University debate highlights the challenges facing the Liverpool city region Bill Gleeson reports

Local Enterprise Partnerships (LEP) have been designed by the government to be private sector led. The idea is that private businesses will lead sub-regional economic development.

However, a question mark hangs over whether the private sector can deliver such economic development – and even whether it sees itself as having such a role.

It’s a role made all the harder in the face of huge government spending cuts and a huge reduction in the amount of money the Merseyside sub-region receives from Europe’s economic and social regeneration funds. The ability of the private sector to lead the regeneration of the Liverpool city region was the subject of a debate at the University of Liverpool this week.

One of the key speakers at the debate, Can the Private Sector Deliver? was the former chief executive of the Mersey Basin Campaign and visiting professor at the University of Liverpool, Walter Menzies. He was joined by Rod Holmes, the project director who oversaw the construction of Grosvenor’s £1bn Liverpool One shopping development, and who recently stepped down as chairman of The Mersey Partnership.

This week’s debate was the first to be staged by the university in its series of debates entitled Policy Provocations.

Prof Menzies said: “The economy is the wholly-owned subsidiary of the environment. This was true when Liverpool was the epicentre of the first region in the world to industrialise on a revolutionary and unprecedented scale – when the River Mersey enabled Liverpool to become the second city of the British Empire. It is true now in 2012 when the Liverpool economy is again in rapid transition.

“A prosperous future for Liverpool can be achieved only through sustainable development. This demands the rejection of ‘business as usual’ and the radical prospect of Liverpool, Manchester and Warrington working with – rather than against – each other.

“Growing inequalities destabilise our society and increase its inefficiency. We have experienced value destruction and economic devastation on an epic scale as a result of feral bankers, city boys, failed regulation, and rogue economics.

“The response continues to be institutional paralysis. Whitehall is hopelessly compartmentalised – Lord Heseltine has described the departmental silos as ‘functional monopolies’. The government machine churns out what Professor Alan Harding, at Manchester’s Institute of Political and Economic Governance, has described as ‘place blind policies’. Then there is the abject failure of Westminster to see beyond London as the centre of the universe, the north as failing colonies, shopping as the new shipping, and a total lack of vision right across the political divide.

“The Sustainable Development Commission has sketched out 12 steps towards a sustainable economy. Others, such as the New Economics Foundation, are actively exploring viable alternatives to rogue capitalism. Beyond any doubt, however, is the overwhelming evidence from that relentless economic growth is inversely related to satisfaction or happiness. Economic growth is not synonymous with prosperity. The North West of England, for example, does not need to emulate South East England to become ‘prosperous’. Our development trajectory must be smart and sustainable.

“In the 19th century, in the city’s glory days, Liverpool businesses were global in reach and Liverpool businessmen had big ambitions for their city. Look no further than this university and the contribution of men like Leverhulme who founded the first town planning school in the world here – Civic Design.

“Now we are told that the city has become over dependent on the public sector, many businesses are sub-offices of London, the US, or further afield and strategic decisions are made elsewhere. We are told that entrepreneurs must shape the future – the Apples and Googles that began in suburban garages.

“So can the private sector deliver? Not on its own is the answer. Enlightened government, strong regulation, a vibrant and dynamic third sector all have a part to play.”

Prof Harding compared progress in Manchester to that seen in Liverpool. He said: “I think that the private sector has been very important to the reinvention of Manchester. The one thing Liverpool needs to emulate is the continuity and drive of Manchester’s city leaders in connection with business.

“What we are after is sustainable, job-rich economic growth for our cities.

“There’s been lots of initiatives. There’s been an endless list of acronyms. The outcomes of these initiatives have been extremely patchy.”

Prof Harding cited Canary Wharf as an example of massive regeneration in East London. However, he pointed out that its original private sector developer went bust and the transport infrastructure and land remediation was carried out by the public sector. Back in Liverpool, he pointed to the regeneration of the Albert Dock, which was financed with £8 of public money for every £1 of private sector investment.

Commenting on the Albert Dock, Prof Harding said: “Is it a success? Yes. Was it private sector lead? I wonder.”He said geography had to be taken into account when analysing the extent to which the private sector had lead job creation and economic growth in Britain’s cities during the economic boom years between 1992 and 2007.

He said: “There’s only one region that had more private sector job creation than public, and that was London.

“In all regions in the north there were more public sector jobs than private.”

He accepted that other cities, such as Manchester and Leeds and places close to London like Reading and Milton Keynes, had also seen significant private sector growth, but nothing like on the scale of London, which was ten times greater.

He added: “The losers have been places like Stoke, Birkenhead and Bradford.

“We are not good as a country at creating private sector jobs. It’s very patchy.”

When it comes to the impact of the private sector on sub-regional economies, Prof Harding said the whole concept was up against the problem of the “delocalisation of business”. Many corporate head offices are no longer located in the cities where the businesses they run were originally founded.

Prof Harding said the coalition government’s Regional Growth Fund, Enterprise Zones and LEPs provide evidence that the government is looking for new mechanisms to get the private sector to take leadership of the economic development of our cities. He described the government’s new City Deals as much more interesting.

He added: “We have seen more intervention through this route than the others. We need to ask a couple of things. How much difference between places are we prepared to tolerate? We don’t want them to be too different.

“Are we able to think how we can reconfigure our municipal institutions so we can begin to fashion them into something that can transform our cities?”

The knowledge sector offers Liverpool huge prospects for economic growth in the years ahead but the region needs to compete in a fast moving global marketplace if it is to realise this potential.

The vice chancellor of the University of Liverpool, Sir Howard Newby, believes that the need for the region to stake its claim by nurturing and developing its knowledge assets is being increasingly appreciated around the city.

He said: “The world we inhabit is global and the competition is global. The most recent professor we recruited is a French Canadian from Munich University, but that's the world the city inhabits as well.

“The best thing we can do for the city is to be a world class university.

“It’s got a lot better over the last four years – there is an awareness of the importance of the knowledge economy to the city region. It’s terrifically important.

“There is a better understanding in the city council about the knowledge assets in the city.”

As a Russell Group university, Liverpool is heavily involved in research in the fields of biosciences, physics, chemistry, and engineering, among others. An example of this is a collaboration between the university’s chemistry department and Unilever to develop new molecules to make more effective and sustainable detergents. Another is the use of stem cells to make blood, thereby preventing the need for blood donations. Other examples include the use of lasers in manufacturing aero-engines and developing nuclear engineering techniques to be used in the next generation of nuclear power stations.

Clearly, the university has an impressive pool of research talent, but the rest of the knowledge economy infrastructure must also be assembled. That includes the capacity to conduct clinical trials and bio-manufacturing facilities. Without these things it would be all the harder to attract knowledge sector inward investors to the region or to encourage indigenous firms to stay.

Sir Howard said: “Bioscience clearly is global and it's a race. First mover advantage is huge in biomedicine. That gives you huge market advantage.

“It’s important from the point of view of inward investment and indigenous growth that all the pieces of the jigsaw are in place. Researchers and the capacity to carry out things like medical trials all need to be in place.”

One piece of the jigsaw that is not so readily available is proof of concept funding.

Sir Howard said: “To get something off the lab bench into a condition that allows it to be demonstrated to investors remains a challenge. Typically, this might require £100,000 of funding.

“The sum is far too small for venture capitalists, but too large for a micro-business or for the university to invest in at this scale.

“Once you get beyond proof of concept, investors are more willing to put money in.”

One piece of knowledge economy infrastructure that has been put in place recently is buildings.

He said: “There has been an historic shortage of next phase lab space.

“This has been recognised and something is being done about it.”

In the past, biotech firms at this stage had to leave the region. However, this is beginning to change. Sir Howard pointed to the recent arrival at the university of Redx Pharma from Yorkshire. It is hoped Redx will expand to employ 250 science researchers and laboratory technicians in five years time.

Sir Howard said: “What is exciting about Redx is they have grown rapidly and we have been able to be accommodate them in the labs they were looking for.

“It’s all beginning to change.”

The North West Fund, formerly known as the Venture Capital and Loan Fund, is the largest public sector fund in the UK and will be used to develop and support growth-oriented enterprise in the region. The Evergreen Fund is expected to generate 14,000 new jobs and an estimated £700m Gross Value Added (GVA) for the region.

The North West Fund will provide debt, equity and quasi-equity to local SMEs, making investments of up to £2m into fast growth companies with particular emphasis on the emerging biomedical, energy and environmental, and digital and creative sectors. A total of £25m, £20m and £15m, respectively, will be made available to North West–based businesses within these industries.

The new fund comprises six funds that will provide finance in the form of development capital (£45m), business loans (£35m) as well as venture capital (£30m) to help local businesses grow through the downturn. An initial £170m is being managed by six fund managers: YFM Private Equity, FW Capital, Enterprise Ventures, Spark Impact, CT Investment Partners and AXM Venture Capital. The final £15m will be made available as follow-on investment through to the closing investment date of 31 December 2015.

North West Business Finance, Northwest Regional Development Agency, the European Regional Development Fund and the European Investment Bank support the fund.

Steve Livingston, Manchester Partner in the Media Team of Crowe Clark Whitehill, a national firm offering audit, tax and business advisory services, comments: “The launch of the North West Fund is great news for innovative North West SMEs, many of which have been hindered in their growth plans in recent years due to a lack of funding. Not only should this £185m fund contribute to 14,000 new local jobs, it should also build on the momentum gathered by other exciting local initiatives, such as the arrival of MediaCityUK.”

He adds: “North West digital, media and creative SMEs now have the local infrastructure and support to compete on a global scale. We are delighted to be a part of this exciting initiative, in helping North West businesses access this funding and accelerate their growth plans in these sectors.”

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Lack of mortgage availability for first time buyers is holding back the housing market, said housebuilder Persimmon today.

In a trading update covering the period from July 1 to November 15, it warned “further recovery in industry output and sales will be dependent upon an increase in the supply of mortgage products on appropriate terms”.

However, the firm, which has two developments within the region at Sefton and Ellesmere Port, said it was currently trading in line with expectations.

Sales volumes remain stable and prices and margins are holding firm, but the normal autumn increase in visitor levels and reservations failed to materialise.

The group says it expects to increase sales revenues by about 10% this year and complete the sales of 9,400 homes, compared with 8,976 in 2009.

It is also generating good cash levels and expects total borrowings to be lower than £80m at the year end, which is ahead of previous forecasts.

Today’s update also confirmed that the group is fully sold up for the current year and has more than £460m of sales already reserved beyond 2010, compared with £500m in 2009.

So far, in the second half of its financial year, the group has acquired about 4,000 new housing plots on 41 sites.

The update said: “We expect our performance for 2010 to demonstrate the progress we have made in pursuing our strategy of operating margin improvement and growth in operating cash generation.

“With the strength of our balance sheet and high quality land holdings we will continue to successfully develop our business in these challenging markets.”

If you would like discuss how our Debt Recovery/Debt Collection service can assist your business, please visit the ‘Debt Recovery/Debt Collection’ section on our website,  contact us on +44 (0) 151 515 3014 or email us.

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