Cabinet. 9 March Proposals for the Delivery of Business Support Services in County Durham

Transcription

1 Cabinet 9 March 2011 Proposals for the Delivery of Business Support Services in County Durham Key Decision R&ED/14/10 MTFP Ref RED 1 Report of Corporate Management Team Ian Thompson, Corporate Director, Regeneration and Economic Development Councillor Neil Foster, Cabinet Portfolio Holder for Regeneration and Economic Development Purpose of the report 1 To report to Cabinet the outcome and final recommendations of the review into services for businesses in County Durham and how these recommendations are being taken forward by DCC within the Regeneration and Economic Development service. 2 In accordance with these recommendations, to seek agreement to implement structural changes to the services provided by the County Council that support new and existing businesses in County Durham through the merger into one integrated business focused team of County Durham Development Company and the Business Services Team within Economic Development. 3 In addition, to ensure that the promotion of County Durham as a business and inward investment location is optimised within a broader place based marketing function that embraces the ambition of the Regeneration Statement to create places where people want to live, work, invest and visit. 4 In terms of structure, this report deals firstly with the review of countywide business services that was commissioned by Cabinet in July 2009, before moving on to examine how the services of the County Council have also been examined. Recommendations about a proposed model for future DCC service delivery then follow. Background 5 In July 2009 Cabinet approved a proposal to review services provided to business in County Durham, based upon a high-level option paper that had been prepared through LGR work-streams prior to vesting day. Cabinet agreed that the review would encompass a range of agencies and services to ensure that improvements could be made from the customer perspective rather than individual providers.

2 6 The review was carried out through a multi agency working group chaired by the Council s Business Services Manager and was reported through the Council s Economy and Enterprise Scrutiny Group in October 2009 and February The County Durham Economic Partnership considered the main recommendations of the review in September The Business and Enterprise Working Group were tasked with gaining agreement to the principles of the report from all partners with a timetable for implementation. 8 Since this review was undertaken, with the general election in May 2010 and the Comprehensive Spending Review in October 2010, the landscape of business support agencies has undergone dramatic change with the Government s announcement to abolish the Regional Development Agencies in March 2012, which will remove the services of ONE from the region. This will also cause the cessation of the Business Link contract which is funded by ONE until December 2011, although the private company Business and Enterprise North East (BENE) who deliver the Business Link contract are intending to continue to trade on a commercial basis. 9 In addition, within coming months the Local Economic Growth Initiative (LEGI) will cease trading as the Government stops funding for this programme and at the same time, activities funded through the Working Neighbourhoods Fund will also cease as this programme comes to an end. 10 This effectively means that the landscape of business support services that had appeared quite cluttered 12 months ago is now far leaner and it is therefore essential for County Durham businesses that the offer of the County Council is similarly reviewed to ensure an effective service that provides value for money and real clarity of purpose in very challenging economic circumstances. Scope of the Business Services Review 11 The review researched the business services landscape and concluded that services broadly fell into one of the following categories which would form the basis of a future common investment framework: Enterprise animation Pre start up Business start up Business support and innovation/growth (including premises) Inward investment and marketing 12 However the review found that from a customer perspective the range of services provided by different agencies were confusing and uncoordinated with many agencies offering similar or conflicting support. The review also

3 found that despite significant public resources from a range of agencies, it was difficult to find any demonstrable impact of business support services on the County Durham economy as no key performance data was being effectively reviewed at that time. Findings of the Business Services Review 13 In order to tackle the issues raised by the review, the working group agreed the following needed to be addressed: A clear purpose for business support A performance management framework A strategic model for delivery 14 All partners involved in the review agreed that a shared investment framework for business support is required that avoids duplication and unproductive activity. They have also agreed the proposed principles by which all activity should be developed. 15 Partners within the County Durham Economic Partnership who wish to either commission services to support businesses or deliver services to support businesses will be required to sign up to a joint accord that adheres to the purpose of business support which is: to have a demonstrable impact upon the economy or people of the County. And adopt the following key principles: 1. Work to the agreed strategic aims of the County Durham Economic Partnership and recognise the aspirations of the Regional Strategy (no longer required) and Regional Employability Framework; 2. Encourage the development of the private sector and the third sector to provide business support; 3. Where market failure exists, publicly fund the provision of services up to an affordable level or where private sector provision becomes viable; 4. Agree not to duplicate services already provided, but to rationalise as necessary in order to provide services that are fit for purpose in the 21st Century; 5. Develop measurable interventions and services that are demand led and not supply driven. 16 The County Durham Economic Partnership endorsed the principles of the review of countywide business services in October It was agreed that all agencies that had agreed the above principles would embed them within their own operations, ideally before April 2011.

4 Taking the Business Services Review forward in DCC 17 Within the County Council an internal review of business support services has been undertaken within the context of the above principles. This review has been carried out by the Head of Economic Development with the aim of providing greater synergy between those services managed directly by the Council and those that are currently managed within the wholly controlled arms length company, County Durham Development Company. Current Delivery Arrangements for Business Support funded by DCC 18 The County Council currently delivers support to encourage businesses to start and grow in County Durham through the Business Services function within Economic Development. This team was created following Local Government Re-organisation (LGR) in April 2009 with a fourth and fifth tier management structure put in place during October 2009 covering the functions of Business Space, Business Start-Ups, Business Development, Be Enterprising (LEGI) and City and Town Centre Management. A total of around 70 staff from the previous district authorities were either brigaded into the service or remained unaffected. Table 1: Financial and Human Resources Team Staff (FTE) (Net) 2010/11 Business Services 537,975* LEGI Programme Management (all fixed term) 11 Property (including 13fte Dales Company transferred staff) 25 Start up (inc 26 FTE fixed term LEGI funded Coaches and 32 Advisors on fixed term contracts) General Business Support 8 DCC sub-total 76 CDDC 22 1,559,300 Total 98 2,097,275 *The business services figure is net of income received from business space. All figures relate to 2010/11 19 In addition, the County Council also encourages economic development, through its wholly owned company, County Durham Development Company Limited (CDDC). The Company is controlled by its Board of Directors comprising senior members of the Authority and private sector Associate Directors. The County Council created CDDC in 1987 to bring inward investment and jobs to the area. The Company has since developed to focus on a range of activities to support and develop high growth opportunities with the (mainly) manufacturing businesses within the economy. This encompasses the top 200 companies that are beneficiaries of the Strategic Account Management Programme (SAMP) including those located at NETPark.

5 20 CDDC markets and promotes the County as a corporate location and continues to lead the response to inward investment enquiries for the County. CDDC plays a central role in driving forward the County's knowledge economy through the development of NETPark. CDDC has a total of 22 staff covering the functional areas of Innovation, Investment and Communications, with staff either employed by or seconded to the Company from the County Council. 21 In the period post April 2009, the main consideration was to ensure continuity of business support services delivered by the former District Councils and DCC/CDDC whilst also ensuring no duplication of activity/services. As discussed above, a business support services review was commissioned in July 2009 to inform the County Council and a range of partners, including Business Link, ONE and the local enterprise agencies on how collectively, they might wish to create a service transformation model for the delivery of business support services in County Durham that would create additional economic impact. 22 The completion of the review provides the Council with a platform to consider what support it should provide to businesses; what delivery structure is best suited that provides value for money; and how to best adopt the key findings of the review. 23 Throughout this time there has been a changing context at a national and regional level and changes within the financial climate of the public sector. This has meant that the work that has been undertaken has been done with a significant degree of cognisance of the external context. The role of the County Council 24 In the future, a key focus of any integrated team will be responding to the business led government agenda concerning private sector growth. This will include building enhanced business relationships across the service functions including strategic engagement through the Local Enterprise Partnership (LEP) and the North East Enterprise Partnership (NEEP) and service delivery through Strategic Account Management, sector support (eg, renewables, manufacturing) and clear geographical coverage. 25 During late September and October 2010, a series of meetings were held across the County with groups of businesses to discuss the LEP proposal and the current level of business support available from DCC/CDDC in the context of a rapidly changing regional architecture. There was strong agreement from the business community that the business support landscape had been cluttered and at times ineffective in the past (in agreement with the findings of the business services review). However, there were also strong views from the business community that DCC/CDDC had a clear role to play in supporting the County s businesses to set up and grow in difficult economic times. The businesses in attendance stated that they would appreciate a clearer and easily

6 accessible offer from DCC/CDDC. A geographically targeted service that is available across the county for all businesses, in addition to the sector based focus currently offered by CDDC, would also be strongly welcomed. Material Considerations and Options 26 The Regeneration Statement recognises that the capacity for businesses in County Durham to compete in the open market is central to the prospects for a more sustainable, modern and growing economy. To address that need, the Regeneration Statement has a key objective to make the County A top location for business. 27 In terms of supporting the wider business economy, the key question is what can the Council do to help businesses in County Durham become more competitive? Key priorities include: Support the creation of more new businesses and a more enterprising and entrepreneurial culture that overcomes issues of worklessness. Ensure an adequate supply of modern business premises and communications infrastructure across the County including provision of next generation broadband connectivity. Specialist business support focused on companies and sectors with the greatest potential for employment growth, including as a priority high value manufacturing and engineering. This includes the Strategic Account Management Programme for the top 200 companies in County Durham. Maximising inward investment opportunities to ensure a comprehensive and joined up approach to attracting business into the County and where appropriate the north-east. Specialist business support that encourages the growth and development of firms engaged in science and technology based businesses within the County, including promotion of product and process innovation and increased research and development (R&D) capacity. Generally support County Durham based businesses to remain within the County and to grow. Understanding skill requirements of businesses and ensuring the provision of an appropriately skilled and trained workforce. Helping to create more opportunities for local companies from public procurement. Supporting the long-term economic growth of Durham City through targeted support for retail, leisure and office based businesses. Further development of NETPark and connected sites as a key driver of regional innovation activity.

7 Providing a dedicated single point of contact for business in County Durham to access the services of the County Council or deal with certain other issues in a streamlined and efficient way that supports them as businesses and ensures that as a County Council, we effectively think and act in a manner that supports business and hence job creation. Providing an interface with the national level in terms of inward investment enquiries, UKTI and the national picture, eg Technology Strategy Board. 28 These priorities suggest a business support service covering three main functional areas: Business Property: supporting the provision of modern business premises and infrastructure; managing the Council s industrial and office portfolio; developing and supporting further public and private commercial property developments, including NETPark; supporting provision of next generation Broadband, a land and property enquiry service and commercial market intelligence. Start Up and General Business Support: developing an enterprising and entrepreneurial culture that encourages businesses to set up, to grow and to improve productivity and competitiveness through partnership working as appropriate. In addition, to provide on an areabased approach at the request of the business community themselves clear support for SME s. Business Innovation and Growth: Strategic Account Management Programme, promoting the links between innovation and new business; promoting product and process innovation as a driver of business enterprise and growth; strengthening links between NETPark and the regions universities; inward investment and international trade opportunities. 29 In addition, the current Business Services team is responsible for City Centre and Town Centre Management and Marketing; the future of these functions will be covered in a separate report. Budgets 30 Taking the total net cost of the combined services gives a starting budget of 2,097,275 for 20010/2011, as summarised below:

8 Table 2: Budget Summary Business Services General 73,076 Business Space 421,007 (surplus) Business Development 559,270 Business Start Up 326,636 Be Enterprising 0 Sub total 537,975 CDDC Central 913,521 Innovation 461,995 Communications 92,284 Investment 91,500 Sub total 1,559,300 Net Total cost (2010/11) 2,097, In line with the MTFP, the net cost of the combined service needs to be reduced by 28.4% ( 595,626) over the next four financial years that will give a target net base budget of 1,501,648 for 2014/ As this is a full restructure, it is proposed that the staff structure be reduced by 28.4% in year 1 in order to minimise repeated disruption to staff and also to enable the new team to start from a clear structural perspective. It is proposed that other revenue budgets will reduce in accordance with the following profile: 10%, 5%, 5% and 8.4%. 33 A headline draft structure for a single integrated team is provided in Appendix 2, although full consultation with staff will be needed on the new structure and therefore amendments to this may be needed during implementation. In addition, the marketing and town and city centre management posts identified are subject to a separate report. Delivery Options 34 This section of the report considers how the above functions should be delivered: either through a team merged within DCC or a team within a wholly owned arms length company. Appendix 3 provides advice from HR, legal and finance, which should be considered as part of this analysis. Delivery Issues 35 In terms of delivery options there is no question that a single integrated team needs to be created. However, there are five structural models to consider in terms of how this operates:

9 Table 4: Delivery Options No Model Advantages Disadvantages Proposal 1 DCC functions transferred into and delivered by CDDC as is. No change to CDDC Perception of being private sector Brand not relevant to new functions Significant TUPE issues Financial issues No legal need for company to deliver core functions proposed Discount 2 DCC functions transferred into and delivered by CDDC, but rebranded to reflect function of new single team All staff buyinto new brand relevant to future functions. Perception of being private sector Significant TUPE issues Financial issues No legal need for company to deliver core functions proposed Discount 3 DCC and CDDC functions transferred into a new company 4 CDDC functions move into DCC, but clearly branded as a business focused team New start for all staff Financial savings TUPE for 11 rather than 40 staff Clear management and HR position Opportunity for business focused staff to assist in shaping DCC from within Clear branding to ensure it feels private sector Costly, time consuming and unnecessary Value of company lost? Pension costs of 11 CDDC contracted staff Clear delegations and branding essential to ensure the team feels private sector and can respond to business needs quickly and effectively Discount Consider

10 5 CDDC functions transferred into DCC, clearly branded as a business focused team, but arms length company retained to maximise any future trading opportunities Financial savings overall Clear brand TUPE for 11 rather than 40 staff Clear management and HR position Opportunity for business focused staff to shape DCC from within Flexibility retained to respond to government agenda Opportunity to do other things/act as a trading arm Pension costs of 11 CDDC contracted staff Clear delegations and branding essential to ensure the team feels private and can respond to business need quickly and effectively Recommend Other issues 36 As currently constituted, CDDC does not have any greater freedom to carry out activities or provide services than the County Council. As the Company is wholly owned and controlled by the local authority, it is subject to the same controls as the authority itself in terms of State Aid, EU Procurement rules, FOI, etc. 37 It seems that the only real advantage of having a company comes down to a matter of perception - i.e. perceived independence from the County Council giving greater credibility to business. In practice this is almost impossible to quantify, and therefore it is hard to judge how important it really is. Informal consultation to date is very mixed on this point. 38 Being part of the Council can be equally important, as businesses are often looking for someone who knows how the Council works and can guide them quickly through the structures/processes. 39 Despite having a wide-ranging Memorandum of Association, CDDC does not appear to have any greater freedom to carry out activities or provide services than the County Council. The key issues are quality of service, single brand and perception.

11 40 In practice, experience suggests that businesses are much more interested in the quality of services provided rather than the team or structure that provides them. However, important aspects will include: Having a clearly identifiable brand for the Service that reflects its actual activities/undertakings. Whilst historically CDDC has been involved in developing industrial estates, currently, CDDC does not get directly involved in development other than at NETPark, so a business related brand would be more accurate. A well-established mechanism for involvement of the private sector, so the service is accessible and responsive to business needs. This will be fundamental to the new merged team, whether or not it is structured as a company. CDDC has such a structure through the composition of its Board of Directors including its Associate Directorships. By keeping the benefits of the existing CDDC Board, but widening the membership of the advisory members to include SME s and a bank but retaining the same DCC membership, this grouping would offer significant potential to lead the future of the business economy. Further developed mechanisms for wider engagement of the private sector would also be beneficial. Having a single point of access to services to ensure that they are easily and clearly accessible will be fundamental, this involves a single phone number, a single metaphorical front door to the authority to ensure easy access and that businesses do not spend their time trying to find their way around the authority. Business support staff should undertake this task for businesses and signpost accordingly. Employing staff that are business focused and think and act in a manner that meets the needs of business and drives the County Council on a broader basis to effectively support the needs of business. This is the most important aspect. 41 It is therefore recommended that the business model with the most advantages would be a merged business support team employed by DCC but with new business focused branding and clear delegations and CDDC retained as a trading company. It will be essential to set the single team up to have the characteristics and appearance of a private sector body. Making it happen 42 The transition from current arrangements to the position described above will inevitably take time to become fully operational, although work between the two current teams is ongoing in order to ensure a professional approach with minimal duplication.

12 43 In terms of key milestones, it is expected that the following timescale would be deliverable: Complete TUPE transfer into DCC of CDDC staff - end June 2011 Restructure into a single team end October 2011 Launch of new brand and fully operational February 2012 Recommendations and reasons 44 It is recommended that: (a) (b) (c) (d) (e) (f) County Durham Development Company and Business Services be brought together into one team within with the Economic Development service in the Regeneration and Economic Development service grouping. The functions of business space, start up and general business support, business innovation and growth be agreed as the basis of any activity to be delivered by the new business team. That TUPE consultation commences to transfer CDDC s function and staff into DCC. Delegated authority be approved to the Portfolio Holder and the Corporate Director for Regeneration and Economic Development to negotiate the terms of this organisational restructure. That the reserves of CDDC be retained by the Company to support future delivery of business services activity. The Corporate Director of Regeneration and Economic Development be delegated to sign the joint accord regarding future delivery of business services by Durham County Council. Background Papers Business Services Review Recommendations Report Contacts: Sarah Robson, Head of Economic Development Andy Palmer, Head of Planning, Policy and Performance

13 Appendix 1: Implications Finance Financial issues have been addressed within the report. Staffing Agreement to the recommendations of this report would result in approx 15 staff contracted to CDDC transferring under TUPE into DCC. Thereafter a restructure of the business services team would be implemented. Risk An assessment of risk has been considered throughout the preparation of the various aspects of work that underpin this report. Fundamentally, when considering the various delivery options for a single business services team, the risks from a legal, HR and financial perspective have been explored (see Appendix 3) and the risks to successful implementation have also been considered. It is difficult at this stage to predict future policy direction, but the recommended way forward is considered robust and sufficiently flexible to address the private sector growth agenda, to meet the needs of businesses within the County and to fulfil the functional need identified by the authority. Equality and Diversity None Accommodation Accommodation issues will emerge once staff are under one management structure. These issues will be addressed as proposals develop in more detail. Crime and Disorder None Human Rights None Consultation Consultation with the Board of CDDC has been undertaken and with the some members of the wider business community during September and October of 2010, as noted in the report. Procurement None Disability Discrimination Act None Legal Implications The functions covered by this report can be discharged by the Council in-house or through a company and are addressed within the report.

14 Appendix 2: Draft Staff Structure Durham Business Service Manager x 1 Admin Support x 1 post Marketing Officer x1 Marketing Assistant x1 Web Support x 1 City Centre Coordinator x 1 Nightsafe Support Officer x 1 Business Space Team Leader x 1 Business Support Team Leader x 1 Business Innovation Team Leader x 1 Operations Netpark Business & Incubation Centres X 25 posts New Business Property x 4 posts Enterprise Promotion Commissioning/ Advocacy X 2 posts Business Development NW, E and S X 4 posts SAMP/ Inward Investment x 2 posts Innvoation Sector Support NETPark NET X 3 posts Diagram 1: draft staff structure - which may be subject to further minor amendments. NB Posts in Italics subject to separate report

15 Appendix 3: HR, legal and financial analysis of delivery options Financial Analysis Within the current economic climate, consideration has been given to the lowest cost option in terms of delivering the services described above, ie which structural option offers the best value for money, a business services team within the authority or an arms length company. Analysis undertaken within Resources has demonstrated that there are the following financial issues: Table 3: Financial Advantages and Disadvantages A B 1 IN-HOUSE COMPANY 2 Financial Advantages Financial Advantages 3 Savings in staffing structure of 288k pa Savings in staffing structure of 288k pa 4 CDDC reserves of 1.5m* could be used to support Economic Development services Savings of 40k in lower pension contributions Any annual surplus currently made by Reserves can be spent on CDDC CDDC is added to their reserves. This activities without having to have DCC could also be used to support the Economic CMT approval. 5 Development service if in-house. Annual savings re Audit Fee and Board 6 Meetings of 10k pa Potential savings through DCC contracts and economies of scale on: Insurances / 7 Telephones / Printing / Advertising etc If brought in-house, the base budget would be reduced by 402k to offset the 'loss' of income in Resources for the Support Service recharge ( 152k) and the NETPark lease ( 250k). This means that the forecast savings achieved of 373k equals 28.2% of 8 revised base budget 9 Financial Disadvantages Financial Disadvantages 10 Additional pension costs of approx 40k if CDDC staff transferred to LG pension scheme Additional costs of 10k pa re Audit fees and board Meetings By 'paying' cash to DCC for Support Services and the NETPark lease, the base budget is inflated by 402k and savings cannot be realised on this amount. This means that the forecast savings achieved of 403k equals only % of the base budget. *CDDC has built up reserves that could be used to support business services for a short time, whether that be through a company structure or through an in house team.

16 Legal Advice Advice from Legal Services is that the Council can discharge the functions covered by this report in-house or through a company. The Local Government Act 2000 extended the powers available to the Council to incur expenditure in the best interests of the residents of the county. The Localism Bill is expected to extend further the powers of Councils to take such action as they see fit in the absence of specific statutory restrictions. Whilst the use of a company will still be necessary if a Council wishes to trade, the activities described in this report do not involve trading. Therefore, in terms of legal analysis, the Council has as many legal powers to provide space and support to business as a company would have. However, in terms of the perception of the business community and their preference in terms of dealing with staff, there is a debate as to whether a company structure might have advantages. If those advantages do not exist then there is a lot to say for conducting operations in-house and avoiding the need to run a separate legal entity with the additional accounting and legal work involved. HR Analysis With either proposal there will be TUPE implications, either if approx 40 DCC staff transfer to CDDC or approx 15 of the 22 CDDC staff come into DCC (the balance are seconded to CDDC from DCC). Given that the majority of staff are employed by DCC, it would be less disruptive for CDDC staff to TUPE into DCC. During TUPE consultation, one of the measures that will need to be consulted upon is the proposed restructure following the date of transfer, as it is identified a saving of 28.4% needs to be achieved in Year 1. The reason for the restructure is not connected to the TUPE transfer but rather justified due to an ETO (Economic, Technical or Organisational) reason. As highlighted in the financial analysis, there are additional pension costs associated if CDDC is brought in-house, however ultimately it is a business decision based on the most cost effective option.