RGF: Why the trophy projects are struggling

The plot thickens on the Regional Growth Fund.
There was widespread disappointment earlier this week when all but a handful of the bids for money to back projects in the East Midlands was rejected.
There are some sniffs emerging which suggest to me that disappointment may be something we have to get used to.
Of the successful projects, the key question is how it was that bids from business got the nod, but bids from the [government-backed] Local Enterprise Partnership didn’t. So here’s a puzzle: were the private sector bids ones which government was already familiar with because these firms had previously applied for money from other public funding streams?
In other words, was this money they were already going to get, now repackaged under another banner? To be absolutely clear, the businesses involved have done nothing wrong, but there is an interesting political question hanging over the way these decisions were arrived at by Government.
The answer isn’t straightforward. One source involved in the process has told me that the issue is that business found RGF more attractive because there was uncertainty surrounding the other funding streams, which would originally have been dealt with by the now-doomed regional development agencies.
There’s some truth in that. Money previously allocated to the RDAs has been disappearing back into a Whitehall-shaped black hole. Indeed, there’s an argument which says it has re-emerged from that black hole in the slimmed-down shape of the Regional Growth Fund. So what goes around comes around, financially at least.
The other question is whether some of these projects will actually go ahead. You’ll note that all over the country the bids that have got the nod have been accepted ‘conditionally’. This is because they still have to clear a number of legal hurdles – the businesses involved must be able to deliver their side of the financial bargain in a match-funded scheme, they’ve got to be what they say they are (in other words, not a widget company dressed up as an aerospace engineer), and, inevitably, they’ve got to conform to a European Union directive.
These are the EU regulations about government aid to business, the basic rule being that state aid should not distort the market.
So it’s not impossible that some of the projects which have won RGF backing may have to be modified in some way before they can proceed. Or that one or two of them might fall over completely.
It also seems pretty obvious that there IS a regional bias in where the RGF money goes. Most of the bids accepted so far have been tilted towards the north, in areas where the public sector is a big chunk of the economy. So the South East, South West, East and East Midlands had fewer bids accepted. I suspect it will end up being the same in round two, when most of the RGF money will be allocated.
From my inquiries, it seems pretty obvious that in the first round there was an emphasis on schemes which were going to fit the Government’s immediate growth agenda – schemes which directly created jobs rather than encouraged them in the longer-term
This is probably why some of the grander, trophy projects – projects which local politicians can’t resist, because they are seen as monuments to achievement - didn’t make it.
They may still struggle in the second round. We’ll see.

RGF: A growing controversy?

There’s a palpable sense of disappointment about the failure to secure anything other than a few crumbs for Nottinghamshire and Derbyshire businesses from the Government’s Regional Growth Fund.
This £1.4bn pot was set up by the government in the wake of its decision to get rid of regional development agencies like Emda.
While emda at one stage had an annual budget north of £150m, the amount of money Nottinghamshire and Derbyshire have managed to squeeze out of the RGF is a pitiful £1.6m. Out of 38 bids made for projects in the two counties, only one was successful.
The successful bid relates to the planned expansion of Molecular Profiles in Nottingham. Levering £8.4m of its own, the pharmaceutical research company plans to open a new building at Nottingham Science Park and create up to 65 new jobs.
This is a significant vote of confidence in an important sector for Nottingham, and Molecular Profiles CEO Nikin Patel is to be congratulated.
But what about everyone else? There are rumblings and machinations about why the 37 other local bids failed, but I suspect ours is not the only region where this soul-searching and teeth-gnashing is taking place.
Today’s announcement covers only the first of three rounds of funding bids, and has accounted for £450m of the £1.4bn available. So there is still £950m to bid for. It is the second round, which is underway now and closes shortly, which will see the lion’s share of the cash allocated.
We don’t know yet whether any of the unsuccessful bids from the first round will be considered again, but the word from Derbyshire & Nottinghamshire Chamber is that they had expected four of the 38 bids to be successful in round one – which suggests to me they will be looked at again.
I suspect the issue is that the Government's preference will be for projects which create wuick jobs, rather than trophy projects like physical infrastructure, which may only work in the long-term. It wants quick wins.
Just to complicate matters, the second round of RGF bidding coincides with the start of bidding for £19m of European Regional Development Fund cash available to the East Midlands. This is being administered by emda, though the word is that bids for this can be 'aligned' with bids for RGF money. Baffled? You're not alone...
There is a degree of paranoia in the East Midlands about its weak identity, and Business Secretary Vince Cable found himself having to reassure the region this morning that the decision was not a personal slight. That’s one to ponder – I’m not aware he has visited Nottinghamshire or Derbyshire since taking office.
There are some fairly blunt questions the government has to answer, though. It is almost certain that some of the bids will have failed precisely because the guidance from Whitehall about what they were looking for was far from clear.
That, in itself, is symptomatic of the government’s tendency to make policy on the hoof: having decided long ago that it did not want to put money into regional development agencies, it had no clear plan for what might fill the administrative void these organisations were bound to leave behind.
I blogged last week about the decision to maintain some parts of the Government Office for the East Midlands operation, and the concerns that – when put together with emda’s demise – it left the region voiceless in Whitehall.
For business, the most important part of the Government operation is the new regional representative for Mr Cable’s department, Rowena Limb. A robust conversation with her about Nottinghamshire and Derbyshire’s expectations for the next round of RGF money will be important.
So will an invitation to the Business Secretary, so that he can come and inspect for himself this unexplored corner of the Midlands. You know what we need to say when he finally does battle his way through the undergowth and find us: Dr Cable, we presume...

Building's shaky foundations

Fancy a business environment where the client keeps on coming back and asking you to ‘re-price’ your quote but never goes ahead with anything?
Or one where firms know they’ll lose money on the contract they are about to sign?
An environment, indeed, where any variation in the final settlement usually means endless arguments or bringing in the lawyers?
Welcome to the world of construction, 2011-style.
I was chatting yesterday to Robert Moyle[pictured], the chairman and chief executive of North Midland Construction, the biggest home-grown construction and civil engineering outfit in Nottinghamshire.
Moyle is a thorough-going gent who rises above mud-slinging. On a more pragmatic level, he has been running his business long enough to have seen robust commercial behaviour many times before, and the nature of North Midland’s business means it is insulated from the worst of it.
But he was concerned, nevertheless, about a commercial environment in building and construction which is having a corrosive impact on the contracting chain. And the lower down you go, the worse it gets. In building, small and medium-sized contractors have been suffering a hand-to-mouth existence.
The re-pricing issue is a problem which has been seen among those who tender for public sector contracts. The contract spec is issued, the tenders come in and then comes a request for a new tender to a different spec. Sometimes it’ll happen again. And again. In a climate of financial uncertainty, the work never goes ahead.
Private-sector building, though, has turned into a dog-eat-dog environment, one where business is so scarce that desperate firms are scrapping for contracts to the point where their tenders suggest cash flow is good news, profit is Christmas.
This is what Moyle told me yesterday: “Some of the prices I’ve seen quoted are absolutely crazy. The policy people are adopting is ‘screw the supply chain’ and the sub-contractors are suffering in a major way.”
This can manifest itself in a number of ways, most of which will come as no surprise to seasoned observers of the trade: paying late, paying less, or not paying at all. And this among businesses who can’t afford lawyers. You don’t need to be a business recovery expert to imagine the consequences.
Moyle and NMC are doing their bit. What has, historically, been a fairly paternalistic company has a high proportion of people who are directly employed. “We’ve got a good supply chain and we do what we can to keep our partners going – better payment terms, whatever it takes.”
But he may well be a lone voice, and the worry is what this is doing to an industry which is now in its fourth straight year of extremely difficult trading conditions. It hit the skids first when the housing market fell over in the immediate aftermath of the credit crunch, had to cope with a recession which took the shine off most areas of the market, and has now seen large-scale public sector work dry up.
There are no easy answers to what is, at heart, a consequence of an economy still trying to find its feet after a catastrophic financial collapse. Businesses are tentative and prefer to manage growth within existing or temporary resources, banks are reluctant to lend against anything remotely risky and they still have a boat-load of debt related to the property collapse.
For Moyle’s NMC, there are plenty of profitable markets. It doesn’t just build – it is a civil engineer, a mechanical and electrical engineer and it is locked into a series of large-scale framework contracts involving utilities, telecoms and power engineering – all sectors with strong, long-term prospects driven by the need to invest in the UK’s infrastructure.
But his business is sizeable, and the exception rather than the rule. Outside the world of domestic home improvements, the lower reaches of building are a fraught place to be right now.
The signs are that its prospects will improve decisively only when the economy locks firmly on to growth.

What a week for Nottingham

What a week for Nottingham. £500m and 5,000 jobs from the massive expansion of Broadmarsh, £240m and 2,000 jobs from the extension of the Victoria Centre, final sign-off from government for the construction of lines two and three of the tram…and now an Enterprise Zone at Lenton which could create anywhere between 5,000 and 10,000 jobs.
Normally, you’d be lucky if you got one scheme a year of this magnitude. To have four in the space of one week is well into all our Christmases coming at the same time.
These are only plans, of course. In this kind of economic climate – one clearly exposed to the impact of global economic events we cannot control – they could change, stall, perhaps be pushed on to the back-burner.
The likelihood is that at least three of them will go-ahead. Together, they could have a significant impact on the Nottingham economy for years to come, adding economic multipliers to local business and the local economy during and after construction.
It’s been obvious for a while that the unused parts of the sprawling Boots site were in pole position to become an Enterprise Zone – especially after the Treasury contacted Nottingham City Council and asked them to put more work into a draft proposal for it.
It was finally confirmed this morning by that well-known political double-act, David Cameron and Nick Clegg (who, incidentally, took over an announcement which was originally scheduled to be delivered by Vince Cable).
Alongside Boots and just across the road from QMC and the university hospital, and the international research giant that is University of Nottingham, it ticks all the boxes the government is looking for with the new generation Enterprise Zones.
The hope is that it could attract national and international businesses of size or standing, probably in technology or knowledge-related industries – while also being a great opportunity to nurture promising spin-outs from university research.
We’re told there is the potential for around 200,000 square metres of commercial business space for all sorts of industry sectors. So together with the 7,000-odd people who work at Boots, that could put up to 17,000 people working at the campus in the coming years.
Which begs one final question. While the expansion of the tram will assist with transport, this surely puts further pressure on government to make the dualling of the A453 a priority.
May be I’m expecting too much…

EZ does it: What our Enterprise Zone will offer

I blogged earlier this week about the Government’s plans to re-introduce Enterprise Zones to encourage business growth.
Sure enough, George Osborne announced in his Budget yesterday that there would be 21 of them across the country, with the first 10 including a site in the area covered by the Derbyshire and Nottinghamshire Local Enterprise Partnership.
I’d just love to tell you where it is right now, but some Very Important People are going to announce it later today and I’ve been told to keep my trap shut so they can claim all the glory.
All I’ll say is that the announcement will be of keen interest to businesses around Nottingham, and the location reflects one of the city’s industrial strengths.
What I can tell you, because the details are already out there on p33 of the Treasury’s Plan For Growth, is what the Enterprise Zone will offer:
RATES: A 100% Business Rate discount worth up to £275,000 over a five-year period for businesses moving into an EZ during this Parliament.
REINVESTMENT: All Business Rate growth in the zone for up to 25 years will be retained and shared between the local authorities in the Local Enterprise Partnership area ‘to support LEP economic priorities and ensure the returns from the EZ growth are reinvested locally’.
PLANNING: Government and local authorities to develop ‘radically simplified’ planning approaches for the EZ.
CONNECTIVITY: Government support to roll out superfast broadband throughout the EZ.
There is more. Alongside these basic rules, the government says it wants to see reduced regulations all round in the EZ, enhanced capital allowances for plant and machinery in areas where there is a manufacturing bias, the use of Tax Increment Finance, and UKTI support for inward investment into these zones or trade opportunities.
More detail will emerge later today, but these zones look likely to provide a stream of cash which Local Enterprise Partnerships had been missing. Government says it wants this money will be used to promote long-term sustainability.
So it clearly has the criticisms of the old Enterprise Zones flagged up earlier this week high in its mind.
Look out for the announcement later.

A late night with George Osborne

Some people sit back and neck decent bottle of plonk. Others watch Waterloo Road (poor souls). I launched into a 130-page document called the The Plan for Growth, produced by those nice people at HM Treasury and the Department for Business, Skills & Innovation.
More fool, me some will say. But since the alternative was the 2011 Budget Red Book, I don’t think I’ve done too badly as far as sticking matchsticks in my eyes goes.
Anyway, enough of the ritual self-pity. The Plan For Growth is one half of yesterday’s Budget, and it offers at least some of the detail which George Osborne’s headline-grabbing Budget Statement didn’t. There are some big, important measures in it, some eye-catching detail, plenty of ifs, buts and maybes. A lot of it matters to anyone who’s in business. I’ll blog separately about Enterprise Zones. So here goes, in no particular order, the rest of it:
PROPERTY DEVELOPMENT: Some public sector land is going to be auctioned off. The Homes & Communities Agency will announce the first tranche shortly, and it’s considering a ‘Build Now, Pay Later’ model in some cases.
WORKERS’ RIGHTS: A plan to extend the Right to Request Time Off for Training to firms with fewer than 250 staff is being scrapped
The Right to Request Flexible Working for parents with children under 17 is being scrapped
PUBLIC SECTOR CONTRACTS: Pre Qualification Questionnaires for firms who want to tender for public sector contracts are being scrapped for work worth less than £100,000.
The Government wants 25% of public sector contracts to go to SMEs (firms with a sub-£25m turnover).
Government also wants to cut the cost of public sector construction and infrastructure by 20% partly through standardised design and new procurement models.
BUSINESS GROWTH INVESTMENT: A Business Angel Co-Investment Fund is going to be set up, probably based around the existing Regional Growth Fund structure, pitched at backing early-stage SMEs with high growth potential. A Business Coaching for Growth service is also going out to tender, offering investment readiness training. One for those GINEM types?
INWARD INVESTMENT: UK Trade & Investment, the government’s international trade agency, will become ‘more entrepreneurial’ by using private sector expertise
There will be a ‘bespoke service’ for key inward investors giving them direct access to ministers and ‘speedy resolution of bureaucratic obstacles to investment’. New help will be given to help small firms trade internationally.
LIFE SCIENCES/SOCIAL CARE: A new Health Research Regulatory Agency will look at streamlining the regulations and cost-effectiveness of clinical trials. It will also strip out regulations ‘never meant for the social care market’ which prevent market entry and flexible services.
CONSTRUCTION: A two-year rolling programme of funding-approved public sector projects will be published to help the construction industry
TOURISM: A £100m campaign, co-funded by the industry, aims to attract 4m more visitors to the UK after 2012. Tourist boards will become smaller, industry-led partnerships with government.
There will be more, and when the Chancellor said his Budget as ‘fiscally neutral’ he was telling you from the start that he’ll take back anything he’s giving away. That's one for the Red Book.

Finally Broadmarsh: The £500 million game-changer

I was sitting in the office early last week looking over some sprawling indicative drawings for the wholesale rebuilding of a massive part of Nottingham. And it’s a big deal.

The drawings sketch out the detail of a £500 million retail scheme ranged across three levels which could not only put Nottingham beyond the reach of its regional rivals, but also rid the city of the out-dated eyesore that is its southern approach.

So what was my reaction? One of deja vu.

The story of the redevelopment of Broadmarsh is a modern-day parable about the relationships between big cities and big developers and shopping centres and the economy.

I first saw photos, drawings and CGIs of the redevelopment of Broadmarsh in the early noughties. Even then, redevelopment was long overdue, with the centre which defines the boundary between the city centre and its southern approach looking every inch the 1960s Arndale dinosaur it really is.

As time went by, the amount Westfield said they were going to spend on the redevelopment slowly rose. But so did the sense that it wasn’t their top priority. Nottingham City Council bent over backwards to try to make sure it remained a priority. Indeed, some critics would point to the strange decision to rid Lister Gate of what looked like perfectly healthy trees. Chopping them down opened up a nice sightline to a re-clad Broadmarsh entrance, but was there really anything wrong with the trees? We’ll never know.

What we do know is that while Nottingham City Council tried to keep what had become a £700m scheme alive, Westfield promptly went and spent a load of money in Derby.

The Australian developer has a long-established reputation for taking a robust attitude to business, but this decision went down very badly in Nottingham – on two fronts.

With the arrival in the City Council’s planning department of Jennifer Dearing, an experienced outside consultant brought in to give some backbone to a drifting planning department, Nottingham’s attitude to Westfield hardened.

More than once, I heard senior figures in the city say that if all Westfield had to offer was a bigger version of the curtain-walled giant they built in Derby, then Nottingham was no longer interested.

It didn’t stop there. The city took the advice of some senior national figures in architecture and urban development and decided that, whatever happened, the plans Westfield had sketched out to the council all those years ago were dead. Whether it was Westfield or someone else, a new approach was needed – one which would use large-scale retail redevelopment to solve an ageing blot on the landscape.

The credit crunch effectively killed off Westfield’s original plan. No one was going to throw £700m at a large scale shopping development when retailers were being deserted by consumers suffering from badly-bruised credit cards.

But none of this changed the fact that Nottingham is Britain’s fifth biggest shopping city and the centre of the East Midlands’ catchment. It may have bled some people to Leicester (which now has a John Lewis as well), but Derby hasn’t got the high-end retail brands to challenge. Neither is as big.

So now, finally, we have a new plan - all £500 million and 5,000 jobs worth of it.

Going back to my initial point, I have to admit that I haven’t seen it all before in the design sense. The drawings I pored over last week show a scheme that has changed drastically. Instead of a monstrous, old-fashioned mall, Westfield has now agreed to produce a series of smaller buildings which will open up new street scenes, and rid one of England’s eight most important cities of a Berlin Wall of a centre which shouts regional mediocrity at anyone walking in from the railway station.

It could lead to Nottingham getting something genuinely different – a new generation of shopping centre which doesn’t stand out like some monstrous blob. One with streets to wander through and an open air atmosphere, one with views of the city it is part of.

So it’s wrong to be churlish about this plan. If it proceeds the way Westfield are suggesting then it could change the face of the city for the better while bringing in 5,000 jobs.

The knock-on impact of its construction will be considerable: a project of this scale will have an economic multiplier during and after construction through the jobs it creates and the money spent during building and the likelihood that – if it brings in new names – it will bring in new visitors.

Those new names should, finally, include Harvey Nichols, with whom Westfield has an informal agreement.

It may also add to the logic behind investment in redevelopment of the railway station and expansion of the tram

In short, a project of this size has the potential to give the city’s economy a noticeable tick-up.
A scheme on this scale does not come without its question marks. What will happen to other parts of the city’s retail core when Broadmarsh opens? And what impact will it have on the Victoria Centre (which has expansion plans of its own)? How will we cope with radical revisions to the city’s road network implied by this plan?
The biggest question of all is the oldest question of all. After all these years, is Westfield finally going to come good on its promise?