SOLIHULL METROPOLITAN BOROUGH COUNCIL ECONOMIC CONDITIONS INVESTMENT TRENDS. Cabinet Portfolio Holder for Managed Growth

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1 SOLIHULL METROPOLITAN BOROUGH COUNCIL Report to: Full Cabinet Meeting date: 16 July 2015 Subject/Report Title: Report from: Report Author/Lead Contact Officer: ECONOMIC CONDITIONS INVESTMENT TRENDS Cabinet Portfolio Holder for Managed Growth Rachel Westwood, Economic Development Manager / Perry Wardle, Head of Economic Development & Regeneration Wards affected: Public/Private report: Exempt by virtue of Paragraph: All Wards Bickenhill Castle Bromwich Dorridge/Hockley Heath Kingshurst/Fordbridge Lyndon Olton Shirley South Silhill St Alphege Public N/A Blythe Chelmsley Wood Elmdon Knowle Meriden Shirley East Shirley West Smith's Wood 1. Purpose of Report To update Cabinet on economic conditions in Solihull, specifically investment trends in 2014/15, as a key indicator of economic health and an identified priority for the regional devolution agenda. 2. Decision(s) Recommended 2.1 Cabinet is recommended to note the 2014/15 investment trends in Solihull and their impact on and implications for the delivery of Managed Growth. 3. Background 3.1 Cabinet has previously received reports on Economic Conditions in the Borough,

2 covering a wide range of measures originally developed to enable partners to review and respond to the effect of the recession in Solihull from 2008 onwards. Given the strong Council focus now on the delivery of Managed Growth, it is important for Cabinet to receive more detailed reports focussing on key aspects of this agenda going forwards. 3.2 Inward investment is an area in which Solihull is traditionally a strong performer, with the Borough s strategic economic assets playing a crucial role in attracting business investment. Recent inward investment performance in both Solihull itself and in the Greater Birmingham & Solihull Local Enterprise Partnership confirms that there is a strong base to build on, enabling more jobs and investment to be secured in the future. 3.3 National Trends. The UK is one of the most successful locations for attracting Foreign Direct Investment (FDI) and the top location for FDI in the European Union. The national investment promotion agency, UK Trade & Investment (UKTI) has recently reported that 2014/15 saw the best performance since records began in the early 1980s, with 1,988 investment projects a 12% increase on 2013/14. The United States, India, Japan, France and China were all key sources of investment, highlighting the importance for Solihull and the region for the recent strengthening of links with these markets via Birmingham Airport (with additional flights to India and New York and the introduction of direct flights to Beijing). Automotive, Software and IT and Financial Services were major investing sectors, and are key strengths of the local and regional economy also. 3.4 Greater Birmingham & Solihull. 2014/15 saw Greater Birmingham & Solihull continue to be the best performing Local Enterprise Partnership area for attracting FDI, with 73 projects creating or safeguarding 6100 jobs. Advanced Engineering & Manufacturing accounted for 29 of these projects (with 19 of these being Automotive); Business, Professional & Financial Services accounted for 22 projects and IT and Communications 11. Investment by Jaguar Land Rover and its suppliers accounted for over 50% of jobs reflecting the company s ongoing commitment to investing in its sites and product range and is complemented by the investment in professional services and IT and Communications, strengthening these important sectors for employment and jobs. 3.5 There is significant potential to build on this strong performance and attract further investment to the area in the future and this is an important element of the LEP s HS2 Growth Strategy (submitted to Government at the end of April) and Solihull s wider UK Central plans. HS2 itself has set up its construction HQ in Birmingham, and will act as catalyst for further engineering and construction related investment (sectors in which Solihull is strong), whilst the recent decision by HSBC to establish its retail banking HQ in Birmingham is creating significant impetus to attract further high profile and large scale investment in this sector. 3.6 It is worth noting that 50 of the 73 FDI projects in GBSLEP came from existing investors in the area, reinforcing the importance of maintaining and developing relationships with key business and those in priority sectors in order to retain investment and jobs and capture future growth. Reviewing and improving Solihull s approach to strategic business engagement is a priority for Managed Growth in 2015/16 and proposals are due to be considered by the Cabinet Member for Managed Growth later in the year. 3.7 Solihull. The Economic Development & Regeneration team recorded 60 investments in Solihull (including both FDI and UK businesses), involving 3200 jobs,

3 up from 47 investments and 2,500 jobs in 2013/ of these investments over 70% - were made by existing investors, with 35 projects involving local expansions. 3.8 FDI accounted for 15 of these 60 investments, with 6 of these 15 investments coming from the United States and Canada a consistently important source of investment for the UK as a whole. As well a being a source new of new employment and helping to drive productivity growth, FDI is also a major contributor to business rates in Solihull, with 19 of the top 50 (by value) business rates accounts being dependent on international investment. 3.9 The most important sectors for investment were Construction, Building Technologies and Engineering (16 investments); IT & Communications (12 investments) and Business & Professional Services (12 investments). A high proportion of these IT and professional services companies work with customers in Construction and Building Technologies, Advanced Manufacturing and Energy and Utilities, which are all key sectors in the Solihull economy and ones that have been identified as having significant prospects for future growth in the HS2 Growth Strategy and wider UK Central plans These key sectors, particularly Energy and Utilities and Building Technologies are increasingly focussed on the low carbon and wider environmental technologies and sustainability agenda, highlighting the genuine strengths and increasing importance of Green Growth in the Borough s economy. There is significant potential to increase investment in this sector in the future, and a focus on Green Growth, particularly in Solihull, could be suggested as an additional priority for the GBSLEP, complementing its focus on the emerging Life Sciences sector concentrated in Birmingham Demand for serviced offices in Solihull continued to be in high demand (with plans for a new Serviced Office Centre on Birmingham Business Park being announced recently) and demand for office space of 1,000 2,000 sq. ft. increased by 45% in 2014/15 compared to 2013/14. This demand is clearly reflected by the take up of space at the new Chelmund s Cross Enterprise Centre, which is now 50% occupied, despite having only opened in October, and indicates the potential to develop similar enterprise and incubation facilities in the future. This increased demand from local small businesses could also deliver future employment and business growth in the Borough as organisations expand Whilst the demand for smaller and serviced offices is significant, there has also been growing demand for both industrial premises and business park space in Solihull, reflecting increased market confidence which is enabling companies to bring forward expansion plans This increase in activity amongst end users and occupiers is matched by increased activity and confidence in Solihull amongst institutional investors and developers, including the Ontario Teachers Pension Plan one of the top ten institutional investors globally which increased its stake in Birmingham Airport and IM Properties, which purchased Blythe Valley Park. International property consultancy Jones Lang Lasalle recently identified Solihull as one of the Growth Leaders in the UK areas which have seen strong capital value growth above 25% since 2012 and which are also forecast to see above average economic growth over the next five years The ability to continue to attract and to increase investment (from occupiers, developers and institutional investors) in the Borough and wider region will be

4 essential to the delivery of UK Central, the HS2 Growth Strategy and the emerging Midlands Engine with inward investment continuing to be a priority for the Council and for wider partnership working. 4. Evaluation of Alternative Option(s) 4.1 Not applicable. 5. Reasons for Recommending Preferred Option 5.1 Not applicable. 6. Scrutiny 6.1 None 7. Implications 7.1 Delivery of the Council s Priorities Inward investment is an essential element delivering Managed Growth in the Borough. 7.2 Policy/Strategy Implications Inward investment is central to the Council s plans for UK Central, the HS2 Growth Strategy, the priorities of the Greater Birmingham & Solihull LEP and the priorities of the proposed West Midlands Combined Authority. 7.3 Meeting the duty to involve Not relevant to this report 7.4 Financial Implications None arising directly out of this report. Investment and business growth makes a significant contribution to increasing Solihull s business rates base, which is a crucial part of the Council s plans for self-sufficiency Legal implications None arising out of this report 7.6 Risk Implications None arising out of this report 7.7 Statutory Equality Duty 7.8 Carbon Management/Environmental Low Carbon Construction and the wider green economy is a key strength of Solihull and an anticipated source of future investment. The environment and quality of life in Solihull is also a crucial factor in attracting investment to the Borough.

5 7.9 Partner Organisations 7.10 Safeguarding/Corporate Parenting Implications 7.11 Customer Impact 7.12 Other implications No other implications identified 8. List of Appendices Referred to 8.1 None 9. Background Papers Used to Compile this Report 9.1 Inward Investment Report 2014/15, UK Trade & Investment, June List of Other Relevant Documents 10.1 None