The future for enterprise and small business
NORTH WEST LOCAL ECONOMIC ASSESSMENT MEETING:
Workshop on ‘What does the future hold for economic development and regeneration?’
Preston Town Hall, Preston PR1 2RLWednesday 21st July, 2010
Presented by Ged Mirfin – Chief Data Officer, BLNW
Centripetal Localism
Business ledCorporatism
CentrifugalLocalism
Municipal Corporatism
Different Models of Local Economic Partnerships
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Local Business Influence
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Local Business Influence
Clear demarcation between Nationally Delivered and Financed Services & Tax
Raising and Locally Delivered and Financed Services & Tax Raising.
National Priorities to be determined centrally but Local Priorities to be
funded by enhanced Local Tax Raising Powers provided the General Public
and Business can be persuaded politically. (Layfield Principle)
Creation of “Keiretsu” like Enterprise Partnerships with very high levels of close knit co-operation cooperation between manufacturers, suppliers,
distributors, banks and local government with active acquiescence
of trade unions and employer engagement and participation
Public Sector Dominated Private Enterprise
Partnerships. Business represented in an advisory
capacity. Invited/Nominated Private Sector Boards.
Creation of Powerful Civic Associations. Return to Civic
Improvement Model with Public Sector & Big Business Working in True Partnership
to 'park, pave, assize, market, gas & water and improve'.
Public Sector Prominence or Business Dominance?
A keiretsu is a grouping or family of affiliated companies that form a tight-knit alliance to work toward each other's mutual success. The keiretsu system is also based on an intimate partnership between government and businesses.
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Local Business Influence
National strategies will be decided and targets set and monitored centrally with little room for
interpretation locally. Local priorities and targets will be largely determined by budgetary constraints and political administrative regulation. Initiatives
will be agreed on the basis of satisficing rather than negotiated
settlement.
Business Support Strategies will reflect the needs of the “Keiretsu” . Funded
Apprenticeships and Specialist Training will be High Priority. Training Regimes are likely to reflect the needs of the Growth Businesses. Education and Training will become much more Business Focussed. There will be a much greater focus on identifying and backing winners at the
expense of poor performing cos.
Re-launch, Re-packaging, Re-branding, Re-positioning of
Existing Business Support Products and Services under
another name/guise because it is too difficult to dismantle existing policy programmes.
Local Business Support Policies tailored to fit local need. Business Support Products and Services will
reflect demand-pull from local businesses as well as local economic
need. Trade-offs will need to be made between the imperatives of business growth and town and neighbourhood
renewal
Enterprise Partnerships: Business Support or Supporting Business?
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Local Business Influence
Government will have to make some invidious choices about which high
growth geographies to support. This may result in Widening Performance Gaps between Affluent and Deprived Geographies . Disempowering Local Government may hasten decline in
areas where support from Local Enterprises is already weak.
Creative Destruction – Pursuing a High Growth Strategy is likely to hasten the demise of existing declining industrial
sectors. Continuous Change Management of a High Growth Enterprise Strategy on
the scale envisaged has not been attempted since the Victorian era. There are however lessons we can learn from
recent experience
Politicians are accountable to the Electorate. Big Business is not. The Representative Test is in
achieving Sustainable and Lasting Economic Development which
will bring prosperity to the greatest number.
Balancing the needs of Business and Society especially a Big Society will
require Politicians to become more Pro-Business even at the expense of Social Cohesion – some geographical areas will lose out and Business to exhibit
more Corporate Social Responsibility accepting limits to growth
Spatial Geography: Competition between LEPs will accelerate the performance gaps between High Growth and Low Growth Local
Economies
Observations on Growth – Lessons from BLNW Data
Public Sector Vulnerability
Public Sector Vulnerability: Sub-Regional View
Public Sector Vulnerability: Most Affected Local Authorities
Public Sector Vulnerability: Most Affected Towns
Start-Up Activity
Significant Growth in Turnover and Jobs will be extremely difficult to achieve within the life of a Single Parliament
from Start-Up Activity
Sales of more than £400k and employing more than 10 people
First 3 to 5 Years of Trading
1% of Start-Ups have Employed
>10 People
Total Jobs in sample – approx 2500
High Growth Geography - Sales
Manchester 52
Cheshire East 39
Cheshire West and Chester 36
Liverpool 33
Sefton 33
Trafford 30
Stockport 28
Warrington 25
Blackburn with Darwen 24
Salford 23
Bury 21
Oldham 21
Wigan 20
Wirral 20
Chorley 19
South Lakeland 19
St. Helens 19
Rochdale 17
Bolton 15
Preston 15
Top Twenty Local Authorities
MANCHESTER 108 ROCHDALE 14
LIVERPOOL 63 WIRRAL 14
PRESTON 33 SOUTHPORT 13
WARRINGTON 25 WIGAN 13
STOCKPORT 24 ST HELENS 12
BLACKBURN 21 CARLISLE 11
OLDHAM 18 ROSSENDALE 11
CHORLEY 16 BURY 10
BLACKPOOL 15 ALTRINCHAM 9
BOLTON 15 NORTHWICH 9
Top Twenty Towns & Cities
20/97
20/39
•Greater Manchester has the highest return 34%•Manchester (City) has 16%•Top 5 Performing Post Codes BB2 (Blackburn 13) BB4 (Rossendale 11) M19 (Manchester 11) PR7 (Chorley / Charnock Richard 11) M28 (Worsley 10)
• Twice as likely to emerge from a Prosperous area
• Non Deprivation Areas - 513 of which 168 are from “Prospering Suburbs”.
• Deprivation Areas – 198 • “Prospering Suburbs” account for 25% 0f all high
growth start ups and 33% of high growth start ups in in Non Deprivation Areas.
• Is Entrepreneurialism a middle class phenomenon?
• Is this accentuated by the current recession?
Entrepreneurialism is a Middle Class Phenomenon
High Growth In Prosperous Wards - Sales
•Manchester has the highest return with 62 companies•Stockport, Rossendale, Northwich and Warrington produce more than 90% of their growth companies from prosperous areas•OA Classification “Prospering Suburbs” are primary drivers for High Growth Companies
as a %ageof Total
MANCHESTER 62 57%LIVERPOOL 29 46%WARRINGTON 24 96%STOCKPORT 22 100%PRESTON 21 64%BLACKBURN 15 71%CHORLEY 13 81%BLACKPOOL 11 73%WIGAN 11 85%WIRRAL 11 79%ROSSENDALE 10 91%CARLISLE 9 82%NORTHWICH 9 100%OLDHAM 9 50%SOUTHPORT 9 69%
Top 15 Sales GrowthNon Deprivation areas
Typical Traits 172
Prospering Suburbs 168
Countryside 92
Blue Collar Communities 32
Constrained by Circumstances 22
City Living 20
Multicultural 5
Not Known 2
Output Area Classification
High Growth - Sales of £400k+ and Staff 10+
Even Geographical Spread - only 42 businessesEasier to grow in Cumbria 16% of high growth companies achieve more than £400k & 10 people, only 3% achieve this in Greater Manchester, 6% everywhere elseVast Majority turnover less than £1m
Total Jobs in sample – approx 2500
34
5 3
High Sales Growth (£5m+) Companies Employing more than 10
Employing – 445 with sales of £125m aprox
Even Geographical Spread of businessesVery Few Companies achieve this sizeAlthough Sales Volumes are good employment is predominantly in the 10 – 49 bracket
Business Activity Matrix - Start Up Companies and Growth*
< £90k £90-£400k £400k - £2,5m £2.5m+
100 - 250+ 0 0 0 2
50 - 99 0 2 0 7
10 - 49 11 13 29 6
0 - 9 1433 626 598 43
Annual Turnover
Head
coun
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•There are few companies that make the leap up the high growth curve!•Turnover and Number of Employees are mutually interdependent•Growing employee base beyond 9 is very difficult and requires turnover of more than £1.0m•From start up to high turnover and employment in a 3 year window is very rare
0.07% 0.32%
*Where Turnover Data Available (2,770 Businesses or 65% of Total)
75.20% 24.40%
The High Growth Programme
Some geographies have higher growth potential than others
Some sectors have higher growth potential than others
…the Digital & Creative Sector will become increasingly important but let’s not forget the importance of older more traditional sectors
(including retail!)
How dependent have we become on Financial Services?
…but don’t forget the importance of the Engineering & Aerospace industry in the
NW!
How much untapped high growth potential is there amongst older businesses?
51.65% of the Businesses on the High Growth Programme are >7 Years Old & 59.70% are >5
Years Old
The future is bright the future is SME!
94.67% of Businesses on High Growth Programme Employ <50 Staff
Business Support: BLNW Interventions
with High Growth Businesses
Can Local Enterprise Partnerships identify High Growth Companies?
Can they support them to the extent that they ought to be in order to generate the levels of growth and number of new jobs
that will grow the Private Sector to absorb Public Sector Job Losses?
Given that Growth in Turnover and Growth in Employment are not Mutually
Interdependent should this be an explicit aim of Policy?
Hunting Gazelles
Young (Late 20s/Early 30s), Highly Educated
Business Owners
Scientists and/or
Academics
Prominent Markings to look for:
IndependentBusinesses
Niche activities or Specialised Product
Offerings within Older or Traditional
Industries
High Technology Knowledge –Based
Businesses
Advanced Manufacturing using Precision
Technology
Entrepreneurial
Based on Specialist Industrial Parks &
Technology Centres
Newer Businesses do not have SIC
Codes
Opposite Ends Risk Spectrum 75%
Low/25% Very High Risk
Action Plan Themes: Intensively Assisted GazellesTheme Occurrences % Theme Occurrences %Sales & Marketing 18 12.68% Export 6 4.23%
Training, Skills & Workforce Development 16 11.27% Staffing, Recruitment & HR 4 2.82%
Supply Chain Membership & Network Access 15 10.56% Graduate Placement 3 2.11%R&D, Innovation & NPD 12 8.45% Environmental Directives 3 2.11%
Business Diagnostics, Benchmarking & Planning 12 8.45%
Knowledge Transfer Programme 2 1.41%
Raising Finance, Capital Expenditure & Debt Refinancing 10 7.04% IPR 2 1.41%
Leadership, Management & Business Coaching 8 5.63% Subsidiaries 1 0.70%Process Improvement, Efficient & Lean Manufacturing 8 5.63% Health & Safety 1 0.70%CRM & Database Management 7 4.93% IT 1 0.70%
New Market Entry & Market Research 6 4.23% Succession Planning 1 0.70%
New Premises, New Build & Business Relocation 6 4.23% Total 142 100.00%
BLNW Action Plan Statistics
The difference with Gazelles is not the type of question they ask it’s the complexity of the issue they face…
Category of Assistance
R&D, Innovation and NPD
Sales & Marketing
Training & Skills
New Machinery, Process Improvement, Retooling
Capital Expenditure
Relocation & New Premises
Export
Relationship Management, Networking, Membership Cluster Organizations/Networks
Gazelle Specific Example
Collaborating with local Higher Education Institution in Grant Funded R & D Knowledge Transfer Project
Market Scoping Research Project on Need for Specialist Footwear for those who suffer general foot discomfort in order to offer products into the mainstream market
Training of Specialist Staff working in the construction, manufacture and assembly of equipment in the Nuclear Industry
Improvement Production Processes in Specialist Marine Manufacturing Company producing products for the offshore oil extraction industry
Access to Finance for Relocation Precision Manufacturing Plant
Consolidation of Manufacturing Plant on Single Site Location including relocation Welsh Manufacturing Plant to North West
JV in Eastern Europe
Obtaining Membership of and Maximising Network Opportunities through the Northwest Aerospace Alliance
• Gazelles require complex kinds of support placing much higher levels of demand on Public Sector Agencies
• Gazelles are “Elite Businesses”. • Supporting them is resource intensive requiring
prioritisation at the expense of existing Business Sectors!
• Can We Afford To Be Doing This?• Can We Afford Not To?• Raises broader questions about the structure
of the UK Economy and the place of High Growth Companies within it?
Issues