How to fix Britain

13 Apr 2017

A blueprint setting out how the Government can boost Cumbria’s economy and help businesses thrive has been submitted to Business Secretary Greg Clark.

Cumbria Chamber of Commerce has responded to a national consultation on the Government’s proposed Industrial Strategy.
The submission makes dozens of recommendations including subsidised university tuition fees for engineering students, reform of business rates, a ‘buy local’ policy in government procurement, sector deals for nuclear and tourism, and tax breaks to encourage investment to cut energy costs.
It follows a major consultation exercise where the Chamber asked businesses what the Industrial Strategy should contain.
Chamber Chief Executive Rob Johnston said: "Having an Industrial Strategy marks a sea change in policy. Theresa May and her Business Secretary have indicated they will be more interventionist than any government since the 1970s.
"The Industrial Strategy Green Paper covers investment, skills, infrastructure, business support, procurement, exports, energy and other areas of vital interest.
"This is a hugely important document and we were very keen to hear what businesses in Cumbria think.”
The Chamber produced a summary of the Green Paper and sent it to 16,000 businesses on its database, asking for comments.
It also held three consultation meetings around the county, attended by businesses of all sizes and from different sectors.
The responses reflected optimism that Cumbria is on the cusp of £25bn inward investment in advanced manufacturing and nuclear, and potential to grow the tourism and food sectors.
But businesses identified barriers holding them back – inadequate road and rail links, patchy broadband and mobile phone coverage, difficulties accessing finance, a shortage of skilled workers and too many school leavers lacking basic skills.
Rob added: "We had some interesting and forthright responses. When you get business people around a table there is always a free and frank exchange of views.
"They pulled no punches when it came to criticisms of the banks, our education system, and failings in Cumbria’s transport and broadband. But don’t get the idea that this document is a list of complaints. At heart it is constructive.
"There are solutions to problems, including ideas on how we can help businesses innovate and bring products to market, seize opportunities presented by Brexit, and how we can make the LEP and the Northern Powerhouse work better for business.
"There is much of merit here, and we hope the Government takes it on board. It will be interesting to see how many of our ideas appear in the White Paper when it is published.”
Read the Chamber’s submission in full below.

Submission from Cumbria Chamber of Commerce
Response to questions for consultation

Does this document identity the right areas of focus: extending our strengths; closing the gaps; and making the UK one of the most competitive places to start or grow a business?
Yes, the ten pillars cover the main issues.
Are the ten pillars suggested the right ones to tackle low productivity and unbalanced growth? If not, which areas are missing?
Based on our experience and understanding of business and economic growth we agree that these are in the main the right pillars to tackle low productivity and unbalanced growth.
While we understand and concur with the push to build world leading sectors it is important that this is not to the detriment of businesses in non target sectors. Growth and productivity come from the range of sectors and experience has shown the value of the robustness of a diversified economy.
In specific discussions we had with businesses as part of this consultation, they highlighted that productivity boils down to two things: technology and people.
Provide tax incentives to invest in plant and equipment, and processes to upskill workers, and you have the recipe to raise productivity.
Businesses praise the former Manufacturing Advisory Service (MAS), which helped businesses to develop people and processes, enhancing productivity. This is seen as a significant gap in the business support offer, only partially now filled by an ERDF consultancy subsidy scheme (which covers only elements of the remit and cannot support ERDF excluded sectors – most notably in this case the nuclear supply chain).
They say that lack of tax breaks for investment in new plant sometimes make it more cost effective in the short term for businesses to patch up and mend old equipment rather than replace it with something more efficient.
Efforts to boost productivity are hampered by a lack of skilled workers.
Are the right central government and local institutions in place to deliver an effective industrial strategy? If not, how should they be reformed? Are the types of measures to strengthen local institutions set out here and below the right ones?
For maximum impact there is a need for genuine coordination and buy-in across all relevant government departments nationally, with activities and funding streams working coherently together to support the Industrial Strategy.
There is a lack of consistency of LEP governance models which is a real concern and continues to leave a number of LEPs open to criticism from the business community. If the LEP model is to continue and to be effective therefore there is a need for alignment of governance and structures, ensuring LEPs openly and transparently reflect the membership of the board and constituencies they represent.
As part of this LEPs should be aligned to some sort of regional construct.
The Northern Powerhouse region is beginning now to gain international traction as an attack brand for the north of England and there is a desire in the business community of Cumbria to own and get behind this brand.
It would be sensible, therefore, not to restart concept of an RDA but to introduce a politically-independent regional body for the Northern Powerhouse (and potentially equivalents elsewhere), with a governance (i.e. board structure) similar to the RDA boards, reporting and answerable directly to relevant ministers. This would be along the lines of a non-departmental public body, but not necessarily with all of the RDA powers. It should have oversight of LEPs in terms of performance, with LEPs reporting and answerable to both this body and local stakeholders.
Are there important lessons we can learn from the industrial policies of other countries which are not reflected in these ten pillars?
There is much to be learned from the German system in which Chambers of Commerce act as an intermediary between business and government in a wholly independent way.
Post Brexit, Britain should be a global business-friendly destination whose industries are encouraged and incentivised to outperform through continued investment, human capital and commercialising innovation.
We should seek to simplify but match or better EU regulations to enable British manufacturing to align with a brand that is recognised for its excellent standards.
Government must ensure that industry does not bear additional costs arising from Brexit, therefore avoiding any competitive headwinds.
Leaving the EU is an opportunity to revisit state aid rules and this should be used as an opportunity to mirror, or better, the approaches taken elsewhere n terms of supporting business growth and investment.
While the pillars reflect the need for skills development, the Cumbrian economy is facing particular demographic challenges and significant numbers of our businesses, in particular those operating in the visitor economy and the food sector, are dependent on EU workers. These issues will be exacerbated by anticipated developments within the county. The future approach on inward migration is therefore clearly of particular concern.

Investing in science, research and innovation

What should be the priority areas for science, research and /innovation investment?
From a Cumbrian perspective, nuclear is clearly a priority area providing significant opportunity to build on what is already a world class sector and supply chain in decommissioning. The global decommissioning market is estimated to be worth £50bn a year by 2020. There is also potential in other clean-energy technologies such as tidal and wave power, and battery storage which should be exploited.
Which challenge areas should the Industrial Challenge Strategy Fund focus on to drive maximum economic impact?
As highlighted above, the nuclear sector is a key opportunity for positive economic impact, building on an existing world class sector. Relaxation of state aid constraints post Brexit should provide more scope to support and nurture the sector, including its existing and potential SMEs.
Currently, nuclear supply chain businesses are unable to access EU funding for growth through the European Regional Development Fund.
The sector presents tremendous opportunities to internationalise products and services, develop new products and diversify into new markets (within and beyond the sector), including commercial spin-outs from publicly funded nuclear organisations.
It is however important that the focus should not be entirely sector driven with effective support for potential winners wherever they emerge.
What else can the UK do to create an environment that supports the commercialisation of ideas?
Inventors and innovators are often not best placed to commercialise and make the most of the opportunities from their ideas.
Learning from success elsewhere, for example Eindhoven, an organisation should be established with a specific remit to evaluate innovations and ideas, identify commercial applications for them and help the inventors or innovators bring them to market – either directly or through making the IP available to others.
Often the opportunities sit within publicly procured contracts. There is value therefore in a shared risk/shared reward model for public-sector procurement that allows innovative businesses to retain their intellectual property rights and back them with access to debt or equity funding to bring products or services to market.
Given the long pipeline to bring R&D projects to fruition, businesses are concerned about future support and funding and need clarity on the impact of Brexit on EU funding and support for research and collaboration.
Support for innovation and commercialisation should include tax incentives for businesses to invest in R&D. This could include for example:
•100% deductible allowances for salary costs dedicated to research and development;
•100% capital allowances for buildings and infrastructure built to run pilot lines and research facilities;
•Reduced business rates for the first few years of a new building;
•Grant funded pure research projects in materials science;
•Funded outgoing university placements;
•100% recoverable wage costs for research apprenticeship placements.
How can we best support the next generation of research leaders and entrepreneurs?
Fundamental to this is encouraging our best brains to focus on research and entrepreneurial opportunities.
There is a need therefore for clear career paths and demonstrating that science and research can offer young people rewarding careers, operating within world class centres of innovation and excellence.
There is potential for the UK to be a centre of excellence for R&D in a range of fields but, equally, a risk that it will go abroad if the right incentives are not put in place.
Alongside this sits a need to encourage and reward entrepreneurship and appropriate risk taking, not least in ensuring appropriate taxation schemes which recognise the risks and the challenges and actively incentivise genuine entrepreneurship which creates real businesses, economic growth and jobs.
How can we best support research and innovation strengths in local areas?
From a Cumbrian perspective this can best be achieved by promoting and developing excellence in institutions, such as the Dalton Nuclear Institute’s Cumbrian research facility, which is part of the University of Manchester, and the National Nuclear Laboratory.

Developing Skills

What more can we do to improve basic skills? How can we make a success of the new transition year? Should we change the way that those resitting basic qualifications study, to focus more on basic skills excellence?
Businesses tell us that the drive to improve basic skills in reading, writing and arithmetic is welcome. At present, there is a mismatch between the skills many young people possess and the skills that employers need.
Businesses are willing to invest in improving the skills of their workers, but they need the education system to support them by providing young people equipped with basic literacy, numeracy and inter-personal skills.
One hotel operator told us: "Things you took for granted 20 years ago, you can’t now. We give our receptionists an English and maths exam as part of the recruitment process. It’s unbelievable how low some of them score.”
There was a view that state schools must monitor pupils’ progress closely and address underperformance, and could learn from the private sector in terms of reducing class sizes, the optimum being 16 or 17 pupils.
Many pupils leaving school and further education lack the social skills to interact with the public. Some employers rate attitude to work and inter-personal skills more highly than academic qualifications, and certainly they are a key element in successful employment.
Some employers highlight migrant workers from Europe generally have better inter-personal skills than their UK counterparts – this should be a priority area for schools and FE colleges to address.
Young people in schools and colleges can struggle to see the relevance of what they are being taught, impacting on their willingness/ability to learn. Contextualising basic skills, and the wider curriculum, within "real life” activities of genuine interest to them (such as in target career opportunities) can have a transformational impact in this respect. This is an activity which many employers and employer organisations, such as ourselves, would be happy to support.

Do you agree with the different elements of the vision for the new technical education system set out here? Are there further lessons from other countries’ systems?

Businesses support the Government’s plan for T-levels. Employers agree that the existing system of technical qualifications is confusing and lacks rigour.
But there are doubts as to whether there is enough capacity in further education colleges if demand for vocational training increases. Hospitality industry operators, for example, say there are already too few places on catering courses to meet their needs.
There is a need for clarity about whether, post Brexit, the Government will continue funding short skills courses currently funded by the EU.
There is merit in the German system of technical education that sees older pupils spend two days each week in businesses to gain practical experience to complement their classroom studies. If young people have a focus and can see a practical application for their learning, they will be better motivated, have more self-belief and be more able and willing to learn.

What skills shortages do we have or expect to have, in particular sectors or local areas, and how can we link the skills needs of industry to skills provision by educational institutions in local areas?
Cumbria faces particular demographic challenges, with a diminishing working age population and continuing net outmigration of younger people. Cumbria’s working-age population is projected to fall from 298,351 in 2016 to 262,400 by 2037. These challenges are expected to be exacerbated by tightening of workforce migration in the light of Brexit. This means that Cumbria is facing wide-ranging shortages in staffing and in skills.
Cumbrian businesses are facing particular skills shortages in STEM subjects and engineering, and expect the situation to worsen as major projects at BAE Systems in Barrow, and Moorside, Sellafield, come on stream.
Cumbria would benefit therefore from having one of the Government’s Institutes of Technology, perhaps based on a federation model involving established institutions and training providers.
There are also, for example, issues in the hospitality industry where chefs and managers, in particular, are difficult to recruit. Hoteliers state that "recruitment, retention and skills” are the biggest issues facing the sector. One-in-five vacancies in the hotel and restaurant sector are for skilled jobs.
Students who study locally are more likely to stay in the county when they graduate – helping to combat a ‘brain drain’ – and so business is keen to see an enhanced higher education offer in Cumbria.
This could best be achieved by using existing HE and FE institutions in the county as ‘gateways’ to learning elsewhere, allowing Cumbrian students to live and study close to home but access learning at excellent institutions nationally, and indeed internationally.
Young people, and others, should be given incentives to study subjects where there are skills shortages, such as engineering, having tuition fees paid or subsidised.
A concerted campaign to improve the image of engineering careers is needed. Currently it lacks the cachet of IT or banking, for example, whereas in Germany an engineer has the same status as a doctor.
One specialist engineering business told us: "Technical jobs and particularly engineering jobs are not seen as prestigious. Every man and his dog is called an engineer. Let’s have pictures of smartly dressed 20-somethings crowded around high tech kit and not have them in boiler suits with a monkey wrench.”
More could still be done to encourage women to pursue careers in male-dominated spheres such as engineering and nuclear. This needs to start at an early age by challenging gender stereotypes in primary schools.
There is a concern that schools encourage pupils to pursue academia rather than technical training, and that schools measure their success in terms of the number of pupils who go to university. This culture needs to change. Opting for an apprenticeship rather than university as a first step needs to be promoted as an active and rewarding career choice.
The education system should be student-focused rather than institution centred, and sixth forms large enough to offer an appropriately wide range of courses with the requisite facilities.
All pupils must be offered meaningful work experience, something which business organisations such as Chambers are well placed to facilitate.
There should be more emphasis on STEM subjects in primary schools.
There is a case for making tuition on how to set up and run a business part of the curriculum in schools – and this could be an excellent vehicle for supporting development of basic skills.
Career guidance in schools is inadequate. It should be independent and impartial. The earlier it starts, the better. If young people have an idea of what their career might be, it will motivate them and allow them to tailor their learning options towards it. That said young people should not be channelled into specific career pathways too early, restricting their choices later.
We could learn from the German system where there is a closer relationship between schools and business through Chambers of Commerce.
How can we enable and encourage people to retrain and upskill throughout their working lives, particularly in places where industries are changing or declining? Are there particular sectors where this could be appropriate?
It is important for business growth and competitiveness that individuals can switch careers at any stage in their working life. The information they need to make decisions must be readily available, simple and accessible, with institutions in place to provide guidance and facilitate the appropriate training and development.
The ESF supported Response to Redundancy programme, operated by Cumbrian partners including the Chamber, helped to re-skill people not in employment, recently redundant or at imminent risk of redundancy, and could be a template for a new national scheme. The initiative provided training for individuals or groups to meet identified needs - enabling them to be re-deployed into new roles within their current organisation or take up other opportunities. Where relevant, employers seeking to recruit staff were supported with a specific work-readiness programme for potential staff, sifting and interviewing.
The businesses we spoke to were divided by the apprenticeship levy. Some regard it as a "stealth tax” and "not a supportive mechanism” but one manufacturer describes it as an opportunity for "seismic change”.
There is a concern that it could push employers towards training that is not aligned with their development goals in order to make use of their vouchers.
The reality is that businesses seek targeted training to address a skills or knowledge gap. Typically, this involves sending employees on one, two or-three day courses – for example supply workshops, LEAN, pension strategy, financial modelling.
The apprenticeship levy could be expanded to support professional growth through such courses in addition to general technical accreditations.
Funding PhD programmes is a key part of sustaining and growing research in industry. These programmes are not credited via the apprenticeship levy. This will steer businesses away from supporting pure research and PhDs. At the very least, businesses require a transition period to benefit from relief for ongoing programmes not covered via the apprenticeship levy. A good outcome would be for industry to get relief from the apprenticeship levy for research PhDs and university programmes.

Upgrading infrastructure
Are there further actions we could take to support private investment in infrastructure?
There is significant opportunity in public sector bodies, in particular local authorities, transferring property assets into local asset vehicles and utilising assets such as pension schemes. These joint ventures with the private sector would unlock development potential in what may be moribund assets.

How can local infrastructure needs be incorporated within national UK infrastructure policy most effectively?

Infrastructure development within Cumbria is disadvantaged by the calculations used to decide between competing schemes. If infrastructure investment decisions are based on a crude analysis of uplift in GVA, then investment will inevitably gravitate to more highly populated areas with larger business communities. If the calculation factors in sustainability and opportunity, then areas such as Cumbria can benefit too.
Overall, there is a view that Cumbria has been starved of infrastructure investment and that, in evaluating projects, the Government looks only at the county’s population of 500,000 and fails to take account of the 40m annual visitors and the fact that Cumbria is destined to host nationally-significant energy projects such as Moorside and a nuclear waste repository.
An "investment dividend” from Moorside and the repository, where the county receives investment in infrastructure as a quid pro quo for hosting these projects, would go some way to counter opposition within the county from sectors such as tourism and food, which might otherwise be hostile to nuclear.
Within Cumbria, improvements to the A595, A69 and A590 are priorities for business.
Improving the A595 between Carlisle and Sellafield would create a wider travel-to-work area for the nuclear industry, and make it practical for people in West Cumbria to access employment and educational opportunities in Carlisle.
There is a concern that the road network in West Cumbria will not cope with the extra traffic when construction of a nuclear power station at Moorside, Sellafield, begins. As one business put it: "The volume of additional traffic will turn the A595 into a car park. Nothing will move.”
Construction of Moorside is due to start in the early 2020s, so decisive action is needed to ensure the transport infrastructure is ready. There is a feeling that detrunking of the A595 has seen maintenance standards slip.
Developer NuGen is planning to make extensive use of rail to bring materials and workers to Moorside, but here too 11 projects have been identified to improve capacity on the Cumbrian Coast railway line, and there are doubts that these will be completed in time.
There was criticism of a lack of "joined-up thinking” by government over Moorside. For example, National Grid is proposing to build a tunnel under Morecambe Bay to carry high-voltage cables. Instead, why not revive plans for a Morecambe Bay barrage that would generate tidal power, and carry the high-voltage cables and a road to cut travel times to Barrow and Millom?
The absence of a functioning airport in Cumbria is a constraint on economic growth, and road and rail links to the county’s nearest international airport, Newcastle, are poor. Cumbria’s largest centre, Carlisle, is 57 miles by road from Newcastle Airport, but the journey time by rail is more than two hours.
South Cumbria is closer to Manchester Airport, and here there are concerns about the loss of through rail services from Windermere and Barrow-in-Furness following the transfer of the rail franchise for these routes from TransPennine to Northern. Businesses see electrification of the lines from Lancaster to Barrow, and Oxenholme to Windermere, as priorities.
Hoteliers argue that the "onerous” transport links to Cumbria are a disincentive to time-constrained visitors. They want better links to Manchester Airport as the sector’s fastest-growing markets are China and the Far East.
While recognising that the Government has a separate digital strategy, long-standing concerns about inadequate broadband and mobile phone coverage in Cumbria persist. Some areas lack 3G mobile coverage, never mind 4G, impacting across the business community, including manufacturers and others not purely the visitor economy.
While there was significant investment through the Connecting Cumbria broadband project, BT has come under criticism from the business community for prioritising private homes over industrial estates and business parks. One-in-nine business premises still have broadband connections slower than 2Mbps. Even this level is woefully inadequate for business, with an estimated need for a symmetrical connection of around 40Mbps.
In a similar vein, there are concerns that spending on flood defences is prioritised towards defending homes rather than business premises, and not enough is being spent on flood defences and alleviation measures overall, forcing businesses to pay "excessive insurance premiums”.
Tourism businesses criticised the "sluggish” response to the damage caused by Storm Desmond in December 2015 – the main A591 road connecting the north and south of the Lake District did not reopen until the following May.
Some rural parts of Cumbria lack mains sewerage. Businesses that want to invest have to provide private treatment works, adding to costs.
Lack of affordable housing hinders efforts to attract and retain skilled workers. The problem is particularly acute in the South Lakeland and Eden districts, where average house prices are a multiple of 9.8 to 9.9 times average earnings. These are the highest ratios in the North West – the regional average is 6.9.
This is a particular problem for the visitor economy because housing is most expensive in the Lake District National Park where strong demand for second homes, retirement homes and holiday lets – and constraints on supply caused by planning restrictions – have priced local people and potential new in-coming workers out of the market.
Operators in the visitor sector are critical of the decline in the public realm as austerity has led local authorities to cut back. One told us: "I’m talking about things like bins, bus stops and public toilets. We are competing with destinations around the world and the public realm is our shop window.”
There was also a view that better sport, cultural and shopping facilities are needed as part of the mix to retain and attract key workers to the county.
One business said: "We need to retain our graduates and skilled workers, which means that we need an attractive lifestyle offer for them. Mountains and lakes aren’t enough for many people.”

What further actions can we take to improve the performance of infrastructure towards international benchmarks? How can government work with industry to ensure we have the skills and supply chain needed to deliver strategic infrastructure in the UK?
To develop a supply chain, businesses must have certainty that will allow them to plan. A National Infrastructure Plan, outlining infrastructure investments over the next 50 years, would help give supply chain businesses confidence to invest in people, processes and equipment.

Supporting businesses to start and grow

What are the most important causes of lower rates of fixed capital investment in the UK compared to other countries, and how can they be addressed?
Businesses tell us that UK banks are failing small firms.
The banks have diluted and centralised services to SMEs, taking lending decisions away from local bank managers. They do not see businesses with turnover below £1m as profitable for them. The low interest rate environment means that lending less than £100,000 over a 10-to-15-year period is not profitable unless the loan is fully secured.
Many start-up and growth businesses do not have the assets to offer as security and therefore growth stalls unless they can raise the capital from crowd funding, angel investors or grants. Many businesses in Cumbria are not clear on how to access these and/or do not understand how these could work for their business. Many are reluctant to consider unfamiliar options, in particular where these would involve some loss of control.
The British Business Bank should act as a key banker and lender to this sector, and be prepared to take a degree of entrepreneurial risk. Fundamental to the success of this is support for start ups and SMEs through specialist access to finance advisers within Growth Hubs, providing impartial support, seen to be clearly in the best interests of the business, to understand and review their options and access appropriate funding. This should be underpinned by wider, wrap around business support, tailored to the needs of individual businesses, to help ensure the maximum impact of investments on growth.
Combined these measures would provide clarity and confidence for small businesses.
It is worth highlighting here issues which emerged with Start-Up Loans for clients on the New Enterprise Allowance Scheme. A specific loan scheme was introduced for these unemployed clients to help them start in business. Often they have poor credit histories. The loan was designed to accommodate this but subsequently lending criteria were changed, denying access to the loan to just those clients it was designed to assist.
Applying for grants and accessing finance is often perceived as unnecessarily complex. There needs to be a simple and responsive system, and more longevity of grant schemes. Grants should be run locally, by local business partners who understand business needs and the local and wider business landscape, such as Chambers of Commerce, rather than by government departments and local authorities.
The Cumbria Business Growth Fund, delivered by Cumbria Chamber of Commerce, is an example of such a scheme. Drawing down money from the Regional Growth Fund, it supported 44 growing manufacturing businesses with £3.8m of grant funding, helping to create or safeguard 520 jobs and lever in £25m of private sector investment. This was delivered through a fast and responsive scheme, getting funding quickly into appropriate business projects, and unlocking private sector investment and borrowing. Robust funding decisions, taking clear account of additionality and potential displacement, were taken by local business experts. This contrasts starkly with, for example, current rural funding, under which a food producer would struggle to apply for grant funding now for a development aiming to have food products on the shelves not for this Christmas but for December 2018.
Another good example of an effective initiative is Innovus, backed by the National Nuclear Laboratory and the University of Manchester, and funded by the Nuclear Decommissioning Authority and the RGF.
Innovus helps businesses bring innovations to market. Public investment of £2m has unlocked £3.4m of investment since 2013, creating or safeguarding 81 jobs with another 430 forecast.
Businesses point out that government could also help them grow by reducing the costs of employing staff, for example by covering sick pay and maternity pay, and covering employers’ costs when they are successful in defending an employment tribunal claim.

Given public sector investment already accounts for a large share of equity deals in some regions, how can we best catalyse uptake of equity capital outside the South East?
Many businesses within Cumbria continue to be very traditional in their views and focus on "traditional” sources of funding, in particular bank borrowing. They are often unsure on how to access equity funding, and more fundamentally do not understand the potential benefits and are reluctant to consider it as an option given concerns around loss of control.
There is therefore a need, if use of equity funding is to be increased outside the South East, to support the informed awareness and understanding of businesses. Some progress towards this was being made in Cumbria through the Growth Hub working with the, now defunct, Access to Finance Service delivered by Grant Thornton as part of Growth Accelerator. A gap has been left in business support provision by the unexpected demise of this service.
That said it is encouraging that, as we understand it, three early equity investments through the Northern Powerhouse Investment Fund are in Cumbria and were referred in through Growth Hub advisers.
It is important that such advice is provided through a source such as Growth Hubs which is clearly impartial, acting in the best interests of the business, with no vested interest in the outcome of a decision and nothing to gain from the investment. Examples of local businesses benefiting from equity investments will also be helpful in addressing this issue.
The Northern Powerhouse Investment Fund, which offers debt and equity funding to SMEs, is a welcome initiative. Businesses are frustrated, however, that those in the energy and agricultural sectors, to cite two examples, are excluded from accessing funding by European funding regulations.

How can we drive the adoption of new funding opportunities like crowdfunding across the country?
The issue here is one of informed awareness and understanding and addressing lack of confidence in the unfamiliar.
Key to addressing this is a need for better advice for businesses, which should be delivered by trusted, impartial, specialist local advisers through Growth Hubs. Again examples of local businesses benefiting from crowdfunding will be helpful in encouraging take up.

What are the barriers faced by those businesses that have the potential to scale-up and achieve greater growth, and how can we address these barriers? Where are the outstanding examples of business networks for fast growing firms which we could learn from or spread?
Key barriers to scale-up include understanding of and access to the appropriate funding sources, skills/staff, the availability of appropriate ongoing support (both funded and paid for) and in some cases aspirations and confidence. Access to the right professional advisers at the right time is also crucial.
Businesses are often concerned about buying professional advice and consultancy and/or fail to make best use of it because, by their very nature, those they are looking to buy from know considerably more about what they are selling than they do. There is therefore a key role for impartial support through Growth Hubs, with advisers assisting businesses to scope their needs, procure advice and manage consultants – where appropriate with some subsidy towards this.
Businesses see business rates as a barrier to growth. They are in effect a tax on investment that deters businesses from investing in their premises.
There was a plea for stability and continuity in any reliefs or grants that government offers to help businesses grow. Constantly changing the offer makes it difficult for businesses to plan.
Other barriers to growth include shortage of skilled staff, and inadequate infrastructure – transport, broadband and mobile phone coverage – and access to finance without security.
Chambers of Commerce are an example of an effective business network.
As membership organisations run by businesses for businesses, Chambers are better placed than the public sector to deliver programmes such as the Cumbria Growth Fund, which allowed smaller projects access to funding from the Regional Growth Fund.

Improving procurement

Are there further steps that the Government can take to support innovation through public procurement?
The Public Contracts Regulations 2015 introduced the Innovation Partnership to encourage public bodies to procure and enter into long-term partnerships with businesses to innovative goods, services or works. If those bodies are to feel confident and capable embarking on a new type of partnership procurement it is essential that the Government provides public bodies with the appropriate technical support and training on how to run procurements under the Innovation Partnerships procedure.
All government contracts should be opportunities to innovate on a shared risk/shared reward basis, with suppliers allowed to retain IP rights, be given the freedom to develop applications for their innovation and be given assistance to bring them to market.
What further steps can be taken to use public procurement to drive the industrial strategy in areas where government is the main client, such as healthcare and defence? Do we have the right institutions and policies in place in these sectors to exploit government’s purchasing power to drive economic growth?
Brexit presents the opportunity to relax procurement rules for public sector contracts to drive UK priorities and prioritise UK suppliers. In that context, the Government should draw up a post-EU procurement strategy.
Public-sector procurers should be instructed to favour local SMEs and supply chains as long as they are competitive.
There is feeling that, at present, procurers operating nationally prefer to deal with one national supplier for simplicity, even though multiple contracts with a series of local suppliers might be more cost effective. One business said: "They don’t see the advantage of dealing with a local company.”
The Government could reform public procurement to make it more commercial and help to drive and shape sectors where it is the dominant customer, encouraging innovation and supply chain development.
The public sector should develop strategies to open up markets to competition, encourage new entrants and develop supply chains to meet market need, working with partners such as Chambers of Commerce to promote the opportunities and help businesses to understand buyers’ requirements and improve their fitness to be part of supply chains, implementing appropriate systems, gaining relevant accreditations and upskilling employees to meet the procurement criteria.
Support for SMEs could improve capability and interest in public sector procurements, for example helping them adopt a formalised Environmental Management System.
SMEs would also benefit from having some understanding of Environmental Impact Assessments and, to a lesser extent, Strategic Environmental Assessments, to support their tenders.
Explanation and demystification of specialist procurement practices within health and defence would make it easier for SMEs to move between sectors, bidding for contracts across government departments.
There are measures that can be taken to help SMEs gain entry to public sector and also large private sector supply chains.
For example, Cumbria Chamber of Commerce has developed the Supply Chain Gateway. This offers sector and organisation specific information, online tools and resources to help SMEs engage more effectively in supply chains and develop their competencies.
It provides insights into what procurers expect from their suppliers, and support in gaining accreditations, workshops and training, and access to supply chain specialist business advisers and manufacturing support.
Government should actively support schemes like this by encouraging engagement by public sector organisations to ensure they provide input on their opportunities and requirements, enabling impartial organisations such as Chambers to support potential suppliers to develop and take advantage of those opportunities.

Encouraging trade and inward investment
What can the Government do to improve our support for firms wanting to start exporting? What can the Government do to improve support for firms in increasing their exports?
Clearly encouraging and supporting export activity is even more important in the light of Brexit, with the need to support existing export activity (which may become more complex and challenging) as well as new.
Given limited local markets, from a Cumbrian perspective, export activity is particularly important. And Cumbria’s businesses have real potential in this regard with much to offer in terms of national growth and balance of payments – from our world class nuclear sector to our varied and internationally regarded food & drink offer (from larger manufacturers to artisan producers).
Alongside the existing product and service offer there is significant potential in nuclear sector spin offs and diversification. There would therefore be real value in a specialist trade offer for this sector.
Businesses see opportunities to target new markets after Brexit, but identify a need for help to comply with new standards and regulatory frameworks, within Europe and elsewhere.
It would be helpful if the Government could provide targeted relief or support for manufacturers to invest in gaining country-specific standards and accreditations.
Likewise, the Government could expand the scope of its support scheme that underwrites export performance bonds.
The focus of the current offer is on new exporters and on expansion of existing exporters into new geographic markets.
A recent change in the definition of a "new exporter” means that this is now defined as a business which has not exported at all within the last 12 months, with even those who have fulfilled one reactive order excluded. Given that low level reactive response to online enquiries is often what encourages businesses to implement an export strategy this leaves a particular and vital gap in the available support, excluding many of those most open to international trade development and most in need of the support.
This support also needs to be sustained beyond the early stages of trading in that market, supporting the business in establishing sustainability and further growth.
The challenges and opportunities of Brexit also enhance the case for supporting existing exporters to grow sales not just in new markets but also in existing ones.
Businesses were at a loss to understand why the UKTI brand has been dropped, given that it was well established and highly regarded. The "UK” designation has real value internationally yet has been replaced by an anonymous internal "Department” designation which could be anywhere in the world.
Business opinion was divided on DIT and its current offer. Some exporters were full of praise but some smaller businesses say there is insufficient help for them to tackle regulations and paper work associated with exporting.
For example, one SME said that DIT helped them decide which market to target, and made any number of introductions, but could not assist with mechanics such as selecting the right commodity code. As a result, they made a costly mistake and are no longer exporting.
A seasoned exporter observed that DIT is stuffed full of "bright young things” but lacks sufficient people with practical experience. As he put it: "We need people who have done it at the sharp end.”
What can we learn from other countries to improve our support for inward investment and how we measure its success? Should we put more emphasis on measuring the impact of Foreign Direct Investment (FDI) on growth?
The relaxation of state aid rules after Brexit provide an opportunity for government to incentivise FDI.
Opportunities in terms of inward investment are relatively limited within Cumbria, with other part of the country offering more attractive locations in many sectors. From a Cumbrian perspective therefore the focus is as much on retaining and expanding those international businesses already located in the county. With this in mind the ability to provide targeted financial support is often key – with local financial support an important element in decision-making as to location. The presence or not of local financial support can be a deal breaker with, on occasion, some element of support being a required "tick box” and the amount of support largely irrelevant.
We therefore see funding for after-care programmes, and specifically grants to relevant businesses, as a key element in supporting us to retain and grow our existing inward investors.

Delivering affordable energy and clean growth

What are the most important steps the Government should take to limit energy costs over the long-term?
Energy affordability is key to many businesses in Cumbria.
Measures they say would assist them include:
•No tariffs on the import of gas or electricity into the UK;
•Relief for research and early feasibility studies on alternative energy-efficient, low carbon power plants;
•Replacement of the restrictive enhanced capital allowance (ECA) scheme for selecting approved technologies from registered suppliers with an effective 100% ECA scheme for investment in replacement primary energy plants such as combined heat and power plants.
•Abolition of the carbon price floor, which makes the UK uncompetitive.
The crucial thing is to have a robust and affordable energy supply.
The Chamber sees nuclear as a vital part of the energy mix. To support this Government must invest directly as a partner in new build to reduce the end cost of the electricity generated. The danger is that to being in investment Government will raise the strike price and the business community, and individuals, then pay for this. As an investor it would get something back.

How can we move towards a position in which energy is supplied by competitive markets without the requirement for ongoing subsidy?
The Government must be prepared to co-invest to create an investible market for providers without pushing up energy costs. Freed from EU state aid rules post Brexit, it can use return on investment in a constructive way

How can the Government, business and researchers work together to develop the competitive opportunities from innovation in energy and our existing industrial strengths?

In terms of national energy strategy, businesses support nuclear but are puzzled why the UK is adopting three different reactor technologies for the proposed power stations at Hinkley Point, Wylfa and Moorside. They feel that this is likely to prove more costly than adopting one reactor model for all three sites.
There was also concern around the funding model for nuclear new build. Specifically, that strike price for electricity from Hinkley Point C, at £92.50 per MWh, is too high adding to costs for businesses, and that Moorside might not happen at all given the problems affecting its sole backer Toshiba.
Government should consider taking a minority equity stake in nuclear new build projects to ensure they go ahead. This would reduce the risk to the majority private-sector investors, reduce the strike price of the electricity, and ultimately provide a return to taxpayers.
The Chamber believes there is scope to utilise combined heat and power plants alongside nuclear new build to provide low-cost heating to nearby homes and businesses.
How can the Government support businesses in realising cost savings through greater resource and energy efficiency?
There is a need for grants and/or tax breaks for business to encourage them to invest in low-carbon technology that will reduce energy consumption.
But it is important that any regime of grants and reliefs is stable, so that businesses can plan with confidence. Sharp reductions in solar feed-in tariffs in 2016, for example, forced many PV panel installers out of business.
There is also a need for impartial technical support to advise SMEs on energy efficiency.

Cultivating world-leading sectors
How can the Government and industry help sectors come together to identify the opportunities for a ‘sector deal’ to address – especially where industries are fragmented or not well defined?
Key to this is working with relevant industry bodies and business membership organisations, developing constructive relationships and respecting their roles and reach back into the business community, rather than seeking to create new relationships and bodies.
In doing so genuine engagement into local areas is vital, ensuring a genuine nationwide, rather than London or London and Manchester centric, view. Similarly there is a need to avoid domination of discussions by a small number of large players in the business community.
Clearly from a Cumbrian perspective a sector deal for nuclear is a key priority.
The visitor economy is another key sector for Cumbria for which we would value the opportunity for a sector deal – and one which is fragmented and complex with varying views of what does and what does not fall within the sector.
Advanced manufacturing also poses challenges in terms of diversity and fragmentation. The food & drink sector is an interesting challenge given the diversity within the sector and differing needs and interests of the large industrials compared to the smaller scale, more artisan producers who also offer significant opportunity for growth.
How can the Government ensure that ‘sector deals’ promote competition and incorporate the interests of new entrants?
To achieve this there is a need to ensure that deals are genuinely based on the interests of the sector as a whole and not on driven by the input of a small number of players protecting their own interests.
There is a need to consider whether it is in the strategic interests of developing the sector to proactively encourage new entrants and if so what measures are appropriate to encourage this for that sector. Potentially there could, for example, be consultation with potential entrants and business organisations.
Promotion of competition can be achieved by ensuring, in the nuclear sector for example, that all parties gain from innovation and that there are no restrictive constraints on harnessing innovations for new commercial applications.

How can the Government and industry collaborate to enable growth in new sectors of the future that emerge around new technologies and new business models?
Government probably can’t – it is too cumbersome and is likely to be too far behind the curve to make a difference.
What it can do is make sure that investment vehicles, and the British Business Bank, are responsive to new technologies.
And it can invest in infrastructure such as Daresbury, the National Science and Innovation Campus in Cheshire.

Driving growth across the whole country

Do you agree the principles set out above are the right ones? If not what is missing?
Opinion is divided on HS2 as a vehicle for promoting growth. Some see it as beneficial but others as a waste of money and possibly a threat, with the danger that passengers from Cumbria to London might have to change trains. There are concerns that it will divert investment in rail services elsewhere and, more widely, that the investment in HS2 could be more productively used.
Better east-west connectivity is a priority for businesses in Cumbria, for both road and rail.
What are the most important new approaches to raising skill levels in areas where they are lower? Where could investments in connectivity or innovation do most to help encourage growth across the country?
Access to a skilled workforce as a vital lever of growth. The education system should be student-focused rather than institution centred, and sixth forms in particular, large enough to offer an appropriately wide range of courses with the requisite facilities.
Students who study locally are more likely to stay in the county when they graduate – helping to combat a ‘brain drain’ – and so business is keen to see an enhanced higher education offer in Cumbria. This could best be achieved by using existing HE and FE institutions in the county as ‘gateways’ to learning elsewhere, allowing Cumbrian students to live and study close to home but access learning at excellent institutions nationally, and indeed internationally.
All pupils must be offered meaningful work experience along the lines of the A Chance to Shine scheme pioneered by Cumbria Chamber of Commerce.
One suggestion from businesses is that Government could help address the skills shortage by offering "relocate to Cumbria” grants, helping to encourage relocation (and help address house price/distance issues), in particular where they have the offer of a job in a specified priority sector such as advanced manufacturing.
One advanced manufacturer said: "We are turning business down because we haven’t got the people. There are people with the skills we need. The challenge is to bring them to Cumbria.”
In Cumbria, the large corporates carrying out the major projects at BAE Systems, Sellafield and GSK are not confident that the skills they require exist in the county in the numbers required.
Skilled workers have to be brought in while Cumbria’s unskilled school leavers migrate out. This presents a huge challenge and underlines the requirement for government to focus on educational attainment and skills.
It also underlines challenges unique to Cumbria rather than a single country-wide approach. This is the case for devolution in a nutshell.
Another issue in a large, rural, county such as Cumbria is the cost and difficulty of travel. This prevents job seekers in towns such as Barrow, where unemployment is relatively high, from taking work in Kendal or Windermere where employers are struggling to recruit. Fares are expensive and the absence of subsidies for buses mean services are patchy and infrequent.

Creating the right institutions to bring together sectors and places
Recognising the need for local initiative and leadership, how should we best work with local areas to create and strengthen key local institutions?
Businesses are supportive of Local Enterprise Partnerships in principle, but feel that Cumbria LEP has underperformed and is dominated by the public sector.
They criticise the LEP for pursuing "big-ticket schemes” that tick boxes for funding, rather than listening to businesses. A hotelier told us: "We as a sector went through quite an extensive skills audit with the LEP, but that was hardly reflected at all in the work they put together.”
Businesses want to see a larger private sector presence on the LEP board, perhaps 75 per cent rather than 50 per cent as is the case now.
Some believe the LEP has been hampered by the two-tier system of local government that still applies in Cumbria. This is seen as wasteful and inefficient, and makes it difficult for the county to speak with a coherent voice. Businesses blame local authorities for failing to secure a devolution deal from government in 2015-16 and have given up hope that Cumbria’s seven local authorities can agree among themselves on a proposal for unitary local government. There is a widespread view that government should impose reorganisation.
Businesses are also keen to see Cumbria secure a devolution deal and hold elections for a directly elected mayor.
What are the most important institutions which we need to upgrade or support to back growth in particular areas?
Local Enterprise Partnerships need a common governance structure and proper accountability.
But the biggest problem with LEPs is that they are too small to function effectively. If the Northern Powerhouse is the vehicle for regional growth and renewal, there should be a regional organisation to co-ordinate public funding streams and pitch the benefits of investing in the North to overseas investors.
There is a lack of consistency of LEP governance models which is a real concern and continues to leave a number of LEPs open to criticism from the business community. If the LEP model is to continue and to be effective therefore there is a need for alignment of governance and structures, ensuring LEPs openly and transparently reflect the membership of the board and constituencies they represent.
As part of this LEPs should be aligned to some sort of regional construct.
The Northern Powerhouse region is beginning now to gain international traction as an attack brand for the north of England and there is a desire in the business community of Cumbria to own and get behind this brand.
It would be sensible, therefore, not to restart the concept of an RDA but to introduce a politically-independent regional body for the Northern Powerhouse (and potentially equivalents elsewhere) with a governance (i.e. board structure) similar to the RDA boards, reporting and answerable directly to relevant ministers. This would be along the lines of a non-departmental public body, but not necessarily with all of the RDA powers. It should have oversight of LEPs in terms of performance, with LEPs reporting and answerable to both this body and local stakeholders.
Tourism businesses are frustrated that promoting tourism is not a statutory function of local authorities, leading many to withdraw support for the sector in response to austerity. Government needs to find ways of growing capacity of leadership in the sector to help businesses adapt.
Are there institutions missing in certain areas which we could help create or strengthen to support local growth?
No, but funding and business growth initiatives should be channelled through membership organisations that have a proven track record of delivering effective business support, such as Chambers of Commerce.
Tourism businesses believe that World Heritage Site designation for the Lake District would enhance its offer as a premium cultural destination.

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