planning work will provide an evidence base for a wider conversation with central government, most likely in the context of developing a Local Industrial Strategy from Autumn 2018.

e) Agree to receive further updates at September and November WLEP Board meetings as the pipeline develops.

5.1. Context

5.1.1. On 11 July 2018, the Worcestershire Leader’s Board met with a specific focus on developing and delivering a Worcestershire-wide Strategic Infrastructure and Growth Plan, based on the economic vision for Worcestershire over the period 2020-2040.Worcestershire’s economic vision, informed by the Strategic Economic Plan (SEP) is:

“To build a connected, creative, dynamic economy that delivers increased prosperity for all those who choose to live, work, visit and invest in Worcestershire”

5.1.2. This paper sets out some of the context and key information about Worcestershire’s economic performance and demographic profile provided to support that session and to inform WLEP Board’s discussion about the 2020 – 2040 pipeline.

5.2. Objectives of Session

5.2.1. To develop a shared understanding of the infrastructure drivers across the county which support the economic vision for Worcestershire (as per existing vision for Worcestershire, informed by our SEP);

5.2.2. To provide an overview of Worcestershire’s projected growth, set against the national growth ambitions of the National Planning Policy Framework; and

As a result of the above, begin to develop a shared understanding of where infrastructure opportunities and existing constraints coalesce across Worcestershire in order to inform a Worcestershire-wide Strategic Infrastructure and Growth Plan which will provide a considered view of strategic growth options for the county through to 2040.

5.3. Background

5.3.1.1. The imminent review of Local Plans in the county provides WLEP, WCC and District Councils with a significant opportunity to understand a Worcestershire-wide view to inform the future growth of the county and to influence what the county should look like in 2040.

5.3.1.2. Infrastructure is an essential component of new development enabling the county to accommodate economic and population growth. Decisions on the location of strategic growth in the county will need to be informed by existing infrastructure capacity, and the opportunities for new and improved infrastructure.

5.3.1.3. The strategic intent and success of funding bids over recent years means that the priority strategic infrastructure projects across the county are now underway or will be delivered by 2021. It is timely then to consider the emerging priorities given the lead in time required for feasibility and design etc.

5.3.1.4. The intention is that the development of a Strategic Infrastructure and Growth Plan will provide an evidence base that the Local Planning Authorities (LPA), as the statutory planning authorities, can use to inform their Local Plan development process.

5.3.1.5. A number of large scale infrastructure projects have been or are being delivered in the county. They support economic and housing growth outlined in Local Plans and also address some underlying network issues. A number of these projects have been supported by funding secured through the Worcestershire and the Greater Birmingham and Solihull LEPs as part of often complex funding strategies that involve other regional and national funding streams, in addition to developer contributions.

5.3.1.6. Going forward, securing significant developer contributions will require greater clarity over the strategic infrastructure priorities and how incremental impact from development underpins the business case.

5.4. Key Statistics

5.4.1. Population

5.4.1.1. The Worcestershire population is projected to increase by 10% from 583,000 in 2016 to 639,000 in 2040. Nearly all of the projected growth in the population is amongst those aged 65 and over, with those aged 18-64 projected to fall slightly from 339,000 to 333,000.

5.4.2. Economic Growth

5.4.2.1. GVA in Worcestershire in 2016 was £12,883 million. Over the last 5 years, average annual growth in GVA for Worcestershire (5.0%) has been just below that of Oxfordshire (5.1%) and South East Midlands (5.2%), but above that of other similar LEP areas.

5 year average annual growth in GVA, 2011-2016Area Average annual growthSouth East Midlands 5.2%Oxfordshire 5.1%Worcestershire 5.0%Greater Cambridge and Greater Peterborough 4.7%Buckinghamshire Thames Valley 4.6%Cheshire and Warrington 4.6%Gloucestershire 4.1%Swindon and Wiltshire 3.9%Stoke-on-Trent and Staffordshire 3.5%The Marches 2.9%

Source: Office for National Statistics, Regional Gross Value Added (Balanced Approach)

5.4.3. Actual and Projected GVA

5.4.3.1. The chart below shows actual GVA since 2000 and how this trajectory would continue based on average annual growth for the last 5 years and last 10 years.

5.4.3.2. The Distribution, transport, accommodation and food sector represents the largest proportion of Worcestershire GVA at 20%. The next largest sectors are Real estate activities (17%), Manufacturing (16%) and Public administration, education and health (15%).

20002002

20042006

20082010

20122014

20162018

20202022

20242026

20282030

20322034

20362038

20400

5,000

10,000

15,000

20,000

25,000

30,000

actual projected last 5 years projected last 10 years

£m

Source: Office for National Statistics, Regional Gross Value Added (Balanced Approach)

5.4.4. Housing Growth

5.4.4.1. The existing Local Plans outline the requirement for a further 46,000 dwellings by 2036 to meet the needs of the county. Three Local Plans in the county are being reviewed, a process that will refine and extend this housing requirement and sustainable economic growth ambitions through to 2040. Additional housing required to 2040 will be circa 24,000 to 28,000 dwellings, meaning a total of circa 70,000 to 74,000 dwellings will be required across Worcestershire by 2040.

5.4.5. Commercial Development Land Requirements

5.4.5.1. The existing and revised plans outline the requirement for circa 400 - 428 ha of employment land to meet the needs of the county.

5.4.6. Productivity

5.4.6.1. GVA per hour worked in Worcestershire in 2016 was £29.40, ranking 20th out of 38 LEP areas.

5.4.6.2. Over the last 5 years GVA per hour worked has grown faster in Worcestershire than any other LEP area.

5.4.7. Employment by Workplace and Residence

5.4.7.1. The table below shows the number of people in employment in each District by workplace and place of residence. The data is taken from two different sources and, whilst not strictly comparable, the difference gives an indication of net commuting patterns. This suggests that more people commute into Worcester than out of Worcester, but there is net commuting out of all other areas.

Numbers in employment by workplace and place of residenceArea Workplace Resident DifferenceBromsgrove 48,000 48,700 -700Malvern Hills 27,000 33,500 -6,500Redditch 38,000 41,600 -3,600Worcester 55,000 53,400 1,600Wychavon 51,000 63,000 -12,000Wyre Forest 33,000 43,900 -10,900Worcestershire

252,000 284,100 -32,100Sources: Office for National Statistics, Business Register and Employment Survey, 2016 &

Annual Population Survey, January 2016-December 2016

5.4.7.2. The proportion of the population aged 16-64 in employment in Worcestershire is estimated to be 76.4%, similar to England and higher than in the West Midlands. Although subject to greater sampling variability, the Worcestershire employment rate appears to have initially increased more rapidly than regional and national averages, before falling back in the last two years, resulting in similar differences between employment rates in 2016/17 as there were in 2010/11.

5.4.7.3. The dominant sectors in Worcestershire in terms of employment are Health, Manufacturing and Retail. Health makes up a small proportion of businesses (5%), but employs just under 14% of the workforce. Similarly, Manufacturing makes up 6% of businesses, but employs around 13% of the workforce. This is not particularly surprising as a small number of sites (for example hospitals) will employ large numbers of people in this sector. Across Worcestershire, about 8% of businesses are associated with Retail activities and 10% of the workforce is employed in this sector.

5.4.7.4. In Worcestershire, 13.9% of businesses are in the Professional, scientific and technical sector, with 6.4% of employment in this sector. Firms in this sector tend to be relatively small and so account for a higher proportion of businesses than employment.

5.4.7.5. For Worcestershire’s key sectors, the breakdown is as follows:

Advanced Manufacturing accounts for 4.4% of local businesses and 6.3% employment

Agri-Tech accounts for 6.3% of local businesses and 2.0% employment Cyber Security, defence and IT accounts for 4.6% of local businesses and 3.2%

employment

Employment Rates aged 16-64, 2010/11 – 2016/17

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/176062646668707274767880

WorcestershireWest MidlandsEngland

Empl

oym

ent r

ate

(%)

Source: Office for National Statistics, Annual Population Survey

5.5. Approach to Date

5.5.1. There are two streams of activity that are being twin-tracked in parallel currently:

Development of Worcestershire vision 2020-2040 commissioned by WLEP Board to inform future Local Industrial Strategy development and identify future pipeline of economic schemes across Place, Business and Skills ‘pillars’ of the SEP.

Review of Local Plans by District Councils – Bromsgrove, Wyre Forest and South Worcestershire Development Plan (Malvern Hills, Worcester City and Wychavon). Note that Redditch is not reviewing their Local Plan currently.

5.5.2. The methodology adopted to date seeks to align the Local Plan review piece with the Place component of the WLEP work to ensure consistency. By mapping a series of key drivers, it will enable strategic planning on a Worcestershire-wide scale that can start to inform options for growth. It will seek to identify areas and corridors across the county that, given current and potential infrastructure investments, could accommodate the growth expected to be required to meet the Local Plan requirements.

5.5.3. A series of meetings and discussions is currently taking place with District Councils, Worcestershire County Council, Worcestershire LEP and infrastructure providers to inform this process. The initial meeting included representatives from Planning and Economic Development to discuss future growth options and an initial presentation to the Worcestershire LEP Board in May 2018.

5.5.4. Further meeting dates have been agreed with the Worcestershire Planning Officers Group (WPOG), and with officers from the County Council and Worcestershire LEP to collate the information.

5.5.5. The key stakeholders for this work will be Worcestershire Leaders Board and the Worcestershire LEP Board in the first instance.

5.5.6. Currently, key areas of focus are split into four categories:

Economyo Worcestershire needs to articulate a strong narrative on what the area’s

key economic strengths are, where it wants to be in 2040 and beyond, and what kinds of interventions could unlock growth.

o This will need to consider travel to work areas, workforce population, communications and connectivity.

o There is also a need to consider what the future of the work environment looks like and therefore the mix and type of employment land required to address potential demand in the context of the future labour markets working patterns / behaviours.

Transport and Physical Connectivityo Provision of all forms of transport is essential to the county.

Enhancements to the strategic road network, the potential of the rail network and the potential for growth nodes focused on stations and potential for more sustainable transport networks are all key considerations.

o This focus area is also considering the advantage of infrastructure developments underway and wider than simply Worcestershire e.g. HS2, North Cotswold Line Dualling, and the A46 corridor.

o The role of local transport hubs in the future development strategy for the county, with new housing being located close by, and sustainable movement at the heart of new and expanded communities are broadly supported through planning and government policy for housing.

o The projected housing numbers for the county may require significant Greenfield development if they are to be delivered. However, large Greenfield development will result in significant infrastructure requirements which development alone will not be able to fund. External funding will be required.

Energy, Utilities and Digital Connectivity o Worcestershire is a net importer of energy as it does not have any

significant energy generating capacity in the county. New development provides an ideal opportunity to decentralise the energy network with local generation.

o Digital connectivity for the county is a key driver to support economic growth and Worcestershire has a timely opportunity to capitalise on this with the current 5G test-bed project underway which is aiming to accelerate the deployment of next generation digital infrastructure, drive forward new 5G business opportunities to improve productivity and develop a home-grown 5G skills bases.

o Telecommunications and digital infrastructure investment has been identified as the backbone to future economic growth and employment. GVA growth of between 3-7% has been seen where digital investments have been made.

o Building 21st-century infrastructure is required broadly to improve competitiveness but is sorely needed in particular in the areas of power, roads, and digital infrastructure. This is particularly important to reduce barriers to investment from multinationals and innovative firms that rank infrastructure as an important consideration in investment decisions.

Population and Placeo The location of key employment sites and relevant housing options is

central to securing further growth in the county, but the high quality natural environment is a competitive advantage to the county that needs to be maintained.

o The Strategic Infrastructure and Growth Plan will need to consider urban hierarchy, with a focus on urban renewal, education and skills and the natural environment.

5.6. Key External Influences / Drivers to Consider

5.6.1. National Planning Policy Framework (NPPF) and Duty to Cooperate Statements

5.6.1.1. Six months on from the introduction of the NPPF, all District Councils will be required to put in place new Duty to Co-operate statements irrespective of progress in terms of Local Plan production.

5.6.1.2. These statements will need to be more comprehensive than the past statements with respect to strategic matters and raises the importance of a collective approach to cross-boundary (out of county) issues in terms of infrastructure and unmet need in Housing Market Areas.

5.6.1.3. Leaders are likely to be asked to sign off new style Duty to Cooperate Statements by the end of the calendar year and the work to develop a Worcestershire Strategic Infrastructure and Growth Plan will help to inform the strategic agenda for partners around these statements.

5.6.2. Un-met housing demand from neighbouring areas

5.6.2.1. In addition to Worcestershire’s housing requirements, Bromsgrove and Redditch are part of the same housing market area as Birmingham, and through the duty to cooperate, will have to respond to the unmet housing need from Birmingham and the Black Country via their Local Plan review.

5.6.2.2. Similarly, Wychavon will likely have to respond to unmet housing need from the Tewkesbury, Cheltenham and Gloucester Joint Core Strategy.

5.6.3. Local Industrial Strategy

5.6.3.1. In response to the successful ongoing delivery of major schemes in the county Worcestershire LEP is also reviewing the projects in the Strategic Economic Plan and developing our thinking for a response to the government’s Industrial Strategy later in 2018. While the WLEP will increasingly focus in the industrial strategy priorities, particularly productivity and skills associated with identified sectors, there will still be a continued emphasis from central government departments on core infrastructure development.

5.6.3.2. This presents a unique opportunity to create a development and infrastructure vision for the county, to determine how it should look and feel by 2040, and the key areas for infrastructure investment that are required in advance, where possible, of development to underpin the county’s wider ambition.

5.6.4. Midland Rail Hub

5.6.4.1. A key priority of Midland Connect, the Midlands Rail Hub, targets improvements to the Midlands’ four main regional rail corridors. Worcestershire stands to benefit

enormously from the development of the corridor and the opening of Worcestershire Parkway station which will link South Wales, Hereford, Worcester and Birmingham. If the Rail Hub is completed in its entirety, the number of trains between Worcester and Birmingham every hour would double, with the journey time brought down to around half an hour. This step change in connectivity would bring people and businesses in the two cities closer together, facilitating new and deeper working relationships.

5.6.5. Housing and Growth Plans

5.6.5.1. The combined authority areas and more recently Oxfordshire and the Oxford Cambridge arch have put forward proposals to central government that make the case for significant infrastructure investment up front to drive delivery of Housing and related economic growth. Given the ongoing challenge of infrastructure capacity in the county and the frustration of the urban extensions not delivering the expected infrastructure in a timely way, there is merit in considering a similar approach across the county and surrounding areas.

5.6.6. HS2 and Birmingham Airport Expansion

5.6.6.1. Whilst direct benefits from these projects are difficult to quantify for Worcestershire, it is important that we continue to recognise and support them in our strategic narrative and engagement with both central government and our neighbouring partners, if only to ensure opportunities to access related funding streams are not missed.

5.7. Summary

5.7.1. The imminent review of Local Plans in the county provides WLEP, WCC and District Councils with a significant opportunity to understand a Worcestershire-wide view to inform the future growth of the county and to influence what the county should look like in 2040.

5.7.2. There is a focus on sustainable transport, with highways improvements and infrastructure forming part of an integrated package, including education and utility infrastructure where possible.

5.7.3. This thinking will inform Local Plans under review across the county as well as seeking to identify the next programme of priority projects for WLEP.

5.7.4. The location of key employment sites and relevant housing options is central to securing further growth in the county, but the high quality natural environment is a competitive advantage to the county that needs to be maintained.

5.7.5. This strategic planning work will provide an evidence base for a wider conversation with central Government.

5.8. Next Steps

5.8.1. Worcestershire Leaders Board (11 July 2018) / Worcestershire LEP Board (16 July 2018) – develop a shared understanding of where the growth could be focused in Worcestershire.

5.8.2. Worcestershire Leaders Board (5 September 2018) / Worcestershire LEP Board (10 September 2018) – review a refined list of growth areas and identify potential projects / schemes.

5.8.3. Worcestershire Leaders Board (14 November 2018) / Worcestershire LEP Board (19 November 2018) – review proposed final list along with supporting narrative. These documents will provide an evidence base to support WLEP and Local Plan development. They may also provide the strategic thinking to support any pitch to central government in response to further guidance on the Local Industrial Strategy and potential for a Housing and Growth bid to central government to support emerging local plan growth ambitions

6.0 INVEST IN WORCESTERSHIRE – OVERVIEW AND STRATEGY

WLEP BOARD RECOMMENDATION

That the Board:

1. Note the approach to the Inward Investment strategy

2. Convene a meeting with leading commercial agents to address barriers to growth and investment.

3. Confirm whether WLEP will continue its contribution (£15K) and commitment to Midlands Engine MIPIM 2019?

4. Work with the Inward Investment Manager to consider the sustainability of our Inward Investment offer over the next 12-18 months.

5. Reflect on the strategy and consider how Board members can use their experience and networks to support our strategy.

6.1 Background

6.1.1 The WLEP investment strategy is entering a new proactive phase. Resource for an Invest in Worcestershire Manager was identified by the Board as a priority and the Inward Investment Manager is now in place and engaged with partners. The first three months have focussed on building relationships with local, regional and international partners. At a local level this has included developing relationships and knowledge of the county with economic development officers; commercial agents and Worcestershire Business Central. At a regional level this has involved working closely with Midlands Engine partners across our key sectors in automotive, digital, agritech. On the international front, time has been spent working closely with the Department of International Relations (DIT) preparing and delivering webinars, collateral and developing potential leads at a leading cyber conference. This included events in London to build on our Memorandum of Understanding (MOU) with Maryland, the objective being to showcase Worcestershire as the leading location for cyber related companies

6.2 Challenges

6.2.1 A number of challenges have been identified as follows:

Brexit is impacting on investment strategy; international firms are reluctant to invest in uncertain times.

Advice from the Department of International Strategy (DIT) is that Government strategy is to ‘safeguard’ and ‘strengthen’ existing businesses. A move away from ‘high volume’ to ‘high value’ investments.

We have high profile ‘neighbours’ with advantages in resource, geography and profile. For example, Birmingham, Coventry and Manchester are leading the devolution charge with high profile Mayors and campaigns.

Overseas investors view London as the UK, although our relationship/engagement/leadership with Midlands Engine helps change this perception.

6.3 Opportunities

6.3.1 Our strategy now aligns with DIT’s in terms of seeking to attract high value and relevant businesses. The LEP is already focussed on tech/digital/cyber, advanced manufacturing, agri-tech and medi-sciences.

6.3.2 Our 5G industry 4.0 pilot has the potential to be game-changer in terms of perception and attracting investment. We have a PR team in place that is supporting our efforts to promote opportunities related to the pilot. We have a tech accelerator, BetaDen, now officially launched with a co-working space that is helping to support and attract businesses.

6.3.3 The drive to devolution and prohibitive cost of London.

6.3.4 Smarter working; Derby has 10 inward investment staff, and whilst we don’t have this resource we do have an opportunity to work even more closely at a County-wide level. Shawn Riley is the Inward Investment Officer for Wychavon District Council and Stephen Butterworth at County Hall is focussed on the game-changer sites. I’ve met and continue to liaise with the Economic Development Officers across the county. I’ll be ensuring a county-wide approach by physically working across the county to prevent siloed working. The same applies to Worcester Business Central (WBC) which is a resource that could be better networked to the Inward Investment team.

6.4 Strategy: intelligence led and proactive promotion

6.4.1 Intelligence led: Locally, we are identifying the fastest growing/leading 250 businesses in the county. This list will focus our attention in terms of account management and will help us understand those most likely to seek expansion. The list will also will help us identify those businesses we need to retain. It will ensure we build relationships to connect potential investors keen to investigate opportunities to tap into the supply chains of leading businesses. This information will be gleaned from several sources to get an accurate picture. The accountancy firm BDO has a top 50 list, the Chambers have a top 100 and WBC have fastest growing list.

Regionally, we will target specific locations. We will be opening a Worcestershire ‘Embassy’ (liaising with Mark Martin regarding location) in London this autumn with a launch event to help promote opportunities in the county and provide a presence in the capital. Birmingham, Bristol, Gloucestershire and Oxford are all relatively close with good transport links, and each with their own challenges where we could provide a solution. We can use BDO’s fastest growing business list (and other sources) as a starting point for targeting events/meetings and marketing.

Internationally, we are focusing on three or four key projects as we simply can’t be everywhere. We are looking to build on previous engagement with a view to realising inward investment. These include:

Maryland/Boston/Virginia/Tel Aviv: We have an MOU (signed by Midlands Engine Chair, Sir John Peace) with Maryland which has seen successful events and

delegations. We will build on this with neighbouring areas in Boston and Virginia. Maryland, like Worcestershire, has a cluster of cyber related businesses due to its proximity to Government HQ’s and the NSA. The USA’s close relationship with Israel means that Israel can be included in this project since it is home to significant R&D and potential investment opportunities. But it’s not all about Cyber; the strategy is to use our Cyber expertise as the vehicle to widen discussions about our other key sectors as our relationship develops. We are receiving an inward investment delegation in late September and participating in an outward delegation in November.

Brittany: Rennes in North-Western France has a growing tech/cyber cluster. There is a naval base, a technology university and the region has received significant Government funding to support the sector. We are receiving an inward investment delegation in November which will include 20 businesses.

Japan: One of the DIT’s high value campaigns which we will focus on. We have some great case studies on Japanese investors including Yamazaki Mazak, Nippon Seiki and Koito. Japan is also a 5G leader so potentially a number of attractive propositions that can be made.

We will still respond to enquiries and opportunities locally, regionally and internationally, however the focus for the next 12-18 months will be on the above.

6.4.2 Proactive county wide promotion Website: We need a website that is clear and compelling, showcasing the opportunities and support in the county. It is our window to the world and the first place to signpost interested parties. However, the current website is not fit for purpose; it is poor in comparison to competitors and has no compelling propositions. We will be launching a new website this autumn which will highlight game-changer sites, county strengths, history, cutting edge technology and the county’s pedigree as a test bed.

Collateral: County Council are working with Blue Moon to produce 4 brochures that showcase each game-changer site for potential investors. We are also liaising with BDO to produce an overarching brochure that presents Worcestershire as an attractive place to invest. This has received positive feedback in recent years, is independent and good quality.

Events: I’ll be working with Stephen Butterworth and Shawn Riley to run two events each year to promote the game-changer sites. The first event will focus on county-based businesses (using the top 250 list) showcasing the opportunity for fast growing businesses to grow but remain in the county. The second event will be targeted at regional, national, and international businesses. We will work with the developers and other partners to promote. We will have a launch event for the embassy in London (Autumn date to be confirmed) and will seek to collaborate on a series of other events in locations identified.

Media: We are stepping up our media presence; as mentioned we have a PR company supporting our 5G pilot, however we are increasing our media output and sending out weekly copy for social media and traditional media outlets.

Soft landing: We are pulling together a soft landing package (aimed at foreign investors) that de-risks and simplifies landing in the UK which includes an affordable co working space option/services and brokering industry links.

6.4.3 What does success look like?

A clear and compelling offer. That means getting the basics in place which includes a great website, marketing collateral, regular events, media and a joined-up county-wide investment approach.

More investment. We’ve been hovering around 10-14 investments/expansions each year. Brexit is stifling investment, but the ambition is to get this closer to 20 including from the target areas identified. (15 may come from inside/environs of Worcestershire and 5 from London/International).

That people inside and outside the county understand and talk about Worcestershire’s ‘investment offer’.

Other LEPs start to look at our approach as ‘best practice’.

6.5 Planning for the future (See recommendations)

6.5.1 We are developing a suite of co working spaces across the county have the game changer sites. However, the lack of good quality 3-30,000 sq. ft premises comes up frequently with high cost cited as a barrier to developing small premises. Does the public sector need to step in to address market failure? If we provide the right premises, then we have a more attractive offer for end users. MIPIM 2019 (The premier real estate event, gathers the most influential players from all sectors of the international property industry for four days). In recent years we have contributed £15k to Midlands Engine to be part of a joint proposition showcasing opportunities in the Midlands. (This includes promotion of Worcestershire at the event, in marketing collateral, discounted tickets, and a £2k kick back for any commercial partners we bring in at a minimum package of £4.5K). Do we feel this is value for money? Do we have relevant propositions? Do we wish to continue our contribution and commitment to Midlands Engine MIPIM?

Invest in Worcestershire sustainability: I’d like to work with the board to consider the sustainability of our Invest in Worcestershire offer over the next 12-18 months. I have a proposition in mind to be discussed at a future board meeting similar to the ‘Derby model’ which is funded (and attractive to) businesses and would allow us to both grow our capacity and resolve MIPIM challenges (since it would not be funded by public money).

7.0 WLEP BUDGET AND LOCAL GROWTH FUND PROGRAMME UPDATE

WLEP BOARD RECOMMENDATION

That the Board notes the:

6. current forecast position in respect of the 2018/2019 WLEP revenue budget,7. current forecast position for Local Growth Fund 2018/19,8. current position in respect of the Growing Places Fund;

7.1 Purpose of the Report

To provide the Board with a position statement relevant to the: Forecast outturn position in respect of the 2018/2019 Growth Deal funded

programmes; Forecast outturn position in respect of the 2018/2019 WLEP Revenue

Budget; Current position in respect of the Growing Places Fund.

7.2 2018/19 Growth Deal funded programme

7.2.1 Table 1 shows the total Growth Deal funding for the WLEP from 2015/16 to 2020/21, giving a total funding allocation of £71.725m

Table 1- LEP Growth Funding Profile 2015/16 – 2020/21

Growth Deal 1/2/3 Profile Total

2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

GD 1 & 2 13,400,000 24,153,000 15,325,957 1,336,400 54,215,357

GD3 3,516,687 3,624,437 10,368,876 17,510,000

Combined 13,400,000 24,153,000 15,325,957 4,853,087 3,624,437 10,368,876 71,725,357

Rounded 13,400 24,153 15,326 4,853 3,624 10,369 71,725

7.2.2 The WLEP funding for 2018/19 is £4.853m. Currently all projects with LGF funding agreed by board are forecast to fully utilise their LGF funding in 2018/19, therefore there are no variances to report at this stage. This is shown in detail at Table 2.

Table 2 – 2019/2019 LGF Budget and Forecast

2018/19 Schemes2018/19 Budget (£000)

2018/19 Forecast (£000)

Variation (£000)

Kidderminster Railway Station 1,098 1,098 0The Kiln 195 195 0Bromsgrove A38 1,000 1,000 0Pershore Northern Link Improvements 500 500 0Churchfields 255 255 0Capital skills programme 1,805 1,805 0

Total 4,853 4,853 0

7.3 2018/19 WLEP Revenue Budget

7.3.1 The LEP's Core budget for 2018/19 is £662k, comprising:

i) DCLG income of £500k,

ii) Local authority income of £150k, and

iii) Other income of £12k.

7.3.2 Current expenditure levels indicate that the WLEP are operating within the £662k budget. The current forecast is for a break-even position at year-end.

7.3.3 Worcestershire County Council, as the Accountable Body for WLEP, includes all transactions undertaken and managed by the WLEP, within the financial ledger and its sub ledgers which are subject to both internal and external review on an annual basis.

7.3.4 At May board, it was advised that 2017/18 outturn was provisional and draft until the accounts had been formally audited and signed off by Grant Thornton. There have been no amendments requested to date, however the audit is still ongoing.

7.4 Current position regarding Growing Places Fund

7.4.1 The Board will recall that the Growing Places Fund (GPF) was originally introduced to provide loans to accelerate the delivery of projects that would deliver economic outputs and outcomes. Loans were agreed at market rates based on the risk profile of the project with all capital being repaid over an agreed period.

7.4.2 The original GPF made available to the LEP totalled £5,518,972 of which £418,515 was revenue. The uncommitted balance remaining at the end of the 2017/18 financial year was £9,821 revenue. The amount currently held on the balance sheet is £3.277m; however this has been committed to individual projects with £452k of the Project Development Fund remaining. A detailed split per project shown at Appendix 1. A review of historic commitments from GPF will take place in quarter 2, which may result in some monies being returned to the GPF.

APPENDIX 1 – GROWING PLACES FUND

8.0 EU STRUCTURAL INVESTMENT FUND (ESIF) STRATEGY UPDATE

WLEP BOARD RECOMMENDATIONThe WLEP Board is recommended to:

f) Note the approach to the whole ESIF programme and its performance. Note the programming of funds to potentially 2023 before the UK Shared Prosperity Fund becomes fully established. (The proposed UK Shared Prosperity Fund will be consulted on in the Autumn 2018).

g) Recognise the position of the ESF funding programme. The lack of local match funding hampers local delivery.

h) Agree that the executive continue to negotiate nationally for DWP match funding.

i) Note the position of the Rural funds managed by Defra and re-enforce the efforts of the executive to secure further funding from those areas who have not spend their allocation.

j) Finally note the impact of the exchange rate on the programme and the extra funding that is likely to become available.

8.1 National ESIF Structural Investment Fund (ESIF) Background

8.1.1 Worcestershire is allocated €67.8m (£51.7m at time of allocation) and the ESIF Strategy outline programmes and projects which would support the delivery of the WLEP vision. Despite Brexit and the UK leaving the EU on the 31st March 2019, the EU programmes continues to deliver projects across the themes of the programme. This is potentially likely to continue up to 2023, before the UK Shared Prosperity Fund comes fully into operation.

8.1.1 Worcestershire’s top priority focus is to nurture and develop robust projects and proposals and establish solid delivery project pipelines. Over-programming of programme areas remains the ambition in order to demonstrate that Worcestershire can deliver strong growth solutions successfully as well as develop reserve schemes ready to secure any additional EU funding arising from underspend in other LEP areas.

8.2 Worcestershire ESIF Structural Investment Fund (ESIF) Programmes Update

8.2.1 The table below identifies the programmes that are currently contracted or being contracted showing that of the £27.1m allocated only less than a £1m is left unallocated. Also spent and claimed are performing on trend except PA6, although this is only an Amber concern at the present time.

8.2.2 European Regional Development Funds

Worcestershire ESIF Allocation Profile (£000’)

Project values (Allocated and Contracted)

Notional Allocation

Remaining Balance to Allocate

Contracts Spent and Claimed values

Performance Rating

ERDF ProgrammePA1 Innovation £4.112.6 £4.469.6 £356.6 £1,980 On targetPA2 ICT/Broadband

£1,127.4 £1,239.6 £112.2 £16 On target

PA3 SME £13,591.8 £13,593.1 £1.2 £7,630 On target

CompetitivenessPA4 Low Carbon £6,143.5 £6441.9 £298.4 £1,530 On targetPA6 Environmental Protection

£1,249.7 £1,412.9 £163.2 £0 Planned spend in

the pipelineERDF Total £26,255.0 £27,156.7 £931.7 £11,156

8.2.3 European Social Funds (ESF) are spending on trend to achieve the 2018 performance review. In the programmes that we have Opted In for with the Big Lottery Opportunities Fund and the Education and Skills Funding Agency, these programmes are performing well.

Worcestershire ESIF Allocation Profile (£000’)

Project values (Allocated and Contracted)

Notional Allocation

Remaining Balance to Allocate

Contracts Spent and Claimed values

Performance Rating

ESF ProgrammePA1.1 Access to Employment by job seekers and inactive

£2,664 £12,350 £9,686 £313 Planned spend in

the pipeline

PA1.2 sustainable integration of Young people

£1,465 £3,141 £1,676 £13 Planned spend in

the pipeline

PA1.4 Active Inclusion

£2,280 £8,699 £6,419 £211 Planned spend in

the pipeline

PA2.1 Life Long learning

£5,343 £22,515 £17,172 £31 Planned Spend in

the pipelinePA2.2 Improving the labour market relevance of education and training systems

£0 £4,718 £4,718 £0 No calls Planned

due to lack of match funding

ESF Total £11,752 £27,156.7 £15,404 £568

8.2.3 However, the ESF programme is not performing as well as the ERDF programme. We have allocated less money through calls and opt-ins. Some of our open calls have attracted bids but these have not come through to contract due to value for money measurement by the managing Authority being too stringent. Unfortunately these are national value for money calculations.

8.2.4 The Executive team have been proactive in working with local partners in an attempt to identify local match, but this has been unsuccessful. We are therefore recommending further discussions with the Managing Authority, Department for Work and Pensions to identify national match to local programmes.

8.3 EAFRD (Rural) Management Information summary.

8.3.1 The EAFRD (rural) programme is designed for larger projects with a minimum grant of £30,000 and a 40% intervention rate. LEADER is a small grants programme between £2,500 and £20,000 at a 40% intervention rate.

Indicative Allocation

total

£2.24m

Contracted Balance for National Calls

Allocation used in Round 1 calls

£0.48m (5) £1.76m £0.5m

Round 2 calls Tourism Infrastructure

Business Development

Current Value in Call

£519,401 £1,250,000 £1,769,401

Projects Contracted

£0.62m (5) £0.62m

EOIs endorsed toFull Application

£0.5m(1) £1.96 (15) £2.46m (16)

EOIs to be endorsed

£1.17m(1) £0.75m(2) £1.37m

Value of pipeline £1.67m £3.33m £5m

Balance againstCurrent Position -£1.15m -£2.08m -£3.23m

8.3.1 The Growth programme closed to Expression of Interests at the end of May. Worcestershire proactive ‘pie and a pint’ workshops has meant that we have received a significant number of Expressions of Interest and potentially has an over-commitment of £3.23m. However we are aware that the drop off of applications is high and we will work closely with applicant to manage expectations.

8.3.2 Leader Update

LEADER Group Total Project Allocation

Contracted + Closed + FA on desk

Headroom As a % of allocation

Rank (National /80)

Total No. Contacted and closed

Worcestershire £1.6m £1.16m £0.44m 71 % 17 538.3.3 The performance of all LEADER groups is being closely monitored to ensure that

all funding is spent by the end of the programme. A number of Local Action Groups have already committed their funds and are looking for additional funding so they can carry on delivering the programme.

8.3.4 Worcestershire LEADER is one of the better performing groups in the country. There has been significant activity and encouragement to focus the Local Action Group to deliver activities that will lead to job creation.

9.0 ANNUAL CONVERSATION PROGRESS & RISK REGISTER

WLEP BOARD RECOMMENDATION:That the Board:

9. Notes the current position in respect of Annual Conversation Actions.

10. Notes and comments on the Risk Register

9.1 GOVERNANCE AND TRANSPARENCY – MARY NEY REVIEW

9.1.1 In January 2018, the recommendations of the Mary Ney Review were implemented by the WLEP. The outcomes of the review were also picked up at the Annual Conversation with the WLEP and this made changes to the governance and operational processes that we abide by. The recommendations of the Review were:

9.2 LEP ANNUAL CONVERSATION

9.2.1 The Annual Conversation meetings are the formal process by which the Government and each LEP meet annually to:

i) discuss the contribution the LEP has made towards driving forward local economic growth;

ii) to review LEP governance and assurance processes; iii) to look at progress with delivery on key local growth programmes; and iv) to discuss the LEP’s priorities and challenges for the year ahead.

9.2.2 Following the Annual Conversation, Cities and Local Growth officials undertake a performance review. For 2017/18, we scored Good for governance, Good for Strategy and Exceptional for delivery. The Annual Conversation also acts as a key milestone in the process for confirming the following year’s Local Growth Fund (LGF) payments and therefore we need to show positive progress against the action plan and ‘espouse good practice’.

9.2.3 Following the Feedback from the Annual Conversation the following areas have been highlighted for action and consideration by the Finance, Audit and Risk Committee.

Action Point Owner Date to be completed Performance RAG rating

1. Board recruitment to be taken forward and diversity statement to be a key consideration.

LEP Executive

LEP to determine timeline based on rotation requirements

On hold until LEP review is published

2. W LEP to ensure the section 151 officers suggestion are fully considered, accepted and procedures adapted where necessary re involvement of s151 in preparing Board papers and attendance at the Board meetings.

LEP Executive

To be included in any refreshed Local Assurance Framework by 28 February 2018

Completed and a process of involvement of s151 in papers preparation and Board meetings

3. LEP to prepare a set of operational LEP To be included in any A full set of operational procedures

procedures that are specific to and owned by the LEP in line with Mary Ney recommendations and commits to meeting the recommendations by 28 Feb 2018, with an extension into other areas of operation during 2018. .

Executive refreshed Local Assurance Framework by 28 February 2018

have been developed, these are being reviewed and added to. Ensuring information is accessible and implemented by all.

4. Accountable Body to consider scrutiny and audit arrangements appropriate for the LEP. This might for example take a thematic approach. Final process to be included in the local assurance framework.

S151 Officer / LEP Executive

To be included in any refreshed Local Assurance Framework by 28 February 2018

Attended Overview & Scrutiny Committee on 23rd May. Internal and External Audit arrangements will be agreed at FAR Committee on 1st August.

5. LEP to consider how the LTB meetings can be make more transparent and meeting papers made available

LEP Executive

To be included in any refreshed Local Assurance Framework by 28 February 2018

Local Transport Board papers are published on the WLEP website

6. LEP to review its business board and Finance, Audit and Risk Committee and consider its function and form in order for it to be fit for purpose around the current strategic priorities

LEP Executive

To be included in any refreshed Local Assurance Framework by 28 February 2018

Business Board to be reviewed following the LEP review being published. FAR Committee terms of reference revise agreed and published.

9.2.4 The report from the Overview and Scrutiny Committee including minutes is available http://worcestershire.moderngov.co.uk/documents/g2168/Printed%20minutes%2023rd-May-2018%2010.00%20Overview%20and%20Scrutiny%20Performance%20Board.pdf?T=1

9.2.5 Good progress is being made in relation to WLEP actions and the Annual Conversation. Until the implications of the LEP Review are known, then actions related to recruitment of non-executive board members, reviewing the business board will not be conducted. Reports from the Internal and External Audit will be reported at the November Board.

9.3 RISK REGISTER

9.3.1 The LEP FAR committee has approved the development of a risk register to identify, manage and put in place mitigating strategies to reduce risk.

9.3.2 The table below shows the risk register which is identified by strategic, operational, financial and implementation risks. This table includes who is the risk owner between the Board, and Executive, the Risk description, the probability and impact of the risk and the mitigating action that has been taken.

9.3.3 This table provides an overview of the key areas of focus for mitigating plans; these plans are established to ensure risks are being managed.

Risk description Impact Probability Overall score Impact Mitigating Actions in place

Failure to develop and implement effective governance arrangements for the WLEP.

5 2 High - 10 WLEP governance and transparency is key to communicating the assurance that decisions arebeing taken in a fair and legal manner. The reputation and legal issues around decisions beingchallenged would be significant enough to close the partnership.

S151 is involved in the governance and overseeing the implementation of the process in line withthe assurance framework. WLEP will continue to ensure that governance remains under review andupdated with government guidel ines. All information in relation is available and updated on thewebsite in accordance with the assurance framework.

Failure to manage overlap with Greater Birmingham LEP, to deliver the WLEP economic strategy for the North Worcestershire. 3 2 Low – 6

Confusion and a lack of co-ordination on matters in North Worcestershire could lead to a lack ofproject delivery or project assurance which does not met the SEP in both LEPs

Good communication between the Northern Districts and GBSLEP is maintain with regular updates.Local Growth Fund, Growing Places and others schemes are well managed. The challenges of theESF programme wi ll continue with potential the same cohort targeted.

Conflicts of interest arising with strategic and project level decisions are recorded on an annual basis and members with a conflict are removed from the decision.

3 2 Low – 6Decision by the partnership can be challenged due to accusations of projects benefitting individual members of the Board.

WLEP will be responsible for managing any conflicts of interest that may arise with strategic and project level decisions, within the context of the guidance that Government’s Assurance Framework the S151 has taken a greater role. Investment decisions will be published on the WLEP website and ‘conflict of interest procedures’ are implemented. This process wil l be fol lowed in all sub groups, even where not decision making.

A risk to the reputation of the partners associated with the failure to deliver the WLEP economic strategy. 3 2 Low - 6

The perception of the success or fai lure of the partnership can be related to accusations as wellas reality.

WLEP and its partners are collaborating closely to ensure that the SEP is deliverable and thatappropriate arrangements are in place to ensure its successful implementation. Amion review andGovernments Annual Review has concluded successful delivery with an exceptional rating

With Worcestershire being one of the smallest LEP and the development of Combined Authorities. The change the role of LEPs lead to geography changes

5 2 High 10 Changes could be made to the structure, role, remit and geography of the LEPsWorcestershire LEP is continuing to track the LEP review, we are making our case as a successful LEP that is delivering with no change required in geography in the WestMids.

Increase in the role and scope of LEPs by Government with no new resources to support the additional responsibil ity (ies) 3 3 Medium - 9

This could put pressure on the supporting partners who have limited resources to pick up theextra responsibilities

Worcestershire LEP is continuing to track the LEP review. Whilst making the case for moreresponsibilities for more resources delivered locally.

A political change in national LEP responsibilities results in a risk of the LEP fail ing to adapt to, or delivery on priorities, and potentially exacerbating existing risks.

4 3 High - 12The LEP is a government organisation and therefore political decision can change the structure and delivery of the partnership. Including closure.

The WLEP has developed effective relationships with external stakeholders, and is closely following likely political changes in LEP responsibilities and relationships with local MPs.

Ineffective communications strategy will have an impact on awareness of the work of the LEP 5 2 High -10

The projects happen but credit and understanding of the partnership that is behind its delivery. The positioning of Worcestershire as a place to do business remains low.

A focus communications strategy including social media and press coverage. The challenge remains that profile of Worcestershire is low and the need for a national profile as a place to do business is critical to the LEP success.

Insufficient staff resources to successful ly deliver the WLEP economic strategy. 4 4 High – 16

The lack of skil led staffed means that the delivery of the SEP becomes diffi cult and fai lure toachieve KPIs

The LEP Budget remains a fixed amount each year, therefore skill level and effectiveness of the teamis reviewed on annual basis. There is a need to identify clear roles and responsibilities between LEPand its partners. External specialists will also be used as and when necessary to ensure that theappropriate skil l sets are available.

Insufficient engagement, resulting in lack of stakeholder or partner support for WLEP activity. 4 2 Low – 8

Stakeholders do not feel part of the partnership or do not want to be associated with the LEP andsupport its actions or projects.

The WLEP will develop and maintain effective engagement with stakeholders to ensure both internalpartnership momentum, and effective collaboration with other organisations. A stakeholder planexists for key projects such as 5G and Centre of Entrepreneurship

The capacity of partner organisations to deliver a programme of capital and revenue projects on time, on budget of suffi cient quality 5 2 High - 10

Project delivery does not happen and KPIs within the SEP are not achieved. Govt see thepartnership as fail ing to deliver

A discussion with LEP partners to identify the project delivery pinch points and capacity areas thatare required to ensure delivery of the required programme. Performance reviews are wellestabl ished across all delivery partners and effective monitoring.

The risk that new arrangements, processes and procedures are not effective in delivering the WLEP economic strategy. 3 2 Low - 6

Not effective processes will lead to inefficient operational processes and leads to problems ofcompliance and governance

The WLEP will develop from best practice procedures and learning from government, business andother bodies. We have taken part in buddying from other LEP - including Enterprise M3, Thamesvalley and Humber LEPs

A lack of government support or funding result in a poor delivery of the WLEP economic strategy, or a failure to deliver individual priori ty projects.

3 3 Medium - 9 The projects that have been considered by the WLEP would not go ahead and lead to the nondelivery of the SEP.

The LEP will work closely with its partners to maximise the availability of public and private sectormatch funding resources. The development of a pipel ine to secure match funding is being developed. Also preparing for the UK Shared Prosperity Fund which will replace LGF and EU programme.

Failure to secure the notional funding previously identified through European Structural and Investment Funds (ESIF) will jeopardise delivery of the Strategic Economic Plan

4 3 High - 12Projects or programmes that under spend will mean less money is invested in the County. Thelack of match national ly and into the local ESF programme means there is a risk of under spend.

The ESIF Committee meets quarterly with performance monitoring report on spend and outputs.Also meetings with delivery partners are arranged to discuss performance and mitigating actions.

Revenue funding made available is insufficient to cover operating costs. 4 3 High – 12The LEP has to operate within a sustainable budget. The risk of not operating to budget cannot bepassed on to the partners. This includes closure costs.

The WLEP has adopted financial management procedures, including a robust management review,and the monitoring of budgeted, estimated and actual operating costs. Operational budgeted costsare to be subject to review to ensure that resource requirements remain appropriate.