Foreign Direct Investment Project Report

Transcription

1 Foreign Direct Investment Project Report 1

2 Foreign Direct Investment Report for the Coast to Capital Local Enterprise Partnership Board Prepared for: The Coast to Capital Local Enterprise Partnership Board By: Bruce Nairne Scott Marshall The views expressed in this report are the views of the authors and do not necessarily reflect those of the Coast to Capital LEP Board 2

3 Executive Summary This project set out to develop sector propositions and an area profile that could be used by UKTI to market the Coast to Capital Local Enterprise Partnership (LEP) to potential overseas investors as part of the new UK First approach to Foreign Direct Investment (FDI). It also sought to build capacity amongst partners to respond effectively to and secure FDI enquiries. Foreign Direct Investment (FDI) is important to the UK economy and is a key strand of the national Government s aim to promote international trade as a means to securing sustainable economic growth. In 2009, a total stock of 652 billion of FDI was invested in the UK, whilst new FDI in 2009 alone supported 53,000 jobs. The UK First approach to FDI means that the Coast to Capital LEP will have to compete on a national stage to secure overseas investment through UKTI. Compared with many areas, it has limited land, is an expensive area to live and work, and has no significant grants and incentives that it can use to attract investors. It must, therefore be focused in its approach; and understand and clearly articulate its main assets to investors. This project has identified a number of key priority sectors to focus on for FDI related activities. These are: Health and Life Sciences; Advanced Engineering; Digital Media; Financial and Business Services; and Environmental Technologies. These are sectors that reflect UKTI priorities for FDI and which through data, documentary evidence and stakeholder consultation, are broadly considered to be the those where the Coast to Capital LEP has distinct strengths in terms of research expertise, established businesses and infrastructure to support sector development. These sectors may not deliver the largest number of jobs to the Coast to Capital LEP, but they represent high value employment opportunities, which an aspirational approach to inward investment should pursue. The challenge for Coast to Capital LEP will be to position itself strongly compared with other parts of the country by focusing on the distinctive offer. This is more obvious in some cases than in others. For example, there is a well-recognised Digital Media cluster, particularly based around Brighton & Hove, which is relatively easy to identify and articulate. The distinctiveness of Advanced Manufacturing is more difficult to capture, because of its diverse nature. Nonetheless, it remains a key sector, particularly for West Sussex, which has a significant number of high profile internationally recognised businesses across a range of sub-sectors. The focus on a small range of sectors does not preclude other FDI activity, but it does provide a focus for the Coast to Capital LEP and its partners to be pro-active in its approach to FDI. However, a sector approach is insufficient in itself there is also a need to promote the Coast to Capital LEP s physical and human capital assets. Although it is a diverse area, with densely populated urban centres and sparsely populated rural areas, there is a common thread to the Coast to Capital LEPs assets that cuts across all its sub-areas and the difference between them is often relative. Its location and connectivity, in particular to London and international markets via Gatwick Airport and the Coast to Capital LEP s ports, are genuine assets for investors. Crawley and the Gatwick Diamond and Croydon may be able to claim the most advantageous connections, but they still apply to most other parts of the Coast to Capital LEP, albeit on a more diluted level. 3

4 Lifestyle factors are also key local assets. These include the rural tranquility in the South Downs National Park; the nightlife, bars and restaurants in urban centres like Brighton & Hove; watersports and leisure activities in the coastal areas; the wide range of both participant and spectator sports and recreation activities across the whole of the Coast to Capital LEP; and its heritage and cultural assets, including internationally a renowned opera house; theatres and festivals; a Royal Palace, castles, and country homes and gardens. The talents of its workforce are also key strength. Around 300,000 of its residents hold a degree or equivalent qualification; it has three well respected universities with around 40,000 students; and around 130,000 of higher skilled residents travel out of the Coast to Capital LEP to work in parts of London outside Croydon. Both the University of Sussex and the University of Brighton have a range of specialist research institutes and there is an internationally recognized business management school, Roffey Park, in Horsham. Its educational provision is strong, with a number of well-respected private schools, a good range of Further Education Colleges; and good state sector education, where achievement levels are generally higher than the national average. Recommendation 1 Coast to Capital LEP and its partners should take an active approach to promoting the identified priority sectors, based around the strong brands that it already has, particularly its high profile cities and towns, such as Brighton & Hove, Croydon and Crawley & Gatwick Diamond, in line with UKTI s positioning strategy. However, it is important to consider the likely scale of FDI activity through UKTI. FDI is one part of inward investment activity and not all FDI enquiries or investments come through the UKTI pipeline. In the period 2006/07, the Coast to Capital LEP accounted for 1.5% of all UKTI projects (more than half of which were in the Gatwick Diamond), and actual new investments delivered a total of just over 700 jobs over a five year period. By contrast expansion and acquisition projects delivered a much greater number of new (2,850) and safeguarded jobs (7.700). The pursuit of new investment should not be at the expense of protecting and growing existing investments, where impact may well be more significant. UKTI has an investor development programme, which the Coast to Capital LEP should engage with to ensure that everything is being done to protect and expand existing investments. Recommendation 2 Coast to Capital LEP and its partners should establish a clear programme of investor development activity that builds on, rather than duplicates, work that is being done by UKTI, BIS Local and other agencies. Around 170,000 people live in one Coast to Capital LEP district or borough, but work in another, and it is inconceivable that many small businesses outside Crawley, for example, are not affected by the purchasing decisions of businesses on the Manor Royal estate. In short, investment in one part of the Coast to Capital LEP can deliver benefits to other parts. However, LEP wide approaches to FDI and wider inward investment will only be effective if they are delivered in a way that supports local authority and Area Partnership activity. Apart from data from UKTI, there currently seems to be a lack of information about FDI and other inward investment activity and there is often an ad hoc approach to responding to enquiries and proactively seeking new investment. There is scope to improve co-ordination and co-operation between partners, without diminishing what might in some cases be healthy competition. There is also scope to develop a more intelligence-led approach to FDI activity than currently exists. The Coast to Capital LEP can identify 4

5 areas where joint propositions can be developed; help to share intelligence between partners; and facilitate better cross border support to identify and land investments. But this will need resourcing. There is a lack of intelligence about inward investment enquiries and lands across the Coast to Capital LEP, which makes an intelligence led approach to FDI and broader inward investment difficult. There also seems to be limited knowledge about what impact an investment in one area may have on other areas, in terms of employment and supply chains, for example. Both these need to be better understood to support more collaborative approaches to inward investment. The consultation process that has been undertaken for this project has brought partners together and created a fresh understanding of both the limitations and opportunities of collaborating more closely on FDI and inward investment activities. Whilst it is important to be realistic and to recognize that each area has its own distinctiveness, the momentum that has been established as part of this process should not be lost. Recommendation 3 Coast to Capital LEP and its partners should invest in a central resource to facilitate better partnership working and intelligence sharing on FDI related activities, based on the response mechanism protocol. 5

6 Table of Contents Executive Summary Page No. 1. Introduction Rationale for the Project Methodology 8 2. The Significance of FDI Activity Coast to Capital LEP Key Assets Location & Connectivity Lifestyle Workforce Skills Sector Strengths and Propositions Approach to Sector Strengths Local Concentrations Priority Sectors Sector Propositions Developing a Response Mechanism Conclusions and Policy Implications 29 Annexes I) Coast to Capital LEP Key Assets III) Local Concentrations Data Tables 6

7 1. Introduction 1.1 Rationale for the project In December 2011, this is regeneration ltd was commissioned by West Sussex County Council, on behalf of the Coast to Capital Local Enterprise Partnership (LEP), to develop two strands of work: a) A strong and convincing Foreign Direct Investment [FDI] offer and sector propositions for UKTI to market; and b) To build capacity among Coast to Capital partners to respond effectively in order to land FDI leads. This project was one of a number commissioned for the Coast to Capital LEP during 2011/12 through the LEP Capacity Fund and the LEP Start-up Fund, in order to inform the approach and delivery of its internationalisation and enterprise priorities. Other related work included setting new economic baselines and targets, an investigation into international trade opportunities within the LEP; and investigating the current and required provision of enterprise education. The driver for this project was the new working arrangements for attracting and securing Foreign Direct Investment into the United Kingdom. The abolition of the Regional Development Agencies has resulted in a UK First approach to FDI, with UK Trade and Investment (UKTI) leading to a national investment service aimed at: Delivering measurable improvement in the business performance of UKTI s international trade customers, with an emphasis on innovative and R&D active firms; Increasing the contribution of foreign direct investment to knowledge intensive economic activity in the UK, including R&D; and Delivering a measurable improvement in the reputation of the UK in leading overseas markets as the international business partner of choice. This UK First approach means that UKTI and its partner, PA Consulting, need to develop a strong network of relationships that can provide local intelligence in order to promote the UK s offer overseas. Part of this has involved the collating comparable evidence of sector and non-sector capabilities from different local areas. This project is known as Surfacing the National Offer. UKTI has identified seventeen data points, the combination of which is aimed at providing an objective assessment of the relative strengths of each area within the UK. The data points include: workforce, property, incentives, R&D & innovation, access to market, telecommunications & ICT infrastructure, industry presence, living environment. The UK First approach and work is currently in progress. A further dimension to UKTI s UK First approach has been to agree Memoranda of Understanding (MoUs) with Local Enterprise Partnerships. The MoU that has been agreed with the Coast to Capital LEP clarifies how the two parties will work together to identify and promote key local strengths; share information on FDI leads and investor development relationships; and land new investments. This project is a key element of this new arrangement. It identifies Coast to Capital s main sector strengths for attracting inward investors; key area assets; and it provides a framework for developing a co-ordinated approach to identifying and securing new investment into the Coast to Capital LEP. 7

8 1.2 Methodology The approach adopted to developing the sector propositions, area profiles and response mechanisms took account of both the requirements set out by UKTI and the perceived needs that were identified by Area Partnership, local authority and Coast to Capital representatives. Our approach involved the following main stages: i) Initial Desk research The aim of this stage of the project was to identify potential sector strengths that would inform the subsequent consultations and to consider FDI response approaches that have been adopted in other parts of the country. This involved a quantitative assessment of the sector strengths within the Coast to Capital LEP and its five Area Partnerships (Brighton & Hove, Croydon, Gatwick Diamond, Coastal West Sussex and Rural West Sussex). It involved analysing employment data from the Annual Business Inquiry and the Business Register and Employment Survey to identify local business and employment concentrations by sector, using two-digit SIC codes. For employment concentrations, each sector had at least 500 employees in each Area Partnership (1,000 in the whole Coast to Capital LEP) and a local quotient of at least 1.2 to be classified as a local concentration. For the business concentrations, there needed to be a minimum of 30 companies in the Area Partnerships (50 across the whole Coast to Capital LEP). The outputs delivered from this stage of the project were a Local Concentrations paper and FDI Response Mechanisms paper. ii) Stakeholder Consultation Following the desk research, a consultation exercise was completed with the five Area Partnerships and a total of nineteen stakeholders and businesses. The aims of this consultation were to: Identify the main area assets in the Coast to Capital LEP and in its constituent parts from an FDI perspective; Test and refine the main sector strengths and how to promote these; Review current approaches to responding to FDI enquiries and to consider how these may be more effectively delivered; Review the approach to FDI from an investor perspective; and Identify key components of FDI documentation. iii) Response Mechanism Workshop Stakeholders who had been involved in the consultation and representatives who attended the UKTI workshop were invited to participate in a half-day workshop to explore ways in which partners could work effectively together to identify and secure new investments across the Coast to Capital LEP. Priority sectors were agreed with partners attending this meeting and were refined at a subsequent project steering group meeting. The key output from this stakeholder workshop was an FDI Response Mechanism Protocol agreed with the project steering group and workshop attendees. iv) Desk Research and Proposition Development A further, more in depth research exercise was undertaken to develop an Area Assets paper and detailed sector propositions. 8

9 In developing the sector propositions, it was important to focus on the area s key assets and strengths. A purely quantitative approach may have resulted in alternative sectors being identified, but these would not have been appropriate for an active approach to attracting inward investment. A combination of local concentrations (based on location quotients); consultation with stakeholders; identification of university specialisms; supporting physical and human capital assets, and market leading businesses located in the Coast to Capital LEP were used to determine which sectors to prioritise. Consequently five sector propositions were developed and agreed in consultation with the steering group: Health and Life Sciences; Digital Media; Advanced Engineering; Financial and Business Services; and Environmental Technologies. The sector propositions were tested by sector specialist to check their validity and content and to ensure buy-in to assist the LEP in securing future FDI opportunities. It is recognised that most LEPs are likely to identify a number of these sectors as being strengths in their own areas, but the aim of these propositions is to set out what the key local components of each sector was specifically for the Coast to Capital LEP. This report summarises the project and includes all the project outputs as appendices. The remainder of this report is divided into the following sections: Section 2 considers the approach to working with UKTI and handling FDI enquiries. Section 3 explores the main assets within the Coast to Capital LEP and the Area Partnerships. Section 4 focuses on what the main sector strengths are within the Coast to Capital LEP from an FDI perspective and summarises the main features of the five sector propositions alongside the rationale for their selection. Section 5 considers the issues that underpin the development of the response mechanisms protocol. Section 6 considers the implications of the findings from the project for the Coast to Capital Board. 9

10 2. The Significance of FDI Activity The new approach to handling FDI enquiries presents fresh challenges to all local areas. The abolition of the Regional Development Agencies removes an overtly spatial dimension to FDI, with the responsibility for it passing to UKTI, which has a remit to take a UK First approach. This means that all local areas need to consider their assets in relation to other parts of the UK, particularly since UKTI will be aiming to develop an objective assessment of each area, based on a range of seventeen selection factors, as part of their Surfacing the National Offer project. The changes in organisational structures mean that areas are at different stages in developing their FDI, or indeed inward investment infrastructure. For example, both East Sussex and Kent have their own dedicated Inward Investment resources (Locate in Kent and Locate in East Sussex), whilst there are large teams of inward investment staff in a number of northern cities and partnership locations. The Coast to Capital LEP is not in this position. Currently, there is no clear dedicated resource at LEP level and evidence from consultations that informed this study suggest that inward investment enquiries are largely handled on an ad hoc basis. There are few published local protocols; enquiries come from a range of sources; and there does not appear to be clarity about which organisations should be involved in FDI or other inward investment responses. However, there is an increasing interest in inward investment activity. At national level, the Government sees the development of international trade as central to the UK s post-recession economy 1. By the end of 2009, a stock of over 652 billion of FDI was invested in Britain, with over half of this coming from other EU Member states. At sub-national level, the Coast to Capital LEP Board has identified internationalisation as one of its two priorities around which it aims to have a ruthless focus ; and at sub-lep level, a number of local authorities, including Horsham District Council, Brighton & Hove City Council and Croydon Borough Council are all developing their own approaches to attracting and securing inward investment. There seem to be risks that FDI, in particular, and Inward Investment in general, become issues that have strong currency at a given time and that all areas follow each other in developing strategies that result in unnecessary duplication and competition, when a more collaborative approach may be beneficial. Whilst the main driver behind the development of a fresh approach to FDI by the Coast to Capital LEP seems to come from its emerging partnership with UKTI, it is important to consider what this may mean in terms of volume, particularly in relation to other activities. FDI is a component of wider inward investment activity and, from the consultation with stakeholders and partners, UKTI driven or engaged FDI activity is only one component of FDI itself. Furthermore, the Coast to Capital LEP forms only a very small part of UKTI s national activity. The table below shows the volume of recorded UKTI FDI activity for the Coast to Capital LEP in the period 2006/7 to 2010/11 2. Total 2010/ / / / /07 Projects New Jobs 3, Source: UKTI/CRM Of the 115 projects, fewer than half (53) was genuine new investments, leading to a total of 706 new jobs in the Coast to Capital LEP over a five-year period. This equates to an average of ten 1 Trade and Investment for Growth BIS Note: This is excludes the 10,910 jobs safeguarded by UKTI activity 10

11 new investments and 141 new jobs as a result of new investments each year across the whole of the Coast to Capital LEP. Furthermore, Coast to Capital is not a significant location for UKTI FDI activity. Over the period 2006/07 to 2010/11, only 1.5% of all UKTI FDI projects were in the Coast to Capital LEP and more than half of these (61) were in the Gatwick Diamond. Total Projects Projects Annual Average Total New Jobs Annual Average Coastal West Sussex Gatwick Diamond Brighton & Hove Croydon Rural West Sussex Total Source: UKTI CRM Although the volume of projects and the number of new jobs that have been created by UKTI FDI activity between 2006/7 and 2010/11 is not modest, only a small proportion of this is accounted for by new investments. Significantly more jobs were created (2,850) and safeguarded (7,700) through acquisitions and expansions. This is important in considering the balance of and approach to FDI activity. Actual new investments through UKTI are only a small component FDI activity: business retention, expansion and acquisition are far more significant. The issue of volume was discussed during the stakeholder and partner consultation to inform this report. However, it is not clear what a reasonable level of activity might be. Does the volume of FDI activity in the Coast to Capital LEP reflect the assets and incentives that it has or is the Coast to Capital LEP under-performing in terms of UKTI related FDI activity because the mechanisms are not in place? There is a further dimension to this. It is quite possible that in areas that are dominated by small businesses (which is the case for much of the Coast to Capital LEP) there may be a number of new investments that occur under the radar. Currently there is a lack of co-ordinated local intelligence about FDI enquiries, other than that which is provided by UKTI. This also appears to apply to wider inward investment activity, which makes it difficult to develop an intelligence-led approach to attracting new businesses to the Coast to Capital LEP. From the data that exists and from the consultations that have been undertaken to inform this report, the volume of UKTI generated FDI activity is likely to be fairly small and that the most effective approach to FDI may be to have a greater focus on investor development activity. This does not negate the importance of UKTI as a key partner to the Coast to Capital Board and its partners, nor does it mean that Coast to Capital partners should not be ready to respond to potential investors promptly and professionally. However, it does suggest that the way that the Coast to Capital Board frames its approach to FDI should be only partly dependent on the potential pipeline of UKTI leads. This leads to a question as to whether there should be a Coast to Capital-wide approach to inward investment, of which FDI activity could be a component part. A broader approach such as this may merit resource investment, since the volume of activity could be expected to be much greater. However, a centralised Coast to Capital approach to FDI would need to overcome what appears to be a fairly strong desire for subsidiarity, with its inherent risks of duplication and competition. 11

12 3. Coast to Capital LEP Assets A wide range of factors influence businesses decisions as to where to invest. Some businesses have a clear idea of the city or town where they would like to invest, whilst others may make decisions based on pre-set criteria. Decision factors that have been identified by UKTI include the quality of the available workforce; the appropriateness and costs of the business accommodation; incentives and grants that are available to investors; the nature of the R&D and innovation in a location; access to markets; telecommunications and ICT infrastructure; the presence of other related businesses or those in their supply chain; and softer liveability factors, such as housing, education provision and other sports, cultural and recreation facilities. This section considers the main assets of the Coast to Capital LEP and its component parts that are likely to be attractive to inward investors, drawing on evidence contained within the Area Assets and Local Concentrations papers. Coast to Capital does not benefit from significant financial grants and incentives to attract new investors. Compared with many parts of the country, it has limited land and business accommodation and its residential property prices are high. Given that it does not have many of the obvious financial advantages, partners need to be clear about its key assets and strengths to secure future investment. Although the Coast to Capital LEP is made up of disparate parts, from the London fringe to rural villages; from coastal towns to corporate urban centres, there is a common thread of assets that stakeholders identified as being key. These largely relate to their location and connectivity; the lifestyle offer (including the natural environment, education provision and cultural/recreational offer); and the skills of local residents. These are considered in more detail below. 3.1 Location and Connectivity The A23/M23 spine from Brighton & Hove, through Gatwick Airport, to Croydon has excellent links to national and international markets. It is difficult to over-estimate the importance of Gatwick Airport to the Coast to Capital economy and the access that this gives businesses to international markets. Airlines fly to more destinations from Gatwick Airport than they do from Heathrow, with daily flights to significant business locations, such as Amsterdam, Barcelona, Berlin, Budapest, Copenhagen, Dubai, Dublin, Frankfurt, Geneva, Hamburg, Helsinki, Kiev, Lisbon, Madrid, Montreal, Munich, Oslo, Paris, Rome, Milan, Vienna and Zurich. Gatwick Airport has plans to increase passenger numbers to 40 million per annum and cargo to around 130m tonnes by 2020 alongside an increase in the routes that airlines use would provide additional business connectivity advantages to the Coast to Capital LEP. Although Crawley and the Gatwick Diamond can claim the best connectivity to Gatwick Airport and Croydon is the clear gateway to London, most parts of the Coast to Capital LEP have good access to the area s transport hubs. In the west of the Coast to Capital LEP, Chichester, in particular, has good connections with Portsmouth Harbour, and Southampton Docks and Airport, whilst in the east, Newhaven provides good direct links to Dieppe, whilst Shoreham Harbour is a busy and growing port from which 1.8m tonnes of cargo is transported annually to countries around the world. Equally, despite obvious challenges to the contrary, the road connections to and from many of Coast to Capital s urban areas are considered an asset. The A23/M23 provides fast connections to 12

13 the M25 and then towards the Midlands, the North and the South West of England, whilst beyond Chichester, the M27 provides relatively fast links to Portsmouth and Southampton. Digital connectivity remains a challenge in some parts of the Coast to Capital LEP and will need to be improved to attract many potential investors. There remain a number of broadband notspots particularly in rural areas, but there are also reportedly poor connections in key commercial centres within the Coast to Capital LEP. However, broadband coverage and speeds are improving. BT has announced the roll out of Next Generation Access (NGA) broadband over the next two years and Virgin Media have upgraded the speeds of their provision to a minimum of 30Mbps in Crawley, Worthing, Lancing and Shoreham by Sea. West Sussex is mostly served in rural areas by Asymmetric Digital Subscriber Lines (ADSL) of up to 8Mbps and, in towns by ADSL2+ (up to 24Mbps) and the aim is to provide access to broadband in all parts by April 2015 and to provide access to superfast broadband (>24Mbps) for 90% of premises by April Lifestyle Investment decisions can be heavily influenced by lifestyle factors, with senior decision makers and their families needing to be confident that they will be able to live in a desirable location with access to good facilities. Liveability is also an important factor in attracting international talent. The Coast to Capital LEP is in one of the most beautiful parts of the United Kingdom. Its urban centres may provide most of the jobs and labour, but it is often its rural and coastal areas that attract people and make them want to stay. The South Downs National Park is the UK s newest national park, covering 1,600 km 2, stretching from Eastbourne to Winchester. It has diverse and inspirational landscapes and breathtaking views; a rich variety of wildlife and habitats; tranquil and unspoilt places; an environment that has been shaped by centuries of farming, but which embraces new enterprise; great opportunities for recreational activities and learning experiences; well-conserved historical features and a rich cultural heritage; and distinctive towns and villages. Chichester Harbour is an Area of Outstanding Natural Beauty (AONB) that has stunning coastal scenery and 5,500 moorings and a rich variety of flora and fauna. It is a Site of Special Scientific Interest, a wetland of international importance, a Special Protection Area for wild birds and a candidate Special Area of Conservation. The Sussex Coast attracts millions of families, adventurers and those who just want to soak in the fresh coastal air. Brighton & Hove, with its marina and pier and seafront entertainment, is sandwiched between two working ports (Newhaven and Shoreham). There are watersports, a pier and family entertainment in Worthing, Bognor Regis and Littlehampton and sandy beaches at Selsey, West Wittering and Bracklesham Bay; whilst Chichester Marina s facilities have earned it the Yacht Harbour Five Gold Anchors Award. The white cliffs of Beachy Head and the Seven Sisters provide stunning views over the English Channel, leading down to the meandering river at Cuckmere Haven. Its schools, colleges and universities provide a rich supply of talented labour and excellent education provision for young people. There are around 500 primary schools, nearly 200 secondary schools, over 100 schools and colleges providing post-16 education; and 3 universities (Sussex, Brighton and Chichester) located in the Coast to Capital LEP. These include independent, voluntary aided schools, community schools; faith schools; and sponsored Academies. GCSE attainment in Croydon is above the national average (58.2%). with 61% of 15 year olds achieving five A*-C grades, including English and Maths); whilst in West Sussex (58.6%) they are similar to the national average. Only in Brighton & Hove (52.8%) are they below the national average. 13

14 Coast to Capital has a strong independent school sector that includes; Whitgift School; Trinity School (both Croydon); Brighton College; Roedean School (Brighton & Hove); Ardingly College; Christ s Hospital; Hurstpierpoint College and Worth School (Gatwick Diamond); and Lancing College (Coastal West Sussex). There are six general Further Education colleges providing a broad range of vocational learning programmes for young people aged 14+, employees and for general adult learners. These are: Chichester College, Northbrook College; Sussex Downs College; City College, Brighton & Hove; Central Sussex College; East Surrey College; and Croydon College. In addition, Plumpton College is a specialist college for the land-based industries. Brighton & Hove has Europe s largest marina with over 1500 berths, whilst Chichester also has a fully serviced marina and boatyard. The seafront, stretching from Newhaven to Chichester provides a range of waterside activities, including yachting, waterboarding, windsurfing and waterskiing. The Coast to Capital LEP has a full calendar of cultural events. The Brighton Festival, held in May, is the largest Arts Festival in England, attracting high profile performance acts and speakers from around the world each year. The city also hosts a Science Festival, a Comedy Festival, and a Digital Festival and is the destination of the famous annual London to Brighton Veteran Car Run. Chichester also has its own well established arts festival, whilst the Coast to Capital LEP is home to internationally recognised performance venues, such as Glyndebourne Opera House, the Brighton Dome and the Chichester Festival Theatre. The area s assets include castles, a Royal Palace and stately homes, including castles in Lewes, Arundel and Amberley; Brighton Pavilion, Fishbourne Palace; Bignor Roman Villa and Petworth House; and there are country gardens at Wakehurst Place; West Dean; and Nymans Gardens. There are racecourses at Goodwood, Fontwell Park; Lingfield Park; Brighton; Plumpton, whilst the famous Epsom Derby is just outside the Coast to Capital LEP. As well as horseracing, the area benefits from international show jumping at Hickstead and polo at Cowdray Park, whilst the Sussex Equestrian Centre at Pulborough provides equestrian events and riding lessons. Crystal Palace, Brighton & Hove Albion and Crawley Town play high level professional football (soccer) throughout the winter. Sussex County Cricket Club play professional cricket in Hove and at other grounds in the area; whilst the Brit Oval and Rose Bowl in Southampton, where England host Test and one day international matches every summer are in close proximity. There are golf courses scattered throughout the Coast to Capital LEP; the Brighton Marathon has become an established part of the marathon calendar and there is a National Sports Centre, with athletics, swimming, tennis and squash at Crystal Palace; outstanding sports facilities, including K2, at Crawley; and Goodwood hosts the annual Festival of Speed. 3.3 Workforce Skills The three universities (Sussex, Brighton and Chichester) have around 40,000 students, including more than 8,000 on postgraduate programmes, drawn from more than 120 countries from around the world. There are three other major universities close by: Surrey University and the Universities of Portsmouth and Southampton, which combined have more than 60,000 students on undergraduate and postgraduate programmes. The Coast to Capital LEP has a well-qualified resident population with 300,000 (more than a quarter) working age residents holding a degree or equivalent qualification: Number and % of Working Age Residents with Degrees 14

15 Number percent Coast to Capital 299, Croydon 70, Brighton & Hove 79, Coastal West Sussex 40, Crawley Gatwick Diamond 108, Rural West Sussex 54, Great Britain 8,702, Source: Annual Population Survey (Jan-Dec 2010) The largest number of graduates live in the Gatwick Diamond area, but the greatest concentrations and are in the main urban centres of Croydon and Brighton & Hove. A summary of main urban centres in the Coast to Capital LEP is provided below: Croydon Croydon is London s third largest London Borough and it is a major commercial and retail centre. It is just 15 minutes away from both Central London and Gatwick Airport by train. There is a 450m infrastructure investment programme, with five million sq. ft of development proposed. There are currently around 230,000 working age residents, around 70,000 of whom hold a degree level qualification. It has around 13,000 businesses employing approximately 130,000 people, including major employers Mott MacDonald, Royal Sun Alliance and Zurich Insurance. Crawley and Gatwick Diamond Crawley is Gatwick Airport s closest commercial centre and is part of the Gatwick Diamond, along with Horsham, Burgess Hill, Haywards Health, East Grinstead, Reigate, Redhill, Leatherhead and Dorking, There are 35,000 businesses employing around 320,000 people located in the Gatwick Diamond, including national and regional headquarters of major blue chip companies, including Virgin Atlantic, Varian Medical Systems, Grant Thornton, CGG Veritas, Thales UK, Doosan Babcock Energy, Pasta Reale, Vent Axia, Elekta Oncology Systems, Siemens, and Boeing Training and Flight Services. It is around half an hour from both London and Brighton. There are major hotels serving the airport and a wide range of businesses providing airport support services. The Gatwick Diamond has a resident population of more than 400,000 people, including 110,000 with a degree or equivalent qualification. Crawley is home to the Manor Royal business district, the single biggest business park in the Gatwick Diamond. Just two miles from Gatwick Airport, mainline rail stations and major motorway networks, the business park has become the centre for a diverse range of business activities with 500 firms employing 30,000 people. Brighton & Hove Brighton & Hove is a major visitor destination; home to two major universities (Sussex and Brighton) with 35,000 students and Europe s largest Marina. It is an internationally recognised cultural centre, with year round events, including the largest Arts Festival in England. The city is around 30 minutes from Gatwick and less than an hour from Central London and it has become recognised as one of the UK s super cities, with its focus on innovation and creativity, particularly in relation to digital technology. It has around 180,000 working age residents, nearly 70,000 of whom hold a degree or equivalent qualification, making it one of the most highly educated urban centres in England. There are around 17,000 businesses employing 150,000 in Brighton & Hove and Lewes, including major employers like American Express. However, the city is noted for its high levels of entrepreneurs and start up businesses, many of which have been started by graduates from the local universities. Worthing Worthing is at the centre of the Coastal West Sussex area that lies between Brighton & Hove and Chichester and which includes Bognor Regis, Shoreham and Littlehampton. It is an attractive 15

16 seaside visitor destination, particularly for families. Coastal West Sussex has around 250,000 working age residents, more than 40,000 of whom have a degree or equivalent qualification. There are 19,000 businesses employing 150,000 people, including high tech engineering businesses; major tourism businesses and a growing creative industries presence, reflecting its close proximity to both Brighton & Hove and Chichester. Shoreham Port is a thriving commercial port and a major route for transporting cargo to and from locations around the world, whilst Shoreham (Brighton City) Airport is the oldest licensed airfield in the UK, providing scheduled flights to northern France and the Channel Islands. Chichester Chichester is the administrative centre of West Sussex and is a high value tourism destination, with the well respected Festival Theatre, Pallant House Art Gallery, an historic city centre and cathedral. It has a high quality leisure and entertainment, including yachting in Chichester Harbour, racing at Goodwood and Fontwell and, not far outside the city, polo at Cowdray Park. It is located close to Portsmouth Harbour and Southampton Docks and Airport and has around 65,000 working age residents, 12,000 of whom hold a degree or equivalent qualification. There are around 6,500 business employing around 50,000 people, including high tech businesses, such as Rolls Royce and the University of Chichester provides degree and postgraduate programmes across a wide range of disciplines at both its Chichester and Bognor Regis campuses. 16

17 4. Sector Strengths 4.1 Approaches to Sector Strengths Our approach to identifying priority sectors for FDI involved a three stage process. Firstly, a desk exercise established the main employment and business concentrations in each Area Partnership. A detailed consultation exercise was then completed to identify what the Coast to Capital s sector strengths were perceived to be and a more detailed analysis into the characteristics of a small number of sectors was then undertaken. The project steering group discussed the possibility of developing a matrix that would show the sectors that were most likely to deliver the highest number of jobs. This is not an easy exercise however. There can be problems with taking a purely quantitative approach to identifying such sectors which could then lead to some odd conclusions that may not be appropriate to informing a proactive approach to inward investment. Emerging employment projections being developed as part of an economic baseline for the Coast to Capital LEP 3 suggests the sectors with the highest number of jobs would be Construction, Public Services and Other Business Services, which together, according to the analysis, could provide 50,000 additional jobs to the Coast to Capital economy between 2010 and Such projections have limitations however, because they are based on historical trends and do not take into account any plans or interventions that attempt to affect future outcomes. The UK economy has been through significant shocks in recent years, so the UK Government is attempting to rebalance the economy away from what it perceives as an over-dependence on consumption and public expenditure and towards production and international trade. It, therefore, seems unlikely that pre-recession trends will continue over the short to medium term. At sub-national level, local authorities, the Coast to Capital LEP and other partners can provide market signals as to what they want their spatial area to be like. Of course these should be based on evidence, but they can also be aspirational. Thirdly, quantitative analysis is often restricted by how data is classified. Standard Industrial Classification codes used in the employment projections do not effectively capture new and emerging sectors such as environmental technologies; the creative industries; and advanced engineering, for example the very sectors that both national and sub-national government organizations see as the main drivers of future economic growth. Such classification challenges can lead to over-claiming, under-claiming and mis-claiming the size, scale and future prospects for sectors that are not easy to define. Lastly, there may not always be a direct relationship between economic growth and the volume of jobs in each sector. The demand for some service sector activities is partly driven by population changes, and arguably jobs will be created in these sectors, whether or not there is an active approach to making them happen. But also, we know for example, that UK manufacturing employment has been in long term decline, but this does not mean that the sector s importance to the UK economy has diminished. Far from it, the pattern for UK manufacturing has been that the higher-end design functions are generally retained, whilst the lower value production elements can be located in lower cost areas. This reduces overall employment, but changes its nature, so that it becomes higher value added with a greater concentration of higher skill activity. The lower employment volume, but higher economic value of activities is what provides the wealth to support employment in other sectors of the economy. 3 Trends Business Research March

18 It is, therefore, more appropriate to take an aspirational approach that is forward-looking, builds on qualitative as well as quantitative evidence of assets, and which focuses on high value added activity. Clearly, there will be potential investments that fall outside the agreed sectors that will be considered on a case by case basis, but the aim of this project was to provide a focus for an active approach to FDI. It is highly likely that most LEPs will identify similar priority sectors that reflect both national priorities and those that are believed to be the principal drivers of future economic growth. In many cases, Coast to Capital will be in competition with other areas to land investments, so the challenge is to create an evidence-based narrative for each sector that clearly marks out its distinctiveness that will be attractive to potential future investors. 4.2 Local Concentrations In 2010, there were around 1.8m residents living in the Coast to Capital LEP, around 60% of whom were of working age and there were around 720,000 people employed in 79,000 businesses. This is 3.2% of all employees and 2.7% of all businesses in Britain, which in itself suggests that the Coast to Capital LEP, overall, has a larger than average number of employees working in larger businesses. This is contrary to the general perception of the area as being dominated by small and micro-businesses. Nearly one quarter (22%) of businesses are in Other Business Services. Within this sector, there is a particularly high number of businesses in Business and Management Consultancy Services (5,000) and Architectural and Engineering Activities (2,500). Other sectors where there is a high volume of businesses include Construction (10%) and Retail (11%), but there tend to be high volume of businesses in these three sectors in most economies. In terms of employment, a higher proportion of people are employed in Other Business Services (14%) than in any other sector, with Industrial Cleaning (19,000) and Labour Recruitment 4 (21,000), being particularly significant sources of employment. Neither of these would generally be considered to be high value added activities. Indeed, they may reflect a fairly high level of casualised labour in the Coast to Capital LEP. Other sectors that employ a large proportion of people are Health & Social Work Activities (13%) and Retail (11%). Again, these are sectors that employ large numbers of people in most economies, so do not really represent local concentrations. The most significant local employment concentration is in Air Transport (LQ ), emphasizing the importance of Gatwick Airport to the Coast to Capital economy. There are around 11,000 employees working in this sector in the LEP area around 12% of all people in Britain who are employed in the sector. Other significant employment concentrations include Insurance and Pension Funding; Manufacture of Medical, Precision and Optical Equipment. There are also strengths in Financial Services activities; Media Related activities and Energy, Gas and Water Supply, Business concentrations are less marked and they tend to reflect the employment concentrations. Manufacture of Radio, Television and Communications Equipment (LQ 2.0) is a local business strength and there is also a concentration in Computer and Related Activities, particularly hardware and software consultancy. 4 This mainly includes people who are registered with employment agencies and who could be working on a casual basis in w wide range of industrial sectors 5 LQ (Location Quotient) is a standard measure that is used to identify local employment concentrations. Where the proportion of employment (or businesses) in a given sector is the same locally as nationally, the LQ is 1.0. An LQ higher than 1.0 shows a higher than average concentration and an LQ below 1.0 shows a lower than average concentration. In the case of the example provided here (LQ 5.0), this represents a very significant local concentration. 18

19 Of course, the Coast to Capital LEP is diverse with specialisms in different spatial areas. Data analysis suggests that each area has the following main concentrations: Croydon (18% of Coast to Capitals employees and 16% of its businesses): Insurance, Pension Funding and Financial Intermediation; Computer and Related Activities; Business Management and Consultancy; Industrial Cleaning; and Public Administration, Brighton & Hove (21% of Coast to Capital s employees and 23% of its businesses): Cultural, Recreational and Creative Industries (including Digital Media); Tourism Related Activities; Insurance and Financial Intermediation; Environmental Services, including electricity, gas and water supply and waste disposal; and Health and Education Services. Gatwick Diamond (44% of Coast to Capital s employees and 44% of its businesses): Air Transport and Related Activities; Manufacture of Medical and Precision Instruments; Insurance and Financial Intermediation; Computer Related Activities; and Business Management and Consultancy Rural West Sussex (21% of Coast to Capital s employees and 26% of its businesses): Real Estate; Wholesale and Motor Vehicle Sales; Insurance and Financial Intermediation Computer Related Activities; Business Management and Consultancy; and Various Manufacturing Activities. Coastal West Sussex (21% of Coast to Capital s employees and 23% of its businesses): Health and Social Work Activities; Various Manufacturing Activities; Retail; Publishing, printing and reproduction of recorded media. This analysis shows the importance of the Gatwick Diamond to the Coast to Capital economy it has not far short of half the Coast to Capital s businesses and half its employees and is the main economic centre of the Coast to Capital LEP. It follows, therefore, that concentrations in the Gatwick Diamond may have a wider significance to the wider LEP area than concentrations elsewhere. 4.3 Priority Sectors Consultation with stakeholders sought to refine the focus of the project by identifying sectors that had a clear local concentration; potential future growth opportunities; a strong presence of internationally recognised companies; a research base to support sector development within the Coast to Capital LEP; and their FDI potential, based on UKTI s priority sectors. The stakeholders identified a long list of sectors that was then slimmed down to the following broad sectors: Health and Life Sciences; Digital Media; Environmental Technologies; Advanced Engineering; and Financial and Business Services. The rationale for identifying each of these sectors is shown in detail below Health and Life Sciences National Significance The UK is a world leader in pharmaceuticals, medical technology and medical biotechnology. There are 150,000 people employed in these sectors and there is more R&D investment in the Pharmaceuticals industry than in any other sector in the UK. There are more than 100,000 19

20 undergraduates reading biological sciences courses and a further 60,000 on postgraduate programmes. The UK has amongst the highest number of PhDs relative to its adult population 6. There is a shift towards more collaborative ventures in the industry, with small, niche biotech businesses driving innovation and discovery and pharmaceutical manufacture being out-sourced to contractors producing more tailored products in relatively low volumes. The proximity of discovery companies and aligned universities to contract manufacturers may be a key factor in investment decisions. The NHS is the world s largest centralised healthcare system and is, therefore, a unique selling point for companies looking to locate in the UK. Its scale means that there is significant scope for clinical trials and for testing products and services for the health care sector - the NHS runs over 200m laboratory tests each year. Local Significance The health and life sciences sector is increasingly important to the Coast to Capital LEP. Historically, it has had strengths in pharmaceuticals, but it is also a market leader in the niche area of Medical Instruments and Devices; has an excellent university research base; and several small biomedical companies attached to the University of Sussex. Although it may not immediately provide a high volume of jobs, the employment that it does provide is often high skilled and the businesses that operate within the sector are export and R&D oriented. Furthermore, there may be a blurring of technologies across a number of sectors (such as digital and environmental), where the Coast to Capital LEP also has strengths. This sector has great potential both reputationally and in terms of delivering high value jobs in the future. Creative healthcare solutions are being driven by a growing and changing demand for healthcare (especially to tackle diseases related to old age); the need to deliver these more costeffectively within an increasingly competitive global market; the application of digital technologies; and the emergence of inter-disciplinary approaches to product development. Increasing demand for healthcare products in emerging economies provides new opportunities, particularly for established healthcare brands. The emergence of the Sussex and Brighton University Hospital as a leading medical school; the University of Sussex s established reputation for life sciences and the University of Brighton s pharmacy and pharmacology strengths, combined with the 420m redevelopment of Royal Sussex County as a nationally important trauma centre and market-leading health and medical businesses provide the right ingredients for this to become an established sector within the Coast to Capital LEP in the future Digital Media National Significance Digital technology is influencing all aspects of the economy, not least how creative content, including animation, film, television, visual effects, computer games and handheld tablet apps, is developed, promoted and used. It is this fusion of high level creativity and technology that makes digital media a significant growth sector for the UK. Indeed, some 7 argue that there is a need to think about the creative, digital and information technology (CDIT) sectors in an integrated way. The UK is the largest producer of TV and radio content in Europe; it has its largest publishing industry and the most games development studios. Businesses in these industries are also 6 27 per 100,000 (2008) quoted in Investing in UK Health and Life Sciences HM Government The Fuse: Igniting High Growth for Creative, Digital and Information Technology Industries in the UK CIHE