Date: 6 Feb 2013 Report to: York Economic Partnership Board Subject: Looking ahead 2013/14 for City of York Purpose 1. To challenge Board members to consider their proactive role and added value to the YEP's city-wide vision of becoming a top 5 UK city and top ten European city economy. The economic outlook 2. As most members will be aware from their business activities, the short and medium-term outlooks for the UK economy deteriorated during 2012. By the time of the Autumn statement, the Office for Budget Responsibility (OBR) was forecasting an overall 0.1% fall of GDP in 2012 and has revised its forecasts downwards to at least 2016. It is predicted that economic output will not reach where we were in early 2008 until early 2014, and post 2014, the economy will grow more slowly than in the early part of the new millennium. 3. The consequences of this period of extended sluggish growth for the UK means fiscal austerity for longer than the Chancellor previously expected and intended. The Autumn statement estimated that public sector reductions will continue until at least 2017/18. Since the March 2012 budget forecast, a further 12bn is taken out of current expenditure with gross investment broadly flat. 4. The direct implication of this for local authorities in the UK is no direct financial stimulus in 2013/14, followed by a 445m cut in 2014/15, supposedly to be mitigated by further progress toward community based budgets. The result is a very challenging agenda for local authorities in 2013/14, particularly in terms of economic development, where demand for progress is high but public resource is dwindling. Keeping mainstream services viable, whilst continuing to manage the social care financial cliff, council tax benefit localisation and reductions, assumption of public health service responsibilities, and even, in the related economic area, planning reforms suggests economic development will face severe competition as a serious LA priority. The policy challenges...and opportunities 5. The Government s mid term review confirmed its priorities for national economic development for the remainder of its term of office: 1 1 This and the previous section draw heavily on LGIU Policy Briefing of January 2013. 1
Realising opportunities for local devolution of economic powers and resources through government s response to Heseltine single pot, and city deals Ensuring local housing, transport and infrastructure priorities are investment-ready, to feed into the relevant national priorities in these subject areas Sector strategies especially in industrial and high tech sectors Making the most of HE and FE assets to drive local growth through their skills, employment, enterprise, science and knowledge-based capabilities Enabling SMEs to take advantage of export, deregulation, and business funding programmes Supporting disadvantaged communities to access the employment opportunities of welfare reforms, work programme and specialist initiatives Aligning local low carbon economic ambitions with national energy and green economy strategies like new Green Deal and Green Investment Bank (Although not mentioned explicitly) preparing for the next round of EU funding The picture in York: measuring progress against YES targets 6. The above context sets the scene for the YEP Board s continued actions and efforts to progress the vision of York becoming a top five UK and top ten European city economy by 2015, and in the process becoming a more international and enterprising city. 7. In view of the most recent indicators available, York has seen positive progress on key indicators over the past year as reflected in the recent Centre for Cities, Cities Outlook 2013 report; however, there are certain key indicators that are showing persistent negative performance. 8. Overall, the city has climbed from 13 to 6 in the UK rankings. This move is down largely to a significant relative increase in the city's performance in employment and some positive movement in business stock and emissions. 2 Indicators 2013 Huggins Index Subset 2012 Huggins Index Subset Employment rate (%) 6 20 Working age population with 7 7 NVQ 4 Total emissions CO2 per capita 12 14 Business stock per 10,000 20 23 population GVA per capita 26 26 Overall ranking 6 13 9. Whilst the progress on these indicators is moving in the right direction, however, there is a concern as to those areas that remain barriers to a more international and enterprising York. Whilst the city remains an attractive place in terms of its quality offer, there remain issues with regard to particular aspects of operating in the city. 10. Put simply, the city's performance can be summed up in three dimensions: 2 European indicators area being calculated based on available information and will be available for the YEP March meeting. 2
People (e.g. skills, educational performance, and employment relate indicators) - GREEN Place (e.g. commercial premises, digital connectivity, housing) - RED Enterprise (e.g. business start ups, business density, innovation related indicators) - AMBER 11. A brief overview of where the city is performing on principal indicators from the Centre for Cities, Cities Outlook 2013 rankings, is below York is top ten for the following: York has seen improvements since 2011 in: York has remained the same since 2011 in: Areas where performance has slipped since 2011: Claimant count change No formal qualifications Change in real wages Youth Claimant Count, 5 A* - C GCSEs, inc. Maths & English JSA Claimant count Employment High Level Qualifications Long Term claimant count Change in real wages Private Sector jobs Change 2010-2011 Employment 2012 Private to Public Sector ratio, 2011 Long Term claimant count, Nov, 2012 Average weekly wages, 2012 Knowledge Intensive service jobs, 2011 No formal qualifications, 2011 Business Stock per 10,000 pop, 2011 JSA Claimant count, Nov 12 Average Housing Price, 2011 Claimant count change, from Feb 2008 High Level Qualifications, 2011 although still highly competitive: 2/64 and 7/64 respectively Affordability ratio - Housing, 2011 Housing stock change, 201-2011 Manufacturing Jobs, 2011 Public Service Jobs, 2011 3 Business Startups per 10,000 pop, 2011 - Patents per 100,000 pop, 2011 Targeting the efforts of the YEP Board for 2013/14 12. The overall message is that if the city is to make significant progress against its international and enterprising aims as a city, and to effectively achieve the top 5 UK and top 10 European city ambitions to which it aspires, progress is needed on key aspects from within the overall economic strategy and delivery plan; drawing from this overall strategy, it is suggested that the YEP Board use 2013/14 to target its efforts on the following lines of activity: 3 Rebalancing the economy away from Public Sector dependence is a main aim of the Economic Strategy This, although seems negative, is positively reflected in the Private Sector Jobs Change indicator above Where York has moved 17 places from 31 in 2011 to 14 in 2013. Between 2010 and 2011 Private sector job creation in York, off-set public sector job losses. 3
Giving the city s business base and workforce the space to grow Unlocking the potential growth of small business Answering the productivity puzzle with high value business investment Evolving the city centre of the 21st century Proactive York voice and resource in shaping the LEP agendas 13. The following proposals are designed to challenge the Board and facilitate a discussion by the Board of where the Board may target its own efforts over the coming year to ensure progress against the Board s vision and aims. 14. These efforts are mapped against the activities CYC are undertaking in these priority areas, and are developed bearing in mind the Board is not a delivery body per se, but that its added value is in its ability to set strategy, bring skills from members' individual industries to develop new ways of approaching the economic development of the city, and to influence key players in the public and private sector to ensure that policy and investment decisions are made to the benefit of the overall economic vision the Board has set for the city. 15. Giving the city s business base and workforce the space to grow and connect 16. One of the principal and persistent barriers to the city s aspirations to become more international and enterprising is the constraints on space in which businesses and individuals can locate and realise their potential this challenge is relevant to both the commercial and residential markets. 17. Initial findings from a full scale review and mapping of office space in the city is demonstrating a significant under supply of grade A office space. Whilst this work is being consulted on with the property industry, other research including the recent DJD report for the local plan and a report by Centre for Cities last year corroborates the challenge that a constraint on high quality commercial premises for the service industry presents. 18. What is also clear is the challenge of providing sufficient grow-on space for small and start up business in the city, particularly in the creative and media arts sectors. This is identified both in the work progressed to date on the business case for the digital and media arts centre, but also in the DJD report being finalised as part of the development of the Local Plan for York. 19. Further, as much as commercial premises are constrained, there is a further urgent demand for housing suited to the workforce of the city s present and future ambitions. The constraints on affordability and housing supply in York highlighted most recently in the Cities Outlook 2013 put the city at a relative disadvantage in attracting the workforce the city needs to support industry effectively. 20. Finally and perhaps even more urgently, though, are the needs of industry and the workforce in developing better connectivity within the city and between York and key regional, national and international market opportunities. Importantly, the city continues to face significant congestion in its intra-city road networks, whilst having further potential to develop better rail connectivity to key markets and hubs. Here, 4
the opportunities in shaping the investment by Government in the rail and road networks is paramount. What CYC will do Collaboratively work with partners assemble a business case and delivery plan for investment in key priority sites in the city, including particularly York Central and its potential to deliver a Central Business District for the city Work with the development industry to remove barriers in terms of planning permission and obligations to make development of allocated sites as viable as possible Continue to progress development of a local plan for submission to Government by end 2014 which enables economic growth Work both with the creative and digital sectors and Science City York to bring forward an investable business case for a digital and media arts centre, and to work to attract or confirm funding where already lined up, including from Economic Infrastructure Fund and Growing Places Fund, as well as European Regional Development Funding Work with partners to identify further spaces that may be developed for appropriate grow on space What the YEP Board can do: Work collaboratively with CYC to develop the case for York Central for presentation to BIS and private investors, with examples of outputs being the identification of a YEP board lead to attend MIPIM with CYC Identify further opportunities and ideas for the creation and unlocking of high quality office space Confirm support for growth of the digital and media arts sector, with a flagship project being the digital and media arts centre to be progressed to business plan stage for 2014 Champion and work with the city to make the case for investment in the city s and region s road and rail networks getting involved in the city s work to shape and make active cases for investment priorities to the Combined Authority being developed with the Leeds City Region and other similar arenas 21. Unlocking the potential growth of small business 22. A challenge to York s growth ambitions which has been consistently highlighted over recent years has been a discrepancy between an above-average early start rate for business and a lower than average VAT registration rate. Work by the Council s ED team and the business networks across the city is starting to identify and hone in on the key constraints facing start up and small businesses in growing to their full potential. 23. Principal amongst these issues is the issue of small office and grow-on space of sufficient quality and in the right location in the city. Most recently, the city conversations conducted by DJD for the preparation of the Local Plan have identified a lack of sufficient small, flexible termed space and grow-on commercial premises as a consistent barrier to the growth of start up business to 5
VAT level. This is particularly true for creative and media arts centre (see above for facilitation of grow on space). 24. Equally as important to small business growth, however, is ensuring that small business is able to exploit market opportunities where markets are still growing. The YEP Board s internationalisation agenda remains a key opportunity for tackling this, and the extension of activities through the YEP Board s international task group and export forum will enable greater exploitation by York business of export markets. 25. Finally, access to finance and investment for growth is an issue which is raised time and again particularly in the current economic climate as being a principal barrier to the growth of business in the city. Whilst this is not an issue that is particular to York, it is an area where the city may have the potential to develop innovative solutions, tapping into the expertise of the business community and particularly financial services industry which is well-represented in the city. What CYC will do: Facilitate attraction of funding to the city for private sector growth, through the provision of support and proactive identification of suitable projects from small local businesses What the YEP Board can do: Push forward in bringing the various business networks and support providers in the city to provide a coordinated and coherent offer under the York Means Business branding Develop new ways of thinking and approaching the access to finance for growth (access to finance task group) Take proactive role in drawing down RGF and other sources of investment for local business 26. Answering the productivity puzzle with high value business investment 27. The national media has recently focused on the productivity puzzle for the United Kingdom, but in York the issue is even more acute. In a city renowned for high level skills and for its leading higher and further education assets, a productivity rate of only 26 th the UK's cities remains a major issue (and by extension, a patent ranking of 56 th of 64 and a knowledge intensive industries proportion that ranks 13 th of 64, when our high level skills rank 7 th of 64). 28. The predominant challenge is that whilst the city benefits from a large highly skilled population, its jobs profile is much more diverse, with a significant proportion of lower skilled jobs associated with industries like tourism, retail and leisure which are considered so central to the city's prosperity and USP. Put simply, the city needs to attract and support growth in higher value, skilled jobs to enable better 6
utilisation of the city's high level skills, which by extension will ensure that those with skills levels best suited to the tourism, retail and related industries are provided maximum opportunity. 29. Here the city's potential to attract and retain high value investment is critical to develop and maximise. The recent announcement by Hiscox UK to invest in the city is testament to the city's ability to attract quality, high value brands on the back of its own quality brand and offer. However, investments of this kind require proactive hunting efforts by local ambassadors - not just the economic development team whose responsibility it is to develop the sell and offer, as well as proactive and professional response to inquiries. 30. Critical to this area of activity will be continued work to "sell" the city via its internationalisation strategy by the YEP's international task group and associated networks which have developed as a result, including the city's export forum and related networks. What CYC will do: Work with business and partners to identify and promote the city's unique inward investment offer by sectors What the YEP board can do: Commit to being ambassadors for the city when working in UK and international markets, carrying the York Means Business messaging, brand and "sell" where possible Considering sector leadership on the board, committing individuals from the Board to act as specific sector ambassador for the city in specific sector arenas Work with CYC on development of the city's offer and sell, considering opportunities such as recent trends toward near shoring of London based professional service industry 31. Evolving the city centre of the 21st century 32. With the evolution of retail as an industry, both with increasing trends of online shopping and the rise of demand by retailers for modern big box floor plates catered for most aptly by out of town formats, the city centre although currently outperforming comparator cities, is facing significant challenge in its current form. The recent announcement of the closure of Jessops and the well-publicised difficulties facing HMV portend further shifts in the way the face of the city centre. 33. The City Team York, already a task group of the YEP, is working through the latest work by DJD and Ekosgen suggesting the city centre in York will need to evolve if it is to maintain footfall and vitality in future years. Within this challenge, there is an opportunity for the city to develop its retail industry as a retail offer of the future developing the city centre retail offer as a true retail experience which cannot be 7
replicated by the online or big box retailing that has become associated with out of town convenience shopping. 34. At the same time, there is growing demand by certain industries outside the retail trade, including particularly the creative and media arts sectors, to locate in the city centre - a trend which is reflected in the significant interest from the creative sector in the development of a city centre creative and media arts centre. What CYC will do: Continue to work collaboratively with the City Team York to develop new ideas and models for retaining and developing further the role of the high street, whether through pop up and meanwhile uses, improvements to the public realm etc Invest 3.5 m in the city centre public realm through Reinvigorate York to ensure world class public spaces Deliver further significant investment into the refurbishment of the Newgate Market Ensure easily accessible information about planning and change of use in the city centre to enable flexible evolution of its character and shape What the YEP Board can do: Set strategic vision for the city centre of York of the future and ensure that the city is at the forefront of innovation in the high street Continue to drive delivery of new ideas and projects to inject new life into the high street and create a more flexible and vibrant offer through the City Team York 35. Ensuring a proactive York voice and resource in shaping the LEP agendas 36. With the Heseltine Review and the latest Autumn Statement, and with the implementation of City Deals, the Government has made significant moves to devolve decisions and funding to Local Enterprise Partnerships (LEPs). Cast opportunistically, the LEPs and the city deals programme should empower groups of local authorities to draw down powers and funding pots from Government with the potential for decision making and investment that is more accurately tailored to the local economic context. 37. York's position in two LEPs presents opportunity and challenge to the city to ensure that not only are both LEPs positioned to maximise the potential draw down of decisions and funding for the two economic areas, but that York is positioned within the two LEPs as a proactive engine of economic growth and policy innovation. 38. The two LEPs are to develop growth strategies, and within each, the city of York has the potential to play an active role, contributing time, intellectual energy and innovation to the agenda, and in doing so, take a leading role from a local authority perspective in each. What CYC will do: 8
Proactively work with and contribute to the new structures being developed through Leeds City Region, working in its capacity with West Yorkshire authorities to develop a Combined Authority Ensure that York's investment priorities are clearly articulated and positioned within the Growth Strategies of both LEPs Work with Science City York and other key partners to ensure the YNYER LEP priority for developing the food and drink sector is maximised What the YEP Board can do: Put forward members to sit on the LCR LEP Board and Panels Ensure opportunities through the LEPs are taken fully advantage of though the business community through the ambassadorial role of Board members within the business community Recommendations 39. Board members are recommended to: Note and consider performance indicators and analysis; and Consider and come prepared with ideas to input to the debate of proposals set out above in setting priority actions for the YEP Board. 9
Leeds City Region LEP APPENDIX. The two LEPs...deciphering what they mean for York As one of the first, core city region City Deals, the Leeds City Region LEP is one of the more advanced of the country's LEPs. The City Deal includes A 1bn transport fund to improve public transport and the highways network, including the creation of a Combined Authority by July 2013 An additional 400m to strengthen economic infrastructure across the city region The creation of a 14 to 24 apprenticeship academy in Leeds Development of apprenticeship hub network, aiming to generate 15,000 new apprentices in four years Initiatives to increase overseas trade and inward investment activity A commitment to deliver ultra fast broadband York, North Yorkshire and East Riding LEP York, North Yorkshire and East Riding LEP is a newer entity, and has to date, taken a different approach to Leeds City Region LEP Development and promotion of the agri-food industry, including supply chain Facilitation of small and micro business growth support via business finance and a "network of networks" Technology/ICT - delivering high speed broadband to rural areas Skills Visitor economy - supporting innovation in the visitor economy TABLE: The rough guide to the LCR and YNYER LEPs Leeds City Region LEP YNYER LEP Approach Strategic, focused on securing devolution where possible on key infrastructure and skills agendas predominantly; newer agendas around trade and investment Agendas Sectors of focus Transport Infrastructure Skills Business Innovation and Growth with focus on trade and investment Medical and healthcare technologies (and related biosciences) Low carbon technologies Creative and digital technologies Advanced manufacturing 10 Business-focused, delivering practical solutions to the immediate priorities and Business finance and networks Skills Agri-food industry Visitor economy
What York may seek from both Greater control over transport planning and investment in collaboration with Combined Authority Share of a 1bn pot of transport fund Share of the 400m economic investment fund An increase in inward investment leads generated via the LCR LEP activity in this area Access to and potential for shaping the export support provision being developed at LCR level Potential for enhanced opportunity for working at city region level on green economy starting with the Green Deal Support for York s role and investment priorities as a regional economic driver, particularly York Central Opportunity for lobbying for investment in the East Coast Mainline Collaborative development and promotion of the agri-food industry in York and North Yorkshire Access for York business to YNYER LEP business support, finance and network activities. 11