Meeting documents
Co-operative Executive
Wednesday 13 December 2006
Economic Development - Update
ECONOMIC DEVELOPMENT - UPDATE
REPORT TO CABINET - 13TH DECEMBER 2006
1 INTRODUCTION
1.1 In April this year, Cabinet received a paper on the refreshed Local Area Agreement and associated matters. The paper picked up a number of issues that are relevant to the economic development agenda.
1.2 This paper provides Cabinet with an update on progress on the economic development agenda since April. In the order of the report:
· Sheffield City Region Business Case
· The Northern Way and Sheffield City Region Development Programme
· Compete Project
· Local Area Agreement 4th Block
· Local Enterprise Growth Initiative
· Creative Sheffield
2 SHEFFIELD CITY REGION BUSINESS CASE
2.1 The City Region Business Case was presented to Ruth Kelly, the new Secretary of State for Communities and Local Government, at the beginning of July. This concentrated on our proposals for the city and the city region including work and skills, transport connectivity and economic development.
2.2 In relation to economic transformation, we are seeking a number of enabling measures including:
· Financial
o Strengthened Local Authority Business Growth Incentive scheme
o A 'business improvement district' for the hospitality industry
· Programming
o Creation of a single economic programme for the whole of Sheffield under which individual partner agencies funds would be positioned at a programme level
· Empowerment
o Allowing the Council to lead on the deployment of public sector land assets in pursuit of agreed goals
o An easier CPO test for non-productive land
2.3 In relation to neighbourhoods, we are seeking a number of enabling measures including:
· establishing a Neighbourhood Investment Fund
· removing the requirement to spend receipts from the sale of housing land on social housing
· relaxation of the detailed constraints on the use of capital receipts in HMR areas
· to be able to use 100% of Right To Buy receipts to support the long-term investment plan
· review the governance structures of Transform South Yorkshire
· to be allowed to use additional S77 receipts on neighbourhood regeneration
· to be allowed to reinvest English Partnerships and Transform South Yorkshire receipts in neighbourhood projects
· further exploration of the use of pooled funding in neighbourhood programmes.
2.4 The Business Case also specifically sought Government support for the establishment of Creative Sheffield as the 'city development company' for Sheffield. To that end, in the recently published Local Government White Paper, the Government has signalled its support for city development companies (CDCs) as a means of harnessing market intelligence, economic strategy and analytical functions to deliver a more co-ordinated approach to economic development, and of improving the involvement of the private sector. The White Paper highlights Creative Sheffield as a model of a CDC and encourages the creation of similar entities in other cities.
2.5 Section 6 of this paper provides Members with an update on the establishment of Creative Sheffield.
3 THE NORTHERN WAY AND SHEFFIELD CITY REGION DEVELOPMENT PROGRAMME
3.1 As part of the Northern Way Growth Strategy, the first City Region Development Programmes (CRDP) were published by the eight northern city regions in June 2005. The Northern Way then requested a second iteration of these documents to inform the development of the Northern Way submission to the Government's 2007 Comprehensive Spending Review.
3.2 In September, Sheffield city region leaders and chief executives signed off the second iteration of the Sheffield CRDP and agreed a transport vision for Sheffield City Region. The CRDP sets out how Sheffield City Region can make a contribution to the national agenda of improving competitiveness and closing the £30bn output gap between the North and the average for England. It identifies real opportunities designed to accelerate economic growth over the medium and long term by capitalising on Sheffield City Region's pivotal location, and by maximising the opportunities of five key economic drivers:
· Robin Hood Airport Doncaster Sheffield
· Growth centres
· Key sectors
o Advanced manufacturing
o Cultural, creative and digital industries
o Business and financial services
· Universities and innovation
· Destination offer
3.3 The CRDP also identifies a number of underlying weaknesses in the economy - enterprise, skills, participation and connectivity - which need to be tackled robustly over the long-term to ensure that the city region reaches its full potential.
3.4 Alongside production of the CRDP, city region leaders and chief executives have considered the appropriate arrangements needed to take the proposals in the document forward. Building upon the successful partnership that developed the CRDP, the proposal is to establish a Sheffield City Region Forum as the strategic body responsible for overseeing and advising on the implementation of the CRDP. The Council will be represented on the Forum by the Leader. Joint Issue Boards will be set up to progress specific workstreams that would benefit from a joint approach across the city region. The new arrangements will become operational later in the year.
3.5 An officer has recently been appointed on a 12 month secondment from Barnsley as the Sheffield City Region Co-ordinator to support the development and implementation of the CRDP.
4 COMPETE PROJECT
4.1 The Compete project is a European network of cities and city regions established in order share experience and raise the profile of major regional cities in order to enable them to fulfil their performance as drivers of urban renaissance and economic competitiveness.
4.2 Sheffield leads the project on behalf of the seven network partners (Barcelona, Dortmund, Helsinki, Lyon, Munich, Rotterdam and Sheffield) and the eight English Core Cities.
4.3 The key themes of the project are:
· Public-private partnerships
· Human capital
· Culture, innovation and creative industries
· Knowledge economy and innovation
· Role of networks in the knowledge based economy
· Connectivity in the global world
· Cluster strategy.
4.4 To date, we have held five very successful partner events in Sheffield, Dortmund, Barcelona, Helsinki and Munich, and a further two are scheduled to take place in Rotterdam and Lyon. A high-profile final conference will be held in the UK in 2007. This will address the lessons learned from Europe and their relevance to the implications of the White Paper and the city region debate.
4.5 It has become increasingly evident that the lessons and learning outcomes from the project are of great strategic significance in the current economic climate. Of particular relevance are the linkages with the Lisbon Strategy for jobs and growth, the implementation of the third Cohesion Report on the integration of new member states, the themes for the new European structural funds 2007-13 and Framework 7 programmes, particularly in relation to the knowledge economy, skills, connectivity and cluster strategy.
5 LOCAL AREA AGREEMENT 4TH BLOCK
5.1 Local Area Agreements (LAAs) were introduced to help Councils and their partners to tackle local priorities more effectively by striking a balance between the priorities of central government and local government in the way that area-based funding was used through:
· pooling different funding streams to give more flexible use of resources
· streamlining performance management arrangements
· identifying freedoms and flexibilities.
5.2 The recently published Local Government White Paper describes how, in future, LAAs will carry more weight as a central part of the performance framework and as the delivery plans for Sustainable Community and City Strategies.
5.3 The Sheffield Area Agreement underpins the delivery of the City Strategy 2005/10 by encompassing a number of distinct but inter-connected themes within its performance framework. It builds upon the three key principles of prosperity, inclusion and sustainability to ensure that measures to increase economic growth and city competitiveness provide opportunities and benefits for all Sheffield residents both now and in the future.
5.4 The addition of an economic development and enterprise block - or '4th block' - was one of the key features of the 2006/07 LAA refresh (the other three blocks being Successful Neighbourhoods, Children and Young People and Healthy Communities and Older People). The 4th block represents a strategic platform from which we can realise our economic vision for Sheffield as set out in the City Strategy:
“To have an economy that matches the best cities in Europe”[1]
5.5 The block is being developed over a three year period (05/06 to 07/08). In year one our work focussed on establishing the strategic themes through consultation with key partners. The themes that emerged reflect the five big ambitions as set out in Sheffield's City Strategy:
· Enterprise and innovation
· Skills and employability
· Transport and connectivity
· Renaissance
· Culture
5.6 The focus for years two and three is continuing this work with partners in the city and across the wider city region to build strong business cases for the interventions and investments we are seeking through the 4th block, and to ensure the LAA objectives fit with the new Economic Masterplan for the city (see paragraph 7.3 of this paper). We will also focus on developing links to the other three blocks of the LAA where our objectives are aligned.
5.7 In response to feedback from local authorities, the Local Government White Paper proposes that the 4th block should encompass economic development and the environment. This fits with the Council's Environmental Excellence strategy as a framework for delivering long-term environmental sustainability and will be considered as part of the refresh of the LAA going forward.
5.8 The White Paper also highlights the value in local partners coming together to form economic partnerships to drive this theme of the LAA forward. In Sheffield, steps have already been taken to introduce strengthened delivery arrangements around the economic development agenda.
5.9 The new arrangements, which were agreed by Sheffield First Partnership in April, reflect the changing policy environment and ensure that effective engagement and involvement of a wide range of partners in relevant aspects of the economic agenda. The roles of the new partnerships have a more focused definition and the accountability arrangements are much clearer.
5.10 The diagram in appendix 1 sets out the economic partnerships, their inter-relationships and their reporting lines to the Sheffield First Partnership as the over-arching body responsible for delivery of the City Strategy. The economic partnerships will also be open to the Council's scrutiny arrangements. The partnerships are described as follows:
· City Economic Strategy Group
A policy and advisory group with a co-ordinating role to ensure a coherent approach to the achievement of the 'Strong Economy' ambition within the City Strategy and the delivery 4th block of the LAA.
· Creative Sheffield
The city development company with a specific focus on the economic transformation of the city's economy through the delivery of higher levels of growth and enhancing competitiveness.
· Work and Skills Board
An employer-led partnership set up to co-ordinate employment and skills related activities across the city to address the needs of new entrants to the labour market, worklessness and employability, and workforce development.
· Culture and Sport Board
An influencing partnership with responsibility for overseeing the delivery of the Culture Strategy and championing the cultural sector as key to the development of successful individuals, thriving communities and a strong economy.
· Local Enterprise Board
An influencing partnership established to provide a citywide strategic framework for local economic development activity, and to identify and articulate the economic development potential offered within Sheffield's communities.
6 LOCAL ENTERPRISE GROWTH INITIATIVE
6.1 The Local Enterprise Growth Initiative (LEGI) is a national initiative designed to release the productivity and economic potential of our most deprived local areas and their inhabitants through enterprise and investment, boosting local incomes and employment opportunities.
6.2 LEGI carries substantial Government funding for successful local authorities for up to ten years. As such, bidding is highly competitive. In the first round, 10 local authorities were successful. Sheffield was not successful in this first round and has since worked up strengthened proposals for the second round of funding.
6.3 The second round bid has been developed with strong support from public, private and third sector parties and, if successful, could provide £18m over the initial three year period. The 'Closing the Gap' areas remain the geographical focus of the bid. An announcement regarding which bids have been successful is expected by mid-December. A business plan is in development for an immediate start in January 2007 if the Sheffield bid is successful.
6.4 A Local Enterprise Board is in the process of being established to provide a citywide strategic framework for local economic development activity, and to identify and articulate the economic development potential offered within Sheffield's communities. It is proposed that Councillor MacDonald, the Cabinet Member for Economic Regeneration, Culture and Planning, should represent the Council on this Board. As part of its remit, the Board will oversee the implementation of the LEGI proposals should this bid be successful, and the preparation of strengthened bid if we are unsuccessful and there is another bidding round.
7 CREATIVE SHEFFIELD
7.1 By bringing together the City Council and private sector partners, Sheffield One has spearheaded a major programme of regeneration to produce a series of strategic schemes that have stimulated the central area economy.
7.2 The transformation of the city centre is now well underway with many of the key projects on site and other moving closer to completion. The Heart of the City scheme has progressed with the opening of the five-star MacDonald's Hotel and the completion of phase 1 of St Paul's Place, together with major civic realm projects, including City Hall and a new square in front of the refurbished station. City living has matured with some innovative schemes and conversions coming forward including Butcher Works, City Lofts and Leopold Square. This is accompanied by the development of a network of supporting infrastructure and services in the city centre.
7.3 As the principal commercial centre in South Yorkshire, Sheffield is successfully diversifying its economy with relatively strong growth in banking, insurance, public services, education and communications.
Prospects for office development in the city centre remain positive with real rental growth, and research shows that office employment could increase by 8,200 jobs over the decade, driven by an expansion of public services and financial and business service sectors. Sheffield is considered to be good value in relation to competing centres with the added advantage of a good public transport system and two strong and improving universities.
7.4 Other forthcoming large scale proposals for the city centre such as the New Retail Quarter and the redevelopment of The Moor signal a change in fortunes for Sheffield and underpins its foundations for a sustainable future.
7.5 The success of Sheffield One as a catalyst to drive Sheffield's economic revival is clear. It is critical now that this success is harnessed in a focussed way to sustain the momentum of activity and turn the revival into transformation. By establishing Creative Sheffield as the new 'city development company', we can build on the successful approach of Sheffield One to ensure that future economic development and regeneration activity has a citywide impact.
7.6 As the single agency leading on economic development in the city, Creative Sheffield will incorporate the functions of Sheffield One and Sheffield First for Investment to build on and enhance the development of physical infrastructure and inward investment activity in the city. This aim is to achieve this by 31 March 2007. In addition, Creative Sheffield will specifically seek to accelerate the growth of knowledge-based businesses, capitalising on the city's research facilities (including the two universities) and lead on the promotional activities needed to achieve a decisive and sustainable shift in the image and perception of the city. As an arm's-length organisation, Creative Sheffield will have an enhanced ability to draw in external funds and the necessary expertise to support an economic transformation agenda.
7.7 As stated in paragraph 2.4 of this paper, the Government has recently signalled its support for the establishment of city development companies to help attract additional private investment and drive economic development in their area. Since Cabinet agreed to set up Creative Sheffield in October 2004, significant progress has been made towards its establishment.
7.8 Creative Sheffield is now in its transition and set-up phase. The ongoing financial and funding arrangements, HR and employment issues, and legal and governance issues in relation to setting up Creative Sheffield are being managed by a transition team led by the Council's chief executive, supported by a number of officers. A Memorandum of Understanding between the Council and Creative Sheffield that sets out the operational arrangements for the company is in development for agreement by both parties.
7.9 Creative Sheffield will lead on the development and implementation of an Economic Masterplan for the city. This will be the strategic framework to guide economic and physical development in Sheffield over the next 10-15 years. Consultants have now been appointed to lead on the development of the Economic Masterplan and Creative Sheffield will act as the managing agent for this contract. As with all major strategies, the Economic Masterplan will come to Cabinet for approval.
7.10 Ian Bromley has been appointed as the chief executive of Creative Sheffield and he took up this post in September 2006. As part of the creation of the new organisation, the posts of Chief Executive of Sheffield One and Chief Executive of Sheffield First for Investment will cease after 31 March 2007.
The Creative Sheffield office has been established alongside Sheffield One and Sheffield First for Investment at St James Row.
7.11 In order to strengthen capacity to deliver economic transformation, two further posts will be recruited to Creative Sheffield. The Director of Physical Infrastructure will build on the successful physical regeneration of the city centre by leading on shaping and defining the key infrastructure projects that emerge from the city's Economic Masterplan. The Director of Marketing presents a real opportunity to have, for the first time, a dedicated resource to lead on strategic city marketing to promote a positive and sustainable image of the city, critical to its future economic success.
7.12 Creative Sheffield will also coordinate the Knowledge Starts in South Yorkshire programme on behalf of the Council. Knowledge Starts is a European Objective 1 funded project to support commercialisation and spin-out activity within the two universities. The Project Manager will sit within Creative Sheffield in order to fully integrate the project within the wider activity to support the knowledge economy.
8 RESOURCING ISSUES
8.1 The Local Authority Business Growth Incentive Scheme (LABGI) was introduced in April 2005 following a pilot scheme in 2004 and is set to continue in its present form until the end of 2008. The main principle of the scheme is to reward local authorities that have increased economic growth in their area by allowing them to retain some of the additional revenue derived from business rates as a result. Any additional money generated under this scheme is not ring-fenced.
8.2 Sheffield benefited from this scheme in 2005/2006 and received a £1.8m reward grant which is currently held as an earmarked reserve. Members should note that determining the reward grant is an annual process. The amount of the reward grant can fluctuate year on year as it is contingent on how the economy progresses, hence the incentive to use the grant to drive economic growth and development.
8.3 Additional money generated under the LABGI scheme is not ring-fenced. However, Members have previously agreed that, the first call on the LABGI reward grant should be to promote further economic development which in turn increases business rate growth and maximises any future LABGI potential. This paper is seeking approval to allocate a proportion of LABGI funding towards the set-up of Creative Sheffield.
8.4 The table below sets out the full financial contributions to Creative Sheffield from each of the key partner agencies towards existing activity and new activity over the two year set-up period:
| | Existing £m | New £m | Total £m |
| Objective 1 | 0.94 | - | 0.94 |
| Yorkshire Forward | 1.45 | 1.70 | 3.15 |
| City Council | 1.41 | 0.85 | 2.26 |
| Renaissance South Yorkshire | 0.09 | - | 0.09 |
| SRB | 0.13 | - | 0.13 |
| English Partnerships | 0.65 | - | 0.65 |
| TOTAL | 4.67 | 2.55 | 7.22 |
The total funding required over this two-year period is approximately £7.22m. Of this £4.67m is already in place (including the funding for Sheffield One and Sheffield First for Investment). Based on the business plan for the set-up and transition phase, Yorkshire Forward are committing £1.7m to the set-up costs, leaving the Council to contribute £850,000 over the two years from 06/07 to 07/08. It is proposed that this sum should be drawn from the £1.8m LABGI reward grant secured on the basis of the uplift in business rates in 05/06.
8.5 In terms of future funding for Creative Sheffield, this will be subject to the development of a fully operational business plan for the period beyond March 2008. Any future funding from Yorkshire Forward would be subject to further appraisal of the business plan.
8.6 In addition, the Council needs to strengthen its economic client and programmes capacity to ensure that Creative Sheffield and a range of other economic initiatives, including Knowledge Starts, the South Yorkshire Destination Management Programme, and the Local Enterprise Growth Initiative, are managed effectively, the Council's interests properly safeguarded, and that we have the capacity to bid for new funding to generate future economic growth. The cost of this is estimated at £95,000 per annum (full year costs). It is proposed that this sum be borne by LABGI funds.
8.7 In the future there will be a need to continue to support project delivery and programme development capacity related to economic schemes. This is an area that could potentially benefit from LABGI funding in return for having a positive impact on the level of reward grant received by Sheffield.
9 FINANCIAL IMPLICATIONS
It is proposed that the contribution to the set-up costs of Creative Sheffield of £850,000 over the two year period from 06/07 to 07/08, and client side capacity for managing economic programmes of £95,000 per annum (full year costs) should be drawn from the £1.8m LABGI reward grant secured on the basis of the uplift in business rates in 05/06.
10 EQUALITIES IMPLICATIONS
There are no equalities implications arising directly from this paper. However, ensuring equality of opportunity for all is a fundamental part of economic development and, in particular, is a prominent theme in the LEGI bid.
11 LEGAL IMPLICATIONS
The are no legal implications arising directly from this paper. The legal and governance issues in relation to the establishment of Creative Sheffield are being addressed through the transition team.
12 RECOMMENDATIONS
12.1 To note the enabling measures in relation to economic transformation and neighbourhoods sought through the Sheffield City Business Case.
12.2 To support the establishment of the Sheffield City Region Forum as the strategic body responsible for overseeing and advising on the implementation of the Sheffield City Region Development Programme, and to note that the Council will be represented on this Forum by the Leader.
12.3 To note progress on the Compete Project.
12.4 To note progress on the Local Area Agreement 4th Block.
12.5 To support Council's engagement in the economic partnerships described in paragraph 5.10.
12.6 To note the timescales for the announcement of the second round of LEGI funding.
12.7 To agree that the Cabinet Member for Economic Regeneration, Culture and Planning should represent the Council on the Local Enterprise Board (paragraph 6.4).
12.8 To note progress on the setting up of Creative Sheffield as the city economic development company.
12.9 To approve the allocation of a proportion of the LABGI reward grant to support the set-up of Creative Sheffield, and to strengthen client and programme capacity in relation to across a range of economic initiatives (section 8).
[1] Sheffield's City Strategy 2005/10, Sheffield First Partnership, September 2005
Downloads
This document contains Appendix 1 to the Economic Development report (450 KB)