Date Friday, 12 October 2018Time 10.30 amVenue Room 10, Town Hall, St Helens

Car Parking is available on the nearby Pay and Display Car Park on Birchley Street.

North West Regional Leaders Board

AGENDA1. Apologies

2. Minutes 3

3. Matters Arising

4. Convention of the North Update 9

5. North West Flood and Coastal Committee - Update and Business Plan 39

6. NW Regional Research Collaboration Update 55

a) NW RRC - Future Prosperity Fund 69

7. NW Brexit Monitor Update 97

8. Any Other Business

Dates of Future MeetingsFriday 15 February 2019, 10:30amFriday 5 April 2019, 10:30amFriday 12 July 2019 (AGM), 10:30am

All meetings are held in Room 10, St.Helens Town Hall.

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NORTH WEST REGIONAL LEADERS BOARD

Minutes of the meeting held onFriday 20 July 2018

Persons present (Voting Members)

Cheshire and WarringtonCouncillor Terry O’Neill (Chairman) (Warrington Council)Councillor Samantha Dixon (Cheshire West and Chester Council)

CumbriaCouncillor Alan Smith (Allerdale Council)

LancashireCounty Councillor Albert Atkinson (Lancashire County Council)Councillor Mohammed Khan (Blackburn Council)

Liverpool City Region Councillor Derek Long (St.Helens Council)Councillor Graham Morgan (Knowsley Council)Metro Mayor Steve Rotheram (LCR Combined Authority)

Greater ManchesterMayor Andy Burnham (GM Combined Authority)

ESE’sMiranda Barker (East Lancs Chamber / RMF), Richard Caulfield (Association of Colleges), Lynn Collins (TUC), Emma Degg (NWBLT)

Also in attendance (non-voting)Gillian Bishop (NW Employers), Jan Bakewell (St.Helens Council), Katrina Hann (GMCA), Emma Prideaux (Lancashire CC), Andy Roscoe (St.Helens Council)

1 APOLOGIES

The Board were informed of apologies received from Councillor Alyson Barnes (Rossendale Borough Council), County Councillor Geoff Driver (Lancashire County Council), Deputy Mayor Bev Hughes (GMCA), Councillor Andrew Western (Trafford Council) & Professor Mark E. Smith (Lancaster University).

2 MINUTES

It was raised that Minute 15, Point 4 in the April minutes be amended to read that:

“a meeting be arranged between the Chair and the two Metro Mayors to discuss the support which they could offer the Board in the future”

Subject to the above amendment, the Minutes of the Board meeting held on 13th April 2018 were agreed as a correct record.

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NORTH WEST REGIONAL LEADERS BOARD

3 MATTERS ARISING

(1) CONVENTION OF THE NORTH

A question was raised regarding the representation and engagement of ESE partners at the first ever Convention of the North, due to be held in the North East on 6th September 2018.

Members who had attended Convention of the North planning meetings provided feedback on the background, strategic approach and aims/objectives of the Convention.

The Convention will provide an opportunity for leaders (both political and civic) to showcase the North and its potential, and to engage with central government on key issues such as transport and Brexit.

The Board discussed its potential relationship with the Convention and how it could articulate arguments that would aim to address regional imbalances and allow the North to unlock its potential.

It was agreed that the Regional Research Collaboration (thorough the team at GMCA) would provide support on any relevant research requirements from the Board ahead of the Convention. It was also agreed that contact details the Convention would be shared with the Chair, and vice-versa.

It was agreed that a report would be brought to the next meeting of the Board which updated on the Convention.

Members were also made aware by the NWBLT representative of a number of policy initiatives/reports. It was agreed that further information on these initiatives – such as copies of the reports – would be provided to Members as and when they were available.

* Resolved that:

(1) An update in respect of Convention of the North be provided to the next meeting;

(2) The Regional Research Collaboration to provide support on any relevant research requirements from the Board ahead of the Convention;

(3) Contact Details for the Convention to be shared with the Chair, and vice-versa;

(4) Further information be provided on the policy initiatives that had been outlined by the NWBLT representative.

4 APPOINTMENT OF CHAIR

* Resolved that Councillor Terry O’Neill be appointed as Chairman for a period of three years, as set out in the Constitution.

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5 APPOINTMENT OF DEPUTY CHAIR

* Resolved that the Deputy Chair position be filled by a Conservative Member of the Board to be appointed and confirmed by the Conservative Representatives.

6 CONSTITUTION AND MEMBERSHIP

The Regional Leaders Board constitution states that alterations to the Constitution shall only be made by the Board at each Annual Meeting, or at an Extraordinary General Meeting.

A number of minor amendments had been made to the Constitution, which were detailed in the covering report.

* Resolved that:

(1) The amended Constitution be adopted; and

(2) The Membership of the Board for 2018/19 be noted.

7 APPOINTMENTS TO OUTSIDE BODIES

* Resolved that:

(1) Councillor Terry O’Neill be appointed to the LGA Executive as Regional Representative; and

(2) Councillor Derek Long to act as substitute member to the LGA Executive in the absence of Councillor Terry O’Neill.

8 NORTH WEST REGIONAL COLLABORATION UPDATE

A report was provided to update Members on the work of the Regional Research Collaboration (RRC).

Key areas of research undertaken over the first quarter of 2018/19 included:

NW Brexit Monitor Research – which was dealt with under the following item;

A report was underway to look at future prosperity funds and the risks linked to changes from the loss of EU Structural Funds. Headlines emerging from this report indicated that total funding within the North West from ERDF and ESF for 2014-20 was 1.1 billion euros, with this investment helping the North West to tackle many socio-economic issues. A final report was expected early Autumn, following engagement with NW sub-regions;

Scoping work had been undertaken around the NW’S Science, Technology and Advanced Manufacturing assets and strengths; and

Work had also been undertaken to ensure that intra-connectivity between NW sub-regions was fully reflected in Transport for the North’s strategies and wider discussions.

The Board welcomed the report and thanked the RRC team for their work.

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With regards to the European Funding received by the North West, Members emphasised how effective the North of England had been at using this fund and maximising its impact. The value in having a flexible fund as grant funding rather than a loan to enable innovation and experimentation was discussed. Members asked that the report be amended to show the total funding envelope for the North West including match funding, and this should be the basis of future ‘asks’ to Government.

It was agreed that the RRC would continue to engage with sub-regions around European funding and develop this into a paper which will inform the Convention of the North in September.

Around Science, Technology and Advanced Manufacturing, the Member from the NWBLT drew attention to a research project that had been undertaken by Innovate UK in respect of levels of NW funding in business innovation. A subsequent report would be published in September 2018. It was agreed that this report would be shared with the Board.

It was raised that Officers attending the RRC Steering Group had expressed an interest in a knowledge sharing workshop on the Local Industrial Strategy (LIS), as the GMCA was a designated ‘trailblazer’. Members raised that education and skills would also be a worthwhile topic.

It was agreed that RRC would scope out the potential for a workshop and whether content should be broad or focus on one or two areas.

Members also raised the issue of Transport, and expressed concern over rail regulatory and governance arrangements across the NW and wider Northern region. It was requested that the RRC research and assess transport governance issues, and determine the scope of such a report.

* Resolved that:

(1) The work undertaken in the first quarter of the 2018/19 research programme be noted;

(2) RRC to continue to engage with sub-regions around European funding and develop this into a paper which will inform the Convention of the North in September;

(3) The draft report that had been produced on NW Business Innovation be shared with the Board;

(4) The RRC to scope out the potential for a workshop and whether content should be broad or focus on one or two areas;

(5) The RRC research and assess transport governance issues, and determine the scope of such a report.

9 NORTH WEST BREXIT MONITOR UPDATE

A report was submitted which updated the Board on the key economic and policy developments in relation to the UK’s decision to leave the European Union (EU).

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The June edition of the North West Brexit Monitor was attached to provide a real-time view of the economic and policy impact of Brexit.

The report updated Members on the key economic and policy developments in relation to the UKs exiting of the European Union. Following an extended meeting of the Cabinet at Chequers in early July, the government had now published a White Paper setting out details of their agreed versions for what UK and EU’s post-Brexit relationship should look like. A number of key votes had taken place in the current week and would continue to do so.

Members asked whether there was the potential for Inclusive Growth Metrics to be included in the monitor (or some other format).

* Resolved that the contents of the June Brexit Monitor be noted.

10 ANY OTHER BUSINESS

(1) ALLERDALE OPEN DAY

Members were invited to the forthcoming Allerdale Day to be held in Albert Square, Manchester City Centre on Thursday 9th to Saturday 11th August 2018. The event would be showcasing the work of the Borough, such as the manufacturing sector.

Members were requested to contact the Leader of Allerdale Borough Council for further details of the event, and to reserve a place.

(2) COMMUNICATIONS

Members asked the Chair to ensure that the views expressed at meetings of the Board were effectively communicated to government departments and to bodies such as TfN.

The next meeting of the Board will be held on:Friday 12 October 2018 at 10.30am, Room 10, St Helens Town Hall

-oOo-

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NORTH WEST REGIONAL LEADERS BOARD

Item 4 – Convention of the North Update

Date: 12 October 2018

Subject: Convention of the North Update

Report of: Councillor Terry O’NeillLeader, Warrington Council & Chair of the NW Regional Leaders Board

PURPOSE OF REPORTThe first ever “Convention of the North” took place in Gateshead on 6th September 2018. It was attended by people from across the political spectrum and from different sectors, including the private, public, voluntary and faith sectors. This briefing provides an outline of the discussions at the Convention. Members of the Board are asked to offer their thoughts on the success of the Convention, and agree on next steps for the Board to take forward.

RECOMMENDATIONSMembers of the North West Regional Leaders Board are asked to offer their thoughts on the Convention of the North, and agree on next steps for the Board to take forward.

1.0 Background

1.1 The population of the North of England is approximately 15 million people, which is almost twice the size of the Greater London population and larger than the population of some European countries (e.g. Belgium, Greece, Portugal). It is considerably larger than the populations of Scotland and Wales, both of which have devolved government. By contrast, the English system of government is one of the most centralised in the world, with most national Government decisions impacting significantly across the North being taken in Whitehall.

1.2 The United Kingdom is at a point of significant social and economic transformation. The coming months will see major decisions (not least in relation to Brexit) which have the potential to re-shape the country’s future and have a significant impact on communities across the North.

1.3 In the light of the above context and this year’s Great Exhibition of the North (which took place in Newcastle and Gateshead from June to September), in early 2018, political leaders from across the North called for a Convention aimed at ensuring that these decisions are not taken without the North’s collective - and powerful – voice being heard in Westminster.

1.4 February also saw the launch of Northern Powerhouse Rail by the Northern Powerhouse Partnership. The Convention would therefore provide a platform for Northern political leaders to speak with one voice ahead of the Autumn Budget and its announcements for HS2. The Transport agenda became even more relevant over

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the summer as the region suffered from Northern Rail timetable changes and the subsequent cancellations and delays.

1.5 Additional themes were expected to focus on Brexit (a call for the North to join London in having a representative at negotiations) and Devolution (the opportunity for all areas of the North, not just the cities). As the plans developed, Skills was added to the agenda as a further breakout session.

2.0 Observations

2.1 The Convention was introduced by Councillor Nick Forbes (Leader of Newcastle City Council), who called for the North’s voice to be strong and clear so that the national Government had no choice but to listen to it. The introductory session also included a speech from the Chief Executive of Legal and General, who emphasised the significant economic power or cities and towns across the North and encouraged those present to be more confident in the assets which are already in place.

2.2 The event was very well attended both by number and seniority. There were over two hundred delegates, many of whom were either Council Leaders or Local Authority Chief Executives.

2.3 The Convention then covered three distinct subject areas and agreed a series of propositions as follows:-

(a) Brexit

The Government is currently considering how to deal with the funding which will “return” to the country after Brexit. At present, significant elements of this funding are allocated to support public services in many areas of the North. The Convention called for this money not to be retained and allocated by Whitehall but instead devolved to regions and allocated according to locally determined decisions;

The Convention called for the establishment of a Taskforce for the North, which would be charged with preparing the North for the implications of Brexit; and,

The Convention called for the development of a Northern Trade Strategy, which would use the collective assets of the North to drive regeneration and economic improvement.

(b) Skills

While some areas of the North have agreed devolution of powers and responsibilities in relation to skills, the position is inconsistent. The Convention called for consistency of approach and also for Government to devolve further powers to local areas so that education and skills systems can be designed in the context of local needs and local employers’ requirements (there is no need for the current “one size fits all” approach);

The Convention called for a new way of distributing and using the funding raised by the Apprenticeship Levy, alongside a new “Skills Agreement for the North”; and,

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The Convention called for the establishment of a new (not national) collaborative approach to improving educational attainment in Northern schools.

(c) Transport

The Convention recognised the clear failures of a national approach to transport (particularly rail services) and called for Government to devolve further transport powers to Transport for the North;

The Convention called for local areas to be empowered to devise and deliver local-level strategic bus, rail and road projects;

The Convention recognised the significant national funding already allocated to public transport projects in the South and called for national funding also to be identified and earmarked for Norther Powerhouse Rail (or “Crossrail for the North”); and,

The Convention called for a new approach to cargo and freight in the light of the potential implications of Brexit.

3.0 Next Steps

3.1 The full background papers are enclosed with this covering briefing (attached as Appendix A). In terms of next steps, it was agreed that the Convention had been useful and should therefore be repeated. It was felt important that the Government had to be reminded again and again that the North was a powerful economic entity and should therefore be treated as such. The work will be taken forward by collective bodies such as the Local Government Association, Core Cities Group, and the Metro Mayors.

3.1 Whilst the Convention received positive PR coverage across the North, nationally it was not as visible and has been overshadowed by Brexit negotiations. The ongoing challenge is to maintain the momentum, concentrating heavily on Transport as major theme.

3.2 A strong message was that the North cannot wait until central government comes to them with support. Instead, the North should tell government what it intends to do, rather than ask permission. The private sector is a key driver for regeneration and needs to be utilised more to help make a positive impact. The recommendation was for the Convention to meet every year, rotating across the region for venues.

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North West Regional Leaders Board North West Flood and Coastal 

Committee ‐ Update and Business Plan 

Adrian LythgoChairman, North West RFCC

Regional Flood and Coastal Committees (RFCC`s)Supporting our communities to manage flood and coastal risk

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RFCC Role

• Regional Flood and Coastal Committees were first established in 2011 following the Flood and Water Management Act 2010, replacing the former Regional Flood Defence Committees. 

• We play a key role in local funding and approving programmes of work that reduce flood risk locally. 

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NW RFCC MembershipMember Sponsor

Adrian Lythgo (Chairman) DEFRA

Cllr Keith Little Cumbria Strategic Flood Risk Partnership

Cllr Alan Quinn Greater Manchester Strategic Flood Risk Partnership

Cllr Neil Emmott Greater Manchester Strategic Flood Risk Partnership

Cllr Stuart Haslam Greater Manchester Strategic Flood Risk Partnership

Cllr Stephen Clarke Lancashire Strategic Flood Risk Partnership

Cllr Fred Jackson Lancashire Strategic Flood Risk Partnership

Cllr Patrick McKinley Mersey Strategic Flood Risk Partnership

TBA Mersey Strategic Flood Risk Partnership

Cllr Karen Shore (TBC) Cheshire and Mid Mersey Strategic Flood Risk Partnership

Cllr Paul Bates (TBC) Cheshire and Mid Mersey Strategic Flood Risk Partnership

Lorrainne Smyth EA Appointed Member  ‐ Communities

Ian Irving EA Appointed Member – Business and Private Sector

Peter Bullard EA Appointed Member ‐ Conservation 

Vacant EA Appointed Member ‐ Coastal

Neville Elstone EA Appointed Member  ‐ General Business

Tayo Adebowale EA Appointed Member  ‐ Sustainability

Paul Barnes EA Appointed Member – Agriculture and Land Management

Jo Harrison EA Appointed Member ‐ Water Industry

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Communities at risk of flooding from rivers and the sea

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What do we do?

1.Ensure there are coherent plans for identifying, communicating and managing flood and coastal erosion risks across river catchments and shorelines

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What do we do?

2. Promote efficient, targeted and risk-based investment in flood and coastal erosion risk management that optimises value for money and benefits for local communities;

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What do we do?

3.Link the Environment Agency, LLFAs, other risk management authorities, and other relevant bodies to develop mutual understanding of flood and coastal erosion risks in the NW.

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Years 1 to 3 (2015/16 and 2017/18)In the first three years of the investment programme we have helped better protect 26,656 

homes. Risk Management Authority Scheme Name

Homes Better Protected

Wyre District Rossall Coastal Defence Improvement Scheme 7,497

Blackpool Unitary Authority

Anchorsholme Coast Protection Scheme 4,814

Lancaster CityMoercame Wave Reflection Wall 5,952

Environment Agency

Salford Flood Alleviation Improvements 1,110

Environment Agency

Jacks Key Reservoir, Darwen 1,098

Environment Agency

Crossens Pumping Station Refurbishment 660

Environment Agency East Lytham FRM Scheme 652Environment Agency Broadfleet Remedial Works 607

Environment Agency

River Mersey Warrington FRM Scheme 595

Blackpool Unitary Authority

Starr Hills Sand Dunes Environmental Work 501

Environment Agency Ulverston FRM Scheme 407Environment Agency Croston Village FAS 347

Environment Agency Northwich Town Centre 292

Environment Agency

Pennington Pumping Station Replacement 262

Environment Agency

Worsley Brook Culvert Repairs 260

Environment Agency

Westleigh Brook FRM Scheme 230

Environment Agency

Hesketh Outmarsh East Mgd Realignment 140

25,4241,232

26,656

Major Schemes TotalSmaller Schemes TotalGrant Total

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Anchorsholme and Rossall Coastal Protection SchemesAnchorsholme Coast Protection Scheme• Full cost of scheme – £27.1 m• Partnership Contributions – United Utilities £2m• Local Levy Contribution – Support for accelerated 

programme allowing scheme to go ahead earlier in programme.

• Number of homes delivered‐ 4800• Blackpool Council Lead• Environmental Benefits – Improved coastal frontage 

visitor offering linkage to Anchorsholme park• Flood Mechanism (tidal/ surface water/ river) Tidal

Rossall Coast Protection Scheme• Full cost of scheme – £63 m• Partnership Contributions – Wyre Council, LCC, 

Regenda Housing, Fleetwood Town Council , Coastal Communities fund.

• Local Levy Contribution – Support for accelerated programme allowing scheme to go ahead earlier in programme.

• Number of homes delivered‐ 7500• Wyre Council Lead• Environmental Benefits – Larkholme Grasslands 5ha of 

BHS (coastal meadows supporting a variety of pollinators including bees and butterflies and amphibians including frogs toads and lizards) https://landscapeandamenity.com/articles/2018‐08‐01/in‐defence‐of‐our‐lancashire‐coastal‐wildflowers

• Flood Mechanism (tidal/ surface water/ river) Tidal

Both schemes are Part of Fylde Coastal Partnershiphttps://www.fyldecoastalprogramme.co.uk/

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Croston Flood Alleviation Scheme• Full cost of scheme – £7.8million• Partnership Contributions – £1,000,000 (Chorley Council) and £181,000 

(Lancashire County Council)• Local Levy Contribution ‐ £667,000• Number of homes delivered ‐ 347• Environment Agency Lead • Environmental Benefits – 2ha of water dependant habit was created with 

the scheme as well as almost 1km of river bank improvements in addition to a large tree planting scheme, new habitat for otters, bats, birds and wetland species. 

• Flood Mechanism (tidal/ surface water/ river) – Flooding predominantly from the River Yarrow with some relief provided to Surface Water networks in the village

• Additional Information ‐ 91 commercial properties also better protected. The scheme provides up to a 1% AEP standard of protection. Lower Yarrow Flood Action Group very active locally and provided strong support for the scheme.

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Salford Flood Alleviation Improvements

• Full cost of scheme – £10.6m (FDGiA£5.2m, Project Acceleration and Growth funding £4.1m, Partnership Contributions – Salford CC £1.3m

• Number of homes delivered (OM2) ‐1110

• Environment Agency Lead in partnership with Salford CC and community steering group

• Environmental Benefits – new community wetland within the flood basin, 10ha of wildflower habitat along the flood embankment, over 3km of new paths, street art on kiosks, strong relationship with local community, great example of a scheme delivering multiple benefits 

• Flood Mechanism (tidal/ surface water/ river) ‐ River

• Additional information: The scheme has been operational since December 2016 and was fully opened to the public May 2017

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Warrington Flood Risk Management Scheme• Phase one delivered in 2015 and Phase 2 and 

Phase 3 delivered within 6 year programme• Full cost of scheme – £34 million• Partnership Contributions – Scottish Power 

(£2million cash) & Warrington Borough Council (£4million in cash & works in‐kind)

• Local Levy Contribution ‐ £1million• Number of homes delivered ‐ 2156 properties 

protected to the 1 in 100yr standard of protection + Howley Lane Electricity Sub‐Station protected to the 1 in 1000yr standard of protection.

• Environment Agency Lead • Environmental Benefits – 5Ha of restored reed 

bed habitat (Twiggeries site) + opening up of 100m length of culvert (Padgate Brook)

• Flood Mechanism (tidal/ surface water/ river) ‐Tidal and fluvial

• Additional Information ‐ Other benefits of the scheme include (1) catalyst for local regeneration; (2) improved accessibility & visibility of the river; (3) improved amenity & recreational value of the area; (4) promotion of local heritage.

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Projects delivering more than 200 homes in 2019‐2021 (current position)

Project Name EA Area Lead RMA

Total Project Expenditure -

2019/20

Total Project Expenditure -

2020/21

total OM2+OM3 in 2019-2021

Morecambe Wave Reflection Wall Phases 1 - 3 C&L LA 0 0 2,610

Fairhaven and Church Scar Coast Protection Scheme C&L LA 5,525,000 0 2,347

Kendal Appraisal Package Kendal FRM Scheme C&L EA 10,000,000 8,400,000 1,557

Radcliffe & Redvales FRM Scheme GMMC EA 6,000,000 10,782,000 812 Wyre Dune and Beach Management Scheme C&L LA 5,380,000 2,918,000 794

Sankey Bridges, Warrington GMMC EA 740,000 2,560,000 475 Mill Beck, Barrow in Furness C&L EA 0 1,730,000 440 Upper & Middle Wyre FRM Asset Mgmt Review C&L EA 0 0 308

NFM - Slow the Flow' delivery in GMMC GMMC EA 350,000 150,000 300 Ulverston Urban Drainage C&L LA 0 515,000 203

* Rochdale FRM Scheme (GMMC Area) will deliver the majority of houses outside of the current spending review period. 294 houses are to be protected before April 2021 and a further 3000 houses during 2021-2022 (after the current spending review period).

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Current issues• New national Flood and Risk 

management Strategy‐ EA or a new body to be 

responsible for all flood prevention / management ?

‐ Public don’t engage until they’ve been flooded.

• Draft RFCC Business plan‐ DEFRA Surface water action plan 

response?‐ Improving link to planning 

authorities / regional spatial plans to promote flood resilient development?

‐ Concrete actions to promote effective partnership working?

‐ Flood Hub – enhanced engagement with communities at risk of FUTURE flooding?

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Questions for Leaders

Would you support stronger / clearer links to minimise flood risk in development planning?Is RFCC accessible to you at the level you want?Do you individually want more information on Programmed schemes in the next 3 years?

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Draft RFCC business plan 2019 ‐ 22 Timescales

• Draft plan publicly available late October 2018

• Engagement on Plan November – January 2019

• Final Plan 1 April 2019

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NORTH WEST REGIONAL LEADERS BOARD

Date: 12 October 2018

Subject: North West Research Collaboration Update

Report of: Katrina Hann, GMCA

SummaryThe NW Regional Research Collaboration provides dedicated capacity to analyse shared issues for the NW’s LEP areas, as well as facilitating knowledge sharing between partners to explore strategic projects in more detail and at scale.

This third update for the 2018/19 research programme summarises the progress made over the last quarter.

The key areas of research undertaken over the last quarter include:

NW Brexit Research. The NW monthly Brexit Monitor continues to form a major component of the 2018/19 programme and ensures NW LEPs and partners are briefed on the economic and social trends and policy developments arising from the decision to leave the EU. Further work has been undertaken with officers across the sub-regions to add more local level detail into the Monitor.

A report has been completed on the future prosperity funds and the risks linked to changes from the loss of EU Structural Funds in the North West. The research highlights the principles that any successor funding programme must consider. The report fed into a paper written by Metro Dynamics which informed discussions at the Convention of the North on 6th September. The completed report will be discussed as a separate item.

Science, technology and advanced manufacturing: The NW RRC 2018/19 work programme includes capacity for research on science, technology and advanced manufacturing assets and strengths to better understand the opportunities across the NW; how they feed into the North's offer and; whether there are collective issues that require further work and analysis, including ways to tackle the productivity challenge. As part of this, it has been agreed that this workstream will comprise of three distinct areas of activity:1) Local Industrial Strategy (LIS) workshop for NW LEPs and stakeholders to

share best practice will be held in Nov / Dec 2) A report on the North West’s Made Smarter pilot will be produced and

Juergen Maier (Siemens), who has led this work, will provide an update on the Pilot at the February RLB.

3) The Northern Powerhouse Independent Economic Review (NPIER) identified the north’s prime capabilities – advanced manufacturing, energy, health innovation and digital and the assets, expertise and businesses which are pan-Northern, highly productive, and internationally competitive. There is much evidence of the NW’s strengths in these areas, yet what is less clear, is a view of how the collective offer works across the NW. A Global competitive strengths and innovation briefing will be undertaken which will articulate

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the collective offer for each of the prime capabilities and agree a way forward that will benefit the NW. The scope of this work will be agreed by the RRC and the final piece brought to the February RLB.

Transport: Discussions with Transport for the North are ongoing to ensure that intra-connectivity issues between North West sub-regions are fully reflected in Transport for the North’s (TfN) plans and where possible TfN will be attending RLB meetings. Linked to this, a briefing has been provided for information presenting the transport governance currently in place at a northern spatial level and the Rail Industry Reviews underway which may influence it. This note is included in the appendix of this report.

Recommendations

NW RLB members are asked to:

Note the work undertaken in the third quarter of the 2018/19 research programme

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NW RESEARCH COLLABORATIONUPDATE ON 2018/19 PRIORITY RESEARCH AREAS

1. Introduction

1.1 The NW Regional Research Collaboration provides dedicated capacity to analyse shared issues for the NW’s LEP areas, as well as facilitating knowledge sharing between partners to explore strategic projects in more detail and at scale.

1.2 The research programme for 2018/19 was agreed in April. The paper provides an update on progress in relation to each research area over the last quarter.

2. Key areas of research undertaken

2.1 As part of the 2018/19 research programme the following key areas of research have been undertaken:

NW Brexit research

i) NW Brexit Monitor

The NW monthly Brexit Monitor continues to form a major component of the 2018/19 programme and ensures NW LEPs and partners are briefed on the economic and social trends and policy developments arising from the decision to leave the EU. Further work has been undertaken with officers across the sub-region’s to add additional local level detail. The latest monitor is reported in a separate agenda item.

ii) Brexit Briefing: Future Prosperity Funds and Risks linked to changes from loss of EU Structural Funding

In addition to the Monitor, the research into the Future Prosperity Funds and the risks linked to changes from the loss of EU Structural Funds in the North West has now been completed.

In advance of the outcome from the UK’s decision to leave membership of the European Union (EU), this study considers the distribution of EU ‘structural and investment funds’ to the UK and North West of England. In particular it looks at the value of funds in current and previous programmes; and aims to outline the main risks and issues to address in the UK Shared prosperity Fund and any other successor funds. Given that the UK has not left the EU, nor is there certainty nor detail on particular deals, the report focusses on the headline risks to future funding, their scale and their delivery, rather than providing a detailed impact evaluation of past/current funding programmes.

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Amongst its recommendations are the need for a multi-year, place based allocation, focussed on an agreed set of outcomes for each area and a fair and transparent set of criteria for the allocation of funding. The report also recommends that funding should match the totality of ESIF value, including match funding, and should be devolved to local areas. The report will be discussed in more detail with the RLB as a separate agenda item.

Collating of intelligence on the North West’s science, technology and advanced manufacturing assets and strengths. The NW RRC 2018/19 work programme includes capacity for research on science, technology and advanced manufacturing assets and strengths to better understand the opportunities across the NW; how they feed into the North's offer and; whether there are collective issues that require further work and analysis, including ways to tackle the productivity challenge. As part of this, it has been agreed that this workstream will comprise of three distinct areas of activity:

o LIS Workshop: A workshop on the development of Local Industrial Strategy’s will be held for NW LEPs and stakeholders to share ideas and practical experiences. The What Works Centre for Local Economic Growth (WWC) have agreed to run this event for the NW as an addition to a number of other scheduled events across the country due to the relationship which the RRC has with WWC and Greater Manchester’s designation as a trailblazer area for the Local Industrial Strategy. Run by the WWC and Cities and Local Growth Unit, this session will include an overview of Greater Manchester’s experience / lessons learnt and the experience of Cheshire & Warrington (confirmed as one of six LEPs included within the second wave of LIS development). Details are still TBC but three dates are currently being held for this (27th & 28th November and 4th December). The event will be held in Cheshire and Warrington.

o Made Smarter Pilot: Regular updates will be provided to the RLB on wider work that is being undertaken on the Made Smarter National Adoption Pilot (NAP) to be delivered in the northwest of England.

o The NAP was one of the key recommendations of the Made Smarter Review published in 2017 and its aim is to develop a delivery model that can be rolled out nationally. Part of the recently announced Industrial Strategy, the Made Smarter northwest NAP will be funded by a £20M Government investment, with a target to increase regional GVA by up to £115M. Over 30 months, the pilot will test out the most effective ways to engage manufacturers in the northwest and encourage them to adopt industrial digital technology (IDT), so that they can improve their competitiveness, increase exports, and raise regional productivity. Working through the five northwest Local Enterprise Partnerships (LEPs)/Growth Hubs (Greater Manchester; Liverpool; Cumbria; Lancashire; Cheshire and Warrington) the pilot will engage with 3,000 northwest manufacturers and provide intensive support to 600 that gives them access to expert advice and funding to invest in technology solutions.

o This new service will work with existing productivity and digital skills programmes in the northwest including Be The Business and the Digital Skills Partnership in Lancashire. The pilot seeks to add value and not

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duplicate services that are already in place. The northwest pilot, supported by a full evaluation, which will test out the proposal that full adoption of the programme could realise a 25% manufacturing productivity increase over the next decade and use this to inform potential scale up across the country. The full business case is currently going through the government approval process, with a view to commencing the pilot as soon as possible.

o It is proposed that regular liaison takes place between RRC and the Growth Company (leading on the pilot) and Regional Leaders will be provided with an update on progress at RLB meetings. An invitation has also been extended to Juergen Maier, who led the Made Smarter Review, to attend the February RLB meeting to update leaders on progress so far and explain how members can input into the pilot.

o Global Competitive Strengths and Innovation Briefing: The Northern Powerhouse Independent Economic Review (NPIER) identified the north’s prime capabilities – advanced manufacturing, energy, health innovation and digital and the assets, expertise and businesses which are pan-Northern, highly productive, and internationally competitive. There is much evidence of the NW’s strengths in these areas, yet what is less clear, is a view of how the collective offer works across the NW. Within energy and nuclear, for example, the NW has an offer across all elements of the supply chain yet more could be done to mobilise these individual strengths as a cohesive offer.

o This piece then, will review relevant literature and any available data on competitive strengths and innovation assets (including the NPIER, Science and Innovation Audits for all relevant areas, work undertaken for the Atlantic Gateway, Cheshire’s work on science assets, innovate report, innovation north report and NP11 ongoing work) alongside any additional data and intelligence to outline the NW’s collective offer across the prime capabilities. Recommendations and actions will look to focus around the following four areas: funding and finance (capital, tax credits and funding that the NW can take advantage of); Innovation adoption (skills that need to be adopted to take advantage of any opportunities or skills that exist locally); science assets that the region has and could maximise to attract more investment; and social impact (looking at the innovation that drives social impact).

o The briefing will be undertaken in liaison with North West Business Leadership Team (NWBLT) building on their existing activity in this space including their recent work with Innovate UK ‘Planning for a step change: Informing where the North West should focus innovation to drive up productivity’1 released September 2018 and also look to bring in the N8 Research Partnership where possible. It is envisaged that this briefing will be brought to the RLB in February 2019 following officer review.

Work to ensure that intra-connectivity between North West sub-regions is fully reflected in in Transport for the North’s strategies and wider discussions

1 Hatch Regeneris (2018) http://www.nwblt.com/wp-content/uploads/2018/09/Planning-for-a-Step-Change-North-West-Productivity-and-Innovation-Study-September-2018-002.pdf

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Discussions with Transport for the North are ongoing to ensure that intra-connectivity issues between North West sub-regions are fully reflected in Transport for the North’s (TfN) plans and where possible TfN will be attending RLB meetings. Linked to this, a briefing has been provided for information presenting the transport governance currently in place at a northern spatial level and the Rail Industry Reviews underway which may influence it. This note is included in the appendix of this report.

3. Recommendations

3.1NW RLB members are asked to:

Note the work undertaken in the third quarter of the 2018/19 research programme

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APPENDIX

Transport Governance at Northern spatial level and Rail Industry Reviews, briefing note for information for Regional Leaders.

1. INTRODUCTION

1.1 In light of the discussion at the 20 July meeting of the North West Regional Leaders Board, the following provides a summary of Transport for the North’s (TfN) governance.

1.2 One consequence of the failures around the May rail timetabling change has been a focus on whether the appropriate governance is in place to manage the two Northern rail franchises, Northern Rail and Trans Pennine Express, and the note goes on to summarise the related reviews that have either concluded or are underway.

1.3 Setting out this transport governance landscape as well as a timeline and description of the various reviews is intended to help inform a discussion for the Board to determine and agree some next steps

2. TRANSPORT FOR THE NORTH GOVERNANCE

2.1 Transport for the North Governance is outlined in Figure 1 below and in section 4 ‘additional information’.

Figure 1: Transport for the North governance

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2.2 TfN Members Board

The Members’ Board is the ultimate decision-making body within TfN and is responsible for the exercise of TfN functions.

The Members Board is made up of 19 Constituent Authorities and 6 Co-Opted members, all within the public sector. The current Chair is John Cridland.

Members’ attendance must be by way of elected members of the relevant Constituent Authority or Co-Opted Member, being either a council leader, elected mayor, or the lead for transport/highways (as appropriate). There are currently 19 representatives.

Essentially, TfN has two primary roles. Firstly and in their own words to,

“enable the North to speak with one voice on the transport infrastructure investment needed to drive transformational growth and rebalance the UK economy.

“We will not replace or replicate the work of existing local transport bodies. Our role is to add strategic value by ensuring that funding and strategy decisions about transport in the North are informed by local knowledge and requirements. This fits with the devolution agenda and we will draw powers down from central government rather than up from local government.”

TfN’s second role is, alongside DfT, to manage the two rail franchises, Northern Rail and Trans Pennine Express.

The Members’ Board is able to appoint committees and to better secure oversight of these rail franchises. It recently established the Rail North Committee to supervise rail franchise management.

2.3 TfN Partnership Board

TfN Partnership Board has a similar make up to TfN Board, with the inclusion of partner organisations, notably the 11 Northern Local Enterprise Partnerships, the Department for Transport, Highways England, HS2 and Network Rail, and acts as a consultative forum for comment, review and recommendation.

2.4 TfN Executive Board

The Executive Board is made up of 19 members, consisting of Senior Executive Officers of Local Transport Authorities (LTAs) or lead officers

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for Transport within their Local Authority, where no LTA exists, as well as representatives of partner bodies, such as DfT, HS2, Highways England and Network Rail.

2.5 Scrutiny Committee

The Scrutiny Committee is made up of 19 councillors from the constituent authorities. It has pre-scrutiny powers only, and is intended to help shape the decision-making process and provide feedback and recommendations to TfN Members Board.

2.6 Whilst the establishment of TfN is undoubtedly a step forward for the North, it has been suggested that Government needs to go further to bolster its role.

2.7 For example, the Convention for the North discussion note on transport remarked that:

“TfN is a strong step forward and it drives long term strategic thinking and investment priorities, identifying strategic transport corridors, publishing strategies in areas such as Northern Powerhouse Rail and Freight and Logistics. It is a genuine partnership which provides a voice on critical infrastructure to the North.

“Demonstrating an increasingly mature Partnership, TfN works alongside the Department of Transport in developing investment programmes.

“Nonetheless, it is still an advisory body which ultimately can only make recommendations. The Secretary of State remains accountable and takes decisions. TfN lacks powers and a budget to approve upgrades with the real risk that projects be deprioritised when there is a conflict of funding demands.”

2.8 Whilst the above statement may underplay TfN’s actual and developing role, for example it initiated and is managing a procurement process for pan-Northern smart ticketing, there may well be scope to strengthen TfN whilst ensuring it remains effectively overseen by its Member authorities.

3. CURRENT AND ON GOING REVIEWS

3.1 The section below outline the number of current and on-going reviews on the rail network and northern transport system.

3.2 These reviews may support further decision making regarding infrastructure requirement and the role of TfN.

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3.3 Blake/Johnson Review (TfN/Government)

This is a joint TfN and Government review of the Rail North Partnership arrangements for managing the Northern and TPE rail franchises. It has a particular focus on learning from the May 2018 performance issues, the steps leading up to it and how to avoid such events happening again.

The review is being led by Cllr Judith Blake (Leader of Leeds City Council) and Rail Minister Jo Johnson MP.

TfGM has provided written evidence and verbal interviews with key participants, including senior transport authority officers and elected members are being conducted. It is unclear when the review will conclude and report.

3.4 Barker Review (Network Rail and Northern)

The Barker review was a report commissioned by Network Rail and Northern and conducted by Vernon Barker OBE that looked at the working relationship of both organisations prior to May 2018.

It is believed this has now concluded, but it has not been shared publically.

3.5 Glaister Review – Office for Rail Regulation (ORR)

This is an independent inquiry into the May 2018 timetable disruption headed by the Chair of the ORR, Professor Stephen Glaister CBE.

An interim report was published on Thursday 20 September which attributes blame to the whole industry, stating that operators, Network Rail, DfT, Government and the ORR itself all let customers down.

The report highlights three major areas of concern;

Network Rail was in the best position to understand and manage the risks, but did not take sufficient action, especially in the critical period of autumn 2017.

Northern were not fully aware of or prepared for the problems in delivering the timetable, and they did not do enough to provide accurate information to passengers when disruption occurred.

Both DfT and ORR are responsible for overseeing aspects of the industry, but neither sufficiently questioned assurances they received from the industry about the risk of disruption.

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The report also recognises the significant impact of delays in engineering projects, particularly around North West Electrification and Network Rail’s over optimism that this could be completed in December 2017 as a root cause of the problems faced.

The full report and recommendations are due to be published in December.

3.6 Williams Review – Government

The Williams review was announced on Thursday 20 September by Government, immediately following the publication of the Glaister interim report. Keith Williams is an ex British Airways executive.

It will provide a ‘root and branch’ review of the UK rail industry and whether or not franchising is an appropriate model of operation. In launching the review Government have said that recommendations will be implemented by 2020.

A concluding date is not yet known (although next year has been suggested) nor is it clear how stakeholders might contribute and respond.

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4. ADDITIONAL INFORMATION

TfN Board Members

Board Member Local Authority Position

Cllr.Phil Riley Blackburn with Darwen Senior Deputy Leader of Blackburn and Darwen Council

Cllr. Simon Blackburn Blackpool Leader of Blackpool Council

Cllr. Rachel Bailey Cheshire East Leader of Cheshire East Council

Cllr. Samantha Dixon Cheshire West & Chester Leader of Cheshire West and Cheshire Council

Cllr. Ian Gillies City of York Leader of City of York Council

Cllr. Keith Little Cumbria Cabinet member for Highways at Cumbria County Council

Cllr. Stephen Parnaby East Riding of Yorkshire Leader of East Riding of Yorkshire Council

Andy Burnham Greater Manchester Mayor of Greater Manchester

Cllr. Darren Hale Hull City Council Deputy Leader of Hull City Council

Cllr. Geoff Driver Lancashire Leader of Lancashire County Council

Steve Rotheram Liverpool City Region Mayor of Liverpool City Region

Cllr. Nick Forbes North East Leader of Newcastle City Council

Cllr. Matthew Patrick North East Lincolnshire Council Portfolio holder for Environment, Transport and Energy

Cllr. Rob Waltham North Lincolnshire Leader of North Lincolnshire Council

Cllr. Carl Les North Yorkshire Leader of North Yorkshire County Council

Cllr. Julie Dore Sheffield City Region Leader of Sheffield City Council

Ben Houchen Tees Valley Mayor of the Tees Valley

Cllr. Terry O’Neill Warrington Leader of Warrington Council

Cllr. Judith Blake West Yorkshire Leader of Leeds City Council

Cllr. Trevor Ainsworth Derbyshire Cabinet Support Member for Highways, Transport and Infrastructure, Derbyshire County CouncilCllr. Richard Davies Lincolnshire Portfolio Holder for Highways, Transport & IT at Lincolnshire County Council

Cllr. John Ogle Nottinghamshire Councillor for Tuxford Ward on Nottinghamshire County Council

Cllr. Jon Collins Nottingham City Leader of Nottingham City Council

Cllr. Mark Winnington Staffordshire Cabinet Member for Economic Growth Staffordshire County Council

Cllr. Daniel Jellyman Stoke-on-Trent Cabinet Member for Regeneration, Transport and Heritage, Stoke-on-Trent City Council

Christine Gaskell Cheshire and Warrington Chair of the Cheshire and Warrington Local Enterprise Partnership

Jim Jackson Cumbria and Lancashire Board member at Cumbria Local Enterprise Partnership

Mike Blackburn Greater Manchester Chair of Greater Manchester Local Enterprise Partnership

Lord Haskins Hull and Humber Chair of Hull and Humber Local Enterprise Partnership

Roger Marsh OBE Leeds City Region Chair of the Leeds City Region Local Enterprise Partnership

David Land North East Board member of the North East Local Enterprise Partnership

Matthew Lamb North Yorkshire Board Member of the York, North Yorkshire and East Riding Local Enterprise Partnership

Martin McKervey Sheffield City Region Board member of the Sheffield City Region Local Enterprise Partnership

Paul Booth OBE Tees Valley Board member of Tees Valley Local Enterprise Partnership

Jim O’Sullivan Highways England Chief Executive of Highways England

Paul Griffiths HS2 Managing Director for Phase 2 of High Speed 2 Limited

Sir Peter Hendy Network Rail

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Transport for the North Constituent Authorities

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NORTH WEST REGIONAL LEADERS BOARD

Date: 12 October 2018Subject: Future Prosperity Funds and Risks linked to changes from loss of EU Structural FundingReport of: Katrina Hann, GMCA

PURPOSE OF REPORT

This report assesses the future Prosperity Fund and looks at the risks linked to changes from loss of EU Structural funding. It particular it looks at the potential scale of risk to the changes to structural funding for future UK Shared Prosperity Funds; the potential risk to leverage of other impacts/investment from structural funds; the principles and operations of future funding programmes cover; and what other factors that should be considered for the future delivery of funding.

RECOMMENDATIONS:

RLB members are asked to:

Note the contents of the report (Appendix 1)

CONTACT OFFICERS:

Katrina Hann, Head of Research, GMCA

Katrina.hann@neweconomymanchester.com

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1. INTRODUCTION

1.1 The report ‘Future Prosperity Funds and Risks linked to changes from loss of EU Structural Funding’ assesses the future Prosperity Fund and looks at the risks linked to changes from loss of EU Structural funding.

1.2 Key questions it addresses are:

What is the potential risk to leverage of other impacts/investment from structural funds?

What should the principles and operations of future funding programmes cover?

What other factors that should be considered for the future delivery of funding?

1.3 The study considers the distribution of EU 'structural and investment funds' to the UK and North West of England – focussing on ERDF/ESF funding. In particular, it looks at the value of current funds; headline impacts of previous programmes, and outline the main risks and issues to address in the design and delivery of a future UK Fund. Case studies of funding programmes and projects are included for each sub-region in the North West of England.

2. KEY MESSAGES FROM THE ANALYSIS

2.1 Key messages from the report are as follows:

The headline risks from 'loss' of European Structural Funding when the UK leaves the EU, leaving a potential €10.5 billion Euro UK-wide funding gap.

Given that the structural funds are supported by at least 50% match funding, the full scale of the UK 'funding gap' could be in excess of €21 billion.

The equivalent 'funding gap' figure for the North West of England is at least €2.2 billion Euro (for ERDF and ESF equivalent - and including match over the programmes timeframe (seven years).

In addition, organisations and institutions in the region have access to a range of transnational EU funding; and developed capacity and expertise in the management of programmes of work.

Any successor 'Single Prosperity Fund' must match the 'full social and economic costing' of EU funds foregone, including the equivalent of match funding; and the funds must be available to be used for investment in skills, communities, business competitiveness, regeneration and low carbon/climate change measures.

EU Structural funding has already provided a range of benefits across the UK. In the North West of England there has been extra investment for the region that has supported the transition from deindustrialisation.

Research by New Economy (2014) shows that ERDF and ESF investment during the last 20 years, and before the current programme was live, helped the region tackle many socio-economic issues, including:

North West GVA increased by at least £2.3bn per annum due to structural funding.

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56,800 additional jobs within the region, and 127,200 people gaining a new qualification.

9,100 new businesses, and 47,200 businesses being helped to become more productive.

3. FUNDING PRINCIPLES FOR SUCCESSOR FUNDING

The report highlights that the principles of any successor funding programme must consider:

Multi-year funding, this should be a multi-year, place based allocation, focussed on an agreed set of outcomes for each area. It should be simpler and faster to access, not artificially ring-fenced, and must be managed and prioritised locally to allow for holistic solutions to local issues.

Flexibility, funding must be flexible enough to be used for capital and revenue purposes, grant and recycling loan/equity to meet the needs of localities; and support innovations such as local revolving investment funds, and experimentation to tackle challenging issues.

Integration, there should be a place based single pot allocation to prevent duplication, to prevent gaps and inconsistencies, and where possible ensure integration with other funding. The allocation of funding should pool (and where relevant devolve) a number of other related funds (e.g. Local Growth Fund, Industrial Strategy Challenge Fund etc.) into a single Shared Prosperity Fund.

A place-based single pot, allocated to functional economic areas, so that resources can be allocated within national themes, but prioritised to local productivity priorities and taking a joined-up approach which avoids policy silos, using an outcome not output model that can stifle innovation.

Funding level and match funding, the amount of funding available to sub-regions should be at least the level of existing EU Structural Funds and their matched funding.

Governance and commissioning, the research recommends a place based approach built around the needs of people/places to enable more targeted support for key local issues. Government should consider the development of a new outcome driven model based upon local Industrial Strategies.

Allocation, the allocation must be based upon: socio-economic indicators; past levels of spend; and past levels of delivery. Targets must consider the severity of challenges and the costs of addressing these, in different parts of the region.

Transparency, there must be a fair and transparent allocation based on a model which does not perpetuate the anomalies noted in previous funding allocations (which have been the subject of Supreme Court challenge).

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The North West

Regional Research Collaboration

Future Prosperity Funds and Risks linked to changes

from loss of EU Structural Funding

Report for:

North West Regional Leaders

October 2018

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The North West

Regional Research Collaboration

Executive Summary74

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The North West

Regional Research CollaborationExecutive summary (1)Headline findings

The North West Regional Research Collaboration (NWRRC) has undertaken research on the headline risks from ‘loss’ of European Structural Funding when the

UK leaves the EU, leaving a potential €10.5 billion Euro UK-wide funding gap. Given that the structural funds are supported by at least 50% match

funding, the full scale of the UK ‘funding gap’ could be in excess of €21 billion. The equivalent ‘funding gap’ figure for the North West of England is

at least €2.2 billion Euro (for ERDF and ESF equivalent – and including match funding over the full programmes timeframe, assumed seven years). In addition,

organisations and institutions in the region have access to a range of transnational EU funding.

Any successor ‘Single Prosperity Fund’ must match the ‘full social and economic costing’ of EU funds foregone, including the equivalent of match

funding; and that funds can be used for investment in skills, communities, business competitiveness, regeneration and low carbon/climate change measures. It is

also important to note that EU structural funding has formed a higher proportion of funding in the UK’s ‘transition areas’ within the region, and that the

North West has also benefitted from a range of other EU funds supporting the rural economy, transnational funds for science and innovation (such as Horizon

2020), and investment from the European Investment Bank.

The UK has significant challenges around productivity, trade imbalance, global competition and widening skills gaps. To tackle this the Government’s objective is

to rebalance the economy to ensure all areas benefit from economic growth via Local Industrial Strategies. To enable this, it is critical that local leaders

across the country can retain and in some cases increase access to devolved funding to replace ESIF programme. Of equal importance is the need to

recognise that local areas must have resources to ensure they can develop or continue to provide the capacity and competence to manage programmes.

This study considers the distribution of EU ‘structural and investment funds’ to the UK and North West of England. In particular, it looks at the value

of current funds; headline impacts of previous programmes, and outline the main risks and issues to address in the design and delivery of a future

UK Shared prosperity Fund (and any other successor funds).

The work focuses on EU Structural Funds, rather than all sources of investment, and aims to address the following lines of enquiry:

What is the potential scale of risk to the changes to structural funding for future UK Shared Prosperity Funds?;

What is the potential risk to leverage of other impacts/investment from structural funds?;

What should the principles and operations of future funding programmes cover?; and

What other factors that should be considered for the future delivery of funding?

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The North West

Regional Research CollaborationExecutive summary (2)Scale of funding and impacts

Total ESIF funding within the North West (ERDF and ESF) for 2014-2020 is €1.1 Billion Euros, comprising: Cheshire and Warrington €142 million,

Cumbria €91 million, Greater Manchester €414 million, Lancashire €265 million, and Liverpool City Region €221 million. (See caveat notes below). As the UK

continues to negotiate its exit from the EU, there is confirmation from Government that this funding commitment to the NW will be honoured to the end of this

programme period. The details of any successor funds are yet to be finalised, however there is an opportunity to shape their structure and format.

EU Structural funding has already provided a range of benefits across the UK. In the North West of England there has been extra investment for the region

that has supported the transition from deindustrialisation. Research by New Economy (2014) shows that ERDF and ESF investment during the last 20

years, and before the current programme was live, helped the region tackle many socio-economic issues, including:

North West GVA increased by at least £2.3bn per annum due to structural funding.

56,800 additional jobs within the region, and 127,200 people gaining a new qualification.

9,100 new businesses, and 47,200 businesses being helped to become more productive.

The current programme is supporting the North West to invest in its science assets, innovation projects and programmes, extensive business support, new

investment funding for development and business growth, regeneration and low carbon and climate mitigation programmes.

Beyond direct impacts, the experience of designing, managing and delivering ERDF and ESF programmes has considerably strengthened the ability

of public and private sector partners to drive economic growth.

Independent evaluation also shows that regional organisations have worked together to deliver largescale innovation projects including the introduction

of financial instruments such as JESSICA and JEREMIE that create recyclable funds for commercial and business growth.

**Footnote: The UK Government was challenged by Liverpool City Region on the amount of funding allocated in the 2014-2020 programme, having failed to take into account issues such as the city

region’s Transition Status and timing of funding. However, the funding process was ruled as lawful by the Supreme Court in 2016 (despite also being labelled on record by one judge as

inappropriate). In future, the North West must argue for a fair and transparent allocation based on a UK model which does not perpetuate the anomalies from the 2014-2020 allocation.**

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The North West

Regional Research CollaborationExecutive summary (3)Brexit risks

The Government's own economic analysis – testing a range of scenarios when the UK leaves the EU, suggest that UK GDP would be 1.6 % lower over 15 years

if the UK remains a member of the EU's single market (EEA deal), 4.8 % lower if a free trade deal is agreed (FTA deal), and 7.7 % lower with no deal (WTO

mitigated outcome).

Applying the Government’s own assumptions (crudely) for the impacts on the North West of England to the scale of forecast growth in the region’s economy

(2020 to 2035) suggests equivalent cumulative losses in the North West over this period are valued at £5.6 billion, £17.9 billion and £26.8 billion

respectively.

The Shared Prosperity Fund will be a significant tool to help address the risk and opportunities from Brexit, including the following:

Trade and competitiveness: Market access measures (exposure to new tariffs and/or quotas); increased administrative burdens (including customs

formalities and VAT); and Non-Tariff Barriers (NTBs) to trade, such as health, safety, and environment standards, and well as rules of origin requirements.

Research by GMCA suggests that the largest (scale) impacts affect the Advanced Manufacturing (Aerospace, Automotive, Pharma sectors) in the region.

Labour market and employment: research by GMCA suggests that sectors with an over-representation of EU8 workers, and proliferation of lower skilled

jobs, appear to be most vulnerable to future changes in migration, in particular within Agriculture, Food, Distribution/Logistics, Hotels and Restaurants, and

parts of Manufacturing.

Investment: There may be greater restrictions on movement of capital post-Brexit, but there is also a risk that the UK becomes a less attractive

destination for inward investment due to a perceived less favourable trading relationship with the EU (e.g. more restrictive access to labour, tariffs, etc.)

It is estimated that that the UK would have received about 22% less FDI between 1986 and 2014 had it not been in the EU (Source: LSE Centre for

Economic Performance, 2017, UK Trade and FDI: A Post-Brexit Perspective).

It is critical that the Shared Prosperity Fund matches the ‘full costing’ of EU funds foregone, including the equivalent of an element of match funding, and that

funds can be used for investment in communities and business competitiveness, given the importance of raising the UK’s productivity performance.

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The North West

Regional Research CollaborationExecutive summary (4)Addressing the risks, recommendations

• The research highlights that the principles of any successor funding programme must consider:

• Multi-year funding – Funding should be a multi-year1, place based allocation, focussed on an agreed set of outcomes for each area. It should be simpler and

faster to access, not artificially ring-fenced, and must be managed and prioritised locally to allow for holistic solutions to local issues.

• Flexibility - It must be flexible enough to be used for capital and revenue purposes, grant and recycling loan/equity to meet the needs of localities; and support

innovations such as local revolving investment funds, and experimentation to tackle challenging issues.

• Integration: There should be a place based single pot allocation to prevent duplication, to prevent gaps and inconsistencies, and where possible ensure integration

with other funding. The allocation of funding should pool (and where relevant devolve) a number of other related funds (e.g. Local Growth Fund, Industrial

Strategy Challenge Fund etc) into a single Shared Prosperity Fund.

• A place-based single pot - allocated to functional economic areas, so that resources can be allocated within national themes, but prioritised to local productivity

priorities and taking a joined-up approach which avoids policy silos, using an outcome not output model that can stifle innovation.

• Funding level and match funding - the amount of funding available to sub-regions should be at least the level of existing EU Structural Funds and their matched

funding.

• Governance and commissioning: The research recommends a place based approach built around the needs of people/places to enable more targeted support

for key local issues. Government should consider the development of a new outcome driven model based upon local Industrial Strategies.

• Allocation - The allocation must be based upon: socio-economic indicators; past levels of spend; and past levels of delivery. Targets must consider the severity of

challenges and the costs of addressing these, in different parts of the region.

• Transparency - There must be a fair and transparent allocation based on a model which does not perpetuate the anomalies noted in previous funding allocations

(which have been the subject of Supreme Court challenge).

1) A minimum six year timescale would allow for strategic planning beyond normal domestic funding cycles, but would align with other (shorter-term) Government financial cycles such as Comprehensive Review.

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Main report79

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Regional Research CollaborationIntroduction

Background and aims

Following the referendum, one of the biggest concerns from LEPs, Local Authorities and Combined Authorities was addressing the potential €10.5 billion UK-wide

funding gap that (under a worst case scenario, and when including match funding, would equate to € 21 billion) would immediately open up from the point the UK

officially exited the EU, unless a viable domestic successor to EU regional aid was already in place. This study considers the distribution of EU ‘structural and

investment funds’ to the UK and North West of England. In particular, it looks at the value of funds in current programmes; and aims to outline the main risks and

issues to address in the UK Shared Prosperity Fund and any other successor funds.

Given that the UK has not left the EU (as of July 2018), nor is there certainty nor detail on our future relationship with the EU, the report focusses on the headline

risks to funding (their scale and their delivery) rather than providing a detailed impact evaluation of funding programmes. Where possible, headline data on the

success of previous programme rounds is highlighted, alongside high level value of funds secured.

The work focuses on EU Structural Funds, rather than all sources of investment, and aims to address the following lines of enquiry:

What is the potential scale of risk to the changes to structural funding for future UK Shared Prosperity Funds?

What is the potential risk to leverage of other impacts/investment from structural funds?

What should the principles and operations of future funding programmes cover?

What other factors that should be considered for the future delivery of funding?

The emphasis is on the North West of England and five sub-regional geographies of Cheshire and Warrington, Cumbria, Greater Manchester, Lancashire and

Liverpool. Where available the study draws on local data and analysis, however given data limitations the emphasis is looking at key issues, risks and data in

aggregate. The research is supplemented by interviews with key informants.

Structure of the report

Section 1: Summarises the context, structure, administration, calculation of Structural Funding.

Section 2: Highlights funding in the North West and by Local Enterprise Partnership area, and includes high level impacts from past programmes 2000 to 2013.

Section 3: Lists the headline risks to trade, the labour market, and investment;. It also includes issues for consideration to help mitigate these risks.

Section 4: Outlines a range of key principles for future funding (e.g. Shared Prosperity Fund) to support growth and address the key risks outlined.

Annex: Provides a series of example case studies of projects that have been funded by ERDF or ESF funding.

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Regional Research CollaborationSection 1: Background The UK voted to leave the European Union on 23 June 2016. It will remain a member of the EU until the terms of ‘Brexit’ have been negotiated and until

then it will continue to make contributions to the EU budget and receive EU funding through various channels. Currently the UK is expected to formally leave

the EU on 29th March 2019 (two years following the trigger of Article 50), and expected to remain in a ‘transition’ arrangement with the EU until 1st January

2021, during which time the UK will essentially function as a member of the EU (including continuing current funding and regulation arrangements).

European structural and investment funds (hereafter ‘structural funds’) support economic development across EU member states and their constituent

regions. Funding rounds are comprised of seven year periods. The current round runs from 2014 to 2020, but funds allocated before 2020 can be

spent up to 2023.

HM Contributions to the EUs central budget will end with the UK's membership, however this does not mean Britain will end payments to the EU after

Brexit. The recent White Paper and negotiations to date have set out that the UK would commit to "appropriate contributions", for example, to EU projects in

fields such as science and innovation.

Government announced that all structural funding commitments (and Horizon 2020 funding) under the 2014 to 2020 programme - if they demonstrate value

for money and are in line with domestic strategic priorities, and are under contract before the UK leaves the EU - will be honoured by HM Treasury, even if

those projects are contracted to continue beyond the date of exit. A (24 July) letter from the Ministry of Housing Communities & Local Government

sets out that the equivalent value of allocated 2014-2020 ESI Funds will continue even in the event of a “no deal”.

Structural funds are comprised of five funds:

European Regional Development Fund (ERDF), aims to strengthen economic and social cohesion in the European Union by correcting imbalances

between its regions. The priority investment areas for ERDF funding are: innovation and research; the digital agenda; support for small and medium-

sized enterprises, and low-carbon.

European Social Fund (ESF), invests in people, with a focus on improving employment and education opportunities; and improving the situation of the

most vulnerable people at risk of poverty. The priority investment areas for ESF funding are promoting employment and supporting labour mobility;

promoting social inclusion and combating poverty; investing in education, skills and lifelong learning, and enhancing efficient public administration.

Cohesion Fund (CF); aims to reduce economic and social disparities and to promote sustainable development’ in EU member States whose Gross

National Income per capita is less than 90 % of the EU average; and

European Agricultural Fund for Rural Development; and European Maritime & Fisheries Fund.

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Regional Research CollaborationSection 1: Administration of funding The EU budget is organised around Multi-annual Financial Frameworks (MFF) which lay down the maximum annual amounts which can be spent in delivering

on the EU’s policy objectives over a period of at least 5 years. The MFF aims to ensure that EU spending is predictable and within the agreed limits.

While allowing the EU to deliver common policies, the MFF is divided into five main categories of spending, which include:

Smart and inclusive growth: Research and innovation; education and training; trans-European networks in energy, transport and telecommunications;

social policy; development of enterprises etc; and covers regional policy aimed at strengthening all regions' competitiveness and interregional cooperation.

Sustainable Growth: Natural resources - Includes the common agricultural policy, common fisheries policy, rural and environmental development.

Security and Citizenship: Includes justice and home affairs, border protection, immigration and asylum policy, public health, consumer protection, culture,

youth, information and dialogue with citizens.

Global Europe: Covers all external action by the EU such as development assistance, humanitarian aid.

Administration: Covers the administrative expenditure of all the European institutions (salaries, building costs, etc.), pensions and European Schools.

The majority of EU funding is administered in partnership with national and regional authorities in Member States, though a share of it is directly

administered by the European Commission. The EU budget determines the amount of structural funding for each Member State.

Whilst the EU calculates notional structural funding amounts for different regions, the funding is then provided to member states who have powers and freedoms

to determine how and where it is spent, and the mechanisms for allocating funding. Responsibility for allocating funding in England rests with government

departments (BEIS, MHCLG) and LEPs.

Funding is allocated across three types of regions, according to how their GDP per person compares with the EU average. Specifically, there are:

Less developed regions, whose GDP per person is less than 75% of the average for the EU; this status applies to two UK (NUTS2) regions: Cornwall and

the Isles of Scilly, and West Wales and the Valleys.

Transition regions, whose GDP per person is between 75% and 90% of the EU average; this status applies to eleven UK regions: Cumbria, Devon, East

Yorkshire and Northern Lincolnshire, Highlands and Islands, Lancashire, Lincolnshire, Liverpool City Region, Northern Ireland, Shropshire and

Staffordshire, South Yorkshire, Tees Valley and Durham.

More developed regions, whose GDP per person is above 90% of the EU average.

Structural funds work through a logic of ‘additionality’; i.e. that they are given in addition to any domestic regional development funding. EU member states

cannot therefore use these funds as an excuse to cut domestic funding and so structural funds provide net additional investment to regions.

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Regional Research CollaborationSection 2: Levels of funding

In the current programme, the UK has been allocated €17.2 billion Euro European Structural and Investment funds, and €22.5 billion Euro European

Agricultural Guarantee Fund.

The bulk of UK structural funding comes through ERDF which has been allocated €5.8 billion of EU funds, and ESF with an allocation of €4.9 billion – A total

of €10.8 billion ERDF & ESF for the UK 2014 to 2020.

Structural funding must be ‘match-funded’ by either central government department funds, Local Authority funds or by private and third sector

organisations. Total investment to regions is greater than just the funding provided by the EU.

Figure 1: EU funding allocations to the UK, 2014 to 2020 € billion

European Structural and Investment Funds 17.2

- European Regional Development Fund 5.8

- European Social Fund 4.9

- Youth Employment Initiative 0.2

- European Maritime and Fisheries Fund 0.2

- European Agricultural Fund for Rural Development 5.2

European Agricultural Guarantee Fund 22.5

Sources: European Commission, European Structural and Investment Funds, April 2016; European Commission, UK Common Agricultural Policy, May 2014; European

Commission, Structural and Investment Funds Open Data; European Commission, Summary of the Partnership Agreement for United Kingdom, October 2014.

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Regional Research CollaborationSection 2: Funding by LEP area Within England, notional allocations for the 2014-2020 programming period were made on the basis of Local Enterprise Partnership areas. The highest absolute

allocations in the UK are in London, North East, Cornwall, Greater Manchester, and Leeds City Region.

Total funding within the North West (ERDF and ESF) for 2014-2020 is €1.1 Billion Euros, comprising: Cheshire and Warrington €142 million, Cumbria €91

million, Greater Manchester €414 million, Lancashire €265 million, and Liverpool City Region €221 million. (Source: Letter from Secretary of State Vince Cable to

English LEPs (2014)

The North West and Yorkshire and Humber are the only two regions that will receive a decrease in their funding in absolute terms between 2014 and

2020 relative to the total level of funding between 2007 and 2013.

Figure 2 EU structural funds (ERDF and ESF) by LEP area, 2014 to 2020

Source: Letter from Secretary of State Vince Cable to English LEPs (2014)

Caveats

• The data are sourced directly from the SoS

letter in 2014. However, note must be taken

of the 2014 High Court ruling on the funding

process - that the UK Government had

“breached its legal duty to have due regard to

the need to eliminate discrimination and

advance equality of opportunity.”

• As a result of this initial ruling, Councils

including Liverpool and Sheffield took the

Government to court after it decided to divert

EU money from English cities to Scotland

and Northern Ireland.

• Liverpool City Council presented evidence

jointly with Sheffield Council showed that

Liverpool City Region received almost £124m

less than it should have, while South

Yorkshire received £74m less.

• Despite the legal case, the final Supreme

Court case ruled that the Government’s

actions (in allocating the money) were legal,

but also put on record that the approach has

been “manifestly inappropriate.”

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Regional Research CollaborationSection 2: Funding per capita by LEP

Figure 3: EU structural funds per capita (ERDF and ESF) by LEP area, 2014 to 2020

Source: Letter from Secretary of State Vince Cable to English LEPs (2014)

The highest allocations in the UK are in Cornwall and West Wales, both will receive over €1,100 (£800) per person from the EU Structural and Investment

Fund - similar to that received on average in Romania and Bulgaria. Total funding per capita within the North West (ERDF and ESF) for 2014-2020 is

€164, and by sub-region: Cheshire and Warrington €157, Cumbria €182, Greater Manchester €154, Lancashire €182, and Liverpool City Region €147.

The sub-regions in the North West represent some of the highest per capita funding in the UK, behind only the North East, Tees Valley, Cornwall, The

Marches; and broadly similar to the Black Country, Coventry and Warwickshire, Stoke-on-Trent, and Staffordshire. However, it is important to note that, in

future, the North West argues for a fair and transparent allocation based on a UK model which does not perpetuate the anomalies from the 2014-

2020 EU funding allocation process – described in the previous page.

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Regional Research CollaborationSection 2: Other sources of fundingFunding to support science and innovation

This study focusses on Structural Funds, in particular ERDF and ESF. However, organisations in the UK can apply directly to the European Commission for

funding from various other streams, often on a competitive basis following calls for applications. For example, the UK is one of the leading Member States in

securing funding for research and innovation, with a typical value of £1.0-1.5 billion per year.

The full range of other EU funding initiatives that are important to LEPs, Local Authorities and Combined Authorities (non-ESIF) are summarised by the LGA

discussion document: Beyond Brexit: Future of Funding currently sources from the EU, and include:

Horizon 2020, Asylum, Migration and Integration Fund (AMIF)

City Vitality Sustainability Initiative (CIVITAS)

Competitiveness of enterprises and SMEs (COSME)

Connecting Europe Facility (CEF)

Consumer programme 2014-2020

Creative Europe, Education, Training, Youth and Sport (Erasmus+)

Employment and Social Innovation Programme (EaSI)

Environment and climate action (LIFE)

European Local Energy Assistance (ELENA)

European Fund for Strategic Investments, Joint European Resources for Micro-to-Medium Enterprises (JEREMIE);

Rural LEADER fund; and

Joint European Support for Sustainable Investment in City Areas (JESSICA) which has funded projects such as the Exhibition Centre Liverpool (£8m),

and e.g. the North West Evergreen Fund – a recyclable fund supporting projects such as Logistics North, Chester Cordis, and CityLabs Manchester.

In addition, projects in the UK can be supported by EU institutions with funding that falls outside the EU Budget. Most notably, the European Investment Bank

(EIB) which borrows money on capital markets and lends it on favourable terms to projects that support EU objectives – committed over €36 billion to UK

projects between 2011 and 2016.

It is important to note that funding can also have an impact on specific regions without being allocated there directly. For example money spent on Horizon

2020 supports large collaborative projects where North West organisations gain significant benefit (funding and collaborative outputs) by working together with

partners from across the EU, and beyond.

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Regional Research CollaborationSection 2: Impacts of programmes

Examples of net impacts measured in formal evaluation

Structural funding has provided a range of benefits to the North West. The most obvious of these has been extra investment for the region that has

supported the transition from deindustrialisation to a period of regeneration. Research by New Economy (2014) shows that ERDF and ESF investment

during the last 20 years has helped the North West to tackle many socio-economic issues.

The net impacts of funding include:

North West GVA increased by at least £2.3bn per annum due to structural funding in the region.

The creation of 56,800 additional jobs within the region.

127,200 people gaining a new qualification.

The creation of 9,100 new businesses.

47,200 businesses being helped to become more productive.

Additional case studies of major EU structural funded projects across the North West of England are included in Annex 2.

The LGA also raised (2017) the issue of the international comparative disadvantage which future funding scenarios could also introduce. Other member states,

such as Greece, Hungary, Lithuania, Estonia and Latvia, would continue to receive relatively high levels of structural funding per person—over €500 per

person, per year (based on averages between 2011 and 2015). This underscores the key principle of why the full quantum of replacement funding, and rapid

transition to successor arrangements, remains so important for the North West of England.

Other impacts

Beyond direct impacts, the experience of designing, managing and delivering ERDF and ESF programmes has considerably strengthened the

ability of public and private sector partners within the region to drive economic growth.

Thanks to structural funding experiences, research shows that partners are increasingly able to work together to deliver innovative, large scale projects which

address local priorities whilst also making a positive contribution towards national economic growth priorities.

There must be continued recognition of the capacity, capability, and ‘Intermediate Body’ status awarded to GM and LCR as a formal progression in

the current programme to manage future funds locally. 1

1 The Greater Manchester CA took on Intermediate Body responsibilities on 1st May 2017, and the Liverpool City Region CA in March 2017 - https://www.gov.uk/government/publications/liverpool-devolution-deal

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Regional Research CollaborationSection 3: Summary of headline risks The impact on EU-UK trade is highly uncertain. As such, it is difficult to assess what the impact might be for the region. Whatever arrangements are agreed upon,

the costs of trade between the UK and the EU are set to increase, these costs are summarised below. The main issues will be to ensure that the UK (and its

regions and cities) secure a deal which helps reduce these risks, and in particular, that any successor public funding (and investment funds) are set

up to ensure that no places are left behind due to Brexit.

Virtually all assessments of the regional risks of Brexit agree that those impacts are negative. The Government's own economic analysis suggest that UK

GDP would be 1.6 % lower over 15 years if upon exiting the UK remains a member of the EU's single market, 4.8 % lower if a free trade deal is agreed, and 7.7 %

lower if the UK leaves the EU with no deal (reverting to WTO rules). The equivalent figures for the North West of England are (from the report chart): Baseline -

EEA-type deal: 2.5%, FTA-type deal: 8%, WTO mitigated outcome: 12%. (Source: EU Exit Cross Whitehall Briefing – January 2018).

This report does not provide any economic impact assessment of the current Brexit proposals put forward in the recent White Paper. However, applying the

Government’s own assumptions for the impacts on the North West of England to the scale of forecast growth in the region’s economy (GVA covering goods &

services, 2020 to 2035) suggests equivalent cumulative losses in the North West over this period are £5.6 billion, £17.9 billion, £26.8 billion respectively.

The Shared Prosperity Fund (SPF) will be a significant tool to help address many of these risks, and enabling opportunities, and will focus upon investment

in infrastructure and human capital, innovation and knowledge transfer, including low-carbon technology, trade, financial and economic, reform, policy and

regulatory capacity, ease of doing business.

It is critical that the SPF matches the ‘full costing’ of EU funds foregone, including the equivalent of an element of match funding, and that funds can be used

for investment in communities and business competitiveness, given the importance of raising the UK’s productivity performance. More details for the design

an delivery of the SPF is in section 4.

Risks to trade and competitiveness

Whilst Brexit may provide an opportunity for the UK to negotiate new and potentially better and/or more ambitious deals with trading partners, the main areas of

risk, identified in several independent impact studies, focus on the following:

Market access measures (tariffs and quotas)

Increased administrative burdens (including customs formalities and VAT)

Non-tariff barriers (NTBs) to trade, such as health, safety, and environment standards, and well as rules of origin requirements

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Regional Research CollaborationSection 3: Summary of headline risksRisks to the labour market and employment

Areas will be impacted differently depending on the composition of different local economies, in terms of sectors and occupations – the risks of Brexit on

the workforce vary as much within an industry as between different sectors, therefore different areas may wish to focus future programmes of support on

different local priorities.

Sectors with an over-representation of EU8 workers, and proliferation of lower skilled jobs, appear to be most vulnerable to future changes in

migration. Low-skilled jobs could be the most vulnerable if visa restrictions are introduced, this means that Agriculture and Food, Distribution/Logistics, Hotels

and Restaurants, and Manufacturing are more likely to be at risk.

Brexit should not overshadow underlying priorities surrounding skills and employment. Any changes to migration policy are unlikely to provide a

permanent solution to the restriction and loss of skills which could emerge after Brexit. This will require greater investment in the local workforce, and ensuring

‘good’ work for all.

Risks to investment

Cross-border movement of capital makes a significant contribution to North West’s economy. Foreign owned firms are more likely to be large employers

than domestic businesses and account for a disproportionately large section of employment and economic activity in the North West and also UK. Both foreign

owned firms and firms with an FDI link are significantly more productive than other businesses, and this effect tends to spill over, lifting productivity of

firms in the same area and industry.

There is a risk that there may be greater restrictions on movement of capital post-Brexit, but there is also a risk that the UK becomes a less attractive

destination for inward investment due to a perceived less favourable trading relationship with the EU (e.g. more restrictive access to labour, tariffs, etc.) This

would likely impact both EU and non-EU firms. It is estimated that that the UK would have received about 22% less FDI between 1986 and 2014 had it not

been in the EU. (Source: LSE Centre for Economic Performance, 2017, UK Trade and FDI: A Post-Brexit Perspective).

According to EY’s 2018 Attractiveness Survey, investor sentiment toward the UK is uncertain in the mid- to long-term, with respondents raising

increasing concerns around the impact of Brexit on future investment plans. In particular, there is evidence that investment in the financial and business

sector and investment in company HQs has fallen compared to the same time the previous year; and investment in the digital sector has slowed significantly

compared to the rest of Europe.

The impact of Brexit on foreign owned firms will vary dependent on industry and the nature of that business’ operations in the UK, for example

whether they export or if they are reliant on sales to the domestic market. In the North West, foreign owned firms primarily operate in Manufacturing,

Wholesale & retail, Professional, scientific and technical activities, and Administrative and support services.

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Regional Research CollaborationSection 4: Key principles for funding Addressing the risks, recommendations

• The research highlights that the principles of any successor funding programme must consider:

• Multi-year funding – Funding should be a multi-year1, place based allocation, focussed on an agreed set of outcomes for each area. It should be simpler

and faster to access, not artificially ring-fenced, and it should be managed and prioritised locally to allow for holistic solutions to local issues.

• Flexibility - It must be flexible enough to be used for capital and revenue purposes, grant and recycling loan/equity to meet the needs of localities; and

support innovations such as local revolving investment funds, and experimentation to tackle challenging issues.

• Integration: There should be a place based single pot allocation to prevent duplication, to prevent gaps and inconsistencies, and where possible ensure

integration with other funding. The allocation of funding should pool (and where relevant devolve) a number of other related funds (e.g. Local Growth Fund,

Industrial Strategy Challenge Fund etc) into a single Shared Prosperity Fund.

• A place-based single pot - allocated to functional economic areas, so that resources can be allocated within national themes, but prioritised to local

productivity priorities and taking a joined-up approach which avoids policy silos, using an outcome not output model that can stifle innovation.

• Funding level and match funding - the amount of funding available to sub-regions should be at least the level of existing EU Structural Funds and their

matched funding.

• Governance and commissioning: The research recommends a place based approach built around the needs of people/places to enable more targeted

support for key local issues. Government should consider the development of a new outcome driven model based upon local Industrial Strategies.

• Allocation - The allocation must be based upon: socio-economic indicators; past levels of spend; and past levels of delivery. Targets must consider the

severity of challenges and the costs of addressing these, in different parts of the region.

• Transparency - There must be a fair and transparent allocation based on a model which does not perpetuate the anomalies noted in previous funding

allocations (which have been the subject of Supreme Court challenge).

1) A minimum six year timescale would allow for strategic planning beyond normal domestic funding cycles, but would align with other (shorter-term) Government financial cycles such as Comprehensive Review.

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Regional Research Collaboration

ANNEX – Case study examples of

ERDF / ESF projects

in the North West of England

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Regional Research CollaborationCumbria

Connecting Cumbria Major Project

ERDF have invested £57m to promote access, take up, and efficient use of ICT by SMEs across the North West. One of the projects, Connecting

Cumbria, is a major project approved by the Commission. It seeks to invest €47,983,353 public funding to improve broadband services to premises in the

Cumbria NUTS 2 area.

It started after achieving its major project approval in May 2013. The total project cost is £48,123,497 (£15,400,000 ERDF contribution and £30,800,000

total ERDF eligible costs). Actual total expenditure declared by the project by the end of December 2014 was £11,669,345 of which £5,834,672 ERDF

contributed. The forecast total ERDF eligible expenditure for 2015 was £19,130,655.

The overarching objectives are to:

• Generate significant improvements in the performance of Cumbria’s SMEs and therefore in the performance of the economy.

• Assist in driving up rates of business innovation through the more effective use of ICT.

• Reduce social exclusion associated with difficulties accessing private and public services by enhancing the role of ICT in provision and access.

• Contribute to creating a lower carbon economy in Cumbria through the wider use of ICT and linked reductions in the need for car travel.

The business support is being delivered by Commendium and by end December 2014 has delivered:

• 1,344 SME’s has been assisted to improve performance (total target 1,973).

• 149 SME’s with improved GVA and creation of 64.5 jobs in SME’s as a result.

(Source: EU Commission: North West England ERDF Competitiveness Programme 2007-13, Annual Implementation Report 2014)

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Regional Research CollaborationCheshire and Warrington

Innovation 2 Commercialisation (University of Chester) 2016 to 2020

Aiming to promote research and innovation activities within the region, the I2C project focuses on supporting established SMEs within Cheshire &

Warrington to introduce innovation into their organisations and advance commercialisation of new products, processes and services to the marketplace.

While the project is open to SMEs from all ERDF eligible sectors with an innovation focus on their development needs, the specific project activities

particularly support the following sectors: Advanced manufacturing, Automotive, Engineering, and Energy. The project includes support at all stages of design

and innovation from foundational design through to commercialisation.

Project activities provide:

Shared equipment resource at Chester University’s Thornton Science Park, meaning that Cheshire and Warrington SMEs have access to a pool of specialist

equipment when they are developing and testing prototypes.

Technical and specialist expertise available to SMEs including Computer-aided design (CAD), Finite element method (FEM), Computational fluid dynamics (CFD)

and Data analysis.

Technical staff to work with businesses to develop and test prototypes, increasing the number of Cheshire and Warrington SMEs who engage in product

development.

New Leaf (Golden Gates Housing Trust (GGHT) in partnership with 30 other local organisations working as delivery partners) 2016 to 2019

New Leaf brings together partners as well as employers from across Warrington and Cheshire to change lives, create opportunities and make a positive

contribution to local communities and the regional economy. The project support individuals into or closer to work through:

One-to-one support

Skills and training interventions

Linking with work and training opportunities

Boosting confidence

Support with budgeting and finances

New Leaf aims to get over 2,800 people from across Cheshire into or closer to employment over its three year duration. In its first year the project

supported 1,185 individuals – 102 moved into employment, and 25 into education or training.

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Regional Research CollaborationGreater Manchester

Graphene Institute Major Project

The National Graphene Institute in Manchester was approved by the European Commission in March 2013 and opened in March 2015. It followed a €78m

(£61m) investment to build on the research leadership of two Nobel Prize winning scientists who isolated Graphene in 2004 at the University of

Manchester. In collaboration with other HEI, research centres, and companies in applied research, the institute helps take graphene from laboratories to

the market place, testing potential applications and commercialization opportunities for graphene, and strengthening Europe’s competitiveness in this

growing global market.

The ERDF contributed to the cost of construction and fitting out of the new 7,626m2 facilities at the University of Manchester, as well as purchase of

equipment to be used for applied research purposes. The University of Manchester has also established a £60m Graphene Engineering Innovation Centre

(GEIC), set to open in mid-2018, with a further £5m of ERDF investment.

The key performance indicators of the NGI by 2020 are:

• 15 joint research projects undertaken with other High Education Institutes

• 154 collaborative research projects undertaken with industry

• 40 industrial collaborations of the NGI

• £7.2m income from collaborative industrial research.

Long term objectives are:

• Establish Manchester and the North West as a leading centre for applied research, commercialisation and manufacture of graphene related materials

• Undertake collaborative graphene related research to increase the commercialisation of graphene related applications and products

• Make companies in the North West, particularly in key industries, aware of the potential of graphene and associated economic opportunities

• Increased scale of graphene related applied research, talent pool of post-doctoral graphene researchers, and the economic impact of these activities.

• Provide support to graphene related spin outs and new starts, and providing an appropriate support package to accelerate business development.

(Source: EU Commission: North West England ERDF Competitiveness Programme 2007-13, Annual Implementation Report 2014)

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Regional Research CollaborationLancashire

Engineering Innovation Centre (University of Central Lancashire) 2017 to 2019

Currently under construction, the EIC is a £30 million-plus state-of-the-art facility at the heart of the Preston, aiming to support the region’s engineering

innovation sector by capitalising on the location of UCLAN at the centre of one of the most intense engineering and manufacturing areas in the UK and

establish UCLAN as a leader in engineering innovation. The Engineering Innovation Centre will create an integrated space for teaching, research and

knowledge exchange, resulting in higher education provision in Lancashire which more closely reflects the economic priorities of the business community.

The EIC project is already underway with additional investment being made in specialist staff and equipment ready for the full opening of the new facility due

in 2019. The Engineering Innovation Centre has seven major objectives, to deliver:

An expanded engineering school with the capacity to accommodate increased undergraduate students.

An increase in applied, industry relevant research linked to key Lancashire manufacturing sub-sectors and specialisms, directly supporting the engineering business

base in Lancashire and the North West.

A long term programme of SME and supply chain engagement, innovation and business development support, with companies able to access state of the art

equipment and testing facilities.

An increase in the number of graduate engineers each year in Lancashire, providing Lancashire employers with a source of locally trained new graduates.

An increase in the number of young people and, in particular the proportion of females, choosing to take up engineering at a local university.

GVA and employment generation as a result of the Engineering Innovation Centre’s activities.

Implementation of the University’s masterplan for the Preston campus, creating facilities that form an important element of the city centre’s regeneration.

Moving On Preston’s College (in partnership with the Lancashire Employment & Skills Executive Partnership (LESEP) – including The Lancashire

Colleges, Lancashire Work Based Learning Forum, Other Public and voluntary organisations) 2016 to 2018

ESFA and ESF funded project targeting vulnerable young people in high priority wards of Lancashire. The project aims to reduce the number of NEET young

people by improving education, employability, and personal skills to enable successful progression, and linking young people with local businesses.

The project aims to provide personalised and flexible packages of support appropriate to individual young people’s needs and aspirations that are informed

by the opportunities available in the local labour market. This includes vocational and employability skills training as well as bespoke pre-employment or

pre-apprenticeship training packages designed in response to employers’ recruitment needs.

The project forms part of the ‘Lancashire Skills Escalator’ – skills and employment projects funded via the ESF and other sources. The project has engaged

an estimated 3,614 beneficiaries through its lifecourse, reducing the number of young people who are NEET or at risk of becoming NEET.

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The North West

Regional Research CollaborationLiverpool City Region

The Low Carbon Eco-Innovatory (Liverpool John Moores University (LJMU) (in partnership with University of Liverpool and Lancaster University).

Low Carbon Eco-Innovatory (LCEI) creates innovative low carbon goods, processes and services, developed through collaborative partnerships between

Liverpool City Region companies and University researchers, students and academic staff.LCEI works with SMEs on an individual basis in order to identify

opportunities for low carbon development which will ultimately bring about economic and environmental benefits for businesses, their customers and the

community. The programme encourages research, innovation and knowledge transfer by offering direct access to facilities at Liverpool John Moores

University, University of Liverpool and Lancaster University to SMEs, thus giving them access to cutting-edge exploitable assets and expertise.

Running from September 2015 to September 2019, the key performance indicators of the £2.65 million NGI, by 2020 are:

• 247 Businesses supported

120 New products to the firm

1,600 Tonnes - Estimated annual decrease in Green House Gases.

Talent Match Plus (Merseyside Youth Association (in partnership with Youth Federation, Young Persons Advisory Service, Windmills, Liverpool

John Moores University, and Kenyon’s)

Talent Match Plus aims to help young people develop the resilience to overcome barriers, apply work-related skills, and gain confidence to access and

progress into employment opportunities. The project supported young people aged 15-29 years old across Liverpool City Region, who are not in education,

employment or training (NEET), including those who are furthest away from the labour market. Support was provided through intensive mentoring and

personalised career coaching, to develop a unique and flexible package of support to meet the needs of each young person and support their progression

into education, employment or training. Support packages included therapeutic support (counselling, speech and language, anger management, self-harm

support), basic skills support (offering literacy and numeracy support), and a Business Start-Up Advisor (self-employment and enterprise support).

The £3.65 million project, running from November 2015 to July 2018, aimed to work with 2,237 young people a year and aims to get 25% into employment

or self-employment and 30% into education / training. In addition, this project provided accredited learning outcomes and a toolkit of best practice.

(Source: Liverpool City Region Local Enterprise Partnership website. Accessed June 2018).

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6a

NORTH WEST REGIONAL LEADERS BOARD

Date: 12 October 2018

Subject: North West Brexit Monitor

Report of: Katrina Hann, GMCA

PURPOSE OF REPORT

This report updates members on the key economic and policy developments in relation to the UK’s decision to leave the European Union (EU). The September edition of the North West Brexit Monitor is attached to provide a real-time view of the economic and policy impact of Brexit.

RECOMMENDATIONS:

RLB members are asked to:

Note the contents of the September Brexit Monitor (appendix 1)

CONTACT OFFICERS:

Katrina Hann, Head of Research, GMCA

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1. INTRODUCTION

1.1 Following the vote to leave the EU, the GMCA has been monitoring the economic and social trends and policy developments on behalf of the NW Regional Leaders Board (NW RLB) to develop an appropriate policy response. The impact of Brexit is being tracked across the following themes:

Macro-economy trends and developments; Key sectors and business investment; Trade, regulation, and access to European Funding; Property investment, housing, and planning; and Economic inclusion.

2. KEY MESSAGES FROM THE BREXIT MONITOR

2.1 The key messages from the September Brexit Monitor are summarised below.

2.2 A separate section outlines headlines from work completed by GMCA on the risks and responses to a no-deal Brexit. A full ‘summary’ of all Government technical papers is also available separately.

September saw Brexit preparations accelerate as negotiation deadlines come closer, with recent months marked in particular by increasing discussion across the nation of the risk and impact of leaving the EU without a deal in place.

On 24th August and 13th September, the Government published a total of 52 technical notices setting out information on how different areas of UK business and law would be affected by a ‘no deal’ scenario, allowing businesses and citizens to make informed plans. While the government maintains that a no deal scenario is unlikely, these notices address areas of immediate concern were the UK to leave the EU with no agreed formal relationship.

The technical notices address a range of topics including the future of certain EU funding streams, medicines labelling and regulation, nuclear regulation, importing and exporting, tobacco and food labelling, humanitarian and state aid, and studying in the EU.

Although the current round of ERDF and ESF funding is guaranteed by government, these notices still raise some concerns around stability of funding and particular on its impact on projects being undertaken with non-UK partners. Despite this, there are reasons for optimism with Government maintaining that they are confident that a deal will be reached, and overall positive – if variable – trends in recent months in construction, services, and retail sectors purchasing manager’s survey data.

Economic trends over recent months show positive signs, with recent good weather and the World Cup offsetting the impact of bad weather earlier in the year. The services PMI (indicating growth rates in the services sector) rose to 54.3

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7

in August from 53.5 in July, although PMI survey respondents highlighted continuing Brexit-related uncertainty holding back larger orders and skills difficulties.

The growth rate for business activity rose in all regions of the UK except the North East in August, with the PMI for the North West rising to 54.2 from 52.1 in July. However, this is still below pre-referendum levels (55.5) (above 50 = growth). This places the North West at the lower end of English regions, but in line with the national average (54.2).

Recent trends in the retail industry also suggest growing sales this month, with underlying trends showing momentum picking up following a longer period of slow growth in the sector. Furthermore, despite a recent dip in the construction PMI, August data indicates that the sector is sustaining a moderate recovery from weather related-disruptions earlier on.

Local business surveys highlight that recruitment intentions remain positive, whilst there has been rising uncertainty about future investment plans.

For most households however, the outlook is still mixed, with falls in unemployment and rising wages unable to counter the effect of rising living costs, leaving most still feeling the squeeze. The Consumer Prices Index and Household Finance Index both indicate a continued rise in consumer costs and resultant squeeze on household finances, with living costs rising faster than wages. Recent rises in costs have been driven in particular by rising transport costs.

Trends in unemployment since the referendum broadly reflect previous long-term trends, with an overall decline in unemployment rates in most areas. This is with the exception of Lancashire where unemployment rates have stayed broadly flat (4.2% pre-referendum to 4.1% latest) and Cheshire & Warrington where rates have risen slightly (3.5% pre-referendum to 3.9% latest), taking it now above Cumbria (3.3%).

On 18th September the Migration Advisory Committee published their final report on the impact and future of EEA migration in the UK. Notable recommendations include that migration policy should focus primarily on high-skilled labour, not implement any regional policy variations, and give no future priority to EU migrants over non-EU migrants.

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7

ANNEX 1: NO-DEAL BREXIT RISKS AND RESPONSE BRIFING NOTE

The following provides a summary of the headline risks and response to the UK exiting the European Union under a ‘no-deal’ scenario. The risks are not exhaustive, but reflect those presented to the GMCA and Mayor in September 2018 to inform the public and private sectors in Greater Manchester to assist with forward planning.

A range of actions being undertaken, at a national level, to prepare for a possible exit from the EU without a deal. This has included the publication of technical notices by the Government, providing advice in the event of a no deal being concluded with the EU by Brexit day. Immediate planning issues include:

o Contingency planning must progress for a no-deal scenario and ensure day 1 issues such as access to food, fuel and medicines/medical devices are being considered;

o Ensure there is no disruption to the operation of the region’s Airports and major sea ports in the region, ensure that just in time deliveries and critical infrastructure are functioning through sufficient planning, and ensure there are no delays, e.g. from the interpretation of new rules, at borders;

o Ensure the rights of foreign national in the UK and UK nationals in the EU are maintained, given agreements so far between the UK and EU will fall if there is no overall deal;

o Ensure key industries, including the health and social care sectors, are not affected by a lack of migrant labour – considering both short and medium term impacts;

o Ensure the removal of EU direction over UK powers is accompanied by further devolution to localities.

o Lobby for immediate release of the regional impact analysis the Government has undertaken;

A series of longer-term risks and actions have also been identified that should be considered, including:

o Undertaking appropriate contingency planning exercises based on local command and control arrangements.

o Undertaking an assessment of key (infrastructure) projects in the region which may be at risk post Brexit due to: increased prices and reduced viability of projects and investments; and availability of labour (such as construction skills).

o Consideration should also be given to relevant public sector interventions to ensure such projects continue and retaining confidence in the market;

o Considering the impact assessments being undertaken by other areas and working collaboratively as appropriate to develop understanding and responses to impacts arising;

o Developing the UK Shared Prosperity Fund so that it is locally controlled, long-term and at least the same amount as current EU structural funds and matched funding;

o Ensuring the region’s economy continues to be viewed as open for business and globally competitive by building relationships with key European cities;

o Further developing and expanding support work with key sectors, particularly:100

7

o Development of Growth Company and business support/business representative organisations web pages providing advice, FAQs and readiness assessments to the region’s firms;

o Identification of firms in the region at particular risk due to just in time supply chains.

o Understanding skills issues from Brexit – monitoring, and taking early action in sectors dependant on migrant labour;

o Putting in place appropriate arrangements to support business and individuals in the event of an economic downturn.

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September saw Brexit preparations accelerate as negotiation deadlines come closer, with recent months marked in particular by increasing discussion across the nation of the

risk and impact of leaving the EU without a deal in place. Despite this, there are reasons for optimism with the UK Government maintaining that they are confident that a deal will be

reached, and overall positive – if variable – trends in recent months in construction, services, and retail sectors purchasing manager’s survey data. Consumer spending growth ticked up,

boosted by the warmer weather. For most households however, the outlook is still mixed, with falls in unemployment and rising wages unable to counter the effect of rising living costs, leaving

most still feeling the squeeze.

Macro-Economic Trends & Developments

• The growth rate for business activity rose in all regions of the UK except the North

East in August, with the PMI for the North West rising to 54.2 from 52.1 in July. However,

this is still below pre-referendum levels (55.5) (above 50 = growth). This places the North

West at the lower end of English regions, but in line with the national average (54.2).

• According to monthly estimates from the Office for National Statistics (ONS), UK

GDP grew by 0.6% in the three months to July 2018 (May-July), after zero growth in

Feb-April 2018 (partly a result of bad weather earlier in the year). The service industries

were the main driver of growth in this period, seeing a boost from warm weather and the

World Cup. However despite positive movements compared to early 2018, the underlying

trend for the UK in real GDP is one of slowing growth since 2014.

Policy, Trade, & Regulation

• On 24th August and 13th September, the Government published a total of 52 technical

notices setting out information on how different areas of UK business and law would

be affected by a ‘no deal’ scenario, allowing businesses and citizens to make informed

plans and preparations. While the government maintains that a no deal scenario is unlikely,

these notices address areas of immediate concern were the UK to leave the EU with no

agreed formal relationship.

• The notices address a range of topics including the future of certain EU funding streams,

medicines labelling and regulation, nuclear regulation, importing and exporting,

tobacco and food labelling, humanitarian and state aid, and studying in the EU.

• On 18th September the Migration Advisory Committee published their final report on

the impact and future of EEA migration in the UK. Notable recommendations include

that migration policy should focus primarily on high-skilled labour, not implement any

regional policy variations, and give no future priority to EU migrants over non-EU migrants.

For more information, please contact:

Louis Richards, Analyst – GMCA Economics Team

louis.richards@greatermanchester-ca.gov.uk

Key Sectors & Business Investment

• The UK Manufacturing Purchasing Managers Index survey shows a continuing slowdown in

manufacturing growth since November 2017, with the index falling to 52.8 (August) from 53.8 (July).

• Growth rates in the services sector however give signs for optimism with the services PMI rising to

54.3 in August from 53.5 in July. Nevertheless, PMI survey respondents highlight continuing Brexit-related

uncertainty holding back larger orders and struggles recruiting skilled workers.

• Recent trends in the retail industry suggest growing sales this month, with underlying trends

showing momentum picking up following a longer period of slow growth in the sector.

Property and Housing

• June housing sales data from the Land Registry shows that the vote to leave the EU has had little

impact on house prices in the North West, with post-referendum trends in house prices roughly in line

with pre-referendum trends, with the exception of Cheshire & Warrington which saw a drop in house prices

up to April 2017 and slower growth since. Overall, prices in Greater Manchester have risen fastest in the

North West, above both national and regional averages since the referendum, with Cumbria close

behind. All other areas of the North West have seen total growth below the national average.

• Furthermore, despite a dip in the construction PMI, August data indicates that the sector is sustaining a

moderate recovery from weather related-disruptions earlier in the year.

Economic inclusion

• Trends in unemployment since the referendum broadly reflect previous long-term trends, with an overall

decline in unemployment rates in most areas. This is with the exception of Lancashire where

unemployment rates have stayed broadly flat (4.2% pre-referendum to 4.1% latest) and Cheshire &

Warrington where rates have risen slightly (3.5% pre-referendum to 3.9% latest), taking it now above

Cumbria (3.3%).

• The Consumer Prices Index and Household Finance Index both indicate a continued rise in consumer

costs and resultant squeeze on household finances, with living costs rising faster than wages.

Recent rises in costs have been driven in particular by rising transport costs.

North West Brexit MonitorKey economic trends & developments – September 2018

Version 25 September 2018

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Macro-economy

• According to monthly estimates from the Office for National Statistics (ONS), UK GDP grew by 0.6% in the three months to July 2018 (May-July). This represents a continued upward trend

compared to 0.1% and 0.4% growth in the previous two rolling quarters (March-May and April-June), and following zero growth in Feb-April 2018 (partly a result of bad weather earlier in the year). The service

industries were the main driver of growth in this period, seeing a boost from warm weather and the World Cup, However, production output continues to slip, contributing to a downward pull on growth.

Despite positive movements compared to early 2018, the underlying trend for the UK in real GDP is one of slowing growth since 2014. (1,2)

• The Bank of England’s Agents Report for Q3 2018 indicates rising (although still modest) consumer spending boosted by good weather, slowing manufacturing output and exports, rising business

uncertainty around Brexit (particularly for investment plans), and recruitment difficulties resulting in higher average pay settlements. The Bank also left interest rates on hold at 0.75% this month, although

highlighted concerns around future ‘greater uncertainty’ in future in light of Brexit and the increasing possibility of no deal. (3,4)

UK International Trade

• The total UK trade deficit (goods and services) narrowed by £1.4 billion to £3.4 billion in

the three months to July 2018; excluding erratic commodities (mainly aircraft and gold), the

deficit narrowed by £0.2 billion to £5.2 billion. (5)

IHS Markit Regional Purchase Managers’ Index (PMI)

• The growth rate for business activity rose in all regions of the UK except the North East in

August, with the PMI for the North West rising to 54.2 from 52.1 in July. However, this is still below pre-

referendum levels (55.5) (above 50 = growth). This places the North West at the lower end among

English regions, but in line with the national average (54.2). All other regions shown in grey below.

• Cost pressures for businesses continue to increase in August, with firms reporting increased

uncertainty on the outlook going into the next 12 months.(7)

EU Trade

• The UK was a net importer from the EU in

July 2018, with imports exceeding exports

by £7.6 billion. (6)

Non-EU Trade

• The UK was a net importer from non-EU

nations in July 2018, with imports exceeding

exports by £2.8 billion. (6)

Macro-Economic Trends & Developments

EU

Refe

rendum

£17.3billion

£20.1billion

£5

£10

£15

£20

£25

Ju

l '1

5

Oct '1

5

Ja

n '1

6

Apr

'16

Ju

l '1

6

Oct '1

6

Ja

n '1

7

Apr

'17

Ju

l '1

7

Oct '1

7

Ja

n '1

8

Apr

'18

Ju

l '1

8

Bill

ions

Non- EU Exports

Non-EU Imports

EU

Refe

rendum

£14.3billion

£21.9billion

£5

£10

£15

£20

£25

Ju

l '1

5

Oct '1

5

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n '1

6

Apr

'16

Ju

l '1

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Oct '1

6

Ja

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Apr

'17

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l '1

7

Oct '1

7

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n '1

8

Apr

'18

Ju

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8

Bill

ions

EU Exports

EU Imports

EU

Refe

ren

du

m

54.2

54.3

44

46

48

50

52

54

56

58

60

62

Ju

l '1

5

Aug

'15

Sep

'15

Oct '1

5

No

v '1

5

De

c '1

5

Ja

n '1

6

Feb

'16

Mar

'16

Apr

'16

May '16

Ju

n '1

6

Ju

l '1

6

Aug

'16

Sep

'16

Oct '1

6

No

v '1

6

De

c '1

6

Ja

n '1

7

Feb

'17

Mar

'17

Apr

'17

May '17

Ju

n '1

7

Ju

l '1

7

Aug

'17

Sep

'17

Oct '1

7

No

v '1

7

De

c '1

7

Ja

n '1

8

Feb

'18

Mar

'18

Apr

'18

May '18

Ju

n '1

8

Ju

l '1

8

Aug

'18

NW UK Other Regions

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7

Key Sectors & Business Investment

British Chamber of Commerce

• In September the British Chamber of Commerce updated their Business Brexit Risk Register following the

Government’s publication of 52 technical notices detailing ‘no deal’ contingency planning, maintaining 19 ‘red-rated’, 4

‘amber-rated’ issues, and upgrading 1 ‘green-rated’ issue, a small improvement from their previous register update.

• This register brings together 24 top questions being asked by businesses across the UK, with red and amber ratings

indicating that the answers to most key questions remain uncertain. The single ‘green-rated’ issue that the Chamber feel is

now clear is around how businesses will pay import VAT.(8)

• In light of this Brexit-related uncertainty and resultant weaker outlook for trade and investment, on 17th September the

Chamber downgraded their projections for UK GDP growth in 2018 to 1.1% from 1.3%, and 2019 projection down to

1.3% from 1.4%. (9)

• The Chamber’s most recent Quarterly International Trade Outlook (covering Q1 2018) highlights significant labour and

skills shortages among exporters, particularly in manufacturing, raising concerns over how Brexit may affect the UK’s

EU labour force. The report additionally raises concerns around how future EU relations may affect ease of trade.

Nevertheless, the report highlights a strong quarter for UK exporters, in particular for the North West, West Midlands,

and South West. (10)

Retail Sales

• The volume (not value) of retail sales grew by 0.7% in July 2018

compared to June 2018, representing a 3.5% increase on July 2017 and a

6.6% increase on June 2016.

• Reports indicate this upturn may have been driven in part by good weather,

the World Cup, and increasing online sales.

• The underlying trend in the retail industry – as suggested by the three-

month on three-month measure – is one of growing sales, with

momentum picking up following a longer period of slow growth. (13)

IHS Markit/CIPS Manufacturing & Services PMIs®

• August data shows a continued slowdown in UK

manufacturing growth, with the UK Manufacturing PMI

falling to 52.8 from 53.8 in June (above 50 = growth).

While a marked drop from late 2017’s high of 58.3, this

still indicates continued growth, although lower

than pre-referendum levels (53.2) for the first time.

• Despite continued weakness of the pound, foreign

demand has decreased, likely driving this slowdown.

With input prices rising, job creation has slowed to near

zero, with cuts being seen among some large

enterprises. (11)

• Growth rates in the services sector however give

signs for optimism with the services PMI rising to

54.3 in August from 53.5 in July. Nevertheless, PMI

survey respondents highlight continuing Brexit-related

uncertainty holding back larger orders and struggles

recruiting skilled workers. (12)

EU

Refe

rendum

52.8

54.3

46

48

50

52

54

56

58A

ug

'15

Oct '1

5

De

c '1

5

Feb

'16

Apr

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Ju

n '1

6

Aug

'16

Oct '1

6

De

c '1

6

Feb

'17

Apr

'17

Ju

n '1

7

Aug

'17

Oct '1

7

De

c '1

7

Feb

'18

Apr

'18

Ju

n '1

8

Aug

'18

Manufacturing PMI

Services PMI

EU R

efer

end

um

106.6

105.9

95

96

97

98

99

100

101

102

103

104

105

106

107

Jul '

15

Sep

'15

No

v '1

5

Jan

'16

Mar

'16

May

'16

Jul '

16

Sep

'16

No

v '1

6

Jan

'17

Mar

'17

May

'17

Jul '

17

Sep

'17

No

v '1

7

Jan

'18

Mar

'18

May

'18

Jul '

18

Month-on-month index

3-month-on-3-month index

Retail Sales Volume Index

June 2016=100

105

7

Policy, Trade, & Regulation

No Deal Technical Notices

• On 24th August and 13th September, the Government published a total of 52 technical notices setting out information on how

different areas of UK business and law would be affected by a ‘no deal’ scenario, allowing businesses and citizens to make informed

plans and preparations.(14)

• While the government maintain that a no deal scenario is unlikely, highlighting that around £3.7billion in funding and over 16,000 staff

have been (or are planned to be) allocated to plan for Brexit and that 80% of the withdrawal agreement has been agreed with the EU, these

notices address areas of immediate concern were the UK to leave the EU with no agreed formal relationship in March 2019.

• The notices address a range of topics including the future of certain EU funding streams, medicines labelling and regulation, nuclear

regulation, importing and exporting goods, tobacco and food labelling, humanitarian and state aid, and studying in the EU.

• While the EU have also published their own preparedness notices discussing possible impacts of a no deal for EU firms, on 31st August

following a meeting with Brexit minister Dominic Raab, Michel Barnier made a statement also emphasising that good progress has been

made in negotiations. Nevertheless, Barnier still emphasised the importance of reaching an agreement, and particular concerns on

agreements around security and intellectual property rights. (15,16)

Migration Advisory Committee

• On 18th September the Migration Advisory Committee published their final report on the impact and future of EEA migration in the

UK in light of Brexit. Particularly notable recommendations for the North West include that migration policy should focus primarily on high-

skilled labour (despite concerns expressed from the hospitality, agricultural, and health sectors in particular around potential labour

shortages), not implement any regional variations in migration policy (including the £30,000 salary threshold), and give no future priority to

EU migrants over non-EU migrants.(17)

Future of European Funding in the North West

• From 2014-20 the North West allocation of ERDF and ESF totalled €1.13billion, for which the European Commission has announced the

region will continue to be eligible until 2020/21. UK organisations have been advised to continue bidding for EU funding of all types,

with the UK Government underwriting the continued payment of any successful funding application, even when projects are

approved after the UK leaves the EU.

• In their recent ‘no deal’ technical notices, the government has reiterated that they will guarantee any funding secured before 29th March 2019

and continue all allocated 2014-20 ESF and ERDF funding, even in the event of a no deal. Current proposals for the EU and UK’s future

relationship also allow scope for the UK to continue in certain EU funding and science schemes as a ‘third country’.

House of Commons Exiting the European Union Committee update

• On 18th September the House of Commons Exiting the EU Committee published their latest update. While it welcomed the government’s

recent White Paper and technical notices, it criticised that the White Paper was only being published 17 months after Article 50, expressed

concerns about the feasibility of current plans for the Northern Irish border, and speculated that many no deal contingency plans would be

reliant on the reciprocal agreement of the EU, which it said has not been guaranteed. (18)

Brexit - Key Dates

August -

September

2018

Publication of 52 DExEU ‘no deal’

preparation technical notices

18th October

2018

EU summit during which both the UK

and EU hope to agree an outline of the

future UK-EU relationship.

Late October

2018

Deadline set by the EU’s chief

negotiator Michel Barnier as the point

by which Brexit negotiations must

have concluded to give the EU time to

sign off on the deal. It is expected UK

parliament will need to have also

voted on this final deal prior to this.

13th

December

2018

Final EU summit of 2018. A possible

fallback option if the October deadline

is not reached.

29th March

2019

Britain’s formal exit from the EU, two

years following the trigger of Article

50. In the case of a ‘no deal’, all

current EU legislation and agreements

would cease to apply from this date in

the absence of any other

arrangements.

31st

December

2020

Planned end of the proposed Brexit

transition period. Until this date, the

UK will essentially function as if a

member of the EU (including

continuing current funding and

regulatory arrangements).

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7

Property & Housing

Housing sales

• June housing sales data from the Land Registry shows that the vote to leave the EU has had little impact on house prices in the North West, with post-referendum trends in house prices roughly

in line with pre-referendum trends, with the exception of Cheshire & Warrington which saw a drop in house prices up to April 2017 and slower growth since. After a period of flat growth since September

2017, house prices in most areas across the North West appear to be picking up once again since March. Although a longer period of flat growth than previous years, this likely reflects a seasonal pattern

with price growth often slowing during winter. Overall, prices in Greater Manchester have risen fastest in the North West, above both national and regional averages since the referendum, with

Cumbria close behind. All other areas of the North West have seen total growth below the national average. (19)

Average House Sales Prices IHS/CIPS Construction PMI

• August’s construction PMI stands at 52.9, down from 55.8 in July (above 50 = growth),

indicating a slowdown in construction output since the previous month. However, growth

remains positive following the recovery from weather related-disruptions earlier in the year.(20)

• Construction PMI survey respondents are positive about prospects for future growth,

citing favourable economic conditions, although tempered by stretched supply chains, skills

shortages, and ongoing Brexit-related uncertainty.

June 2018 Average House Price

North West Since last month Annual Change Since EU Referendum

£159,801 +0.5% +3.1% +7.8%

EU

Refe

ren

du

m

52.9

44

46

48

50

52

54

56

58

60

Aug

'15

Oct '1

5

De

c '1

5

Feb

'16

Apr

'16

Ju

n '1

6

Aug

'16

Oct '1

6

De

c '1

6

Feb

'17

Apr

'17

Ju

n '1

7

Aug

'17

Oct '1

7

De

c '1

7

Feb

'18

Apr

'18

Ju

n '1

8

Aug

'18

Construction PMI

EU

Refe

rendum

90

95

100

105

110

Ju

l '1

5

Aug

'15

Sep

'15

Oct '1

5

No

v '1

5

De

c '1

5

Ja

n '1

6

Feb

'16

Mar

'16

Apr

'16

May '16

Ju

n '1

6

Ju

l '1

6

Aug

'16

Sep

'16

Oct '1

6

No

v '1

6

De

c '1

6

Ja

n '1

7

Feb

'17

Mar

'17

Apr

'17

May '17

Ju

n '1

7

Ju

l '1

7

Aug

'17

Sep

'17

Oct '1

7

No

v '1

7

De

c '1

7

Ja

n '1

8

Feb

'18

Mar

'18

Apr

'18

May '18

Ju

n '1

8

Cheshire & Warrington

Cumbria

Greater Manchester

Lancashire

Liverpool City Region

North West Average

England & Wales

Average house price

sale index

(June 2016=100)

107

7

Economic Inclusion

Unemployment and Claimant Counts

• Trends in unemployment since the referendum broadly reflect previous long-term trends, with an overall

decline in ILO unemployment rates (the standard definition of unemployment used by the International

Labour Organisation) in most areas. This is with the exception of Lancashire where unemployment rates

have stayed broadly flat (4.2% pre-referendum to 4.1% latest) and Cheshire & Warrington where rates

have risen slightly (3.5% pre-referendum to 3.9% latest), taking it now above Cumbria (3.3%). (21)

• Numbers claiming unemployment / underemployment benefits (Job Seekers Allowance and related

Universal Credit) in the North West stood at 128,715 in August, up 1,305 (1.1%) on the previous month,

with rises in all age groups.

• The total number of claimants is 22.2% (23,280) higher than pre-referendum levels. As a proportion

of the working age population, number of claimants has also risen to 2.8% from 2.3% in June 2016,

mirroring national trends. (22)

Due to recent changes to unemployment benefits and the roll-out of Universal Credit in the North West over the last year, long-term trends in

claimant counts should be treated with caution. Greater numbers may be moved onto certain types of benefits or be expected to find additional work

and may appear in counts, while total unemployment rates may not change. ILO unemployment rates are unaffected.

Household Finances

• The Household Finance Index (HFI) –

which tracks Britons’ sense of financial

wellbeing – reveals a continued although

slowing squeeze on UK household

finances. August’s HFI rose to 45.9 from

45.0 in July (below 50 signals deterioration).

While wages continue to rise, this has been

overshadowed by rising living costs.(23)

• The Consumer Prices Index (CPI-H) 12-

month inflation rate was 2.3% in July 2018,

unchanged from June, indicating a

continuing rise in consumer costs. Rising

transport fares produced the largest upward

contribution to inflation this month.(24)

ILO Unemployment Rate (% of economically active population aged 16-64) Claimant count (JSA and related Universal Credit) in the North West by age group

EU

Refe

ren

du

m

2.3%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Ju

l '1

5

Oct '1

5

Ja

n '1

6

Apr

'16

Ju

l '1

6

Oct '1

6

Ja

n '1

7

Apr

'17

Ju

l '1

7

Oct '1

7

Ja

n '1

8

Apr

'18

Ju

l '1

8

Consumer Price Index(inc. owner-occupierhousing costs)

3.5%

3.9%

4.1%

3.3%

6.6%

4.9%

4.2%

4.1%

6.2%

4.8%5.2%

4.4%

5.5%

4.5%

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

Jun '15 Sep '15 Dec '15 Mar '16 Jun '16 Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18

Cheshire & Warrington

Cumbria

Greater Manchester

Lancashire

Liverpool

UK

North West Average

EU

Refe

ren

du

m

0

25,000

50,000

75,000

100,000

125,000

Jul '1

5

Se

p '1

5

Nov '1

5

Jan

'16

Ma

r '1

6

Ma

y '1

6

Jul '1

6

Se

p '1

6

Nov '1

6

Jan

'17

Ma

r '1

7

Ma

y '1

7

Jul '1

7

Se

p '1

7

Nov '1

7

Jan

'18

Ma

r '1

8

Ma

y '1

8

Jul '1

8

Num

ber

of C

laim

ants

Aged 50+

Aged 25-49

Aged 16-24

108

7

Section Sources

Macro-Economic Trends &

Developments

1. ONS (10 September 2018): Statistical bulletin: GDP monthly estimate, UK: July 2018

2. ONS (10 August 2018): Statistical bulletin: GDP first quarterly estimate, UK: April to June 2018

3. Bank of England (13 September 2018): Agents' summary of business conditions - 2018 Q3

4. BBC News (13 September 2018): Bank of England leaves rates on hold amid Brexit uncertainty

5. ONS (10 July 2018): UK trade: July 2018

6. HMRC (11 September 2018): Overseas Trade Statistics - Non-EU and EU Trade: July 2018

7. IHS Markit / NatWest UK Regional PMI (10 September 2018): “Yorkshire & Humber is top performer in August, while North East remains laggard”

Key Sectors & Business

Investment

8. British Chamber of Commerce (September 2018): Business Brexit Risk Register

9. British Chamber of Commerce (17 September 2018): UK growth forecasts downgraded as Brexit uncertainty hits investment and trade

10. British Chamber of Commerce (11 April 2018): Quarterly Economic Survey Q1 2018

11. Markit/CIPS UK Manufacturing PMI (3 September 2018): “UK manufacturing upturn slows as new export orders contract for first time since April 2016”

12. Markit/CIPS UK Services PMI (5 September 2018): “Stronger upturn in service sector activity during August, but business optim ism hits five-month low”

13. ONS (16 August 2018): Retail sales, Great Britain: July 2018

Policy, Trade, & Regulation

14. Department for Exiting the European Union (13 September 2018): How to prepare if the UK leaves the EU with no deal

15. European Commission (31 August 2018): Statement by Michel Barnier following his meeting with Dominic Raab, UK Secretary of State for Exiting the EU

16. European Commission (2018) Preparedness notices

17. Migration Advisory Committee (MAC) (18 September 2018): EEA Migration in the UK: Final Report

18. Exiting the European Union Committee (18 September 2018): The progress of the UK’s negotiations on EU withdrawal (June to September 2018)

Property & Housing19. HM Land Registry (15 August 2018): House Price Index Database: June 2018

20. Markit/CIPS UK Construction PMI (4 September 2018): “Construction output growth eases to three-month low in August”

Economic Inclusion

21. ONS (2018): Labour Force Survey (model based estimates of unemployment), accessed September 2018

22. ONS (2018): Claimant count (combined Job Seekers Allowance and unemployment element of Universal Credit), accessed September 2018

23. IHS Markit Household Finance Index (20 August 2018): “Survey-record rise in income from employment helps lift household sentiment in August”

24. ONS (9 September 2018): Consumer price inflation UK: July 2018

Sources

109

7

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