When the Chancellor unveiled her Spending Review on 11 June, she simultaneously published the Guidance for Mayoral Strategic Authorities on developing Local Growth Plans. These are the key documents to be prepared by the 13 Mayoral regions and are intended to be a major driver for boosting the Government’s growth agenda.

Securing community support for economic growth initiatives

Small remains beautiful

Debates about economic growth frequently revolve around big politics and macro-decisions taken by Ministers or Treasury mandarins. They are about inflation, interest rates, supply-side economics or taxation. Only in the last twenty years have we put more focus on large game-changing infrastructure projects as key drivers of a more productive economy.

 

That’s where we talked ourselves into even more doom and gloom. Successive reports confirmed that many of our flagship projects took longer, cost more, and achieved less than our competitors. We have significant skills shortages and a track record of political indecision and confused objectives. Full marks for the current Government’s push to approve more NSIPs and attempts to make the planning environment more project-friendly.

 

The truth, however, is that the contribution these large investments make to our overall economic growth is not well understood. This is partly because there are big differences between the impacts of a nuclear power station, for example, or a new road tunnel, or maybe a new town. And the benefits tend to be very long-term, by which time other factors make cause-and-effect more tenuous. In addition, the benefits are often secondary. In other words, they stimulate, facilitate or enable other activities of economic value, rather than create wealth on their own account.

 

No doubt there are great examples, such as the enormous return on the investment of redeveloping London Docklands or Salford Quays. Academics and analysts are less sure that road-building programmes and other transport projects yield such advantages. Yes, they provide significant user benefits, but what do they contribute to overall economic growth, given the opportunity cost of spending money differently?  No-one is quite sure.

 

There are fewer doubts, however about the impact of small businesses. Politicians and officials agree that a healthy level of company formation and a flourishing SME sector adds to the economy. In the UK, small firms account for about half the private sector turnover and 60% of private sector employment. In sectors such as construction, manufacturing, Information technology and business services, SME performance is a bellweather of overall economic activity. Although a direct correlation with economic growth is hard to find, the overall perception is that it DOES help … a lot!

 

If we examine the conditions conducive to their success, we find that clustering around other sources of activity makes a real difference. Recent research has championed the success of university towns like Oxford and Cambridge to attract funding that is less easily secured elsewhere. But it is not enough on its own. The commercialisation of academic research is potentially frustrated by a lack of housing and other ‘pull factors’ and this, in part, supports the pressure for infrastructure improvements like East-West Rail and the proposed new town at Tempsford.

 

Two things matter. Creating a culture where young people actively want to become wealth-creators and run businesses, and possessing sufficient skills to succeed. Analysis of business start-ups in the UK reveals huge regional variations that are often attributed to historic patterns and cultural expectations. Teaching schoolchildren about business and ‘entrepreneurship’ has been popular, in theory, for years, but rarely attempted in the UK on a consistent basis. Sporadic initiatives have come and gone and although some programmes such as Young Enterprise and the King’s Trust (formerly The Prince’s Trust) have been running for decades, nothing comes close to comparison with the sustained emphasis placed on this in countries like Finland, Germany, Canada or Singapore.

 

Is it possible that the new English Strategic Authorities could fill this gap and leverage their forthcoming new powers to invest properly in entrepreneurial education?

 

Westco sees the re-alignment of local authorities as an opportunity for new Mayors to ‘take back control’ of economic activity rates in their areas. Low cost but highly effective programmes can give young people and students better awareness of financial management. Mentoring schemes to promote local success-stories and internships in growth companies are also do-able – and can come on stream quickly. Such measures are not in competition with the big projects, but these can often combine together to produce a virtuous circle of increased economic activity.

 

Encouraging SMEs and motivating young people to explore enterprise-based careers is not a guaranteed route to higher growth, but it is a lever that local authorities can use. In an age when unpredictable global forces can blow any policy off course, it is deeply satisfying to ‘grow our own’ future businessmen and women. Previous attempts have been centrally driven. This time around, let us build from the ground up … at local levels.

 

Author: 

Rhion Jones is the co-founder of The Consultation Institute and has been monitoring consultation case law since 2008. He has published 50+ commentaries on specific judicial reviews and delivered over 100 courses on the Law of Consultation. Rhion currently provides government and C-suite advice and guidance under his trading name, The Consultation Guru.