Clusters and Key Sectors in Crawley July 2004 · Clusters can therefore be a key element in generating sustainable economic growth. This analytical framework has been used at various

Clusters and Key Sectors in Crawley

July 2004

Crawley Borough Council – Cluster Support Strategy

SEER Consulting – July 2004

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Contents

EXECUTIVE SUMMARY .........................................................................................3

INTRODUCTION........................................................................................................6

1. POLICY CONTEXT .......................................................................................7

1.1 THEORETICAL CONTEXT ................................................................................7 1.2 NATIONAL POLICY CONTEXT .......................................................................10 1.3 REGIONAL POLICY CONTEXT .......................................................................10 1.4 LOCAL POLICY CONTEXT .............................................................................12 1.5 ROLE OF CLUSTERS OR KEY SECTORS IN SUPPORTING SOCIAL INCLUSION..................................................................................................................................13

2. THE HUNT FOR CLUSTERS IN CRAWLEY..........................................16

2.1 METHODOLOGY ............................................................................................16 2.2 CLUSTERS AND KEY SECTORS ....................................................................17 2.3 CLUSTER SPOTTING METHODOLOGY: AN OVERVIEW ................................18 2.4 WHY IS ADVANCED MANUFACTURING NOT A CLUSTER? ...........................19 2.5 WHY IS OTHER BUSINESS ACTIVITIES NOT A CLUSTER? ...........................20

3. KEY SECTORS AND BUSINESS ISSUES ................................................21

3.1 CROSS-CUTTING BUSINESS ISSUES AND PRIORITIES.................................21 3.2 RETAIL ..........................................................................................................24 3.3 HOTELS AND RESTAURANTS........................................................................25 3.4 OTHER BUSINESS ACTIVITIES......................................................................25 3.5 ADVANCED MANUFACTURING ......................................................................26 3.6 GATWICK AIRPORT.......................................................................................27 3.7 CRAWLEY’S BENEFITS .................................................................................27 3.8 GROWTH AND THE FUTURE .........................................................................27

4. ISSUES FOR DISCUSSION.............................................................................29

5. CONCLUSION ..............................................................................................32



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Executive Summary Crawley Borough Council commissioned SEER Consulting to assist with gathering information on the structure of the Crawley economy. The research provides robust empirical evidence on clusters and sectors of key importance to the local economy, which can be used to inform efforts to diversify the economy. It will also aid the Local Economy Action Group to prioritise its work for the next 18 months. We broadly repeat the Department of Trade and Industry’s (DTI) cluster methodology and build on it by interviewing 29 businesses, relevant business organisations and the Crawley Business Panel.

• Cluster theory defines clusters as “geographic concentrations of interconnected companies and institutions in a particular field…which encompass a range of linked industries and other entities important to competition”. Clusters are important to sustainable economic growth because they improve an area’s competitiveness by increasing productivity, driving innovation and stimulating new business formation.

• There needs to be a concentration of businesses and a supply chain

relationship or there cannot be a cluster. There are three critical success factors for clusters – networks and partnerships, innovation and research and a strong skills base.

• Clusters cannot be artificially created by public sector intervention.

Instead, cluster policy should support, develop and retain existing clusters.

• Cluster and key sector development has a role in regeneration and

social inclusion by increasing employment (both directly and indirectly), bringing new money to an area, increasing the skills of the local community and increasing business involvement.

• Crawley has concentrations of businesses in Air Transport, Advanced

Manufacturing, Other Business Activities, and Computing and Related Activities. Input-output analysis showed that Other Business Activities was the only concentrated sector that had a local supply chain. Although not concentrated, Hotels and Restaurants and Retail employ over 16% of the workforce and are therefore ‘key sectors for the local economy’.

• Four sectors were explored in more depth in the interview process to

establish their needs and to what extent they cooperated and competed like a cluster. These sectors were, Other Business Activities (because of its concentration and supply chain linkages), Hotels and Restaurants and Retail (because they employ a large proportion of the



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workforce), and Advanced Manufacturing (concentrated in the data, little evidence of supply chain linkages, but previously identified in the DTI report).

• Gatwick Airport plays a pivotal role in the Crawley economy. 35% of

businesses on the Business Panel reported that they had a linkage with Gatwick Airport, including supplying them with goods and services, and using it for business travel.

• The Airport was seen as both a positive and a negative factor for the

local economy – increasing the status of the area on one hand and increasing competition for staff and increasing congestion on the other.

• The data analysis and interview process found that there are no

clusters in Crawley. Therefore, it is important that strategy and policy addresses and supports the needs of Crawley’s ‘key sector’ employers and develops and retains existing businesses.

• Hotels and Restaurants, Retail and Other Business Activities have

been identified as ‘key sectors’ because they employ a large proportion of the workforce. Together they offer a mix of high and lower skilled employment and have significant growth potential.

• Advanced Manufacturing makes up less than 5% of local employment,

however it increases the range of job opportunities available to local people and increases the diversify of Crawley’s economy. Advanced Manufacturing is also more concentrated in Crawley than nationally. Therefore, Advanced Manufacturing is a strategic ‘key sector’.

• Businesses in all the ‘key sectors’ reported a number of priorities for

support. These included crime, the image of Crawley, skills of the workforce, lack of medium sized premises, and parking. Some also wanted Crawley Borough Council to have a ‘buy local’ policy and to be more responsive to their needs. Some respondents were considering their position in Crawley as commercial rents and business rates were thought to be very high.

• The skills of the workforce were a particular problem in the key sector

of Retail. Working with the Skills for Life Development Centre and a recently successful ESF bid may help to tackle this issue.

• The quality of the town centre’s shops, bars and restaurants was of

concern to companies in the key sector of Other Business Activities. Increasing the range of Retail and Hospitality in the town centre would encourage people to spend money in the town at lunchtime and after work. It may also aid retention of businesses.



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• Many of the priorities that the ‘key sectors’ identified are in the Local Economy Action Plan. Other priorities within the plan were not mentioned by respondents. For example, some businesses wanted more recycling, which had not been identified in the Action Plan. When prioritising actions, a balance needs to be struck between managing continued sustainable economic growth, supporting the key sectors and enabling local people to access all the opportunities the economy has to offer.

• It should be borne in mind that these findings reflect the thoughts of

businesses whose main aim is to make money. While their priorities should be considered, a long term, more holistic approach may need to be adopted to balance the interests of local businesses in the short to medium term, with long term needs of local people, the local environment and the borough.



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Introduction Crawley Borough Council commissioned SEER Consulting (a division of Sussex Enterprise) to assist with gathering information on the structure of the Crawley economy. There are three principal objectives for this study:

• To provide robust empirical evidence on any clusters and sectors of key importance to the local economy. This will inform the work of the Local Strategic Partnership.

• To inform Crawley Borough Council’s efforts to diversify the local

economy from dependence on the airport.

• To make recommendations for the Council and their partners in terms of support for local employment, industries. If clusters are found, suggestions that complement existing cluster development work and strategies at regional and local level will be made.

In this report we make a clear distinction between ‘clusters’ and ‘key sectors’. This is because there is an increasing tendency within economic development circles to use ‘clusters’ as an umbrella term for groups of businesses in a related field of activity. In this report we use the original meaning of the term ‘cluster’ as developed by Michael Porter, and we repeat the Department of Trade and Industry’s methodology for the hunt for clusters in Crawley.1 Businesses in a ‘cluster’ work and compete in different ways than businesses in a key sector. Therefore this distinction is critical to inform the most appropriate support and development strategy. After the data analysis process, 29 interviews with companies in potential ‘clusters’ and key-sectors were conducted to assess the extent to which businesses work together and compete, their business issues, and the ways in which these businesses could be best supported. Interviews were also conducted with relevant business support organisations. Members of Crawley Borough Council’s Business Panel were also asked to complete a questionnaire which covered similar issues by telephone (with 112 responses in the relevant key sectors).

1 Our Competitive Future – Building the Knowledge Driven Economy: DTI 1998



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1. Policy Context In this section we summarise the policy context for the study and look at the theory of defining clusters; national and regional cluster policy; and the local strategic framework into which any cluster support activities will fit. We also look at evidence and issues around the role of cluster and key sectors in supporting social inclusion. 1.1 Theoretical Context Why is the film industry concentrated in Hollywood and not spread evenly across the globe? Why is the bulk of the UK’s financial service industry based in London? As the economy operates on an increasingly global scale aided by transport, and information and communication technology, it is perhaps surprising that competitive advantage is increasingly found more locally. Local knowledge, pools of specialist firms, face-to-face networking and interaction, and local rivalry provide competitive advantages that distance cannot match. These agglomerations of competing businesses have been termed ‘clusters’. The rise of modern cluster theory can be traced back to a study of “The Competitive Advantage of Nations” by Michael Porter, published in 1990. This argued that the economic competitiveness of nations and regions is based on internationally competitive “clusters” of economic activity. Porter argues there are only a few true clusters, and that a predominance of low value-added, locally trading companies is normal – even for the most dynamic regions in the world economy. Therefore, when looking for clusters in Crawley it is important to bear in mind that a predominance of low value added companies would be normal. If clusters were not found the question would then be how to build on and support the key sectors that exist. He defines clusters as “geographic concentrations of interconnected companies and institutions in a particular field. Clusters encompass an array of linked industries and other entities important to competition.”2 He adds that “clusters affect competition in three broad ways: first, by increasing the productivity of companies based in the area; second, by driving the direction and pace of innovation, which underpins future productivity growth; and third, by stimulating the formation of new businesses, which expands and strengthens the cluster itself” (Porter 1998, p80). Clusters can therefore be a key element in generating sustainable economic growth. This analytical framework has been used at various levels of UK government and governance, eager to find ways of promoting local and sustainable

2 Porter 1998: Clusters and the New Economics of Competition’ Harvard Business Review, p78



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economic development. In order to apply the framework to this study, we must first examine the theory of clusters in a little more depth. This is so that we can understand what is so “special” about clusters, and what makes them different from ordinary sectors. Porter’s Diamond of Competitive Advantage Porter identified four broad attributes of a nation (that we will apply to Crawley/West Sussex) that individually and collectively determine the competitive environment. These attributes are shown in Figure 1. Figure 1: Porter’s Diamond of Competitive Advantage Factor Conditions: such as, infrastructure, skills, and capital availability. Demand Conditions: refers to the nature of the home market demand for the industry’s product or service. This must be sophisticated if it is to support international competitive advantage. Related and Supporting Industries: the presence of supplier and related industries that are internationally competitive. Firm Strategy, Structure and Rivalry: the conditions determining how companies are created, organised and managed, as well as the nature of domestic rivalry. Clusters are dynamic and have a recognisable lifecycle. The interventions and support that are appropriate at an early stage in the lifecycle of a cluster are likely to be very different from those at later stages. The lifecycle is often

Firm Strategy, Structure

and Rivalry

Demand Conditions

Related and Supporting Industries

Factor Conditions



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described in different ways, but can be represented simply as a cyclical process containing four stages (see Figure 2): Fig 2: The Stages of the Cluster Lifecycle Embryonic

Declining

Established

Mature

• Embryonic Clusters – those at the early stages of growth • Established Clusters – those perceived as having room for further

growth • Mature Clusters – those that are stable or will find further growth

difficult • Declining Clusters – those that have reached their peak and are failing

or declining – clusters at this stage are sometimes able to re-invent themselves and enter the cycle again.

Moving between the different stages of the cluster lifecycle may be simply a function of a product’s lifecycle. As the technology and product base of a cluster matures innovation is required to maintain successful performance. If any ‘clusters’ are identified within Crawley we will assess what stage it is at during its lifecycle. Alongside assessing the presence of elements of Porter’s Diamond we need to also look for three ‘critical success factors’ for clusters identified by the DTI:

• “the presence of functioning networks and partnerships, • a strong innovation base with supporting research and

development activities where appropriate; and • the existence of a strong skills base”3

3 A Practical Guide to Cluster Development – Department of Trade and Industry 2003



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We will need to assess the presence and strength of these factors in our hunt for clusters in Crawley. Before we do that, we will review previous national and regional cluster research to understand current thinking about clusters. 1.2 National Policy Context Clusters were initially identified by the DTI as an important area of economic development in the 1998 Competitiveness White Paper. The first map of national cluster activity was published in February 2001 “Business Clusters in the UK: a First Assessment”. This was published in tandem with a joint DTI and DfEE White Paper “Opportunity for All in a World of Change” which encourages Regional Development Agencies (RDAs) to develop existing and embryonic clusters in their region, with particular emphasis on emerging technologies and links to Higher Education: “The DTI cluster policy is to create the conditions that encourage the growth and formation of clusters, but not to artificially create clusters”. Cluster research tends to concur that clusters cannot be artificially created and in the UK, DTI cluster policy is not advocating the creation and support of ‘clusters’ that are based on little evidence. Rather its aim is that regional and local bodies are aware which concentrations of businesses exist in their area, and of the issues and implications of this for policy and business support. 1.3 Regional Policy Context The DTI established a £15m Innovative Clusters Fund (ICF) in 2000-2001 as a pioneer funding stream to RDAs to promote cluster development and business incubation in the regions. A further £35m was provided by the DTI, as part of its Regional Innovation Fund (RIF), to the RDAs in 2001-2002 to carry forward and progress their initial proposals. From 2002-2003, the RIF has been subsumed within the ‘Single Pot’ funding arrangements for the RDAs, increasing their flexibility to mix funds to promote regional economic development. Clusters and business incubation will continue to form a key driver of this process in line with their Regional Economic Strategies. However, some commentators have been critical about the way that the cluster theory has translated into public policy: “The process of agreeing priority clusters has been fairly protracted … the pressure to achieve consensus between partners has tended to extend the list of potential clusters.” (Peck and McGuinness, 2003, p53) “… the RDAs have tended to ‘err’ on the side of inclusivity rather than the kinds of selectivity implied in much of the clusters debate.” (Peck and



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McGuinness, 2003, p54). This is illustrated in the extensive list of ‘clusters’ identified in SEEDA’s Regional Economic Strategy. In this study our intention is to treat only ‘true’ clusters as clusters, and where appropriate identify potential or embryonic clustering and any sectors that are likely to be of long-term strategic importance for Crawley. The DTI report ‘Business Clusters in the UK – a first assessment’ identifies the South East as having “one of the UK’s most diversified regional economies. There are 134 industries that are over-represented in the region” relative to national employment shares. This diversity probably owes something to the region’s large size. The report identified eight substantial regional clusters, and many other less mature and less important clusters in the South East. Sussex or Surrey was mentioned as being a major contributor to some regional clusters, and local or less substantial clusters. These are listed below and where mentioned any specific localities are shown. a) Substantial regional clusters

Pharmaceuticals and biotechnology – Sussex University has research strengths in biochemistry, pharmacology and biological science, Surrey University has a bio-skills unit dedicated to the development of training materials for the industry Software and computer services – media and new/ digital media in Brighton, Surrey e-commerce and telecoms Instrumentation – Crawley (medical devices) Information/ communication technology and electronic equipment – Surrey (including Redhill), Surrey University has a strength in electrical and electronic engineering Finance – Brighton (consumer credit and hire purchase), Worthing (non-life insurance), Reigate/ Redhill (life insurance and leasing) Consultancy and Business Services – throughout the South East

b) Local or less substantial clusters

Perfumes and Toiletries – concentrations in Sussex



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SEEDA has identified industries that “offer significant clustering potential”4 in West Sussex. These are:

• Advanced Engineering • Bio-technology • Care Services • Financial Services • Logistics • Marine Technologies • Medical Equipment • Motorsports and Automotive • Pharmaceuticals • Tourism and Hospitality

We will bear these regional clusters in mind when we subsequently examine activity in Crawley. Any ‘clusters’ in Crawley are likely to have links to businesses in related or supporting industries in parts of Sussex, Surrey or the South East region as a whole. 1.4 Local Policy Context This section sets out the local policy framework within which the cluster and key sector support activity will operate. Crawley’s Local Strategic Partnership, Crawley Together, sets out the six priority issues for the town in A Vision for Crawley, 2003 to 2020. Local Action Groups have been set up to develop actions to work towards and achieve the priorities. The six priorities in the Vision and their relation to business are:

• Affordable Housing – concern that the affordability of housing in Crawley is contributing to recruitment problems

• Community Safety – including the adverse affects of crime on business

• Local Economy – diversification away from dependence on Airport related industries, develop into a regional retail centre, access to more highly skilled work for local people

• Health and Social Care • Education and Life-long Learning – improve the skills of the

community so local residents can enjoy the best jobs on offer • Local Environment – improve cleanliness, graffiti and vandalism

The Local Economy Action Group is working towards achieving priorities within the local economy and has identified the following priorities:

• Creating a positive image of Crawley – to reverse the negative perception of Crawley

• Encouraging a thriving economy – to provide a diverse range of job opportunities, community support and address social inclusion issues

4 SEEDA – The Regional Economic Strategy for South East England 2002 - 2012



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• Ensuring the right transport infrastructure – to ensure transport is integrated and accessible

• Developing and regenerating Crawley town centre and neighbourhood centres – to improve the choice and quality of shops

However, there are many issues that affect businesses that are included in other themes in A Vision for Crawley, so it is important that the voice of business is heard within each of the other five local priorities. Crawley currently enjoys a strong sub-regional retail position. It has been identified that significant further retail growth is both vital and viable, and therefore the sector is of strategic importance to the town.5 To develop and regenerate Crawley Town Centre a major, mixed-use, retail-led scheme is planned. Crawley Borough Council is currently re-working its Economic Development Strategy, which this research will inform. The three principal themes are Diversification (through business support and development), Skills and Image. 1.5 Role of Clusters or Key Sectors in Supporting Social Inclusion Equality of access and opportunity is at the heart of the work of Crawley Together. The partnership aims to “narrow the gap between those that have and those that don’t – whether that be education, health, or opportunities to work – and in so doing leave no one behind”6 ‘Cluster development’ and key sector activity forms an important part of the regeneration agenda for all the English regions. Primarily, this reflects the philosophy that the growing clusters will generate sustainable economic growth, jobs and income and a general improvement in prosperity. As well as promoting sustainable economic growth, ‘clusters’ and growing key sectors have the potential to support an area’s social inclusion and regeneration agenda. A recent report by the ODPM7 concluded that, “business regeneration initiatives in deprived areas have been most successful (in terms of additionality and business survival) where they have been targeted and selective according to the sector and business type”. However, as with other employment and physical regeneration schemes, past development of such activity has not always had a significant impact on the most disadvantaged local communities and individuals. An example is Silicon Valley in California where, despite the phenomenal economic growth brought about by the ‘IT cluster’, pockets of severe deprivation still exist, made worse by the rising cost of property. 5 Crawley Town Centre North – Draft Development Principles Statement 6 Crawley Together – A Vision for Crawley – 2003 to 2020 7 Business-led regeneration of deprived areas, ODPM



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The development of clusters or key sectors can promote social inclusion in several ways:

• By generating direct employment for disadvantaged communities and people

• By generating indirect employment in the local economy, providing work and income (e.g. in service sector or construction jobs)

• Through linked skills development activities to raise the potential and aspirations of local people

• Where new and growing businesses become involved within the local community

The ways that clusters and key sectors can promote social inclusion are discussed below.

Direct Employment for Disadvantaged Communities The degree to which clusters and growth sectors provide direct employment to local disadvantaged people will be highly dependent upon the skill levels of jobs being created. In general, the sectors, which are defined as ‘clusters’ through national and regional work, tend to be characterised by high skills levels and a technology focus. This can reduce their value for meeting social inclusion objectives in the short and medium term.

Indirect Employment for Disadvantaged Communities When indirect employment is generated by direct employment in highly skilled clusters then new spending in the local economy can create jobs across a range of local services. Such spending is likely to support employment in the leisure economy (bars, restaurants); personal services like hairdressing; retailing; as well as demand for services like car repair and maintenance and property maintenance and construction.

Skills development activities Irrespective of the prevalent skills level in a sector, some sectors have a greater culture of skills development than others. The development of clusters and key sectors will have a far greater social inclusion impact where employees are developed, acquire skills and progress.

Business Involvement within the Local Community To meet social inclusion objectives, a successful cluster and key sectors strategy should aim to ensure new and growing businesses become involved and embedded in the local community. This is more likely to lead to local recruiting; to involvement in giving and in-kind support to local community



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projects; and to support for work experience, intermediate labour market and other employment creation schemes. Now we have an understanding of the national, regional and local policy context, how cluster and key sector policy can support social inclusion and the types of conditions and inter-relationships we are looking for between firms and sectors, we can begin to hunt for clusters in Crawley.



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2. The Hunt for Clusters in Crawley This section focuses on identifying and quantifying clusters that conform to Michael Porter’s definition of clustering and identifying key sectors and other strategically important activities. In this section we use data analysis techniques, supported by qualitative research to repeat the methodology used for the DTI’s cluster identification study and to apply it using data for Crawley. Full details of the methodology are discussed in the annexe. In this section we summarise the main steps in this analysis and the potential clusters and sectors that have been identified at each stage. 2.1 Methodology It is impossible to conclusively prove the existence of a cluster from data analysis alone, as “clusters rarely conform to standard industrial classification systems, which fail to capture many important actors and relationships in competition” (Porter 1998, p79). Therefore, true cluster mapping needs to take place by talking to individual businesses and agencies to understand the local business population. However, “every cluster is in sense an agglomeration, but not every agglomeration is a cluster” (DTI 2001, p4). This means that we can use data analysis as the starting point for cluster identification: There must be a concentration and supply chain relationship, or there cannot be a cluster. There are two ways in which businesses may operate as part of a ‘cluster’ or key sector. Figure 3 shows the traditional business supply chain relationship, where business 1 supplies business 2 who in turn supplies business 3 and business 3 supplies the end consumer. Figure 3: Business Supply Chain Relationship

Business 1

Business 2

Business 3

Consumer

Alternatively businesses in different sectors may serve the same consumer by providing complementary goods or services. For example, in Crawley businesses in the hotels, restaurant and airport industries may serve the same customers (see Figure 4).



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Figure 4: Customer-focused Business Relationships

Business 1 Customer Business 2

Business 3

2.2 Clusters and Key Sectors Remembering that “there must be a concentration and supply chain relationship, or there cannot be a cluster”, as a first stage we analysed which sectors of the local economy have a high concentration (i.e. above UK average proportions of employment) and which have a large share of local employment. Eight sectors have a share of employment that is greater in Crawley than for the UK as a whole and/or a significant proportion of local employment. These are listed below in descending order of concentration of employment. Industries with concentrated employment in Crawley8 Sector Relative

concentration (UK = 100)

Percentage of Crawley

employment Air transport 3831 14.2% Supporting/ Auxiliary Transport 576 9.4% Manufacture of medical / precision instruments

395 1.9%

Manufacture of other transport equipment 269 1.6% Other business activities 156 17.8% Post and telecommunications 155 3.5% Computing and related activities 137 2.8% Manufacture of chemicals and chemical products

132 1.2%

Hotels and Restaurants 103 6.8% Retail trade, except of motor vehicles 82 9.3%

The six sectors at the top of the table suggest potential for ‘clustering’ because of their high relative concentrations, as well as their reasonably significant employment share. The analysis set out in Section 2.3 in this report and in the Annexe undertakes a closer examination of these sectors to determine their potential as clusters. The two sectors listed above in grey do not qualify as clusters under our definition (because they are not concentrated). However, because of their 8 Only those sectors with greater than 5% of total employment have been included as key sectors



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large percentage of employment, they are clearly ‘key sectors’ as together they employ over one in six people in Crawley. The key sectors are not clusters because they do not conform to the concept of clustering as set out on page 6, this is largely because the sectors primarily serve the local market rather than being competitive in national and international markets. 2.3 Cluster Spotting Methodology: An Overview Table 1 summarises the steps we have gone through in the cluster analysis, and the sectors that were identified at each stage. At each phase, some activities were refined and others dropped, as they did not meet the criteria for progression. Table 1: Summary of ‘Cluster’ Analysis Findings Phase Activity identified 1) Search for concentrations of employment by sector (SIC 2 digit) (see section 2.1 in the annexe)

Manufacture of chemicals and chemical products Manufacture of other transport equipment Manufacture of medical/ precision instruments Air transport Supporting and Auxillary Transport Post and telecommunications Retail Hotels and Restaurants Other business activities (including advertising, security and labour recruitment) Computing and related activities

2) Identification of concentrations of employment by sub-sector (SIC 3 digit, LQ>1.25 and employment>1% within Phase 1) (see section 2.2 in the annexe)

Manufacture of pharmaceuticals Manufacture of instruments for measuring Data Processing Architectural/ engineering activities Labour Recruitment Investigation and Security

3) Identification of potential supporting industries (SIC 3 digit, LQ>1.25, employment<1%) (see section 2.3 in the annexe)

Manuf: medical/surgical equipment nec Maintenance/repair:office machinery etc Activities of Other Transport Agencies Advertising

4) Identification of supply chain relationships (Input-output analysis, LQ>1.25) (see section 2.4 in the annexe)

Other Business Activities

5) Analysis of linkages (Interview evidence)

None

For a detailed presentation of the methodology and evidence, please refer to the technical annexe to this report. From the evidence in stages 1-4 in Table 1 and the percentage of employment in Crawley we identified four different sectors to explore in more depth in the interview process. These were, Other



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Business Activities (because of its concentration and supply chain linkages), Hotels and Restaurants and Retail (because they employ a large proportion of the workforce), and Advanced Manufacturing (concentrated in the data, little evidence of supply chain linkages, but identified in the DTI report). One aim of this study was to inform Crawley Borough Council about the possibilities for diversification of the local economy, therefore we have not investigated the Air Transport sector, however, it is obviously important to the local economy. Our analysis, combined with the interview evidence and discussion in the annexe, leads us to believe that there are not any true ‘clusters’ in Crawley that have strong networks and partnerships, a strong skills base, innovation and research capacity. However, there are several significant concentrations and large employers. These ‘key sectors’ are Hotels and Restaurants, Retail and Other Business Activities. Although it does not employ more than 5% of people in Crawley, Advanced Manufacturing is a strategic key sector for the borough as it increases the range of work available to local people and the diversity of the local economy. 2.4 Why is Advanced Manufacturing Not a Cluster? A medical device and instrumentation cluster had been identified in Crawley in previous research by the DTI – a first assessment of clusters in the UK. However, although advanced manufacturing is concentrated in Crawley (including in instrumentation), input-output and interview evidence suggests that the companies do not operate in ways that indicated they are a true ‘cluster’. The Advanced Manufacturing companies concentrated in Crawley are not part of local supply chain relationships, do not have strong networks and partnerships and do not share innovation and research and development capacity. In general, the advanced engineering companies we spoke to sourced their inputs nationally or internationally, although supported local companies wherever possible. Despite being in the same broad sector the companies were making very different end products, and their main competitors were national. Several of these companies were the regional headquarters of multi-national corporations and they did not compete, or collaborate in ways that would indicate they were part of a cluster. It is widely recognised that ‘clusters’ cannot be created by public sector intervention. The large presence of Advanced Manufacturing companies in Crawley is likely to be due to historical coincidence. The new town of Crawley was built about 50 years ago with an industrial park, Manor Royal, which attracted businesses in industries such as engineering. These businesses located in Crawley within a short space of time, rather than competing,



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collaborating, developing networks and growing ‘spin-offs’ and evolving as a ‘cluster’. Advanced Manufacturing was identified as having potential for clustering in SEEDA’s Regional Economic Strategy. Although not clustered in Crawley the sector could be a part of a South East wide concentration. Although it does not account for more than 5% of people in Crawley, Advanced Manufacturing employment is concentrated in the town and is a strategic key sector for the borough as it increases the range of work available to local people, and the diversity of the local economy. 2.5 Why is Other Business Activities Not a Cluster? The Other Business Activities sector employs 18% of the workforce in Crawley and is concentrated in the local area, particularly in the sub-sectors of labour recruitment, and investigation and security (together contributing 11% of employment). Within Other Business Activities there are several sub-sectors, some of which involve high skilled employment, such as solicitors and accountants, and others such as security which generally offer low-skilled employment. A supply-chain relationship is evident in the data, however interview evidence suggests that companies do not innovate, collaborate and compete in ways that make them a ‘cluster’. The way the Annual Business Inquiry data is collected means that some companies in the labour recruitment sub-sector include their clients in their number of employees. Therefore the 9% of employment in Crawley within the labour recruitment sub-sector is likely to indicate a large number of people in temporary employment, rather than a ‘cluster’. The sub-sector of security includes, passenger and luggage inspection and surveillance. It is likely that a large proportion of employment in this sector is supported by Gatwick Airport. Even excluding a large number of flexible workers, and airport related activity the sector from our calculations, Other Business Activities still makes up more than 5% of local employment, therefore it should be treated as a ‘key sector’. Unlike the other ‘key sectors’ we have identified, Other Business Activities offers opportunities for higher skilled employment for the borough. The DTI report identified the presence of Consultancy and Business Services throughout the South East. However, the sector was not included within West Sussex in the Regional Economic Strategy. Other Business Activities in Crawley could be part of a South East wide ‘key sector’.



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3. Key Sectors and Business Issues Given that our research has found no evidence for true clusters it is important that strategy and policy addresses and supports the needs of Crawley’s ‘key sector’ employers. This section explores the data from 29 interviews with senior managers in companies and 112 companies from the Crawley Borough Council Business Panel, highlighting the key business issues. This will help to inform the Local Economy Action Group priorities. The Local Economy Action Group Plan covers four main areas;

• Creating a positive image of Crawley • Encouraging a thriving economy • Ensuring the right transport infrastructure • Developing and regenerating Crawley town centre and neighbourhood

centres Within each of these priorities a series of actions have been identified. Many of these issues and priorities were voiced by the businesses we spoke to. However, some issues were more of a priority than others and some topics were of more concern to certain industries than others. Sections 3.1-3.5 give details of issues and priorities for all industries and other issues that are sector specific. 3.1 Cross-Cutting Business Issues and Priorities Before we look at how Crawley Borough Council should best support its key sectors, we need to understand the barriers and issues that Crawley businesses currently face. Some of these are generic to most businesses, others affect some of the ‘key sectors’ disproportionately. Sussex Enterprise Annual Business Survey 2003 found that the issues of more concern to all Crawley businesses than Sussex businesses were:

• Skills levels among the workforce • Salary levels too high • Difficulties recruiting staff • Lack of new customers • Difficulties in getting planning consent

Some of these business constraints, such as lack of new customers and high salary levels, are symptomatic of Crawley’s success and the high level of competition in the town. However, Crawley Borough Council is well placed to make a wider range of suitable sites and premises available, and to work with partners to help up-skill the workforce in skills and qualifications relevant to industry.



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Many businesses had experienced recruitment difficulties and high staff turnover. The volume of staff employed at Gatwick Airport was seen as a major contributor to the recruitment difficulties of other firms. In general interviewees reported that their lower skilled staff lived in Crawley, while higher skilled staff commuted in from towns such as Haywards Heath, Dorking, East Grinstead, Epsom, Redhill and Brighton. All businesses reported they could solve any external training requirements locally. Businesses were more likely to use local providers such as Thales and Crawley College to minimise travel costs. Higher level and professional training was often sourced from London.

Listed below are a number of issues that businesses in all key sectors viewed as priorities for improving Crawley’s local economy. These were highlighted in both the face-to-face interviews and from the business panel.

• Acknowledging that the Council has considerable buying power in the

local economy, several companies across a wide range of industries (including office design, recruitment agencies, security and advanced manufacturers) wanted Crawley Borough Council to support local businesses with a buy local policy. Businesses reported they had competed to supply services to Crawley Borough Council, but the contracts had gone to firms from outside the area. Some of these companies reported that they are prevented from entering other markets, for example Birmingham, because of other Council’s buy local policies.

• Security, Crime and Image - Businesses in all sectors reported that

crime had placed extra costs upon their business and that it was detrimental to the image of the area. Some employees reported feeling intimidated if leaving the office alone after working late. Graffiti and vandalism contributed detrimentally to the image of Crawley as a good place to do business.

• Some respondents said that the external image of Crawley was poor

and needed to be better promoted, while others said that Crawley already had a successful image as a regional hub. Those that said Crawley had a poor external image did not want short-term cosmetic solutions or ‘spin’, such as initiatives like ‘Crawley in Bloom’ or glossy marketing material. They called for better planning policy so that poorly designed and characterless buildings such as at the end of the High Street were not granted planning permission. Cleanliness of the town centre was also reported to be an issue.

• Business Rates were seen as being disproportionately high in

Crawley – possibly reflecting high rental and property prices. Crawley is a net contributor to the national pool of business rates, i.e. it



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contributes more to the national pool (estimated to be £83.2m in 2004/5) than it receives (£30.2 million in 2004/5)9. Business rates are a factor that many businesses said they would seriously consider in their location decisions when their leases ran out. One business services company commented that for the level of business rates payable in Crawley they could be located in Guildford, which they saw as a more desirable business location. This illustrates the challenge and competition that Crawley faces from business locations within the South East to maintain its existing business stock.

• Parking impacts on the recruitment of staff in town centre businesses,

because the cost of parking is not offset by wages for many lower paid jobs. On business estates, such as Manor Royal and Spindle Way, poor parking facilities restrict access. It was also reported that lack of parking had a perceived negative impact on the number of visitors to the town centre.

• Quality and Range of Medium Sized Sites and Premises -

businesses in both the Other Business Activities and Advanced Manufacturing sectors reported that there was a lack of choice of quality medium sized affordable sites and premises in Crawley. In some instances businesses were considering relocating outside the borough because of this.

• Businesses wanted Crawley Borough Council to be more

responsive and pro-active. Some businesses had registered complaints (mainly about waste, travellers, vandalism) and asked the Council to act, but had received no response to their enquiry and no action had been taken. This led to the feeling that their priorities were not the same as those of the Council.

• Transport - although many businesses reported that transport

infrastructure was a key location benefit, they also reported that the transport system was congested, especially in rush hour. Schemes to get school traffic off the roads were one suggested way of tackling this.

• Several companies expressed support for more recycling facilities.

High levels of demand are increasing the cost of doing business in Crawley. Managing and easing these costs and constraints on businesses, such as the lack of quality and suitable sites, high rental and rates costs and recruitment difficulties wherever possible, is imperative if Crawley is to retain its current businesses.

9 Includes a share of monies to West Sussex County Council and Sussex Police



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Businesses mentioned that they used the business support services of organisations such as Crawley Chamber of Commerce, Sussex Enterprise and CADIA. In general, respondents did not see a direct role for Crawley Borough Council in providing business support services. 3.2 Retail Retail is a key sector (and will grow in importance if the Town Centre North Development goes ahead). This section discusses retail specific issues. One retailer said that the town centre was missing out on a lot of potential clients, especially at lunchtime, because access from Manor Royal to the town centre was poor and congested. Others reported a good availability of staff, but they did not always have the right skills. The Sussex Enterprise Annual Business Survey 2003 found that businesses in the retail sector in Crawley identified a number of constraints (which were of greater importance to retailers in Crawley than elsewhere in the county).

• Poor transport infrastructure or traffic congestion • Skill levels among the workforce

Of these skills levels among the workforce was of particular concern. Recently West Sussex Economic Partnership and Sussex Learning and Skills Council have successfully bid to the European Social Fund to work in the retail sector, to up-skill the workforce. The project will initially be based in Crawley. If successful, this project could help to increase the skills levels of people in the sector in the short to medium term. However, funding for the project is limited and sustainable work over a long period needs to carried out to improve the situation. Retail businesses were less likely to source their goods and services from within Crawley, instead they used mainly national markets. This often reflected the fact that the company was a branch of a national chain and therefore had little influence on purchasing decisions. In general, it was reported that the industry had been expanding over the past five years and it was predicted that it would continue to grow over the next five years. Companies in the retail sector were more likely to report that they wanted Crawley Borough Council to improve access to the town centre (including parking facilities), to improve the cleanliness of the town centre and to improve marketing of the town centre. Businesses in the retail sector did not tend to work collaboratively with each other, but rather in direct competition. Being near to Gatwick Airport was particularly seen as a major benefit for retailers as it increased the flow of people through the town. This is likely to be because retailers are serving the same consumers as the Airport, as outlined in Figure 4.



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3.3 Hotels and Restaurants Hotels and Restaurants have been identified as a key sector. This section discusses their sector specific issues. Hotels and Restaurants did not report any sector specific issues. However, their success is partly linked to the tourism generated by the airport. Businesses in other sectors said that the quality of the restaurant and bar offer in the town centre could be improved to meet the need for business lunches and professionals socialising after work. This could generate more employment and growth within the hospitality sector. The Sussex Enterprise Annual Business Survey 2003 found that businesses in the hotel sector in Crawley identified only one constraint (which was of greater importance to the sector in Crawley than the sector elsewhere in the county).

• Skill levels among the workforce The sector tends to employ local people. Improving the skills levels among the workforce is vital to increase productivity and customer service. 3.4 Other Business Activities Other Business Activities is a diverse sector and includes high skilled and low skilled jobs in sub-sectors such as solicitors, accountants, architects and security guards. Other Business Activities companies in the higher skilled sub-sectors, such as legal activities and accountants reported issues that seem specific to their sector. Other Business Activities companies are competing with London and towns like Guildford for their higher skilled workforce and this impacts on wages, recruitment and retention. Although some companies highlighted the quality of the town centre, others feel the range and quality of restaurants and shops needed improving and updating, especially at the top end of the market. Better quality retail and restaurant / bar facilities would encourage staff to spend money in the town at lunchtime, to entertain business clients in the town or to socialise in the town after work. Respondents reported a need to increase the level of sophistication in the town’s restaurant, and bar offer. Key constraints for Other Business Activities companies identified in the Sussex Enterprise Annual Business Survey 2003 are largely symptomatic of a thriving business location. Other Business Activities organisations in Crawley were mainly constrained by:

• Competition • Lack of new customers



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The survey of the 98 members of the business panel in other business services found that business services companies support and supply local companies, but mainly work regionally and nationally. Nearly one quarter (22%) of business service companies were supplied by companies in Crawley, however nearly half (46%) sourced their goods and services mainly from the UK. There is seen to be a lot of competition within the sector, with approximately one third of companies (31%) reporting they had over 21 competitors within the Borough. Nearly one quarter of companies (23%) said that their main market was Crawley, however 68% mainly served regional or national markets. Over half of business service companies (53%) reported growth in the last five years and 63% forecast business to grow over the next five years. A minority of companies in this sector reported that they worked in partnership or collaboratively with other local companies on a referral basis, with joint ventures, or to increase flexibility if a project was too big for them to handle alone. These types of arrangements are typical of higher-level services in any location as the sub-sectors produce many complementary services, such as architectural and legal advice. Businesses reported that they had business relationships with other local companies where they would recommend and refer a local supplier to a client. Companies within the same field, such as law, said they were in direct competition, so did not collaborate or work in partnership with other businesses in the sub-sector. 3.5 Advanced Manufacturing Although not a large employer, Advanced Manufacturing is concentrated in the town and a strategic ‘key sector’ as it increases the range of work available for local people and the diversity of the local economy. Therefore, we have included a summary of findings that Advanced Manufacturing companies reported. They had several unique issues, and felt general issues more acutely. Many reported that recent new build in the town has been very office oriented and this meant that the quality and range of mixed office and warehouse accommodation was limited, especially for medium sized accommodation. Some companies reported that a lack of suitable accommodation meant they were looking outside Crawley for premises. Several advanced manufacturing businesses reported that rents were very high and some were planning to move out of Crawley when their leases ran out. In recent years many businesses on the Manor Royal estate said they had experienced crime against their business and had had problems with



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travellers. Those businesses that had been affected thought Crawley Borough Councils support was inadequate with this problem. The well-documented shortage of engineers and skilled trades staff impacts disproportionately on the advanced manufacturing sector and recruitment difficulties are holding back expansion in many companies. Gatwick Airport was seen as a competitor for engineers. In general advanced manufacturing companies tended to buy from and serve wider markets than other sectors, mainly nationally or internationally. 3.6 Gatwick Airport Gatwick airport has been a major business driver of the Crawley economy over the last 50 years. Businesses we spoke to felt Gatwick Airport contributed both positively and negatively towards the local economy. On one hand it gave the area status and aided the movement of staff between national or international destinations. In general, Heathrow was used for the movement of freight. On the other hand it increases congestion and is direct competition for staff, which increase recruitment difficulties and pushes up wages. Pollution and noise from the airport was also of concern to some businesses. From the Business Panel survey, 35% of business service companies reported a linkage with the airport. These ranged from use for business travel, increased business because they are located near an airport, and supplying the airport as a customer (such as recruitment). 3.7 Crawley’s Benefits All businesses could name several benefits of being located in Crawley and on balance it was seen as a good place to do business. Many of the regional offices of national or multi-national companies were located in Crawley because it is centrally located south of London and businesses are able to serve a large business and consumer market within the South East. Many see Crawley as a ‘regional business centre’ or ‘regional hub’. Crawley benefits from having good rail, air and road links. Road links were thought especially important if employees commuted into Crawley from rural areas. Some business service and retail companies mentioned that the presence of other major banks, accountants, or retailers in Crawley made it an important location in which to have a presence. In general, it was reported that the surrounding area provided a good quality of life. 3.8 Growth and the Future Most of the businesses we spoke to forecast continued business growth over the next five years, provided that constraints such as recruitment difficulties



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were not restrictive, as most companies were planning to grow through increasing employment. Several companies in the advanced manufacturing sector were planning to consider their businesses position in Crawley when their leases ran out, because rents and rates in the area were considered to be too high. Some companies in business services also felt that the business rates in Crawley were high, when compared to places like Guildford, which would allow them to be closer to their market. The cost of rates would also be a factor in their consideration to stay in the borough when their leases ran out. Other businesses had been looking for suitable and affordable medium sized accommodation without success, so their growth was being constrained.



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4. Issues For Discussion There are a wide range of initiatives underway to support clusters at regional, national and international level, and a wide body of research into intervention needs. The key consensus of work to date is that it is a mistake to intervene to try to create clusters from scratch, they should be supported to develop from existing concentrations and business networks, building on economic strengths. Given that our research has found no evidence of clusters in Crawley the work and attention of the Local Economy Action Group needs to focus on developing and retaining the borough’s existing businesses and key sectors. In this section we revisit the themes in the Local Economy Action Plan and assess the extent to which these are priorities for the key sectors we have identified (Other Business Activities, Retail, Advanced Manufacturing and Hotels and Restaurants) with the aim of aiding the Local Economy Action Group to prioritise actions for the next 18 months. Some actions and priorities within the Plan mirror the findings of the research, others were not found to be a priority and some were not included in the Plan. Actions identified in the Plan, which relate to new and start-up businesses are not discussed. 4.1 Creating a Positive Image of Crawley PRIORITY: Image Businesses in the retail sector wanted Crawley to be more effectively marketed. However, businesses in other sectors did not want ‘spin’ or short-term cosmetic solutions such as ‘Crawley in Bloom’, but good planning and design. PRIORITY: Crime and Safety Some businesses had experienced crime and some reported that employees had been or felt threatened on the streets at night. 4.2 Encouraging a Thriving Economy PRIORITY: Buy Local Crawley Borough Council has considerable purchasing power in the local economy. Businesses wanted a buy local policy to support local business. PRIORITY: Crawley Borough Council responsiveness Businesses reported that Crawley Borough Council is unresponsive to their inquiries. The link between Crawley Borough Council and the local business community needs to be improved.



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PRIORITY: Sites and premises A lack of medium sized office and mixed use business accommodation was reported. This was constraining growth, or companies were considering re-locating. Additional suitable and affordable space needs to be created. PRIORITY: Skills and Employment Many higher skilled jobs in firms in all the sectors we spoke to are filled by in-commuters. This was particularly the case within the higher level business service sector, and also managerial positions in the Retail and Advanced Manufacturing sectors. Up-skilling local people so they have the opportunity to access the full range of employment available in the town has been identified as a priority in the Local Economy Action Plan. The research demonstrates this acute need. The skills of the local workforce, especially in the key sector of Retail, need to be tackled if local people are to have access to all the opportunities available in the local economy. Tackling skills gaps and shortages will also help to increase productivity, aspirations and self-esteem. The Skills for Life Development Centre in Sussex is working to increase the coherence of skills for life provision in Sussex. They work with local organisations and providers to identify learner groups and enable them to receive government-funded training up to Level 2. Working in partnership with the Centre could be one way of tackling the skills shortages and skills gaps within all sectors of the Crawley economy. West Sussex Learning Partnership and the Sussex Learning and Skills Council have recently bid successfully to the European Social Fund for developing a retail skills centre in Crawley. This work may also help to increase skills, productivity and raise aspirations of the local workforce. The sustainability of this work is essential in delivering improvements in skill levels in the longer term. 4.3 Ensuring the Right Transport Infrastructure PRIORTITY: Congestion Businesses said that road congestion cost them time and money as employees and visitors were often delayed. PRIORTITY: Parking Businesses reported that the lack of and cost of parking in the town centre increased recruitment difficulties and was detrimental to the number of customers they received. Parking on Manor Royal and other business estates was also highlighted as an issue.



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4.4 Developing and Regenerating Crawley Town Centre and Neighbourhood Centres PRIORITY: Range and quality of shops/ bars Some respondents, particularly with higher skilled other business activities companies, wanted an improved range and quality of shops, restaurants and bars. This would increase the likelihood of staff socialising in the town after work and increase the diversity and mix of people in the town centre. 4.5 Other Priorities PRIORITY: Recycling Several companies said they would like Crawley Borough Council to give more help, advice and guidance with recycling. Schemes do already exist, such as the Green Business Programme, but may need to be more widely publicised. When prioritising actions a balance needs to be struck between managing continued economic growth and enabling local people to access the all opportunities the economy has to offer. The impact of priorities on all sections of the community needs to be considered, because prioritising the development of some sectors will benefit in-commuters more than local residents, if local residents don’t have the skills to participate. Table 2 summarises the scale and growth potential of the key sectors we have identified. Table 2: The scale and likely impact of key sectors in Crawley

SIC Sub sector

Proportion of

businesses (ABI)

Share of employment

(ABI) Predominant Skill Level10 Growth potential11

Locally concentrated?

(LQ) 30-33

Advanced Manufacturing 1.3% 3.2% High / Low Medium 2.19

52 Retail 13.4% 9.3% Low Medium 0.82 55 Hotels and

Restaurants 7.0% 6.8% Low Low / Medium 1.03

74 Other Business Activities

16.7% 17.8% High / Low High 1.58

It should be borne in mind that these findings reflect the thoughts of businesses whose main aim is to make money. While their priorities should be considered, a long term, more holistic approach may need to be adopted to balance the interests of local businesses in the short to medium term, with long term needs of local people and the borough. 10 Sussex Skills Review 2002 – Sussex Learning and Skills Council 11 Sussex Forecasting Model 2003 - EBS



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5. Conclusion

• Previous national and regional research had identified a ‘cluster’ in instrumentation in Crawley (DTI). SEEDA’s Regional Economic Strategy had identified several industries that offered significant clustered potential in West Sussex, including Advanced Manufacturing, Logistics and Medical Equipment. This research relied largely on data evidence and did not involve interviews with local businesses that asked specifically about their behaviour.

• Cluster and key sector support in Crawley must work within the local

framework as set out in The Local Economy Action Group’s Action Plan. These are Creating a Positive Image of Crawley, Encouraging a Thriving Economy, Ensuring the Right Transport Infrastructure, Developing and Regenerating Crawley Town Centre and Neighbouring Centres.

• Clusters must be concentrated in an area and compete and innovate

intensely. Our data analysis used Location Quotients and Input-Output techniques. These found that Advanced Manufacturing and Other Business Services were concentrated in Crawley. There was also evidence of local supply chain linkages from Other Business Activities. Therefore these sectors were included in the interview process.

• Interview evidence suggests that there are no true ‘clusters’ within

Crawley. Industries that are concentrated do not innovate, collaborate and work in partnership in the way set out in Porter’s cluster theory.

• However, there are key sectors (Other Business Activities, Retail and

Hotels and Restaurants), which are not concentrated but make up large proportions of employment and are therefore critical to the success of the town. Air Transport was also concentrated but was not investigated as one aim of this research was to inform diversification away from Air Transport and related sectors.

• Although it makes up less than 5% of local employment, Advanced

Manufacturing is concentrated in the town. Therefore, it is a strategic ‘key sector’ because it increases the range of employment opportunities in the town.

• Equality of access is at the heart of the work of Crawley Together. The

partnership aims to “narrow the gap between those that have and those that don’t… and in so doing leave no one behind”12. Key sector development can support social inclusion by direct employment, indirect employment, skills development activities and business

12 Crawley Together – A Vision for Crawley – 2003 to 2020



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involvement in the local community. Buy-in from relevant businesses for actions to support key sectors is critical.

• Respondents from the key sectors identified several of the priorities in

the Local Economy Action Plan, including the image of the town (focusing on good planning and design rather than glossy brochures and ‘spin’), the range and quality of shops and bars, and parking. One priority that was not identified in the Action Plan was information, advice and guidance about recycling.

• It should be borne in mind that these findings reflect the thoughts of

businesses whose main aim is to make money. While their priorities should be considered, a long term, more holistic approach may need to be adopted to balance the interests of local businesses in the short to medium term, with long term needs of local people and the borough.

Documents

Clusters and Key Sectors in Crawley July 2004 · Clusters can therefore be a key element in generating sustainable economic growth. This analytical framework has been used at various