ECONOMIC STATEMENT

HETHEL ENGINEERING CENTRE NEW ADVANCED ENGINEERING FACILITY CD10588 - P1

ECONOMIC ASSESSMENT OF NEED FOR HEC PHASE 3 DEVELOPMENT:

HETHEL ADVANCED MANUFACTURING CENTRE

Providing „BREEAM Excellent‟ low carbon manufacturing grow on space for the advanced engineering businesses currently incubated in Hethel Engineering Centre

This development will build on the achievements of Hethel Engineering Centre Phases 1 and 2:  Incubated 55 hi tech startups  Created over 190 high skilled jobs  Supported over 5700 businesses delivering over £3.5M in added value  Engaged over 11,000 students  Delivered over 9000 training man days  Facilitated the further strengthening of the supply chain of engineering and manufacturing businesses  Grown the advanced engineering and manufacturing cluster in Norfolk and the East of England

HEC Phase 3 development will deliver:  A Low Carbon Advanced Manufacturing Facility, adding much needed grow on space and building another key component of the Lotus Technology Park  Creating 18 hi tech startups and 220 high skilled jobs  Growing the clean tech clusters in Norfolk, building on the established advanced engineering and manufacturing sectors and supply chains

Confidential (Jan 12) 1 of 111 Summary Justification for the growth of Hethel Engineering Centre

1 Introduction

1.1 This document is provided in support of the full Planning Application submitted to Norfolk County Council in October 2011 for the further extension of the existing Engineering Centre to provide eight new, larger units to provide move-on accommodation for several of the existing tenants as well as to provide space for 2-3 exciting investments that we are dealing with

1.2 Appendix 1 provides an overview of a selection criteria assessing the proposed development against other possible locations

1.3 Appendix 2 provides a detailed economic assessment of the potential benefits of the proposed development

2 Background

2.1 Hethel Engineering Centre (HEC) opened in 2006 and has been widely celebrated as a highly successful, exemplar enterprise hub supporting the engineering sector. HEC supports a substantial cluster of businesses across Norfolk, Suffolk and beyond, many of which are at the forefront of technology in their respective fields - particularly automotive, advanced engineering and manufacturing and the developing area of clean technology.

2.2 It has achieved the following in the past 5 years…

 Over 55 new hi tech business startups, of which only 2 have so far failed. An extraordinary achievement given the average survival rate in Norfolk is around 70% after 3 years – which in turn, is above the national average  Those businesses incubated at HEC have created over 190 high skilled jobs – some that have moved on elsewhere have continued to grow further  There are currently 20 businesses based at Hethel, so over 30 businesses have expanded and moved elsewhere.  The vast majority of startups were local, indigenous entrepreneurs. In fact, only 1 business has so far been attracted to setup from outside the UK  HEC has supported over 5700 businesses, resulting in businesses benefitting through measurable value of over £3.5m.  HEC has delivered over 80 conferences, real advice workshops, exhibitions providing opportunities for sharing best practice, networking and showcasing the very best products and services  In the past two years, more than 10 winners of the EDP‘s Future 50 programme were incubated at HEC. These are entrepreneurs across a wide range of sectors, adjudged by an independent panel to have the most growth potential.  HEC has delivered over 9000 training man days  Engaged with over 11,000 students

2.3 It is widely acknowledged as making a significant impact on the engineering and advanced manufacturing sectors of Norfolk and the East of England, but probably the best accolade was the recent award of Best Economic Development project at the 2011 Local Government Chronicle Awards.

Confidential (Jan 12) 2 of 111 3 History

Why is there a Hethel Engineering Centre?

3.1 Approximately 10 years ago, the Local Economic Partnership, Shaping Norfolk‘s Future was concerned at the state of the engineering and manufacturing sector in Norfolk. There had been a number of high profile closures at the time and there was concern that more would follow unless action was taken.

 There was a lack of new businesses starting up, and most notably those that were, were tending not to exploit innovation and intellectual property  There was a lack of high quality training facilities, particularly those needed to support the dissemination of advanced techniques. That which was available locally was perceived to be of poor quality, or not available at all.  There was a lack of access to the latest technology  There was minimal collaboration and networking within and outside of the sector  The local university, U.E.A., was withdrawing support for electrical, electronics and mechanical engineering courses and their support for postgraduate research. This coincided with a progressive reduction in the emphasis placed on apprenticeships and part-time training on offer from local colleges of Further Education as a result of greatly reduced funding streams.  Finally, there was no local focus for the sector

3.2 The response was to conceive the Hethel Engineering Centre – and the concept was supported by a substantial business plan which looked at need, demand, feasibility, operating models etc. This led to the project being led by the County Council and supported with grant funding from EEDA, Business Link (Norfolk), South Norfolk Council, LSC and the land was provided by Lotus at nominal cost. Cabinet agreed to support the project directly with a capital grant of £250,000, and a further contribution of £3.25m through Prudential Borrowing. The Council took the decision to own and run the centre, employing all staff and undertaking all activity within it.

Why Hethel?

3.3 The project was also supported by a careful appraisal of options for the location of the centre. Ideally, it would have been in the centre of Norwich, but the project also needed to satisfy EEDA‘s definition of an Enterprise Hub in order to access funding. In the event, locations considered in and around the city had few attributes on which to build an iconic project, with all the right linkages. Other locations considered were Snetterton (because of the Motorsports link), Attleborough and Thetford. All 3 sites would have qualified for EU funding support and they were/are on the A11 Corridor, which was heavily promoted as an ―arm‖ of Motorsport Valley at the time. However, they were discounted because of a combination of landowner issues and lack of positive attributes.

3.4 The 52-acre site owned by Group Lotus between the Lotus factory, Potash Lane and the B1135 road to Wymondham in Hethel was selected as the best location and with support from both Lotus and South Norfolk Council partners set out to justify the location in business and planning terms. Appendix 1 shows a table, produced at the time that assesses the relative merits of each site, and clearly places the Lotus site at the top of the list.

3.5 Although not allocated formally in the local plan, planning permission pre-existed for the development of buildings and other facilities for occupation by Lotus on the whole site. The permission had been implemented thanks to the construction of the access road. Since the change of ownership in the 1990s, the proposals were not being pursued and subsequently, Lotus was prepared to provide the

Confidential (Jan 12) 3 of 111 Council with 3 acres of land to accommodate the Centre. At the time Lotus stated: ―demand from suppliers wishing to be located close to Lotus is so strong that they could fill all the units (with suppliers)‖; this lent confidence to the successful commercial outcome of the project.

3.6 Other advantages for choosing this location included:

 Lotus is an advanced engineering company renowned for innovation and very high engineering standards  Lotus parent Proton wished to become involved in the East Anglian business community  Lotus engineering contracts extend world-wide; 10% of all vehicles have Lotus designs incorporated in engine, power train, suspension or body parts  Lotus has many small high-tech suppliers and understands the needs and rationale of the project  Lotus were committed to use the training and advanced machining capacity that the Centre will provide  Lotus will add credibility to the aims of the Centre and its ability to provide benchmarks and networking with a world class organisation. (Subsequently, many people and businesses still assume the Centre belongs to Lotus)  Access to Hethel is excellent with fast roads to other parts of the County and East Anglia  Lotus has a motor test track, engine test and design resources that it was prepared to allow to be used by tenants, subject to negotiation  Hethel is in the Norwich travel to work area and not far from the University of East Anglia  Hethel and the Centre will be at the eastern end of what had then been conceived as the ―Motor Sport Valley‖ – a somewhat contrived marketing initiative that was successful in demonstrating the highly successful motorsports industry in the UK. Norfolk, particularly the A11 corridor was acknowledged as contributing significantly to this. The centre‘s presence would help anchor the concept.  Lotus is committed to having follow-on units on the site and wishes to see a ―Lotus Technology Park‖ evolve on the site; this had, and still has the encouragement and support of South Norfolk Council and more latterly the Greater Norwich Development Partnership which has incorporated the concept into the Joint Core Strategy.

3.7 Finally, as the primary focus for engineering in Norfolk, Lotus support, endorsement and active involvement in this project was extremely important. In the past there were a number of occasions when the long term future of Lotus in Norfolk has appeared less than secure. This project could further embed Lotus in their current location, especially should the ultimate aim to create a Technology Park materialise.

4 The case for growth

4.1 The Centre has been successful, virtually from day one, and reached capacity in 2008. New businesses were being turned away, so the Centre was extended in 2009/10 to meet increasing demand and also to provide sufficient additional income to allow the centre to be fully financially independent, as start up grant funding was shortly to run out.

4.2 The building had been designed in a manner that could easily facilitate expansion, as growth of the centre was always envisaged if the facility met or exceeded expectations. An increase in lettable space at the Hethel Engineering Centre provided that additional space to cater for the growing demand for tenancies at what is regarded as being a flagship enterprise hub.

4.3 The whole emphasis of the Centre is quality. The original aims were ambitious and some felt they were unachievable. Yet, virtually all of the 75 or so businesses that are in, or have passed through the centre have been high quality businesses that meet the criteria that was set. The Centre is expensive to run, but the services are excellent and businesses will pay for them if they deliver a return. The results speak for themselves and with the centre currently full, together with a waiting list, Confidential (Jan 12) 4 of 111 it is clearly meeting demand as well as a need. Businesses that are not knowledge based, incorporating R&D and innovation in the business model and which do not have significant growth potential tend not to consider HEC as a viable location. They cannot afford it, and the Centre‘s management would not entertain them in any case.

4.4 One of the key attributes of the centre is the networking and collaboration; some of it facilitated; increasing amounts of it occurring naturally. Tenants work for each other, they jointly develop ideas, they share research and they set up joint ventures. The Centre also facilitates engagement with academia. Whilst the UEA does not have a school of engineering, its many other world class facilities are interfaced with the Centre, along with other aspects of the Norwich Research Park. The Centre also works very closely with Cranfield, Cambridge and Hertfordshire Universities – some of the most eminent in the world with respect to engineering and technology. Together with these, he Centre links its businesses into an extensive automotive supply chain across the East of England (incl Ford, Vauxhall, Nissan, Lotus, Riccardo, Lola), and the significant clusters in the Midlands and North East.

4.5 The fundamental, key issue is many of the tenants want to continue to be part of this network, even though they may have outgrown the centre. Wymondham is too far away, as is Norwich, and they do not want to be on a standard industrial estate, between a double glazing company and a tyre fitter – with all due respect to essential service companies such as those.

4.6 The Centre has many examples of tenants who have won substantial business where the image and environment created by the Centre has played a key role. Tenants appreciate that and wish to sustain this when they relocate. Many of those who have relocated have not stayed local, and the Centre is also aware of new businesses that have started up outside the county due to the lack of space at Hethel.

5 Wider Issues

5.1 Norfolk‘s economy does not perform as well as the UK as a whole, or the East of England region, GVA per employee figures consistently show Norfolk to be lagging behind by a noticeable margin. This is due in part to the skill levels of the Norfolk workforce, but at least as much to the economic structure of the county. We simply have too few, high value added businesses and we are more reliant on lower value added activity such as processing, retail, service industry. Whilst these are important, the lower proportion of higher value added activity has a knock on effect across the whole economy, with diminished demands for high skills and lower pay.

5.2 Successive economic development strategies have sought to address this, and the Hethel Engineering Centre was a key response to that. It is clearly contributing. However, for the real effects and benefits to be felt, it needs to move into the final stage of the plan – to develop move on accommodation and a location that can attract other high tech businesses seeking an iconic location with a real rationale. Such locations are rare, and certainly do not exist anywhere else in Norfolk, where the focus is engineering and technology.

5.3 The Hethel Technology Park concept will become one of a small number of high quality locations that UK Trade and Investment indicate will attract investment from overseas. Evidence for the success of Technology Parks is clearly illustrated around the UK, eg Colworth Science Park (Bedfordshire), Birmingham Science Park, Manchester Science Park. Norfolk has many of the vital components for building a similar facility at Hethel (and could have a second, focussed on Life Sciences at the Norwich Research Park).

Confidential (Jan 12) 5 of 111

5.4 South Norfolk Council has recently undertaken a Site Specific Allocation exercise and the LTP site is identified within it as a promoted location.

5.5 Lotus, which still owns the rest of the site, is undertaking a master planning exercise, which we hope will lead to the adoption of the site in South Norfolk‘s LDF (Local Development Framework). The proposed extension to HEC to form the Advanced Manufacturing Centre will be incorporated into the document. However, the need for the AMC is more urgent. The Centre is full and has two tenants, occupying several units between them that must commit to expansion plans soon. They are very keen to stay in the immediate vicinity for the reasons already stated, but practicalities will dictate they move away if the AMC is not certain to be built shortly. In all likelihood they will move to the Midlands or the South East.

5.6 Their relocation will free up space for more start-up tenancies that are waiting in the wings, which we also stand to lose unless plans are firmed up soon. In addition, there are at least 2 other enquiries from potential investors that would significantly enhance the Centre‘s reputation (and cashflow) if they could be provided with the necessary certainty over timescales for development.

Confidential (Jan 12) 6 of 111 Appendix 1 – Site Selection Criteria and Weighting

Weighting Potash Lane - Hurricane Way - Haverscroft Rd Snetterton Criterion multiplier Hethel Norwich - Attleborough Score Weighted Score Weighted Score Weighted Score Weighted

Proximity to university/cluster A 4 4 4 4 3 3 2 2 Proximity to conurbation A 3 3 4 4 3 3 2 2 Prestige location/association A 4 4 2 2 2 2 3 3 Transport links to provide access to site B 2 1.6 3 2.4 2 1.6 3 2.4 Links with motor racing engineering / 2 advanced engineering sectors A 4 4 3 3 2 4 4 Norfolk-wide SME support for location B 3 2.4 2 1.6 2 1.6 2 1.6 Suffolk, Essex, Cambs business support for Norfolk location A 3 3 2 2 3 3 2 2 Partner support for location EEDA A 4 4 3 3 2 2 3 3 Norfolk County Council A 4 4 3 3 3 3 3 3 Norwich City Council B 2 1.6 4 3.2 2 1.6 2 1.6 South Norfolk B 4 3.2 2 1.6 2 1.6 2 1.6 Breckland B 3 2.4 2 1.6 4 3.2 4 3.2 Other Districts B 2 1.6 3 2.4 2 1.6 2 1.6 L & S C B 4 3.2 3 2.4 2 1.6 3 2.4 Business Link A 4 4 3 3 2 2 3 3 Norfolk Engineering Sector B 3 2.4 3 2.4 2 1.6 3 2.4

Ability to attract start-up businesses A 3 3 3 3 2 2 2 2

Ability to attract innovating businesses A 4 4 3 3 2 2 3 3

Attraction to other eng. services on offer A 3 3 2 2 2 2 2 2

Ability to provide move-on accommodation A 4 4 4 4 3 3 3 3 Availability of EU funding B 0 0 0 0 4 3.2 4 3.2

Absence of development constraints A 4 4 3 3 3 3 2 2 Proximity to suppliers of services/facilities/ training etc. A 2 2 3 3 2 2 2 2 Availability of broadband communications A 4 4 3 3 2 2 2 2 Score Weighted Score Weighted Score Weighted score wtd

Total Score 77 72.4 67 62.6 58 53.6 63 58

Scores: 4 = excellent; 3 = good; 2 = satisfactory; 1 = poor Ranking of criteria - weighting: A = essential = 1.0; B = desirable = 0.8; C = optional = 0.6

Confidential (Jan 12) 7 of 111 APPENDIX 2 – DETAILED ECONOMIC ASSESSMENT

1.0 Advanced Manufacturing Centre Project Objective

The primary project objective is to improve the competitiveness and productivity of SMEs to realise the market opportunities for new low carbon products and services. This will be achieved by:

 Innovation programme – engaging 600 and assisting 240 SMEs to build regional low-carbon innovation networks and collaborative, open innovation projects leading to the manufacture of new low carbon products and services. This drives the demand for new and expanded facilities at Hethel. It will capitalise on our expertise in the low carbon automotive and clean tech sectors that, in our 5 years of operations has seen us incubate 55 business start-ups, creating 190 high skilled jobs, supporting over 7500 businesses, generating £3.5M added value. It seeks to achieve the outputs and outcomes as per the diagram below:  Advanced Manufacturing Centre (AMC) - construction of a 40,000 sq ft BREEAM excellent low carbon manufacturing facility to accommodate SMEs moving from product development into manufacture and creating 160 high value new technology jobs.

There is a new market sector for value based, premium priced, low carbon products and services (as detailed through the Dyson / Hauser reports). In order to grow this new market sector there is demand from new technology businesses for:  incubation / grow-on space  low carbon manufacturing facilities operating within a cluster, i.e. co-located networked communities  innovation led business support (ERDF Priority Axis 1 - Innovation and Knowledge Transfer with the intention of improving productivity) that realises the potential in the region’s engineering & manufacturing sector enabling it to play a key role in delivering the solutions for achieving a low carbon economy.

Confidential (Jan 12) 8 of 111 2. Strategic Fit Introduction

The primary project objective is to raise awareness and engage engineering and manufacturing businesses in collaborative open innovation projects leading to the commercialisation of new low-carbon products and services, thereby competitiveness and productivity of SMEs and providing a platform to grow Hethel Engineering Centre from a successful enterprise hub to a thriving low carbon innovation hub. The project will deliver a major business development programme and an Advanced Manufacturing Centre to build regional low-carbon innovation networks with the objective of creating new businesses and supply chains to develop, manufacture and supply new low-carbon products services.

 Innovation programme – engaging 600 and assisting 240 SMEs to build regional low-carbon innovation networks and collaborative, open innovation projects leading to the manufacture of new low carbon products and services. This drives the demand for new and expanded facilities at Hethel. It will capitalise on our expertise in the low carbon automotive and clean tech sectors that, in our 5 years of operations has seen us incubate 35 business start-ups, creating 140 high skilled jobs, supporting over 5700 businesses, generating £3.5M added value. It seeks to achieve the outputs and outcomes as per the diagram below:  Advanced Manufacturing Centre (AMC) - construction of a 40,000 sq ft BREEAM excellent low carbon manufacturing facility to accommodate SMEs moving from product development into manufacture and creating in 160 high value new technology jobs.

The Advanced Manufacturing Centre (AMC) will provide much needed innovation space for SMEs in the sector. It will allow the Hethel Engineering Centre, to build upon its incubation space for design/engineering and enterprise led business support to, through Hethel Innovation Limited, add ‗grow-on‘ space for incubating start-ups/businesses seeking to move into manufacturing and deliver innovation led business support. Hethel Engineering Centre (HEC) is at capacity and there is much demand from existing tenants and external individuals/organisations for high quality workshop space with an innovative and collaborative environment where they can thrive. This demand can be seen through the letters received. The project will help regional SMEs to exploit opportunities to increase output and productivity in the development and manufacture new low-carbon products and services through low-carbon innovation. This will be achieved by engaging businesses in regional innovation networks, promoting open innovation and knowledge transfer and providing state-of-the-art advanced low-carbon manufacturing facilities. This will support business incubation and growth, create new high-value jobs and establish a centre of excellence for advanced low-carbon innovation and manufacturing as an important step towards the realization of the Lotus Technology Park.

From its base at Hethel in Norfolk, the project will reach out to regional SMEs, academia and public sector organisations to engage in pilot innovation projects using open-innovation and knowledge, benefitting from a variety of Business support services offered through Hethel Engineering Centre. Businesses will also be encouraged to participate through an Innovation voucher scheme and Innovation LaunchPad.

The Hethel Innovation programme fits strategically with the ERDF through:  Providing a framework for changing SME attitudes and approaches so: o encouraging greater knowledge exchange with universities and R&D institutions o facilitating more collaborations with other businesses o building stronger open innovation networks sharing best practice and providing support o embedding cultures of low carbon innovation  Increasing SME productivity and capability to manufacture new low carbon, sustainable products and services

Confidential (Jan 12) 9 of 111 Further evidence of strategic fit with ERDF can be found in section 2.2.

2.1 Project Headlines Project definition. What is the strategic fit?

 Recent UK technology strategy reports (including those of Hauser and Dyson) have identified the low- carbon market sector as providing a new and significant opportunity to develop a knowledge-based economy through the design, development and commercialisation of innovative new products and services. The value-based pricing and premium positioning of these products and services supports good margin, high value employment and ongoing investment in research and development.

 HEC has addressed this low-carbon market opportunity through the development and implementation a clear strategy, focusing on enterprise, innovation and skills, to support new technology businesses as they move from start-up, through product development and into manufacturing.

What is the value proposition?

 The HEC value proposition combines high-quality facilities, flexible tenancy terms, comprehensive business support services and access to the local and extended networked communities of business, public sector and academia within and beyond Hethel. The value that businesses attach to HEC premium priced services is evidenced in consistently high occupancy rates (currently 100%) and a waiting list for new tenants.

 HEC has established a new business support programme under the brand Hethel Innovation. This programme engages groups of SMEs in collaborative open-innovation projects leading to the development and manufacture of new low-carbon products and services. This programme creates new opportunities in the low-carbon sector. It adds value to tenants‘ businesses, fuels their growth and drives the pipeline of small and growing businesses through the start-up, product development and manufacturing phases. It is this innovation programme that drives the demand for services and facilities at Hethel.

 Since opening in March 2006 HEC has incubated more 55 start-up businesses with the creation of more than 190 high value new technology jobs. HEC‘s success is evidence that the right building, in the right location, with the right management can and does create jobs.

Where is the demand?

 HEC is now at full capacity. Larger established businesses are ramping up operations and require grow-on space in the form of new larger manufacturing units. Successful start-ups are growing and require larger units within the existing facility. Finally there is growing demand from new prospective tenants. These businesses all value being part of the HEC community and prefer to operate on the Hethel site:

o CTI (Caterham Technology and Innovation) is one of HEC‘s larger tenants and has already and reluctantly made a decision to relocate because HEC cannot provide enough additional facility to meet their timescales

Confidential (Jan 12) 10 of 111 o Scion Sprays, Active Technologies and Magnus Marine are fast-growing businesses that now need grow-on space to accommodate their ramp-up in production o Genite and Sonar Link are smaller businesses that now need to move into larger units

 There is now firm demand for larger manufacturing units in the proposed new Advanced Manufacturing Centre. This will accommodate the grow-on needs of the larger tenants thereby creating capacity in the vacated medium and smaller units in the existing HEC. This in turn will create capacity to accommodate the needs of smaller growing tenants and new start-ups.

Why has the market failed to satisfy this demand?

 The market is failing to satisfy this specific demand. Landowners and property developers are not providing the high-quality, high-value incubation and grow-on facilities that new-technology SMEs require because they lack information on the capabilities, potential and strategic direction/co- ordination of SMEs engaging in new technology innovation clusters. It is well established that commercial developers are generally not attracted to funding and operating incubators as a business proposition. Developers usually seek leases of a minimum of 3 years rather than the short flexible leases preferred by start ups and larger units than that typically required by an incubator tenant. In addition commercial developers business models do not allow the provision of value added businesses and innovation activities to help SME's accelerate their growth. Risk aversion and imperfect information by private developers in relation to new businesses in emerging technology sectors also lead to market failure. It is appropriate therefore that the public sector should address these market failures to realise the full economic potential.

How will this project deliver economic outputs and outcomes?

 The innovation programme directly addresses ERDF Priority Axis 1: ―Innovation and Knowledge Transfer with the intention of improving productivity‖. The programme will:

o Map the low carbon sector and identify new opportunities

Confidential (Jan 12) 11 of 111 o Engage innovators and connect them with existing and developing supply chains and academia o Support SMEs in developing new low-carbon strategies through open innovation o Collaborate by bringing together large and small businesses, academia and R&D institutions to develop new low-carbon products and services

 The outputs of the innovation programme over 3 years include 60 high-value new technology jobs (plus 60 safeguarded) and 10 low-carbon technology start-ups.

 The proposed AMC will promote low-carbon technology in its construction and operation. The 40,000 ft2 facility will be built to BREEAM ―Outstanding‖ standards and will showcase low carbon technologies, including wind turbines, PV and biomass, through providing tours, exhibitions, workshops, and web based info - so creating physical / virtual ‗windows‘. The design will incorporate wide corridors, open plan work spaces and flexible factory space; complimenting the existing facilities of HEC and encouraging open innovation through engagement, networking and collaboration

 The businesses that will move into the AMC will produce a wide range of advanced technology low- carbon products:

o Active Technologies – low-carbon automotive, renewables, bio-digesters, solar

o Scion Sprays – automotive and industrial fuel injections systems reduced CO2 emissions o Magnus Marine – high efficiency marine power supply systems o Windcrop – next generation wind turbines o Heatstream – high efficiency heat

 In the first 3 years of this project these businesses will produce low-carbon products and services that

will save globally over 600,000 tonnes of CO2.

 The outputs of the AMC include 160 new jobs and 8 new technology start-ups

 The AMC will form the next major step towards the realisation of the Hethel Technology Park and will be instrumental in demonstrating demand to prospective property developers.

Project Headlines

‗1.6. The UK's 4.8 million small and medium-sized enterprises (SMEs) are vital to the economy. They provide 60 per cent of private sector jobs and account for half of all private sector turnover. The Government is committed to ensuring that the UK has an environment where it is easier for new companies and innovations to flourish and where people who aspire to be entrepreneurs are encouraged.‘1

This project responds fully to this recognised government need for supporting SME‘s, creating an environment where ideas and innovations can be harnessed and grown into commercial realities.

The sector faces a number of long term challenges beyond the current economic slowdown. These include: capacity to innovate; access to skilled staff; and access to external finance. Development within these areas could potentially put the East of England at the forefront of leading low carbon innovation in some of the world‘s largest market opportunities, increasing the regions reputation as the UK‘s Ideas Region, with the

1 HM Treasury;BIS: The path to strong, sustainable and balanced growth. Nov 2010 Confidential (Jan 12) 12 of 111 ability to export this expertise to the rest of the world. By helping businesses to seize the opportunities of a low carbon economy through innovation, Knowledge Transfer, collaboration and support this project aligns itself with National, regional and local strategy to deliver economic growth.

The single main SMART outcome of this project is:

INCREASED PRODUCTIVITY, COMPETITIVENESS AND KNOWLEDGE BASE OF REGIONAL SMEs THROUGH THE APPLICATION OF OPEN INNOVATION KNOWLEDGE TRANSFER TOOLS AND TECHNIQUES TO 20 BUSINESS-LED LOW-CARBON PILOT INNOVATION PROJECTS (LCPIPs), ENGAGING 600 AND ASSISTING 240 SMEs, LEADING TO COMMERCIALISATION OF NEW LOW- CARBON PRODUCTS AND SERVICES AND CREATING 220 NEW JOBS, DELIVERING QUANTIFIABLE

REDUCTIONS IN CO2 EMISSIONS OVER THE 4 YEAR LIFE OF THE PROJECT.

The project fully supports the Hethel Innovation Ltd Values of:

 Engineering Change  Challenging Convention  Growing the Knowledge Economy

The programme will assist in building low carbon clusters around existing regional assets (industry, academia and public sector). These clusters will develop business-led low carbon pilot innovation projects (LCPIPs) which will be the ―vehicles‖ through which the programme will to deliver the project objective through the application of open innovation tools and techniques. As Robin Webb, Director of Innovation at UK-IPO stated, ‗no organization can expect to find and keep the best ideas by working in isolation‘.2

The Hethel Innovation project comprises of 2 components: Advanced Manufacturing Centre &, the Hethel Innovation programme all delivered through a (SPV (Special Purpose Vehicle) called Hethel Innovation Limited (HIL) Company number 0753449, set up on 18/02/11 and 100% owned by HEC).

The project delivery headlines are:

 Constructing a Low Carbon Innovation hub (i.e. Advanced Manufacturing Centre), driven by increasing firm demand from new technology businesses for start-up and grow-on space. Building 8 - 12 new workshop/office units of grow-on space totalling 40,000sqft to BREAAM Excellent construction. o The Low Carbon Innovation Hub (Advanced Manufacturing Centre) will incubate 8 hi-tech start- ups, and in turn create 160 high skilled jobs  Creating a new business led Innovation team, led by the HIL Innovation Manager and additional resource of two HIL Innovation Engineers. o Business led innovation team will support 240 businesses and create 10 hi-tech start-ups, 60 high skilled jobs and safeguard a further 60 jobs.

 20 business-led low-carbon pilot innovation projects (LCPIPs) engaging industry, academia and public sector in consortia that meet the challenges of delivering low-carbon economic growth  600 businesses visited to share best practice and raise awareness of open innovation and knowledge transfer tools and techniques

2 The Innovation Handbook; How to develop, manage and protect your most profitable ideas. Jolly, Adam. 2008 Confidential (Jan 12) 13 of 111  Benchmarking of key, relevant sectors in the region with associated asset mapping and gap analysis reports.  Two high-profile regional exhibition events per annum promoting low-carbon innovation, advanced manufacturing and engineering  2 region-wide networks focussed on open innovation in the Clean Tech and Low Carbon sectors,  Tailored business support for at least 240 regional businesses that, through a systematic approach, embeds a culture of sustainable open innovation. This business support will comprise company visits, workshops, telephone and virtual support, backed up by a local support framework  Development of a suite of tools and techniques that take businesses beyond lean manufacturing onto open innovation in a clear process-oriented manner  Creation of an ‗Open-Innovation Standard and tool kit‘ promoting best-practice  8 regional open innovation workshops per annum engaging SME managers in the use of tools and techniques for low-carbon open innovation

These will be delivered through a variety of approaches, such as:

 Engagement of SMEs, academia and public sector organisations  Building collaborations  Establishing low carbon pilot innovation projects  Benchmarking innovation capability  Provision of open innovation tools and techniques  Conferences, Workshops & events  Sharing best practice  Business support/interventions  Culture change  Supply chain development

The principal objective of this project is to realise the potential of regional SMEs to exploit opportunities to increase output and productivity in the development and manufacture of new low-carbon products and services through low-carbon innovation. This will be achieved by engaging businesses in regional innovation networks, promoting open innovation and knowledge transfer and providing state-of-the-art advanced low- carbon manufacturing facilities. This will support business incubation and growth, create new high-value jobs and establish a centre of excellence for advanced low-carbon innovation and manufacturing as an important step towards the realization of the Lotus Technology Park. The objectives, outputs and outcomes can be further summarised as below:

Objectives

 Construct 40,000sqft Low carbon Innovation hub  Strengthen SME innovation networks  Promote open-innovation and knowledge transfer  Exploit opportunities for new technology development  Provide an environment for business growth  Deliver new low-carbon products and services  Become a low-carbon Innovation hub  Create a Culture of Excellence for Advanced Low-Carbon Innovation and Manufacturing.  Establish new anchor tenants, through start-up incubation, as the first step towards the Lotus Technology Park

Confidential (Jan 12) 14 of 111

Lotus Technology Park Lotus proposes to undertake masterplanning of the 55 acres that forms the Technology Park. Lotus is also working with a Developer in order to facilitate the building of one or two key buildings, the key first building being the Lotus Brand Centre. HEC is working with Lotus in regard to the Lotus RGF (Regional Growth Fund) bid for £27.5M that would facilitate the building of improved and additional facilities for the future growth in car production.

Outputs

 40,000 ft2 advanced manufacturing centre to BREEAM ―excellent‖ standards  18 new business start-up companies advanced low-carbon manufacturing businesses  220 new technology, high-value jobs plus 2 jobs created for delivery of the project.  60 high skilled jobs safeguarded  240 Businesses across the region supported, embedding a culture of open innovation. This business support will comprise company visits, workshops, telephone and virtual support, backed up by a local support framework  40 business/academic Knowledge Transfer Collaborations (KTPs)  6 Mapping reports to give a valuable insight into the current innovation landscape in the region.  Open Innovation standards and toolkit creation  Extended business development scope and outreach  Sustainable new low-carbon products and services  Low-carbon Innovation hub

MARKETING ENGAGEMENT BUSINESS SUPPORT INNOVATION

1. Asset Mapping reports. 1. 8 workshops per year. 1. Support 240 1. 20 Pilot Innovation Minimum of 6 2. 2 conferences per year. Businesses across the programmes. 2. Gap Analysis reports. 3. Build a database of project. 2. Run Supply Chain Minimum of 6 businesses. 2. Develop an Open Development 3. Build a database of 4. 200 business visits per Innovation toolkit. Programmes. businesses. year. 3. 4 x Best practice report 3. 2 Conferences per year 4. Vision(s) & 5. 40 Business/Academic / Case studies per year 4. Run Collaborations. Prospectus(es) collaborations 4. Benchmarking activities 5. Create 18 new 5. PR, Communications & (Knowledge Transfer 5. Develop Open business start-ups. Social Networking. Partnerships) across 3 Innovation standards. 6. Create 220 new jobs & years. 6. Awareness raising safeguard 60 jobs. 6. Networks – Clean Tech activities. 7. Create sustainable new & Low Carbon. products and services. 8. Support business growth. 9. Become a Low Carbon Innovation hub

Outcomes

 Centre of Excellence for Advanced Low-Carbon Innovation and Manufacturing  Low-carbon innovation hub  Business-led low-carbon innovation networks  Supply chain development for low-carbon products and services  Increased GVA  First step to realise Lotus Technology Park  Economic, environmental and socio-cultural benefits

Confidential (Jan 12) 15 of 111

The following diagram summarise the components, outputs and funding of the project:

The revenue element of the project can be summarised by the diagram below:

The project will be led and managed by HIL, but has the support of and will engage regional link partners. An example of those engaged will be The University of East Anglia (UEA),Cranfield University (Beds) and University of Hertfordshire (Herts). The project will be working through sector networks such as EEF and cross sector networks such as Norfolk Network and the Cambridge Network. The project will also engage industry link partners, from our extensive network, in the delivery of up to 20 low carbon innovation pilots,

Confidential (Jan 12) 16 of 111 working with innovation experts including WDP consulting, The Low Carbon Innovation Centre and IFM. In terms of public sector, we are working with Norfolk, Suffolk and Essex county councils. Letters of Support have been received. The project will run from 2011 to March 2015 and has eligible costs of £7,729,620. The project seeks £3,091,848 of ERDF funding (40% of total eligible spend).

Delivery Outputs

This project will deliver the following outputs: MARKETING ENGAGEMENT BUSINESS SUPPORT INNOVATION

1. Asset Mapping reports. 1. 8 workshops per year. 1. Support 240 1. 20 Pilot Innovation Minimum of 6 2. 2 conferences per year. Businesses across the programmes. 2. Gap Analysis reports. 3. Build a database of project. 2. Run Supply Chain Minimum of 6 businesses. 2. Develop an Open Development 3. Build a database of 4. 200 business visits per Innovation toolkit. Programmes. businesses. year. 3. 4 x Best practice report 3. 2 Conferences per year 4. Vision(s) & 5. 40 Business/Academic / Case studies per year 4. Run Collaborations. Prospectus(es) collaborations 4. Benchmarking activities 5. Create 18 new 5. PR, Communications & (Knowledge Transfer 5. Develop Open business start-ups. Social Networking. Partnerships) across 3 Innovation standards. 6. Create 220 new jobs & years. 6. Awareness raising safeguard 60 jobs 6. Networks – Clean Tech activities. 7. Create sustainable new & Low Carbon. products and services. 8. Support business growth. 9. Become a Low Carbon Innovation hub

Breakdown of the capital component outcomes and outputs

Component Immediate outputs Intermediate outputs Ultimate outputs Outcomes

Advanced  Business case  Groundwork  Units operational  Sustainable  Business plan  Structure in month 11 Innovation hub by Manufacturing Centre  Architects plan  Roof  Tenancy at 90% end of year 3 - Incubator  Planning  Mechanical in y4  Delivers application  Electrical  160 high skilled strategically  Planning  Fit-out jobs created important start-ups approval  Sales and high-value jobs  Marketing

Hethel Engineering Centre (HEC) is 100% occupied and tenants need larger units. HIL needs to build ‗grow- on‘ space to accommodate these high-growth start-ups, and free up space within HEC. Demand is outstripping supply. The AMC will:  showcase low carbon technologies (eg Wind turbines, PV, Biomass) through providing tours, exhibitions, workshops, and web based info - so creating physical / virtual ‗windows‘.  be a prestigious building (BREEAM Excellent) designed to incorporate wide corridors, open plan work spaces, flexible factory space complimenting the existing facilities of HEC - encouraging engagement / networking / collaboration  incubate high-tech start-ups that will develop low carbon products and services eg next generation wind turbines (Windcrop), high efficiency heating systems (Heatstream), rotating PV panels / bio digesters (Active Technologies) and low emission fuel injection systems (Scion Sprays). Over the first 3 years the

tenants of the AMC will save over 600,000 tonnes of CO2  be a real manifestation of the demand for manufacturing space, and the next key component in the development of the Lotus Technology Park

Confidential (Jan 12) 17 of 111 Key delivery activities are highlighted below, with further detail being provided in Section 5 – Scope.

 Benchmarking through Asset Mapping and Gap analysis reports. – Mapping activity in the region to provide an important overview of current activity and highlight potential areas/businesses for particular engagement and support.  Business Visits – 600 businesses visited to raise awareness of the benefits of innovation, create relationships, seek the necessity for support and further engagement in the project.  Business support (start-up and SME focussed) – 240 businesses supported through the project across a range of interventions, programmes and activities.  Website & database – to aid communication, engagement, project awareness and collaboration.  Vision & prospectus document – to outline the key vision, purpose and objectives of the project. It will highlight the opportunities available to SMEs in the region and the benefits of investment in Innovation, knowledge transfer and collaborative working.  Workshops – 8 per year across a broad range of relevant subject matter.  Conferences – 2 per year, highlighting collaborative/open innovation, with a technical/sectorial focus.  Knowledge Transfer Partnerships – linking Academia and industry on specific, transferring knowledge and sharing best practice. Turning these relationships in to Pilot Innovation Projects.  Networks for Low Carbon and Clean Technology – To share expertise, knowledge and develop a culture of collaborative innovation in the region.  An Open Innovation toolkit to support businesses – Part of a wide package of business support activities to help businesses to understand the benefits of investment in time and resource in innovation activities. This will help them to address their needs, understand the methodologies that underpin innovation, plan the route forward and manage their innovation processes.  Shared best practice, including case studies – communicated across the region to further raise awareness and creation of an innovation culture in the region, focussed on collaborative actions.  Development of Open Innovation standards – To define the practices and processes involved with open innovation.  Promotional activities – raising awareness of Innovation  Pilot Innovation Programmes – facilitation of real Pilot Innovation Programs that focus on bringing academia, small and large businesses and RTDI (Research, Technology Development & Innovation) organisations to work together to commercialise a particular business idea or find solutions to specific societal challenges  Supply Chain Development Programmes - helping identify market opportunities for technical innovation and support the realisation of product

The Hethel Innovation project builds upon the proven success of Hethel Engineering Centre. The drivers for this are:

 Consolidation and extension of a project that is already aligned with local, regional and national strategies for economic development through enterprise, innovation and skills and which has delivered against budget and KPIs  100% occupancy of existing incubator units  Increasing demand (potential and firm) for incubation and grow-on space for new and existing businesses, both in and beyond the region  Increasing demand for business support for cluster and supply chain development (eg enhancing the innovation offering of the Enterprise Hub for the benefits of business)  Reduced dependence on revenue grant funding to deliver a sustainable innovation hub

Confidential (Jan 12) 18 of 111 Since 2006 HEC has established a recognised expertise in SME business development. These activities will be further extended in this project with the additional services of an Hethel Innovation Limited (HIL) Innovation Manager and two full-time HIL Innovation Engineers and. Hethel Innovation Limited (HIL) (SPV (Special Purpose Vehicle) set up on 18/2/2011 and 100% owned by HEC) will lead the project, engage SMEs, build collaboration, support open innovation activities and develop supply chains. This project extends business development support through a new 40,000 ft2 advanced low-carbon manufacturing centre. This will be built to achieve BREEAM ―Excellent‖ standard and will have roof-mounted photovoltaic array. The manufacturing centre will comprise 2,500 and 5,000 ft2 units accommodating 8 - 12 new manufacturing businesses, creating 160 high value new technology jobs. This project will allow us to grow from being a successful enterprise hub to a thriving Low Carbon Innovation hub and is a critical step towards the realisation of the Lotus Technology Park. HEC will provide a 40m2 ERDF project office at cost for the duration of the 3 year project. With the emphasis on a sound Norfolk base and using the skills and experience gained over the last five years, this project will allow HEC to reach out to the region raising awareness and engaging engineering and manufacturing businesses in collaborative open innovation projects leading to the commercialisation of new low-carbon products and services, allowing us to become a thriving low-carbon innovation hub.

Low carbon clusters are an important element of a broad-based innovation strategy and low carbon cluster development is a fundamental tool in a strategy to building a knowledge economy. This is particularly true for the region of the East of England as 80% of businesses employ less than 25 people. Therefore bringing businesses together, through such clusters, to deliver products and services is crucial for them to survive and succeed in a global market.

2.2 Business need and strategic fit 2.2.1 Business need

Overview

This project is needed because regional SMEs are failing to achieve growth through the exploitation of emerging opportunities driven by the need for new technology innovation in strategically important low-carbon industry sectors. This is caused by market failures in the form of positive externalities and imperfect information resulting in a lack of new technology skills, lack of awareness of open innovation processes, lack of coordination of innovation clusters and supply chains and lack of high-quality, high-value incubation and grow-on space in co-located, networked cluster communities.

Low-carbon innovation and manufacturing is a key driver of productivity and employment growth across the UK and its promotion is a strategic priority for the region. While the East of England has a significant number of engineering and manufacturing SMEs, these businesses are failing to achieve their growth potential through the exploitation of emerging low-carbon opportunities. SMEs are unwilling to invest in innovation and R&D because it is unclear how they will direct and benefit from this investment. SMEs are typically unaware of the business opportunities presented by engagement in low-carbon networks and also fail to recognise the benefits of working with knowledge transfer networks and applying open innovation tools and advanced manufacturing processes. These are market failures of positive externality and imperfect information. There is a new market sector for value based, premium priced, low carbon products and services (as detailed through the Dyson / Hauser reports). In order to grow this new market sector there is demand from new technology businesses for:  incubation / grow-on space  low carbon manufacturing facilities operating within a cluster, i.e. co-located networked communities

Confidential (Jan 12) 19 of 111  innovation led business support (ERDF Priority Axis 1 - Innovation and Knowledge Transfer with the intention of improving productivity) that realises the potential in the region‘s engineering & manufacturing sector enabling it to play a key role in delivering the solutions for achieving a low carbon economy.

Demand is coming from high growth businesses such as CTI, Scion Sprays, Magnus Marine, Active Technologies, Genite Corporation, Syrinix, Windcrop, Heatstream and Sonar Link – all HEC tenants. The market is failing to meet the needs of this new sector. Property owners and developers do not provide the high-quality, high-value co-located grow-on space and manufacturing facilities that new-technology SMEs require because they lack information on the capabilities, potential and strategic direction/co-ordination of SMEs engaging in new technology innovation clusters. Commercial developers are generally not attracted to funding and operating incubators as a business proposition. Developers usually seek leases of a minimum of 3 years rather than the short flexible leases preferred by start ups and larger units than that typically required by an incubator tenant. In addition commercial developers business models do not allow the provision of value added businesses and innovation activities to help SME's accelerate their growth. Risk aversion and imperfect information by private developers in relation to new businesses in emerging technology sectors also lead to market failure.

The world economy is now emerging from a prolonged period of recession and the UK economy is forecast to grow moderately in 20123. During this recession regional SMEs have shown resilience and a sustained demand for the type of high value business development services provided by organisations such as HEC. While the East of England has a significant number of engineering and manufacturing SMEs, (the most recent regional manufacturing review estimated that there are 18,000 businesses in the manufacturing sector in its broadest sense.)4, these businesses are failing to achieve growth through the exploitation of emerging opportunities driven by the need for new technology innovation in strategically important sectors, including low-carbon automotive, renewable energy and sustainable fuels. The root causes of this are lack of new innovation technology skills, lack of awareness of open innovation processes, lack of coordination of innovation clusters and supply chains and lack of high-quality, high-value incubation and grow-on space in co- located, networked cluster communities.

This project will enable regional businesses to exploit new market opportunities for low-carbon products and services. Public sector intervention is necessary because the market is failing to satisfy business need and no such projects exist in the East of England.

Economic benefits - Beneficiaries will be SMEs that succeed in exploiting new technology market opportunities for low-carbon products and services. These will include businesses based at Hethel, county wide organisations and the wider groups of businesses that form low-carbon innovation networks and supply chains. These businesses have been consulted and informed of HECs plans and have played a major role in driving this project through their immediate business requirements. Through the project, 600 businesses will be visited and 240 supported across a range of interventions and activities. Other beneficiaries include the wider local and regional communities who gain from the injection of up to £20m annually into the local economy as well as the local authorities who will see increased business rates and council tax revenues.

Environmental benefits - The wider community will benefit from reduced CO2 emissions as a direct result of the low-carbon products and services produced through the pilot innovation programmes. Quantitative benefits have not been specified because of the uncertainty at this stage as to the specific CO2 reductions that will be delivered from the, as yet, undefined new low-carbon products and services and also the size of

3 PWC: UK Economic Outlook, July 2011 4 EEDA: Regional Strategic Framework for Manufacturing Confidential (Jan 12) 20 of 111 market and market penetration. However, assessment criteria will be set to ensure that innovation projects undertaken will have the potential to reduce emissions by an agreed percentage (before commencement) in like for like products or can offer a plausible, sustainable / less disruptive alternative solution. We will commit to measuring the CO2 benefits throughout the project as either actual or potential (once in the market) figures. Qualitatively it is clear that these new products will have significant potential (and will indeed be essential) in helping meet UK targets for carbon emission reduction.

Socio-cultural benefits - Beneficiaries will be local communities. Notwithstanding the world renowned localised centres of technical excellence, economic activity and growth in the East of England, the region in general, and Norfolk in particular, suffer from low-aspiration, educational under-achievement, lack of skills and lack of visionary, entrepreneurial management. This disparity is reflected in a wide income gap, relatively low GVA and localised areas of deprivation and social exclusion. As the HEC community and network grows larger advanced manufacturing businesses and extended regional supply chains the outreach of Hethel will bring opportunity and prosperity to more geographically and socially diverse communities.

Capital Need The Advanced Manufacturing Centre (AMC) will provide a much needed innovation space for SMEs in the sector. It will allow the Hethel Engineering Centre, to build upon its incubation space for design/engineering and enterprise led business support to, through Hethel Innovation Limited, add ‗grow-on‘ space for incubating start-ups/businesses seeking to move into manufacturing and deliver innovation led business support. Hethel Engineering Centre is at capacity and there is much demand from existing tenants and external individuals/organisations for high quality workshop space with an innovative and collaborative environment where they can thrive. This demand can be seen through the letters received. In essence the AMC building means that we can grow from an Enterprise hub to an Innovation Hub, offering start-up companies and SME‘s an exemplar working environment with the latest resources to turn business ideas into commercial reality, creating a culture of innovation through collaborative working, being immersed in an innovation environment and benefitting from the innovation eco-system that surrounds them. The Low Carbon credentials, distinguished architecture and BREEAM excellent status of the building will deliver high levels of energy performance and a lowest carbon footprint, providing a fantastic starting point for any business focused on low carbon products and services. With the added value of the innovation support team, tenants of the AMC will have a fantastic opportunity to benefit from the leading edge resources, network and draw upon the expertise and ideas of other tenants of the AMC/HEC and wider community, receive specialist advice and support and fully utilise the low carbon opportunities presented by the building.

Strategic Fit for Hethel Engineering Centre (HEC)

The AMC is another step in the evolution of the Hethel Engineering Centre and will enable us to create a thriving Low carbon Innovation Hub where ideas are freely exchanged, projects are developed and new ideas are turned into commercial reality. HEC opened its doors in 2006 and was a £5 million partnership project between EEDA, Norfolk County Council, South Norfolk Council and Lotus. As an Enterprise Hub, HEC was created to address the lack of tailored premises for high-tech start-ups in the region in which small companies and commercial research outfits could locate and grow, therefore dedicating itself to the support of advanced manufacturing businesses in the East of England and calming the concern that talent and businesses would leave the region or fail to commercialise and generate economic benefits for the local economy. Under the current economic conditions, there is a very real concern that companies failing to innovate (or having the space, support, culture, environment and network to stimulate innovation) may fail or indeed leave the region, hence the very real need for an Innovation environment such as the Advanced Manufacturing Centre. Several existing tenants have expressed a real need for such ‗grow-on‘ space and the AMC provides a vital component of the Hethel Innovation programme to support SMEs, create and manage pilot innovation Confidential (Jan 12) 21 of 111 projects through which start-up businesses are produced, incubated and supported to deliver commercialised, low carbon products thereby creating jobs, wealth and economic prosperity.

HEC was constructed in rural Norfolk, with a building that balances a high-tech ethos with the low-lying ‗green field‘ rural countryside within which it sits. The layout of the building encourages networking and sharing of knowledge and resources. The location is close to the Lotus factory, and the building was designed to reflect its close affiliation with engineering and motorsport. Its sleek, dynamic, and powerful image reflects the technological innovation it seeks to inspire. Approaching the main entrance, visitors cross an elegant curved bridge over a reflective pool. The building is mainly clad with metallic silver-grey composite wall panels. The office suite is defined by a cedar louvered wall system. In contrast, the panels windows and frames are finished with dark grey aluminium.

The building is orientated to provide natural daylight to the offices, and circulation spaces are top lit. Natural ventilation is used, with heating and cooling by air-to-heat pumps. The landscaping features sustainable drainage systems (SUDS) for surface water, extensive planting and microclimate conditioning, and external lighting designed to reduce light pollution. The Colin Chapman Conference Room features an unusual decorative design feature — Ayrton Senna‘s 1987 Lotus Formula 1 car hanging from the wall.

The building was the winner of the ‗Innovative Design‘ category at the SCALA Design Awards 2007. It also received a commendation in the New Building category of the South Norfolk Design Awards 2006.

HEC has been highly successful in its activities, incubating 55 business start-ups, creating 190 high skilled jobs, supporting over 8500 businesses and generating £3.5M added value since 2006. The success and demand for such a building was recognised in 2010 with the opening of Phase 2, an extension to the existing HEC building that delivered incubator workshops and office space for a further 11 tenants. Once again HEC is full, with tenants and other organisations requesting ‗grow-on‘ space. This provides us with the opportunity to drive forward with our vision of creating a low carbon innovation hub, the Advanced Manufacturing Centre, which can offer a complete innovation environment for start-up businesses and SME‘s in our sector to take advantage of the opportunities provided to design, prototype, test, monitor, manufacture and showcase new low carbon/sustainable products. It will be a centre of best practice in low carbon materials and design to the small business sector.

Low Carbon Need

As discussed, the AMC will provide a new ‗innovation‘ focus to the whole of the Hethel site and will lead us towards a Low Carbon technology park. It is vital that the building reflects the forward thinking strategy of Hethel and the innovative culture that it and its tenants will be creating. Through a BREEAM excellent building we can:

 Promote the environmental credentials and benefits of a building to potential tenants.  Improve the performance of the building and our own experience and knowledge of environmental aspects of sustainability.  Use it to reduce running costs, measure and improve the performance of buildings, empower staff, develop action plans and monitor and report performance. These can be passed on to tenants who will also benefit from reduced costs

It is hugely important that a low carbon innovation hub, incubating low carbon focussed businesses and engendering an eco-system of sustainability, innovation and green thinking has a building that recognises and

Confidential (Jan 12) 22 of 111 signifies all of these things through its design, construction and operation. It also needs to build upon the existing good practice that HEC has

As stated, it is important to have a low carbon building to incubate the businesses that will be pioneering low carbon products and services offering massive carbon savings globally. This AMC will provide a low carbon innovation hub, where the culture and environment is one focused on the low carbon economy and the collaborating and knowledge transfer of expertise and experience in this area.

The BREEAM process will be followed, from workshop and consultation with tenants, through pre- assessment, design, construction and assessment. Tenant‘s technologies can also be incorporated in to the construction of the building.

The building will incorporate technologies such as a biomass boiler and photovoltaic panels. These technologies will be easily viewed by tenants and visitors to the AMC through transparent panels/windows in the walls, so that they can see the technology and workings of the building and appreciate the low carbon innovation that is inherent within the building.

Undoubtedly the building will create public interest through its low carbon nature, architectural design and nature of the opportunities available to businesses in the sector. We will offer factories for the future tours and seek media coverage and communicate its innovative nature, low carbon benefits and distinctive design/construction to the wider community.

Need for innovation

The AMC is focussed entirely on encouraging, inspiring and supporting innovation, not only providing an environment, culture and eco-system that provides innovation space in terms of workshops, meeting rooms, but that also supports the wider Hethel Innovation programme of innovation based business support. This will be a thriving innovation hub, incubating innovative businesses that will be pioneering the next generation of low carbon products and services. The outputs from the businesses based in the AMC will provide massive carbon savings globally each year. The design of the building will build upon that of the existing strengths of HEC, with its wide corridors and outstanding workshop facilities providing a clean, crisp, high quality manufacturing environment that stimulates creativity and innovative thinking and that allows for easy collaboration and communication between tenants and the wider community. Tenants will benefit from easy in – easy out contract terms and affordable rent, this is highly attractive to start-up companies who struggle to find high quality space without getting tied into long term and expensive contracts. At the start-up phase of business it is incredibly attractive to have short-term contracts as it allows for flexibility and greater financial stability. On top of this, incubation within the AMC offers the chance to work next to, learn from, gain support and collaborate with other businesses, creating an innovative hub and network which just isn‘t available in this sector within the region. HEC has proved over 5 years that it is able to successfully incubate such businesses( 55 business start-ups, creating 190 high skilled jobs, supporting over 8500 businesses and generating £3.5M added value since 2006). The AMC will further address the market failure and allow HEC to continue to support the sector creating businesses, jobs and wealth with a focus on Advanced Manufacturing. Wi –fi will enable businesses to fully utilise web based systems and communicate effectively within and outside of the centre. THE AMC will work seamlessly with the engineering focused HEC, creating a pipeline of businesses and support from idea conception, through design and prototyping, testing and assessment to the manufacturing of commercialised products. There is already demand from existing tenants and external organisations looking for ‗grow-on‘ space to allow for further innovation work and manufacturing capability.

Confidential (Jan 12) 23 of 111 As discussed, the AMC will enable us to grow from an enterprise hub to an innovation hub, providing innovation support for low carbon businesses through the whole supply chain. There is a market failure in that there is no such advanced manufacturing facility in the region that offers the innovation space and support required to meet the growing needs of the engineering/manufacturing sector. With HEC at full capacity and with the demands of existing tenants and the wider community focussed on innovating to maintain and grow market position, without such a building there is a fear that organisations may move out of the region to find suitable premises or fail due to increasing competition. The AMC will provide a vibrant innovative community that will collaborate and tap in to the extensive expertise of the businesses incubated there. It will also provide a focal point for the wider community to utilise the facilities in their innovation activities.

Benefits of a low carbon building

There are many benefits to having a low carbon building for both Hethel and the tenants:  Reduced operating/running costs  Enhanced asset value and profits  Improved employee productivity and satisfaction  Optimised life-cycle economic performance  Life-Cycle Savings from: o Energy & Lighting Efficiency o Water Efficiency o Materials Efficiency o Employee Productivity o Employee Health o Construction & Debris Recycling  Employee health & productivity, less sick days and retention of staff.  Social impact & reputation  CSR opportunity and marketing  Environmental impact  Meets future legislation/fiscal policy

The AMC will provide affordability for tenants and incubators will all have their own energy metering systems. This provides transparent costing for the businesses, enabling them to instantly see the benefits of the savings and providing competitive edge at vital stages of the business.

The AMC will allow tenants and the wider community to showcase new technologies (through an environment and culture of collaborative innovation and best practice) and is the next phase in creating a low carbon technology park.

It is in line with EU initiatives Manufuture5 and factories of the future6. The mission of the European Technology Platform Manufuture is to propose, develop and implement a strategy based on Research and Innovation, capable of speeding up the rate of industrial transformation to high-added-value products, processes and services, securing high-skills employment and winning a major share of world Manufacturing output in the future knowledge-driven economy. This is very much in alignment with the work that will be done in the Advanced Manufacturing Centre through the Hethel Innovation project. Businesses incubated in the AMC will meet all of the platform proposal points through their actions.The "Factories of the Future" is one of the three Public-Private Partnership included in the Commission's recovery package. It consists of a research programme to support the manufacturing industry in the development of new and sustainable technologies.

5 http://www.manufuture.org/manufacturing/ 6 http://ec.europa.eu/research/industrial_technologies/factories-of-the-future_en.html Confidential (Jan 12) 24 of 111 The objective is to help EU manufacturing enterprises, in particular SMEs, to adapt to global competitive pressures by improving the technological base of EU manufacturing across a broad range of sectors. "Factories of the Future" (PPP FoF) is targeting the manufacturing industry. Manufacturing is still the driving force of the European economy, contributing over 6,500 billion euro in GDP and providing more than 30 million jobs7. It covers more than 25 different industrial sectors, largely dominated by SMEs, and generates annually 1,500 billion euro of value-added. The focus is on the development and integration of enabling technologies, such as engineering technologies, ICT, and advanced materials for adaptable machines and industrial processes. The activities of the initiative are defined on the basis of the medium and shorter term R&D and innovation needs of the industry and in particular SMEs. Demonstration of newly-developed industrial technologies, ICT and materials improve the competitiveness of the companies. This initiative is expected to deliver in particular:

 A new European model of production systems for the factories of the future (e.g. transformable factories, networked factories, learning factories) depending on different drivers such as high performance, high customisation, environmental friendliness, high efficiency of resources, human potential and knowledge creation.  ICT-based production systems and high quality manufacturing technologies capable of optimising their performance with a high degree of autonomy and adaptability for a balanced combination of high throughput and high accuracy production.  Sustainable manufacturing tools, methodologies and processes that have the capability of cost- efficiently shaping, handling and assembling products composed of complex and novel materials

Building on the EU's excellent R&D base, the future of manufacturing is vital to European economic growth and sustainability. The long-term shift from a cost-based competitive advantage to one based on high added value requires that European manufacturing increases its technological base and develops a number of new enabling production technologies with cross-sectoral benefits. There is an increasing demand for greener, more customised and higher quality products. This initiative will help European industry to meet these needs by converting to a demand-driven industry with lower waste generation and energy consumption. These initiatives illustrate the need for Advanced Manufacturing facilities and further highlight the benefits of Hethel building such a facility to help SMEs innovate, maximise their ability to access and utilise new technologies, practices and procedures and move from engineering to manufacturing processes.

The SME tenants will have a real impact on carbon saving through the low carbon products and services that they will be developing, such as ‗Scion Sprays‘ fuel injector, ‗Heatstreams‘ energy efficient heating systems and ‗Ansible Motions‘ simulation systems.

As detailed above, critical market and equity failures have been identified which justify public sector intervention.

In addressing market failure this intervention is designed to increase SME productivity through engagement in low carbon innovation clusters, business support and application of open innovation techniques and processes. These clusters will be business led, meet business needs and deliver tangible outputs through real low-carbon pilot innovation projects. HIL will utilise its experience and expertise from HEC to use region- wide networks to identify opportunities for pilot innovation projects and potential cluster members. HIL will work closely with regional partners to engage Cluster SMEs in open innovation (OI) networks and will provide incubator accommodation and facilities for these pilot innovation projects.

7 http://ec.europa.eu/research/industrial_technologies/fof-facts-and-figures_en.html Confidential (Jan 12) 25 of 111 In addressing equity failure through HIL and the construction of an Advanced Manufacturing Centre, this project strengthens HEC as the regional enterprise hub for advanced manufacturing and engineering and low-carbon innovation and catapults it forward to becoming a successful low carbon innovation hub. Through this, HEC becomes an inspirational and aspirational focal point for new technology businesses in Norfolk. This project raises awareness of open innovation processes and techniques and provides a delivery framework for Norfolk businesses to engage with a wider community through low-carbon cluster development.

2.2.2 Strategic fit

The key themes of this project are:

 Business-led innovation networks innovation networks

 Open-innovation and knowledge transfer

 New technology development

 Business start-up and growth

 Advanced low-carbon manufacturing

 Supply chain development

 New low-carbon products and services

 Business support

In developing its low-carbon innovation strategy HEC has considered public sector ‗push‘ from National, Regional and Sub-Regional Low-carbon strategies alongside business ‗pull‘ in the context of exploiting existing regional assets. Using this framework, low carbon technology platforms have been identified across core business sectors in the East of England and from this HEC is focusing on the low carbon technology platforms in advanced engineering and manufacturing. European Strategic fit ERDF

This project aligns itself entirely with the ERDF aims and objectives of supporting low carbon economic growth and supporting SMEs to respond to the commercial potential behind a low carbon economy through promoting and supporting businesses with innovation and knowledge transfer.

In this project the main drivers for intervention are:

 IMPROVING ECONOMIC PERFORMANCE o By addressing market failures and increasing productivity. o By raising awareness of the benefits of investing in innovation and R&D o By opening up the potential of cross-sector working and opportunities of new technology, products and markets.

 ENVIRONMENTAL IMPACT – Reducing CO2 emissions

OP Vision

Confidential (Jan 12) 26 of 111 The OP adopts the headline vision set out in the current RES: A leading economy, founded on our world- class knowledge base and the creativity and enterprise of our people, in order to improve the quality of life of all who live and work here.

OP Meta-theme There are two over-arching and inter-related imperatives for the OP as a whole in the period to 2013:  To support the process of delivering growth  To deliver the growth agenda in a manner that is cognisant of the region‘s carbon footprint and to stabilise and reduce it

These two imperatives are brought together in the OP meta-theme: TOWARDS LOW CARBON ECONOMIC GROWTH

OP Priorities

In line with the meta-theme and high-level programme objectives, the East of England Competitiveness Programme focuses on the first three of the four Priorities identified by the National Strategic Reference Framework:

 Priority Axis 1: promoting innovation and knowledge transfer with the intention of improving productivity  Priority Axis 2: stimulating enterprise and supporting successful business by overcoming barriers to business creation and expansion  Priority Axis 3: ensuring sustainable development, production and consumption

ERDF Competitiveness Programme - This project directly addresses the meta-theme, high-level programme objectives under priority axis 1.

 Meta-theme – Towards low carbon economic growth

 Objective 1 – to capitalise on the region‘s strengths in research and development and to ensure that more businesses are genuinely innovative.

 Objective 2 – to increase the productivity of the region‘s businesses and encourage economic activities that are based on higher skill levels, particularly in those parts of the region that are set for substantial growth

 Objective 3 – to encourage higher levels of business start-up and growth, particularly in activities that are consistent with lower carbon economic growth

 Objective 4 – to enhance resource use efficiency among the region‘s businesses and communities, and to accelerate the development of the environmental goods and services sector (including the continuing development of both ―clean technology‖ businesses, products and services, and renewable forms of energy)

It is understood that the majority of ERDF resources will be focused on a limited number of major strategic interventions where they can best address the ERDF‘s programme meta-theme of TOWARDS LOW CARBON ECONOMIC GROWTH. The LCPIP project addresses this through the following criteria:

 Delivers long-term improvement in the performance of the regional economy  Makes significant contribution across a number of regional economic strategy goals

Confidential (Jan 12) 27 of 111  Delivers OP and RES priorities where there is no obvious alternative regional organisation

OP strategic alignment

The following table and figure from the OP summarises the strategic fit of the OP high level objectives with other European, national and regional priorities.

The OP will complement EEDA‘s Enterprise Hub programme across all three Priority Axes:

Confidential (Jan 12) 28 of 111 The following table summarises the strategic fit of this project with ERDF priorities

Priority Axis 1 – Innovation and Knowledge Transfer with the intention of YES improving productivity / NO Support for collaborative approaches to commercialisation of R&D through an „Open Innovation‟ inter/extra- organisational model , focusing on the exploitation of energy efficient and clean technologies YES

Programmes to encourage the uptake and further exploitation of ICT solutions within the region‟s businesses including initiatives to promote energy-efficient processes and outcomes. NO

Support for innovation advice to businesses YES Outreach programme to businesses with the aim of engaging them in appropriate knowledge networks YES Initiatives to support collaboration between HEIs and businesses in the context of knowledge transfer YES Support for innovation and knowledge transfer (e.g. complementing the network of Enterprise Hubs) YES Other activity – relevant to Priority Axis objective YES

Priority Axis 2 – Stimulating Enterprise and supporting successful business YES by overcoming barriers to business creation and expansion / NO Provision of venture capital facility and/or other access to finance measures (NO) Business start-up programme encouraging entrepreneurship (YES) Support for business-to-business networking and cluster development within the clean technology sector (YES) Interventions to support the development of the renewable energy supply chain with particular reference to wind, solar, biomass, hydroelectric and geothermic and energy efficient solutions such as combined heat (YES) and power solutions

Provision of business support to social enterprises, focusing especially on those which are intrinsically “low carbon” (NO)

Support, advice and encouragement for businesses to improve environmental performance and resource efficiency (NO)

Other activity – relevant to Priority Axis objective (NO)

Priority Axis 3 – Sustainable Development, Production & Consumption YES / NO Support for projects that effect sustainable consumption such as green procurement; eco-effective production processes and consumer access together with information initiatives and energy efficiency (NO) demonstrator projects linked to economic development objectives and outcomes

Limited support for key strategic developments linked to the growth of the clean technology and renewable energy sectors (NO)

Limited provision of flagship business space (potentially incubators and move-on space – and possibly third “spaces”), particularly in support of low-carbon focused enterprises and with an eco-efficient design in (NO) accordance with local plans

Support for renewable energy demonstrator or exemplar projects making use of wind, solar, biomass, hydroelectric and geothermic solutions and others (NO)

Support for exemplar demonstrator energy efficiency solutions such as combined heat and power (NO) Support for the development of social enterprise particularly those involved in low carbon activities such as re-cycling (NO)

Support for initiatives within communities aimed at encouraging low carbon forms of economic growth (NO) Other activity – relevant to Priority Axis objective (NO)

Confidential (Jan 12) 29 of 111 This project fits with the EU's growth strategy (Europe 2020) for the coming decade. This is based upon three themes driving the EU to become a smart, sustainable and inclusive economy.8 5 key targets have been identified for the EU as a whole and broken down into National targets. This project mainly addresses target 2, but will have the added benefits of supporting targets 1 and 3.

The 5 targets for the EU in 20209

1. Employment o 75% of the 20-64 year-olds to be employed i. The Hethel innovation project will both create and safeguard jobs. 2. R&D / innovation o 3% of the EU's GDP (public and private combined) to be invested in R&D/innovation i. The Hethel Innovation project will raise awareness of the benefits of investing in R&D/innovation, create collaborations and produce real output in terms of commercial products/services delivered through Pilot Innovation. 3. Climate change / energy o greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than 1990 o 20% of energy from renewables o 20% increase in energy efficiency i. This project is focussed upon Low Carbon and Clean tech, particularly in the automotive sector. 4. Education o Reducing school drop-out rates below 10% o at least 40% of 30-34–year-olds completing third level education 5. Poverty / social exclusion o at least 20 million fewer people in or at risk of poverty and social exclusion

Smart Growth

Smart growth means improving the EU's performance in:

 education (encouraging people to learn, study and update their skills)  research/innovation (creating new products/services that generate growth and jobs and help address social challenges)  digital society (using information and communication technologies)

EU targets for smart growth include:

1. combined public and private investment levels to reach 3% of EU's GDP as well as better conditions for R&D and Innovation 2. 75% employment rate for women and men aged 20-64 by 2020– achieved by getting more people into work, especially women, the young, older and low-skilled people and legal migrants 3. better educational attainment – in particular: – reducing school drop-out rates below 10% – at least 40% of 30-34–year-olds with third level education (or equivalent)

8 http://ec.europa.eu/europe2020/index_en.htm 9 http://ec.europa.eu/europe2020/targets/eu-targets/index_en.htm Confidential (Jan 12) 30 of 111 The Hethel innovation project will support research and innovation resulting in the creation of start-up businesses and new products/services that generate growth and jobs and help create a low carbon economy.

Sustainable Growth - for a resource efficient, greener and more competitive economy.

This means:

 Building a more competitive low-carbon economy that makes efficient, sustainable use of resources  Protecting the environment, reducing emissions and preventing biodiversity loss  Capitalising on Europe's leadership in developing new green technologies and production methods  Introducing efficient smart electricity grids  Harnessing EU-scale networks to give our businesses (especially small manufacturing firms) an additional competitive advantage  Improving the business environment, in particular for SMEs  Helping consumers make well-informed choices.

EU targets for sustainable growth include:

1. Reducing greenhouse gas emissions by 20% compared to 1990 levels by 2020. The EU is prepared to go further and reduce by 30% if other developed countries make similar commitments and developing countries contribute according to their abilities, as part of a comprehensive global agreement 2. Increasing the share of renewables in final energy consumption to 20% 3. Moving towards a 20% increase in energy efficiency

This project fully supports the EU objectives in developing a low carbon economy through innovation of new products/services, collaboration and knowledge transfer and business support for SMEs.

Inclusive Growth – a high-employment economy delivering economic, social and territorial cohesion.

Inclusive growth means:

 Raising Europe‘s employment rate – more and better jobs, especially for women, young people and older workers  Helping people of all ages anticipate and manage change through investment in skills & training  Modernising labour markets and welfare systems  Ensuring the benefits of growth reach all parts of the EU

EU targets for inclusive growth include:

1. 75% employment rate for women and men aged 20-64 by 2020– achieved by getting more people into work, especially women, the young, older and low-skilled people and legal migrants 1. Better educational attainment – in particular: – reducing school drop-out rates below 10% – at least 40% of 30-34–year-olds completing third level education (or equivalent) 2. At least 20 million fewer people in or at risk of poverty and social exclusion

Through its regional interaction with businesses, pilot innovation projects and business support, the Hethel innovation project will create start-up businesses and help existing businesses to diversify, grow and create wealth. In turn, this creates jobs and helps to grow the economy. The UK government sets out its action in

Confidential (Jan 12) 31 of 111 regards to Europe 2020 in its National Reforms document: Europe 2020:UK National Reforms Programme 201110

National Strategic Fit

The path to strong, sustainable growth & The growth review

The Government‘s economic policy objective is to achieve strong, sustainable and balanced growth that is more evenly shared across the country and between industries. The following information highlights the demand and need for the Hethel Innovation Programme project and how the project supports National strategy. ‗The path to strong, sustainable and balanced growth‘ document11 sets out key challenges and reforms to improve the dynamism of the UK business environment, many of which are relevant to and supported by the activities of the Hethel Innovation Programme.

‗1.2. The Government‟s vision is to create a dynamic economy...... It means ensuring that the UK is well- positioned for the transition to a low-carbon economy. The Government believes that it is the agenda of the private sector that should come first – the people, businesses, and social enterprises who are the real creators of prosperity in this country. The Government‟s priority must be to create the conditions for businesses to grow and for individuals to reach their potential.‘12

The Hethel Innovation project fully supports this vision and will work with companies in the region to benefit from the opportunities created by a low carbon environment, thereby creating prosperity in the region and country.

„1.6. The Government is also getting behind the big businesses of tomorrow. The UK's 4.8 million small and medium-sized enterprises (SMEs) are vital to the economy. They provide 60 per cent of private sector jobs and account for half of all private sector turnover. The Government is committed to ensuring that the UK has an environment where it is easier for new companies and innovations to flourish and where people who aspire to be entrepreneurs are encouraged.‟13 The Hethel Innovation project will work with SMEs across the region to raise awareness of innovation and support them in embedding innovation in their companies. Pilot Innovation Programmes will allow innovations to ‗flourish and produce high-value products and services. In section 1.7 the government also acknowledges the fact that small businesses have specific needs and can be disproportionately burdened by poor Government policy. That is why the Government is recognising their needs by streamlining business support and providing targeted help to those SMEs that have high-growth potential.

As part of its Framework for Growth, the government sees the importance of innovation in the growth of the economy:

„1.38 Innovative firms will help drive the new breakthroughs which bring long-term wider benefits to the economy.‟14

10 http://ec.europa.eu/europe2020/pdf/nat_ref_prog_2011_uk_en.pdf 11 http://www.bis.gov.uk/assets/biscore/corporate/docs/p/10-1296-path-to-strong-sustainable-and-balanced-growth.pdf 12 The path to strong, sustained and balanced growth. HM Treasury; BIS. November 2011. Pg 5, section 1.2 13 The path to strong, sustained and balanced growth. HM Treasury; BIS. November 2011. Pg 6, section 1.6 14 The path to strong, sustained and balanced growth. HM Treasury; BIS. November 2011. Pg 13, section 1.38 Confidential (Jan 12) 32 of 111 There is much emphasis on the importance of a sound intellectual property framework and spreading the benefits of existing technologies. Openness to trade, more competitive and efficient markets and a better skilled workforce will help promote the spread of new technologies throughout the economy, with huge potential rewards for productivity.

„1.75. There are critical but different roles that Government can play in improving the UK‟s performance, through increasing the UK‟s share of world markets, raising employment or improving productivity. In particular, the Government has identified the following challenges:

 consolidating existing strengths in high-value services and advanced manufacturing to drive export growth;  supporting new and expanding industries where the UK has the potential to become a world leader including in low-carbon technologies;  improving performance in large domestic sectors, which is critical to increasing overall productivity and employment;  ensuring essential infrastructure sectors underpin growth across the economy; and  benefiting from the Government acting as a more intelligent customer in sectors where it is a major purchaser and can promote innovation.‟15

The Hethel innovation programme project will support these challenges through its work with the advanced engineering and manufacturing sector and focus on innovation and a low carbon economy.

In November 2010, through ‗The path to strong, sustainable and balanced growth‘ document‘16 the Growth Review was launched by the Chancellor and Business Secretary. The ‗Growth Review‘17 Document produced in March 2011 outlines 4 key overarching ambitions to ensure the UK is progressing towards economic objectives, these are:

1. To create the most competitive tax system in the G20; 2. To make the UK one of the best places in Europe to start, finance and grow a business; 3. To encourage investment and exports as a route to a more balanced economy; and 4. To create a more educated workforce that is the most flexible in Europe. The Growth review highlights the fact that Britain has lost ground in the World‘s economy and covers some key facts relevant to this project: „Manufacturing has halved as a share of our economy, and 50 per cent of all manufacturing jobs have been lost.18‟

15 The path to strong, sustained and balanced growth. HM Treasury; BIS. November 2011. Pg 20, section 1.75 16 http://www.bis.gov.uk/assets/biscore/corporate/docs/p/10-1296-path-to-strong-sustainable-and-balanced-growth.pdf 17 http://cdn.hm-treasury.gov.uk/2011budget_growth.pdf 18 The Growth Review. HM Treasury; BIS. March 2011. Pg 3 Confidential (Jan 12) 33 of 111 It reports that:

„1.30. Despite the UK‟s strength in research, some measures suggest UK business is falling behind in innovation. Just over 40 per cent of UK manufacturing firms are involved in technological innovation, lower than Germany at over 70 per cent, Sweden at over 50 per cent and Finland at 50 per cent.36 In a recent survey around 20 per cent of UK manufacturing firms cited lack of information on technology or markets as a barrier to innovation.37 Germany has set up an impressive innovation infrastructure, including a network of Fraunhofer Institutes, a collaboration between the public and private sector, undertaking applied research to shape technology and improve industrial processes and techniques.‟

The Hethel Innovation Project addresses this issue directly through its awareness raising activities/events, business support methods, pilot innovation projects and networks. Collaboration and knowledge transfer are central to the projects activities. Through the capital element of this project and the construction of the AMC (Advanced Manufacturing Centre) we can further incubate start-up/high growth businesses, creating networking opportunities, providing vital support for fledgling business and SMEs and conducting important research to benefit the sector. The Government have documented a raft of reforms to support SME‘s including innovation focussed actions around business support, again, this is highly relevant to the Hethel innovation Programme project.

Growth Review Framework for Advanced Manufacturing19

This framework report follows the Growth Review and outlines the opportunities, potential barriers and key priorities as part of a 10 year commitment to enable UK manufacturing companies to grow sustainably. It contains details of the three goals that government has committed itself to delivering over the next decade, including growing manufacturing in the UK, establishing the UK as the leading exporter of high value goods and services and promoting careers in manufacturing.

According to the Framework, challenges to the UK economy over the coming years include globalisation, new competitors in new markets, challenges associated with climate change and increased technological competition. Government outlines perceived barriers to advanced manufacturing including innovation and knowledge transfer, poor take up of new technologies, limited access to skills and training, restricted access to finance, exporting difficulties, inhibitive manufacturing regulations and concerns associated with energy costs and security of supply.

Two of the challenge areas highlighted in the report and addressed by this project are below:

‘Innovation and knowledge transfer: Knowledge of the latest industrial technologies and their application to manufacturing processes is often difficult to access, particularly for SMEs. Information is often contained within a particular sector, and not disseminated widely across sectors where it could also be beneficial.

Take up of new technologies: The costs of demonstrating and testing the use of new technologies can be very high, particularly for SMEs, and can require access to equipment beyond the affordability of an individual company. Firms often lack knowledge about the range of technologies that are available and their potential benefits.‟20

19 Growth Review Framework For Advanced Manufacturing. BIS. Dec 2010 20 Growth Review Framework For Advanced Manufacturing. BIS. Dec 2010. Pg 5 Confidential (Jan 12) 34 of 111 It states that:

„In the globally competitive market-place, the ability of our manufacturers to exploit innovation and technology to create better products and processes is crucial to maintaining a competitive advantage.

The 2009 UK Innovation Survey shows that over 60% of manufacturing firms are involved in innovation activity resulting in new or improved products and processes. In the electrical and precision engineering sector, the figure is 77%.‟21

Helping to develop a knowledge economy is an important part of the outcomes of this project and its importance is recognised through the growth review framework for Advanced Manufacturing document:

„Industries such as advanced manufacturing are characterised by high levels of innovation, knowledge, skills and investment have a particularly important role to play in raising productivity, competitiveness and standards of living. New ideas, technologies, products developed in the manufacturing sector may have important uses in other sectors of the economy. Higher value industries and activities are also associated with higher levels of productivity and therefore financial rewards to employees for the value they generate‟.22

Ingenious Britain: Making the UK the leading high tech exporter in Europe – James Dyson23

In March 2010 the Prime Minister commissioned a report from James Dyson to reawaken ‗Britain‘s innate inventiveness and creativity‘ and for Britain to meet the challenge of becoming ‗Britain to become Europe‘s leading generator of new technology‘.

Dyson stated that:

‗Many of the best new ideas are being created in university labs and the UK has far more than its fairshare of leading universities. And the fact that more than 70% of full time engineering and technology postgraduates are from outside the EU shows that our universities provide world-class research led courses in engineering. But, with a few exceptions, we are not world-class at taking ideas out of university and into the market.‟24

„Universities must work with industry and investors to capitalise on our world-beating research and to accomplish the equally exciting task of commercialising ideas.‟25

„As Rolls-Royce demonstrates with every engine it sells, innovation is the absolute key to its success.‟26

The Hethel Innovation Programme will address this problem through its knowledge transfer, network and pilot innovation project activities. We will bring industry and academia together, across a number of platforms, to innovate and progress projects to commercialisation of products and services. The construction of the AMC will allow for such knowledge transfer activities to take place in the right environment, one that offers all of the necessary resources to bring stakeholders together, prompt discussion, harness creativity and allow for innovation ideas to flourish and become a commercial reality.

21 Growth Review Framework For Advanced Manufacturing. BIS. Dec 2010. Pg 8 22 Growth Review Framework For Advanced Manufacturing. BIS. Dec 2010. Pg 13 23 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson 24 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson. Pg 5 25 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson. Pg 34 26 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson. Pg 6 Confidential (Jan 12) 35 of 111 Dyson advocates innovation throughout his report, promoting investment in R&D activity, collaboration and sharing of knowledge to provide high tech products and services to drive growth and the economy, all activities that are addressed by this project:

„...‟successful firms are always seeking ways to improve their efficiency. But it‟s not what makes them the best. Successful firms are in the business of harnessing innovation to gain sustained competitive advantage: new and better products that deliver more value to customers, priced to reflect this higher value. This drives long term wealth creation and rising living standards. New inventions and new products define economic eras.‟27

„R&D investment is a key contributor to high tech success. When coupled with measures to promote innovation (e.g. training, encouraging risk taking), investment in R&D can lead to the success of companies and act as a driver for wider economic growth. Yet the UK continues to lag behind EU averages in investment in R&D. This is also the case with R&D in manufacturing sectors, contrary to the myth that our lower R&D investment profile is due to the service nature of our economy.‟28

„Research is the basic starting point for all technological innovation. While the UK excels at basic research, there are often breaks in the chain of development that mean we do not fully capitalise on this expertise. Smoothing the transitions between the stages of technology development could enhance the ability of the UK to capitalise on our scientific expertise.‟

Through addressing these issues we can work with businesses in the region, promoting the benefits of investment in R&D, knowledge transfer and technological innovation to create a region that is rich in high value businesses, knowledge and expertise. The Capital element will allow for further promotion and relevant R&D activities to take place through prototyping, testing and advanced manufacturing.

Other National Strategies This project fits with the strategies outlined in New Industries, New Jobs (NINJ) (April 2009), recognising the important trends that shape the strategic vision for Britain, including new low-carbon technologies and advanced manufacturing, along with the growing importance of innovation and awareness of technological change.

The New Industries, New Jobs (NINJ) (April 2009) report addresses “A strategic vision for Britain‟s recovery following the recent economic downturn”. The paper recognises the important trends that shape this strategy, including new low carbon technologies and advanced manufacturing, along with the growing importance of high-level skills and awareness of technological change. The paper identifies four immediate priority areas for action and reform objectives: INNOVATION, SKILLS, FINANCE and INFRASTRUCTURE, of which innovation and skills are closely aligned with LCPIP objectives.

The paper identifies strategic areas in specific sectors for ―unlocking potential‖. HEC is aligned with three of the eight strategic areas identified. HEC is already working on a number of projects in these areas and will extend this through the LCPIP project:

 Low-carbon industrial strategy – eg wind energy, bio-digester  Ultra-low carbon vehicles – eg electric vehicles

27 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson. Pg 8 28 Ingenious Britain. Making the UK the leading high tech exporter in Europe. A report by James Dyson. Pg 51 Confidential (Jan 12) 36 of 111  Advanced manufacturing – eg robotics

―Advanced Manufacturing‖ (BIS, July 2008) builds on NINJ in recognising the importance of high-value, high skilled internationally successful businesses to Britain‘s manufacturing base and knowledge economy. HEC specifically addresses composites as one of the first technologies to be identified in this paper for significant growth opportunity. Through business development/support, low carbon clusters, supply chain development and open innovation programmes the LCPIP project is closely aligned with the four identified areas of government intervention:

 Access to information and investment  Skills  Take up of new technologies  Specific sectorial challenges

Regional Strategic Fit With the Government announcing the closure of the RDAs the subsequent transition of issues relating to economic development and regeneration to Local Enterprise Partnerships, this business case will address strategic fit in terms of the Regional Economic Strategy and information gathered from the newly formed New Anglia LEP. It should be noted that since its creation, HEC has been strategically aligned with local, regional and National strategy and deemed exemplar in terms of its fit, delivery and performance. This provides HEC with a strong foundation on which to build and deliver this ERDF project, laying strong foundations for the future. HEC will continue to ensure it fits current and future strategic development.

Strategic Fit with the New Anglia LEP

The New Anglia Local Enterprise Partnership aims to provide a unique opportunity for businesses and organisations to re-shape the economic landscape at a challenging time for the UK economy. It states that it will focus on creating the best possible environment for businesses to develop and innovate, creating prosperity and bringing global recognition to key business sectors. It has also been announced as the Governments Pathfinder LEP for Green Agenda – paving the way towards a Low Carbon economy.

With the immediate priorities of focussing on the tourism, energy and advanced engineering sectors and provide support for businesses, especially small and medium sized enterprises, to enable them to grow. These sectors have significant potential for jobs growth and much work has already been undertaken in these areas

Hethel Innovation Limited (and Hethel Engineering Centre) is a co-ordinator for the New Anglia Advanced Manufacturing and Engineering group (NAAME) and will be working closely with the LEP on sectorial issues. The innovation programme fits directly into the LEPs aims through innovation, business support & development (SME focussed) to aid economic growth through economic prosperity, job and wealth creation. The creation of new workshop space will undoubtedly support the LEP vision of creating the best possible environment for businesses to develop and innovate.

The partnerships specific aims (documented through their business plan)29 are:

 To ensure New Anglia is nationally and internationally competitive

29 http://www.newanglia.co.uk/Downloads.aspx Confidential (Jan 12) 37 of 111  To act as a catalyst to achieving sustainable economic growth and tackling barriers where they occur through:  Enabling business start up and growth  Developing existing growth sectors, clusters and supply chains  Championing infrastructure improvements to aid business productivity and the smooth functioning of local labour  Delivering action at the level that is meaningful and works for business  Facilitating business and local community engagement  Promoting skills and workforce development

The Hethel innovation Programme fits squarely into all of these aims, with specific reference to economic growth, start-ups, cluster and supply chain development and collaboration (business and community engagement). It will utilise and build upon the extensive HEC capability, experience and strong reputation in Norfolk but allow us to reach out to and engage the region in innovation awareness and activity.

Strategic Fit with RES (Regional Economic Strategy)

Strategic fit can be found through:

 ‗Tapping‘ the significant potential of the engineering and manufacturing sector and facilitating commercialisation across the region‘s strong research and development base, particularly for energy efficient and clean technologies, in order to enable increases in productivity and resource efficiency.  Encouraging cross sector collaboration bringing together the strengths of key sectors to accelerate low carbon innovation and therefore the growth of low carbon sectors  Building high skilled, hi-tech, knowledge intensive businesses  Acting as a catalyst for bringing together industry, academia and the public sector to meet the challenges of delivering a low carbon economy  Enabling the significant majority of small and medium businesses to come together to achieve global competitiveness

The RES (Where are we now?) identifies low economic growth as the major strategic challenge and considers critical factors in addressing this. These include entrepreneurship, globalisation, innovation and skills. The vision (Where do we want to be?) states:

Confidential (Jan 12) 38 of 111 The Hethel Innovation project will engage regional delivery partners and industry partners and will directly address and deliver this vision along with four of the six headline regional ambitions and six of the eight goals which support these ambitions:

Headline regional ambitions Economic output Employment Skills Inequality Greenhouse gases Water resources RES goals Enterprise Innovation Digital economy Resource efficiency Skills for productivity Economic participation Transport Spatial Economy

The spatial response for the Greater Norwich Engine of Growth specifically identifies the importance of the “…advanced automotive engineering cluster and enterprise hub based at Hethel, with Lotus as an internationally renowned innovative company as its anchor” and declares a strategic ambition to “…enable the development of clusters at Norwich Research Park and Hethel around globally renowned anchor companies and research institutes in areas of automotive engineering, environment and life sciences.”

The Corporate plan addresses the RES goals through five delivery programmes and two foundation programs, as indicated in the diagram overleaf. The solid red circles indicate a primary strategic fit of LCPIP project to the RES and Corporate plan. The dashed circles indicate a secondary strategic fit.

Primary Secondary strategic fit The Corporate Plan Refresh (June 2009) addresses the regional strategic role in fit delivering NINJ. This will be principally through the science, innovation and high level skills programme and will focus on supporting the growth of key clusters and supply chains. Clean-tech innovation is identified as a major sector for integrated investment, including “..the expansion of Lotus Technology Park focused on low carbon vehicles, anchored by

Confidential (Jan 12) 39 of 111 Lotus.” (See Appendix 10) The Hethel innovation project is closely aligned with this strategic objective and is a major delivery mechanism.

EEDA's low Carbon Innovation Evidence Base30

The aim of this study was to provide a greater understanding of the development of low carbon technologies in the East of England.

The report found that, with increasingly ambitious national and regional targets for reducing energy and resource use, there are huge opportunities for regional companies to benefit from the growing demands for low carbon and environmental goods and services (LCEGS). It demonstrated strength in the LCEGS sector in the East of England with leading positions in a number of strategically important sub sectors and technology areas which are being supported by strong market drivers. These include alternative fuel vehicles, low carbon vehicles, recovery and recycling and carbon capture and storage. It also has strengths in alternative fuels, ICT and advanced materials. These strengths are regions are complemented by universities at the forefront of research in areas such as biofuels, bioenergies, crop development, climate change, advanced engineering and automotive design whilst also providing an increasing number of tailored environment-related courses. However, the sector faces a number of longer term challenges beyond the current economic slowdown. These include: capacity to innovate; access to skilled staff; and access to external finance.

Development of the above sub sectors could potentially put the East of England at the forefront of leading low carbon innovation in some of the world‘s largest market opportunities, increasing the regions reputation as the UK‘s Ideas Region, with the ability to export this expertise to the rest of the UK and internationally, creating new jobs and providing a more secure future for the region‘s economy.

Regional Strategic Framework for Manufacturing, 2007 - 2012 31

The Strategic framework has a 5 point vision that is highly relevant to the Hethel Innovation Programme activities and outcomes:

 Maintaining a manufacturing capacity that is above the average for the UK (by numbers employed and wealth created per capita)

 Ensuring productivity growth is above average for the UK

 Generating high quality jobs that attract talented people from across a wide range of communities

 Assisting manufacturers to bring their ideas to market effectively

 Contributing to a sustainable future for all manufacturing by supporting emerging technologies and promoting the benefits of environmentally

This vision requires support for manufacturers in the following areas (highlighted to illustrate links to the Hethel innovation Programme):

30 http://www.eeda.org.uk/files/Executive_Summary_of_East_of_England_Low_Carbon_Innovation_Evidence_Base_November_2009.pdf 31 http://www.eeda.org.uk/files/EEDA-Manu_Framework.pdf Confidential (Jan 12) 40 of 111  promoting the region as the place to establish and run a business and to attract the businesses which will drive the predicted growth in manufacturing output  assisting organisations to raise their productivity and thus enable the region to achieve productivity growth in excess of the national average  generate interest in manufacturing as a career of choice, ensuring that manufacturers have access to the talent they require to drive business growth  support the predicted growth in manufacturing output by assisting companies to turn world beating ideas into world beating products  helping manufacturers to access new markets and new opportunities that will generate the additional wealth that has been predicted for the region  encouraging manufacturers to reduce their impact on the environment as well as ensuring they realise the tangible business benefits that can accrue from improved resource efficiency, ensuring our region retains a high quality of life and minimises its environmental footprint.

It reports that „innovation – manufacturing represents 77% of all R&D spend in the UK. The East of England represents the second highest regional spend in absolute terms (£4.2bn in 2003) after the South East (£4.7bn in 2003) but the largest by percentage of GDP and percentage of GVA16. It is also the only UK region to rank in the EU‟s top 10 R&D regions. Even allowing for the distortion caused by larger organisations investing heavily in R&D in our region, this still supports the concept of the East of England being Europe‟s ideas region. Growth in regional manufacturing output depends heavily on the need for continued investment in R&D and the development activities required to turn world beating ideas into world beating products, something that the public sector has an important role in supporting.‘32

The report identifies 10 Regional Manufacturing Issues, these being:

1. Skills availability in the market 2. Accessing talented personnel 3. Thinking strategically 4. Access to investment 5. Access to knowledge 6. Globalisation 7. Perceptions and messages 8. Co-ordination of support 9. Ability to spot gaps 10. Ease of working with the public sector

The main strategic fit with the project here lies within ‗access to knowledge‘, with some coverage within ‗access to investment‘, ‗globalisation‘, ‗co-ordination of support‘ and ‗public sector working‘.

5 themes were created to support the issues identified overleaf:

32 http://www.eeda.org.uk/files/EEDA-Manu_Framework.pdf Confidential (Jan 12) 41 of 111 This theme aligns directly with the Hethel innovation Programme as it seeks encouraging organisations to be more innovative and ensuring they have access to the right resources to support their own innovation activities, which in turn will support the R&D investment that underpins the predicted growth in manufacturing output. This involves the coordination, stimulation and promotion of the options available to organisations to enable them to benefit from innovations in their products, processes and services

LOCAL STRATEGIC FIT Hethel Engineering Centre Strategy

HIL through HEC is well positioned to deliver this project. HEC is the Enterprise Hub for high-performance and manufacturing in the East of England and, since opening in March 2006, has been successfully delivering INNOVATION, ENTERPRISE and SKILLS programmes in line with European, national, regional and sub- regional strategic objectives as shown in the figure overleaf.

HEC STRATEGY

STRATEGIC FIT

EUROPEAN NATIONAL REGIONAL SUB-REGIONAL COMPETITIVENESS & ADV. MANUFACTURING LOW CARBON OPEN BUILDING A KNOWLEDGE INNOVATION FRAMEWORK STRATEGY INNOVATION BASED ECONOMY ADV. MANUFACTURING NINJ: NEW INDUSTRIES, STRATEGY NEW JOBS

SUSTAINABLE INNOVATION HUB

BUSINESS LED INNOVATION NETWORKS

LOW-CARBON SCIENCE AND TECHNOLOGY PARK STRATEGIC AMBITIONS STRATEGIC AMBITIONS STRATEGIC

ENTERPRISE INNOVATION SKILLS

FOCUS

HEC is now taking the lead in the development of advanced engineering and manufacturing clusters focused on low-carbon innovation and has been identified by EEDA as the regional low-carbon enterprise hub for advanced engineering and manufacturing. The LCPIPs project is closely aligned with HEC‘s ongoing innovation programme of low-carbon cluster and supply chain development but extends the scope to include the application of open-innovation tools, techniques and processes to business led low carbon pilot innovation projects. HEC now has a proven track record in economic development; having incubated over 55 successful new businesses with the creation of over 190 new high value jobs in the 5 years since opening in March 2006, generating over £3.5 M of added value. We have experienced the constant growth in demand for high value and premium products/services, successfully incubating new technology businesses, creating start-ups and jobs. This project will have a strong emphasis on using the HEC capability and experience in Norfolk but allow us to reach out to and engage the region in innovation awareness and activity.

HEC is working towards a strategic goal of establishing a 55 acre Science and Technology Park around the existing Hethel site.

Confidential (Jan 12) 42 of 111

The diagram below details the evolution of Hethel Engineering Centre and future plans including construction of the AMC (becoming an innovation hub) and move towards a Technology Park.

HIL plans to take the lead in the development of advanced engineering and manufacturing innovation networks/clusters focused on low-carbon innovation and providing the support, links and to stimulate start- ups, diversification and growth in the region. The construction of the Advanced Manufacturing Centre and Hethel Innovation business support programme is vital in achieving this goal. The AMC itself is another step in the evolution of the Hethel Engineering Centre and will enable us to create a thriving Low carbon Innovation Hub where ideas are freely exchanged, projects are developed and new ideas are turned into commercial reality. HEC opened its doors in 2006 and was a £5 million partnership project between EEDA, Norfolk County Council, South Norfolk Council and Lotus. As an Enterprise Hub, HEC was created to address the lack of tailored premises for high-tech start-ups in the region in which small companies and commercial research outfits could locate and grow, therefore dedicating itself to the support of advanced manufacturing businesses in the East of England and calming the concern that talent and businesses would leave the region or fail to commercialise and generate economic benefits for the local economy. Under the

Confidential (Jan 12) 43 of 111 current economic conditions, there is a very real concern that companies failing to innovate (or having the space, support, culture, environment and network to stimulate innovation) may fail or indeed leave the region, hence the very real need for an Innovation environment such as the Advanced Manufacturing Centre. Several existing tenants have expressed a real need for such ‗grow-on‘ space and the AMC provides a vital component of the Hethel Innovation programme to support SMEs, create and manage pilot innovation projects through which start-up businesses are produced, incubated and supported to deliver commercialised, low carbon products thereby creating jobs, wealth and economic prosperity.

Through its existing good practice HEC has been identified as the regional low-carbon enterprise hub for advanced engineering and manufacturing.

Regional Low-Carbon Innovation Hubs

Hethel Engineering Centre OrbisEnergy BRE Environment East Adv Eng and Manufacturing Renewables Built Environment Products and services

Confidential (Jan 12) 44 of 111

Through working with the Engineering & Manufacturing businesses in the region we can support them to see the cross sector opportunities and the results that may be found through diversifying their activities and product offering, using their expertise to meet the needs of other sectors. Through identifying new sectors within which they can work and rising to the challenge of innovating new products and services, businesses in the region will generate higher margins and create jobs through the necessity for a skilled labour force, high tech solutions and stringent quality controls. From the diagram below you can see the core sectors in the East of England across which the project will work to highlight the opportunities in new markets, promote open innovation and provide a platform for knowledge transfer through supported collaborations and relevant interventions. This will create a culture of innovation within the businesses engaged and the region itself.

Confidential (Jan 12) 45 of 111

Through the projects we aim to generate start-ups, incubate and support companies to progress up the supply and value chains. For example, working with a manufacturing company on innovation through new technology to enable them to become advanced manufacturers and benefit from the opportunities associated with Clean Technology.

Key to the success of the East of England‘s low-carbon manufacturing economy will be the ability to innovate. HEC, through this project, will be a catalyst for innovation; an innovation hub creating an environment that encourages SMEs to engage in low-carbon clusters which embrace open innovation and knowledge transfer and deliver increased productivity and competitiveness.

A decision not to construct an Advanced Manufacturing Centre would:

 Significantly frustrate, if not stop, the ambitions of Lotus to build the Lotus Technology Park as well as businesses both within HEC and in the wider cluster requiring grow-on space for expansion, resulting in a possible loss of jobs  Limit to the extent to which HEC would contribute to the delivery of local, regional and national strategic objectives

The project has received a number of letters of supports from a wide range of organisations, illustrating the need and demand for it. Demand is coming from high growth businesses such as CTI, Scion Sprays, Magnus Marine, Active Technologies, Genite Corporation, Syrinix, Windcrop, Heatstream and Sonar Link – all HEC tenants. The market is failing to meet the needs of this new sector. Demand is also particularly apparent from the South Norfolk Council letter which states ‗HEC is a key location for growth in the South Norfolk Economic Strategy 2011 – 2014‘ and also the Genite Corporation who are engaging on radical low carbon projects and state that ‗We cannot do this alone and would be seeking the support and funding of others as well as assuring the growth of HEC continued to achieve this‘.

Confidential (Jan 12) 46 of 111 2.3 Solutions for Business

Alignment - Business support services will be offered as part of this project and fits the governments coordinated action to re-balance the economy and providing targeted assistance particularly for manufacturing, emerging sectors. Within the new, streamlined solutions for business portfolio, the project falls into the Networking for Innovation framework.

 Networking for Innovation - Networks for Innovation bring together people from businesses, universities, and research, finance and technology organisations to stimulate innovation through knowledge transfer. Building relationships to develop and exploit new ideas. This is project encompasses both physical and virtual networks through the use of digital social networking technology and the traditional events and masterclass methods.

The project itself offers a deeper level of support than highlighted by the framework descriptor and the LEP is looking to develop sector focussed business support. This programme fully supports the needs and demands of the LEP in this area, particularly with regards to development of the energy and clean tech sectors. Examples of further activities that fall within the Solutions for Business frameworks can be found in the additionality section.

All marketing, promotional and operational materials will conform to the Solutions for Business Brand Identity guidelines.

HIL will maintain a close working relationship with other relevant and appropriate Business Support programmes and provision, thereby building further productive relationships across the region.

Added Value - This project seeks to deliver a ‗framework for change‘, specifically for the engineering and manufacturing sector, bringing together the five ‗Solutions for Business‘ products detailed above with:  Benchmarking SMEs capability and capacity to deliver low carbon innovation  Sharing best practice through sector focused, region wide exhibitions, workshops and events, and  Embedding a culture of open innovation,

Thus providing for SMEs a ‗route map to success for delivering low carbon innovation.

Seamless Delivery - Hethel Engineering Centre (HEC), as one of EEDA‘s Low Carbon Innovation Hubs, already ensures that all its activities, support and programs fit within the ‗Solutions for Business‘ framework and branding. To this end, as the business support function of HEC, HIL has strong links and partnerships with Business Link East (BLE) and MAS East. HEC has worked with BLE at all levels, working with business advisers on a daily basis, partnership directors on a monthly basis and thematic leads such as manufacturing or innovation as and when appropriate.

Confidential (Jan 12) 47 of 111 3. Rationale and Additionality 3.1 Demand and Need

Demand and need are set in the context of, at the highest level, the UK economic outlook. At the regional level demand and need are indicated by a piece of work has been undertaken by HEC to classify and map engineering manufacturing businesses across the six counties of the East of England. Finally, demand and need are analysed in terms of firm and potential demand for services at Hethel Engineering Centre. 3.1.1 Economic Climate

National Economic Outlook

The Government is continuing to strive forward with its plans to rebalance the economy, in the midst of a challenging global economic situation, as outlined in the report ‗The path to strong, sustainable and balanced growth.

The UK economy has been recovering since late 2009, growing at an above trend rate in the second and third quarters of 2010, but then suffered a surprising drop in the fourth quarter of last year. The 0.5% fall in GDP in Q4 2010, which the ONS attributed to the effect of the snow in December, was reversed in Q1 2011.

In July 2011 PriceWaterhouseCoopers33 forecast a main scenario in which UK GDP would grow moderately at around 1.3% in 2011 and 2.2% in 2012.

Manufacturing output rose by 0.8% in Q1 2011 to a level that was 4.4% higher than a year earlier. The manufacturing sector declined by 14.5% during the recession period, but has shown an expansion of 6.5% since the recession ended. The CIPS/Markit Manufacturing Purchasing Managers Index for Manufacturing showed a sharp from its record peak of 62.0 in January 2011 to 52.1 in May (see Figure 2.3). Manufacturers reported a slight decline in production and new orders in May for the first time since mid-2009. This change was mainly due to a decline in domestic demand. However, exports maintained their recent strength due to the ongoing global recovery and a relatively weak sterling exchange rate.

33 PWC: UK Economic Outlook, July 2011 Confidential (Jan 12) 48 of 111

The main scenario forecasts growth at 3.3% for the manufacturing sector in 2011 (slight decline when compared with 3.5% in 2010, rising to 3.4% in 2012. Figure 2.16 illustrates our main scenario for sectoral output growth in 2010 (latest ONS estimates), 2011 and 2012. The relatively cyclical manufacturing sector was the worst hit by the recession in 2009, but saw a stronger recovery than services in 2010 which has continued in 2011 and is forecast to follow a similar trend in 2012.

For the East of England (all sectors) the main scenario forecasts growth of less than 1.2% in 2011 Rising to 2.2% for 2012.

PWC conclude that for continued modest growth in the UK economy over the next two years, but there are many pitfalls still to negotiate along what is likely to be a long and bumpy road to recovery. This analysis suggests that business demand and need for HEC services are likely to increase from this point onwards.

Confidential (Jan 12) 49 of 111 Regional The most recent regional manufacturing review estimated that there are 18,000 businesses in the manufacturing sector in its broadest sense.34 The East of England Technopole report states that manufacturing in the East of England lies at the heart of several regional sectors, these include:

 Agriculture, Food processing and Drink  Automotive Manufacturing  Advanced Manufacturing  Pharmaceuticals and Life Sciences  Energy and Off-shore Industries HEC is in the process of mapping manufacturing engineering businesses in the East of England35 as part of a process to geographically identify potential market size and specific regional clusters.

This analysis maps manufacturing businesses in the East of England and from this identifies the asset base and primary regional sectors. This enables the identification, growth and development of cluster programmes throughout the East of England, which in turn facilitates the growth of manufacturing. The database used was obtained from Companies House. This database contains details of approximately 18,000 manufacturing businesses in the East of England. The database was filtered down to 8,000 companies via SIC (Standard Industrial Classification) codes so that only manufacturing businesses are included.

8,000 businesses are being reviewed sub-regionally:

 Essex 2342  Hertfordshire 1700  Norfolk 1149  Suffolk 1000  Cambridgeshire 910  Bedfordshire 900

To date, analyses have been completed for Norfolk, Suffolk and Essex

Norfolk Already the home of blue chip companies including:

 Energy – Shell, Perenco, Seajacks.  Automotive – Lotus, Beru F1, MultiMatic.  Electronics – C-MAC, Syfer Technologies, Hamlin Electronics, Partnertech, E-Tech Group, Fluke, ATB Laurence Scott. and a significant skilled supply chain of engineering businesses including Warren Services, Mussett Engineering, TML Engineering and Milltech Precision Engineering, HAAS Automation, Cooper Roller Bearings.

The engineering and manufacturing sectors have the potential for knowledge based growth through building further links with academia such as UEA and research facilities such as Norwich Research Park. Norwich is

34 EEDA: Regional Strategic Framework for Manufacturing 35 HEC: Mapping Manufacturing in the East of England, Jason Chahal, 2009 Confidential (Jan 12) 50 of 111 becoming a world class destination for business and this report will enable the identification, growth and development of sector focused business support and cluster development programs throughout Norwich and Norfolk, helping to promote and attract world class businesses to the region.

Of the initial 1149 businesses, 916 of these were classified as manufacturing businesses using EEF‘s definition.

Within Norfolk there were 6 sectors identified, these are:

 Engineering 443  Transport 181  Electronics 159  Energy 75  Food 43  Meditech / Life Sciences 15

A number a clusters have been identified, including automotive, marine and energy. The following maps show density and distribution of businesses in these clusters.

Automotive Marine

Energy

HEC has extensive experience within Norfolk and proven track record in economic development; having incubated over 55 successful new businesses with the creation of over 190 new high value jobs in the 5 years since opening in March 2006, generating over £3.5 M of added value.

Confidential (Jan 12) 51 of 111 As previously detailed, Hethel Engineering Centre (HEC) itself is 100% occupied and tenants need larger units. HIL needs to build ‗grow-on‘ space to accommodate these high-growth start-ups, and free up space within HEC. Demand is outstripping supply.

With an initial emphasis on Norfolk, HIL will utilise its capability, experience and reputation through HEC to draw in relevant parties to the project and then engage its wide network of partner organisations and contacts to reach out and provide a regional engagement through this project.

Suffolk Of the 983 businesses in the database, 761 are classified as manufacturing businesses under the EEF‘s definition. Suffolk has 6 main sectors:

 Engineering 427  Electronics 127  Transport 84  Energy 47  Food 39  Meditech / Life Sciences 37

Suffolk‘s asset base lies in the engineering manufacturing and energy sectors. The main concentrations in Suffolk are on the east coast in and around Lowestoft, and in the west of the county in and around the Sudbury area. The engineering, energy and electronic sectors are based in and around the offshore energy industry which is based on the east coast. The concentrations of businesses in the west of the county could potentially be ‗overflow‘ from Essex.

Essex 1930 out of the 2342 businesses in the database were classified as manufacturing businesses. This is spread over four sectors:  Engineering 1097  Electronics 465  Transport 282  Meditech / Life sciences 66

Confidential (Jan 12) 52 of 111

The need for ERDF intervention is driven by the failure of the market to address business needs and strategic objectives. ERDF intervention, at this stage, will not only mitigate the risk of failure to respond to immediate business needs but will also improve the productivity and competitiveness of regional SMEs in exploiting low- carbon innovation opportunities through pilot projects delivering real product. ERDF intervention will further secure a sound foundation for the long-term realisation of the Lotus Science and Technology Park though the development of Hethel Engineering Centre. ERDF intervention is appropriate at this stage in the development of Hethel Engineering Centre as the business model is now proven. The timing of this intervention is particularly pertinent as the UK economy looks to recovery after the recent economic downturn. All evidence suggests that the market will not satisfy this need in the event that there is no intervention.

Method of intervention The proposed method of intervention is in the form of ERDF capital and revenue funding, at an intervention rate of 40%, matched to eligible capital expenditure in construction of an Advanced Manufacturing Centre (AMC) and revenue expenditure in the delivery of business-led low-carbon open innovation cluster and supply chain projects. This intervention is entirely consistent with European, national, regional and sub-regional strategic objectives for economic development and is supported by a broad base of stakeholder organisations. It is also consistent with regional delivery mechanisms and builds upon the proven success of Enterprise Hubs generally, as a tool of economic development, and of HEC specifically as an exemplar enterprise hub. Failure by ERDF to make this intervention will jeopardise the success and growth of existing businesses, prevent the establishment of new technology start-ups and compromise the delivery of low- carbon strategic objectives.

The diagram below provides an overview of the Hethel Innovation project, incorporating both capital and revenue elements:

Confidential (Jan 12) 53 of 111 In terms of the capital element, the AMC will:

 showcase low carbon technologies (eg Wind turbines, PV, Biomass) through providing tours, exhibitions, workshops, and web based info - so creating physical / virtual ‗windows‘.  be a prestigious building (BREEAM Excellent) designed to incorporate wide corridors, open plan work spaces, flexible factory space complimenting the existing facilities of HEC - encouraging engagement / networking / collaboration  incubate high-tech start-ups that will develop low carbon products and services eg next generation wind turbines (Windcrop), high efficiency heating systems (Heatstream), rotating PV panels / bio digesters (Active Technologies) and low emission fuel injection systems (Scion Sprays). Over the first 3 years the

tenants of the AMC will save over 600,000 tonnes of CO2  be a real manifestation of the demand for manufacturing space, and the next key component in the development of the Lotus Technology Park

The table below illustrates the methods of intervention employed throughout the revenue component of the project.

Marketing – This involves activities that will map the region in terms of sector activity, needs and analysis of the gaps and opportunities available. Through research and investigation the bench marking process can take place and opportunities for engagement can be identified. Communication methods will also take place.

Engagement – A variety of engagement activities will take place throughout the project as detailed in section 5. These include events, exhibitions/conferences, workshops/masterclasses and networking events.

Business Support – This project will utilise a broad programme of business support methods, delivered by the HIL team and supporting partners/consultants. This includes visits to workplaces, relevant workshops/masterclasses, Mentoring/Coaching, group and 1 to 1 sessions and sharing best practice.

Pilot Innovation – Project based collaborations requiring a consortia approach, facilitation, planning, strategy and management. Start–up activity generated through PIPs will be incubated within the HEC offices and workshops, and AMC (Advanced Manufacturing grow-on space) and therefore, the requirement of the capital part of this bid is a vital component within the Hethel Innovation Project. Through expansion of buildings we can fully incubate, support and nurture activities to offer the greatest chance of reaching commercialisation of low carbon products and services.

Confidential (Jan 12) 54 of 111 Pre-launch activities. – Prior to commencing project business case submission and delivery, it has been essential to undertake activities to determine the need for intervention, project feasibility and ascertain the range and scope of the intervention required. These activities have included:  Identify and build database and network of engineering and manufacturing businesses in the East of England  Map and analyse engineering and manufacturing sectors and sub sectors in the East of England  Develop and test concepts of: o Pilot Innovation o Growing Business Led Innovation Networks  Outline sector and sub sector ‗Innovation Platforms‘  Public sector launch presentation  Hethel Innovation project concept launch at HEC

Pre launch activity was essential to the project because it allowed HIL to develop the concept of growing ‗business led innovation networks‘ and, to this end, develop frameworks such as ‗pilot innovation‘. Also, pre- launch activity was essential to test the concepts developed in order to allow time to revise and adapt so that the frameworks developed were credible and effective. Finally pre-launch activity was needed to map and develop the areas to focus on and create a team that understood how to innovate collaboratively. Therefore the funding was needed to secure resource, undertake testing and feasibility studies and to assess through communication and engagement.

3.1.2 Need

Low-carbon innovation is a key driver of productivity and employment growth across the UK and its promotion is also a strategic priority for the region. It is at the heart of The Government‘s economic policy objective to achieve strong, sustainable and balanced growth because:

‗1.38. Innovative firms will help drive the new breakthroughs which bring long-term wider benefits to the economy‘36

And

‗1.6. The UK's 4.8 million small and medium-sized enterprises (SMEs) are vital to the economy. They provide 60 per cent of private sector jobs and account for half of all private sector turnover. The Government is committed to ensuring that the UK has an environment where it is easier for new companies and innovations to flourish and where people who aspire to be entrepreneurs are encouraged.‘37

While the East of England has a significant number of engineering and manufacturing SMEs, these businesses are failing to achieve growth through the exploitation of emerging opportunities driven by the need for new technology innovation in strategically important sectors, including low-carbon automotive, renewable energy and sustainable fuels. The root causes of this are lack of new innovation technology skills, lack of awareness of open innovation processes, lack of coordination of innovation clusters and supply chains and lack of high-quality, high-value incubation and grow-on space in co-located, networked cluster communities. By helping businesses to seize the opportunities of a low carbon economy through innovation, Knowledge

36 HM Treasury;BIS: The path to strong, sustainable and balanced growth. Nov 2010 37 HM Treasury;BIS: The path to strong, sustainable and balanced growth. Nov 2010 Confidential (Jan 12) 55 of 111 Transfer, collaboration and support and by providing high quality, high value incubation and grow-on space, we can help to deliver economic growth in the region.

As James Dyson stated in his Ingenious Britain report 38:

‗The UK‘s long-term performance depends on our ability to generate new ideas and bring them to market.‘ ‗....we need to move away from fixed policy notions about innovation occurring in only universities and being financed solely by venture capital. Instead the focus must be spurring enterprise and innovation to develop the next generation of wealth creators – high tech companies and entrepreneurs across all sectors.

EEDA's low Carbon Innovation Evidence Base

The aim of this study was to provide a greater understanding of the development of low carbon technologies in the East of England.

The report found that, with increasingly ambitious national and regional targets for reducing energy and resource use, there are huge opportunities for regional companies to benefit from the growing demands for low carbon and environmental goods and services (LCEGS). It demonstrated that the LCEGS sector in the East of England is significant and forecast to grow by between 4 and 6% per year over the next 7 years. The region has clear UK leading positions in a number of strategically important sub sectors and technology areas which are being supported by strong market drivers. These include alternative fuel vehicles, low carbon vehicles, recovery and recycling and carbon capture and storage. It also has strengths in alternative fuels, ICT and advanced materials. In renewable energy, the region has opportunities for future growth in offshore wind, biomass and perhaps wave power in the longer term.

The region‘s business strengths are complemented by world class universities at the forefront of research in areas such as biofuels, bioenergies, crop development, climate change, advanced engineering and automotive design whilst also providing an increasing number of tailored environment-related courses. However, the sector also faces a number of longer term challenges beyond the current economic slowdown. These include: capacity to innovate; access to skilled staff; and access to external finance.

Development of the above sub sectors could potentially put the East of England at the forefront of leading low carbon innovation in some of the world‘s largest market opportunities, increasing the regions reputation as the UK‘s Ideas Region, with the ability to export this expertise to the rest of the world.

3.1.3 Demand

A report by Nesta in June 200939, highlighted the difficulty in measuring the demand for innovation, stating ‗There is a real lack of data sources collecting information on the relationship between innovation and demand.‘ and ‗this report shows the lack of aggregate data available to policymakers to truly understand the nature of demand in the UK across different types of demand.‘ However, the report also cites Levies innovation confidence index as describing the UK as ‗as an innovation confident nation, meaning consumers in the UK are willing to try and buy new products and believe that they add value‘.

38 James Dyson: Ingenious Britain; Making the UK the leading high tech exporter in Europe. March 2010 39 Innovation Index Working Paper. Measuring the nature of demand in the UK: The challenges of an indicator approach. June 2009. Nesta; Katherine Ashby & Michchell Mahdon (The Work Foundation). Confidential (Jan 12) 56 of 111

They also cite the World Economic Forum prox measure, showing that the UK is doing reasonably well in the extent to which companies are perceived to embrace technological innovation. However, as the question is focused on aggressiveness only in relation to new technology, it doesn‘t necessarily tell us much about engagement with innovation per se.

This illustrates that there is a demand for innovation within the UK, certainly when looking at consumer demand, but that there is also scope to increase awareness and focus on innovation through a project such as the Hethel Innovation project.

The BIS Annual Innovation Report 201040 underlines the need and desirability for Growth in the UK economy to be driven by innovation and private sector ingenuity, but highlights some effects of the economic downturn stating, ‗business investment in R&D fell by 2.5 per cent between 2008 and 2009 and Venture Capital investment continued to decline. But importantly NESTA‘s Innovation Index suggests that ongoing private investment in innovation helped minimise the impacts of the downturn. Increasing and broadening these investments will be a key driver in delivering the private sector led economic growth central to Britain‘s future‘.

The BIS report also covers the importance of the ‗research base‘ and knowledge transfer, key components of the Hethel innovation project.

Some key findings from the report are as follows:

 R&D intensity in the UK, overall and in business, has remained below many major developed economies and business R&D dropped by 2.5 per cent between 2008 and 2009 to £15.5 billion.

o The NESTA report, ‘Demand and innovation. How customer preferences shape the innovation process‘41 All the advanced OECD economies have seen a major shift towards more knowledge- intensive industries, more knowledge-based work, high-tech manufacturing, and high value-added knowledge services. Investment in knowledge based assets or ‗intangibles‘ is now equal to or exceeds investment in traditional products in economies as diverse as the UK, the US, Finland and the Netherlands o The Hethel innovation project will address this through raising awareness of the benefits of Innovation and investment in R&D through its wide range of engagement activities and usage of media channels.

 Overall total R&D intensity has remained broadly stable at around 1.9 per cent of GDP from 1997 to 2008.

 Business R&D intensity has also remained stable at just over 1 per cent of GDP.

 Nominal investments in intangible assets have risen 4.6 per cent per year since 2000 to £140 billion in 2008. They account for 14 per cent of private sector output.

 Innovation drives economic growth - it has accounted for 63 per cent of annual labour productivity growth since 2000, with investments in intangibles accounting for 23 per cent of productivity growth.

40 BIS Annual innovation report 2010. http://www.bis.gov.uk/assets/biscore/innovation/docs/a/11-p188-annual- innovation-report-2010 41 http://www.nesta.org.uk/library/documents/Working-Paper-Demand-and-Innovation-v7.pdf Confidential (Jan 12) 57 of 111 Investment in intangibles in 2008 also helped reduce the negative impact on productivity of the start of the recession.

 Venture capital investment continued to decline, most likely as a result of the downturn, from €1.53 billion in 2008 to €782 million in 2009.

o The Hethel innovation Project will develop many links across the region, opening access up to partnerships, collaborations and knowledge transfer through Pilot innovation Programmes. Supported activities, networks and targeted events will provide opportunity for businesses in the project to engage with Venture Capitalists.

 The UK has seen a strong increase in science and technology human resources from 37 per cent of the labour force in 2001 to 44 per cent in 2009. o The Hethel innovation project will bring together industry and academia to share knowledge, expertise and to collaborate through Pilot innovation Programmes.

 Turnover for UK businesses from innovation products increased from less than 8.5 per cent in 2006 to 10.5 per cent in 2008. o This illustrates the growing demand for Innovative products and is a real opportunity to businesses to benefit from investment in this area and to engage with the Hethel innovation project.

 University knowledge exchange income, valued at £3 billion in 2008/09, increased by 6 per cent per year between 2003/04 and 2008/09. o Knowledge transfer and the sharing of expertise/case studies are key components on the project.

 Overall government investment in R&D, incorporating the science budget, higher education funding councils and direct government expenditure on R&D was valued at over £9.4 billion in 2008/09.

The reports detailed in this section indicate the governments view on demand and the importance of innovation in growing the economy. HEC has been working with start-ups and SMEs over the last 5 years and we have seen, first-hand, the demand for this project. HEC has a proven track record in economic development; having incubated over 55 successful new businesses with the creation of over 190 new high value jobs in the 5 years since opening in March 2006, generating over £3.5 M of added value. We have experienced the constant growth in demand for high value and premium products/services, successfully incubating new technology businesses, creating start-ups and jobs. We are also seeing growth in the demands for application of skills, capabilities, products/services through collaborative actions based on Pilot Innovation Programmes. One example of this is HEC tenant ‗CTI‘ who are actively seeking collaboration for high tech projects.

Demand for grow-on space through the HIL Advanced Manufacturing Centre.

Since 2006 the brand value of HEC has grown locally, regionally, nationally and internationally through a number of factors based around a clear strategic focus on:

 High-performance engineering and manufacturing – HEC brand positioned around high- value, high-skill new technology  Enterprise, innovation and skills – HEC delivers customer value and strategic objectives

Confidential (Jan 12) 58 of 111  Strong clusters – Sub-sea communication, bio- fuels, low-carbon automotive, wind energy (ERWE – Eastern Region Wind Energy),  High quality services and facilities – supply-chain development, open innovation  Success of tenant companies – Scion sprays, Active Technologies, Syrinix, SonarLink, PDC Marine, Paradigm  Business support networks – consultancy, real advice workshops  High profile regional and national events – EAME09-11, IMechE, UKTI  Engagement of business, public sector and academia – Lotus, Ford, Caterpillar, Shell, CEME, NRP, FE colleges, Schools, Universities (Cranfield, Hertfordshire, UEA, Anglia Ruskin)

Although the floor rental rates are at the high end of the price range the high-quality, high-value product offering has attracted a large and diverse group of customers and tenants to the point that the incubator units are now 100% occupied and there is a waiting list. As the Pilot Innovation Projects, delivered within this project, move from R&D, through product development and on to manufacturing, the participants attach growing value to the co-located networked communities that HEC delivers and there is now demand for grow- on and manufacturing workspace coming from high growth businesses such as CTI, Scion Sprays, Magnus Marine, Active Technologies, Genite Corporation, Syrinix, Windcrop, Heatstream and Sonar Link – all HEC tenants. The market is failing to meet the needs of this new sector. Firm requests for incubation and grow-on space have been received from some existing tenants.

The following figure shows projected occupancy of the Advanced Manufacturing Centre:

Occupancy % 90 80 70 60 50 40 Occupancy % 30 20 10 0 2013 2014 2015 2016

HEC tenants and customers attach value to being part of a dynamic and innovative community both at Hethel and in the extended networks and clusters across the region. HEC business development services, addressing cluster and supply chain development, are in demand and this will increase through the activities and outputs identified through the Hethel Innovation project. As the Hethel brand has grown, so other business from within and beyond the region have seen the value in this and have made expressions of interest in units at HEC and on the proposed Science and Technology Park. The capital element of this bid will allow HEC to provide the environment, incubation and support required to give the businesses involved in the project the best chance of turning their ideas and collaborations into commercial reality, thereby growing the economy through their success.

Confidential (Jan 12) 59 of 111 3.1.4 Market Failure Addressed Summary of the rationale for intervention

Critical market and equity failures have been identified which justify public sector intervention. In addressing market failure this intervention is designed to increase SME productivity through engagement in low carbon innovation networks/clusters/ecosystems and application of open innovation techniques and processes including business support, workshops and conferences. These clusters will be business led, meet business needs and deliver tangible outputs through real low-carbon pilot innovation projects. HEC will use its region- wide networks to identify opportunities for pilot innovation projects and potential cluster members. HEC will work closely with its network of businesses, academia and R&D organisations and relevant public sector organisations, including University of Hertfordshire and Cranfield University to engage Cluster SMEs in open innovation (OI) networks. HEC will provide incubator accommodation and facilities for these pilot innovation projects.. There is a market failure in that there is no such advanced manufacturing facility in the region that offers the innovation space and support required to meet the growing needs of the engineering/manufacturing sector. With HEC at full capacity and with the demands of existing tenants and the wider community focussed on innovating to maintain and grow market position, without such a building there is a fear that organisations may move out of the region to find suitable premises or fail due to increasing competition. The AMC will provide a vibrant innovative community that will collaborate and tap in to the extensive expertise of the businesses incubated there. It will also provide a focal point for the wider community to utilise the facilities in their innovation activities. In addressing market failure this project strengthens HEC as the regional enterprise hub for advanced manufacturing and engineering and low-carbon innovation and provides a springboard for it to become a highly effective low carbon innovation hub, an inspirational and aspirational focal point for new technology businesses in Norfolk. This project raises awareness of open innovation processes and techniques and provides a delivery framework for Norfolk businesses to engage with a wider community through low-carbon cluster development.

Therefore, public sector intervention is justified by these market and equity failures and is designed to address them through:

 Enterprise – The grow on space, i.e Advanced Manufacturing Centre, provides high-quality, high- value start-up and grow-on space with flexible tenancy terms in an advanced engineering and manufacturing community.  Innovation – Extended business led innovation support programmes developing open innovation networks, low-carbon clusters and supply chains.

What problem(s) need to be addressed? What are their root causes? SMEs in the East of England are failing to achieve growth through the exploitation of emerging opportunities driven by the need for new technology innovation in strategically important sectors, including low-carbon automotive, renewable energy and sustainable fuels. The root causes of this are lack of new innovation technology skills, lack of awareness of open innovation processes, lack of coordination of innovation clusters and supply chains and lack of high-quality, high-value incubation and grow-on space in co-located, networked cluster communities.

Is there a market failure? Yes  No

If Yes, explain what market failures are causing the problems described above

Confidential (Jan 12) 60 of 111 SMEs are unwilling to invest in innovation and R&D because it is unclear how they will direct and benefit from this investment. SMEs are typically unaware of the business opportunities presented by engagement in low- carbon clusters and also fail to recognise the benefits of applying open innovation processes, tools and techniques. This is a market failure in the form of POSITIVE EXTERNALITY and IMPERFECT INFORMATION

There is a market failure in that there is no such advanced manufacturing facility in the region that offers the innovation space and support required to meet the growing needs of the engineering/manufacturing sector. Landowners and property developers do not provide the high-quality, high-value incubation and grow-on facilities that new-technology SMEs require because they lack information on the capabilities, potential and strategic direction/co-ordination of SMEs engaging in new technology innovation clusters. It is well established that commercial developers are generally not attracted to funding and operating incubators as a business proposition. Developers usually seek leases of a minimum of 3 years rather than the short flexible leases preferred by start ups and larger units than that typically required by an incubator tenant. In addition commercial developers business models do not allow the provision of value added businesses and innovation activities to help SME's accelerate their growth. RISK AVERSION and IMPERFECT INFORMATION by private developers in relation to new businesses in emerging technology sectors also lead to market failure. With HEC at full capacity, no other suitable facility/resource available and with the demands of existing tenants and the wider community focussed on innovating to maintain and grow market position, without such a building there is a fear that organisations may move out of the region to find suitable premises or fail due to increasing competition. This project will offer incubation space to the start-up businesses that develop through the pilot innovation programmes, interventions and support provided.

Public sector intervention is justified by the above market failures in order to generate the benefits of advanced manufacturing clusters and low-carbon open innovation.

Provide evidence on the severity of the market failures These market failures are evidenced not only by slow growth of new technology businesses, low awareness and application of open innovation and a shortage of new technology skills but also by strong demand for enterprise, innovation and skills programmes at HEC:

 Regional SMEs, academic and public sector organisations have demonstrated high levels of interest and participation in established low-carbon innovation cluster and supply-chain development programmes initiated by HEC (eg ERWE – Eastern Region Wind Energy group)  HEC has continued to attract new tenants through a sustained period of economic downturn despite the market availability of existing low-cost industrial rental units. The issue is not price-point but quality, value and flexibility.

Explain how the design of the intervention will tackle the specific market failure problems identified The intervention is designed to address two market failures:

Enterprise - The additional incubator space provides start-up businesses with access to high-quality, high- value accommodation and facilities in a dynamic and innovative community with low-risk, easy-in easy-out tenancy agreements

Innovation - The intervention is designed to stimulate innovation in the region, increasing awareness of the benefits of R&D investment, creating pilot innovation programmes that, in turn, produce start-up businesses and increase SME productivity through engagement in low carbon innovation networks/clusters, business support and application of open innovation techniques and processes. The networks/clusters will be business

Confidential (Jan 12) 61 of 111 led, meet business needs and deliver tangible outputs through real low-carbon pilot innovation projects. HEC will use its region-wide networks to identify opportunities for pilot innovation projects and potential cluster members. HIL will work closely with regional deliver partners, including University of Hertfordshire, Cranfield University and WDP Consulting (Cambourne, Cambs) to engage Cluster SMEs in open innovation (OI) networks. HEC will provide incubator accommodation and facilities for these pilot innovation projects.

HEC Business Units Market failure addressed

HEC Incubator Enterprise

Business Development Innovation

Is there an equity failure? Yes  No

If Yes, explain what equity failures are causing the problems described above Norfolk has the lowest GVA per capita in the East of England. Notwithstanding localised advanced manufacturing and engineering clusters, the Norfolk labour market suffers from low aspiration, low attainment levels, These factors result in a shortage of new technology skills, low awareness of and investment in innovation and low start-up and growth rates of new technology businesses.

Provide evidence on the severity of the equity failure The following data from Nomis42 compares key economic indicator for Norfolk with the regional average for the period January 2010 – December 2010:

Norfolk Regional average Employment Working age population economically active 77.1% 78.7% Jobs in knowledge-based industries 14% 17% Gross Value Added Per capita £15.67k £17.89k Businesses New registrations in stock (2007) 7.7% 9.6% Skills Working age with no qualifications 13.0% 10.4% Working age with NVQ Level 4 and above 26% 28.5% Working age with NVQ Level 3 and above 46.2% 48.2% Working age with NVQ Level 2 and above 63.4% 65.8%

Explain how the design of the intervention will tackle the specific equity problems identified This project develops HEC as the regional Low Carbon Innovation Hub for advanced manufacturing and engineering and low-carbon innovation. HEC becomes an inspirational and aspirational focal point for new technology businesses in Norfolk. This project will grow out of Norfolk raising awareness of open innovation processes and techniques and providing a delivery framework for Regional businesses to engage with a wider community through low-carbon innovation network/cluster development. This is underpinned by a business support programme and events programme offering a variety of relevant services.

42 http://www.nomisweb.co.uk/reports/lmp/la/1967128599/report.aspx?town=norfolk#tabempunemp Confidential (Jan 12) 62 of 111

Special considerations

Norfolk Within the East of England, Norfolk has relatively low GVA per capita. This is a function of relatively low aspiration, attainment, skills, enterprise and innovation across the county as a whole. Economic development has been compromised by poor transport links to the rest of the UK and to Europe. Against a background of declining traditional industries: oil and gas, agriculture and food processing, new trends are emerging. Alongside improvements in road, rail, air and sea transport links, strategically important clusters in new technology are becoming established in Norfolk. In the engineering and manufacturing sector these include:

 Low-carbon vehicles  Wind energy  Tidal energy  Alternative fuels  Carbon capture

Norfolk‘s economy is now beginning to see the benefits of improved transport links, making it more accessible to organisations across the region, nation and globe:

 A11 dualling  East-West rail link  Great Yarmouth Outer Harbour  Norwich Airport

Hethel Engineering Centre has been a driving force at the centre of a network of academic, private and public sector organisations and is well positioned (strategically, operationally and geographically) to play a lead role in the economic development of the Greater Norwich Engine of Growth, Norfolk and the East of England as a whole. This project builds upon this strategically important programme of economic development.

Norwich Research Park (NRP) NRP is an element of growing importance in the programmes of open innovation and cross-sector cluster development that are being developed at Hethel Engineering Centre and which will be extended as part of the Hethel Innovation programme, especially in the areas of low-carbon, alternative fuels and renewable energy. The Norwich Research Park is a collaboration between the University of East Anglia, the Norfolk and Norwich University Hospitals, and four independent research centres; the John Innes Centre, the Institute of Food Research, the Sainsbury Laboratory and from July 2009 The Genome Analysis Centre. The Norwich Research Park is home to over 30 science and IT based companies making the NRP a vibrant place to do business as well as research.

The Norwich Research Park has one of Europe‘s largest single-site concentrations of research in Health, Food and Environmental Sciences and has:

 Over 11,000 people  2,700 research scientists  >£130 million annual research spend  Three of the UK‘s BBSRC Institute all within a 1km radius.

Lotus

Confidential (Jan 12) 63 of 111 Lotus is an internationally recognised prestige vehicle manufacturer and engineering consultancy, providing over 1000 high-skill, high-value jobs in R&D, new technology and advanced manufacturing. Lotus works closely with HEC and its tenants through low-carbon innovation clusters. As part of building the Norfolk engineering and manufacturing cluster i.e. bringing businesses together into geographic knowledge focused centres of excellence HEC in partnership with NCC and Lotus is seeking to facilitate the building of the Lotus Technology Park.

3.2 Additionality

This project will enable HEC to incubate businesses as they grow in the ‗grow-on‘ space, i.e Advanced Manufacturing Centre, and operate in new sectors such as clean technology (in particular transport, materials, energy and environment) building new networks and supply chains, running a new range of workshops, conferences, best practice events, developing new business-led innovation programmes (eg innovation toolkit (tools, techniques and processes), innovation standards, innovation benchmarking) leading to running a new range of pilot innovation programmes. This will lead to the formation of low carbon clusters and supply chains developing new low carbon products and services through Hethel facilitating business led low carbon innovation programmes. This programme will deliver significant additional economic outputs and without the ERDF funding, HEC would not have the resource to undertake the above.

3.2.1 Scale This project will allow HIL (and HEC) to create a larger community/cluster and accommodate companies as they grow and engage with a larger group of SME‘s regionally & run 20 projects in this sector. This will result in greater promotion and facilitation of innovation and knowledge transfer activities across the region, increased awareness of the opportunities provided by a low carbon economy and growth of this economy through creation of start-up businesses, jobs and commercialisation of high-value products and services.

3.2.2 Timing Funding will provide an opportunity to construct the Advanced Manufacturing Centre quickly and deliver a greater level and quality of activity, thus speeding up the creation of new businesses, diversification of products, routes to market and job creation. Through this success, economic outputs and outcomes will be delivered earlier.

3.2.3 Specific group/location The ‗grow-on‘ space i.e Advanced Manufacturing Centre will allow growth of the community/cluster and an increased level of activity will enable greater geographic reach and will allow us to encompass a wider range of business sectors.

3.2.4 Quality Additional funding made available by this programme will allow the construction of BREEAM excellent ‗grow-on‘ space i.e Advanced Manufacturing Centre and will support higher quality OI awareness and delivery programmes. Through a focussed support and a programme of interventions HEC will help the businesses in the region to innovate leading to increased value and progression up the supply chain as detailed below:

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Specific Additional benefits of the project include:

 Increased GVA - New businesses achieving high growth in revenue, profitability and value.  Increased productivity – Through innovative products, services and processes  Knowledge Transfer – Growing number of business/university partnerships with student placements and employment in regional businesses  Shared Best Practice - Businesses attending real advice workshops, EAME exhibition and engaging in consultancy projects  Sustainability – Through front-end support for start-ups and structured support for all businesses in the project.  Low-carbon cluster development - Nationally recognised low-carbon automotive/energy innovation clusters working on private & public funded programs  Supply chain development - Regional and national supply chain programs engaging universities, R&D institutions, SMEs, & public sector organisations delivering world class sustainable products and services into global markets.  Open-innovation delivery - Cross-sector collaboration and networks engaging academia, industry , public sector sharing knowledge and best practice to meet the challenges of the low-carbon economy

3.3 Links with other Activities 3.3.1 HEC network

HEC is part of a broad network of public, private and academic organisations in Norfolk and across the East of England:

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 Cluster champion – Continuing the good work that was carried out for the SNF (Shaping Norfolk‘s Future) HEC, through HIL is now the engineering sector coordinator for the New Anglia LEP and in this role is able to coordinate and focus all the businesses and organisations working in the engineering and manufacturing sector. HEC is able to, in its New Anglia role, in partnership develop a single coordinated engineering sector action plan for Norfolk.  University / R&D institution – UEA, Norwich Research Park. The Norwich Research Park is a collaboration between the University of East Anglia, the Norfolk and Norwich University Hospital, and four independent research centre‘s; the John Innes Centre, the Institute of Food Research, the Sainsbury Laboratory and from June 2009 The Genome Analysis Centre. With over 9,000 people the Norwich Research Park has one of Europe‘s largest single-site concentrations of research in Health, Food and Environmental Sciences.

 Enterprise Hub – Hethel Engineering Centre is dedicated to supporting the growth and success of high performance engineering and manufacturing companies and individuals throughout the region. Hethel Engineering Centre offers the following services:  business incubation space – offices, workshops  specialist business support  engineering consultancy  engineering services

 Network EEF, HEC, Norfolk Network. HEC has a database of over 3,000 engineering and manufacturing businesses in the Eastern region, HEC‘s annual engineering and manufacturing event EAME facilitates cross sector networking, it also allows businesses the chance to engage with tomorrows engineers via the student convention. HEC also runs real advice workshops and IMechE conferencing.

 Science and Technology Parks – forthcoming Science and Technology Park. As part of building the Norfolk engineering and manufacturing cluster i.e. bringing businesses together into geographic knowledge focused centres of excellence HEC in partnership with NCC and Lotus is seeking to facilitate the building of the Lotus Technology Park.

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 Technology Consultants – UEA, Hethel, Active Technologies. Hethel Consultants are a cost effective way of getting your problems solved, from in house training to cost reductions. Active Technologies is an engineering design company that specialises in problem solving. We work closely with our clients to develop new products and technologies in all areas of mechanical engineering.

 Venture Capitalists – TCV based at Hethel, is a group of commercially-minded professionals with extensive experience in corporate finance, equity investment and driving growth in businesses. TCV has a reputation in the business community for professional integrity, commercial expertise and a deep appreciation of the motivations and expectations of clients, professional partners and investments.

 Collaborative Research & Development – Through pilot innovation programmes it is expected that support will be given to assist the industrial and academic/research communities to work together on R&D projects in strategically important areas of science, engineering and technology - from which successful new products, processes and services can emerge.

 Designing Demand – Through innovation vouchers, project engagement, collaborative working and networks it will be possible for businesses to gain innovation focussed mentoring to aid creation of an innovation culture within the organisation and to help focus on strategic outcomes.

 Knowledge Transfer Partnerships - access knowledge and skills from the UK Knowledge Base (Further and Higher Education Institutions or research organisations) for use in the strategic development of their business. A key component of the Pilot innovation programmes are the collaborative links between industry and academia. The project will engage a wide range of businesses and academic institution and create important relationships between organisations within both through networks and a wide range of tailored events.

 Manufacturing Advisory Services - specialist support with manufacturing related issues such as: lean processes, supply chain performance, shop floor control and innovation in manufacturing. Through the Hethel innovation project we will continue to offer support with manufacturing related issues such as lean processes, supply chain performance, shop floor control and innovation in manufacturing.

This project will be led and managed by HIL, but has the support of and will engage regional link partners as indicated in section 3.4. An example of those engaged will be The University of East Anglia (UEA),Cranfield University (Beds) and University of Hertfordshire (Herts). The project will be working through sector networks such as EEF and cross sector networks such as Norfolk Network and the Cambridge Network. The project will also engage industry link partners, from our extensive network, in the delivery of up to 20 low carbon innovation pilots, working with innovation experts including WDP consulting, The Low Carbon Innovation Centre and IFM. In terms of public sector, we are working with Norfolk, Suffolk and Essex county councils. Letter of support for the project have been received. 3.3.2 Lotus Technology Park

By 2021 the Lotus Technology Park will be a thriving community of engineering and technology businesses providing an additional 1500 to 2000 jobs on a 55 acre allocation, complementing the 2000 or so jobs already in place within the Lotus complex, the Hethel Engineering Centre and nearby businesses. These jobs will be created through maximising the attraction of co-location with Lotus, the centre of excellence that exists in the HEC along with the growing community of high tech, knowledge based businesses. It will be a:

Confidential (Jan 12) 67 of 111  A primary driver of the local and regional economy, recognised as an innovation powerhouse and a world-leading centre for research and innovation in support of a Low Carbon economy through Clean Technology and related Automotive Engineering with a particular emphasis on low carbon vehicle design and manufacture. LTP occupants will work collaboratively, and have strong linkages with other significant centres of excellence in engineering as well as in science and other technologies.

 An outstanding ―Next Generation‖ science and technology park, integrated with the local community and economy to provide an excellent place to work and do business as well as being an attractive and cost effective destination for inward investment:

 developed to international standards of sustainability and design  fully accessible with public transport links  incorporating ancillary uses such as accommodation, educational, catering and conference facilities set within superbly landscaped public spaces and recreational areas.  Providing showroom and showcasing opportunities for LTP‘s occupants.  Exploiting linkages with the Norwich Research Park, and the A11 Technology Corridor

Delivering significant wealth creation and prosperity across the key Engine of Growth through:

 providing easy access to the best quality, specialist, tailored expertise and knowledge that will help to significantly improve business performance – located at the UEA and the knowledge base elsewhere in the region.  improved access to and ability to recruit from the graduate employment base.  Increasing and making available the pool of trained technologists and entrepreneurs.

5.1 Work Breakdown Structure This section identifies all the scope elements required to deliver the principal desired outcome from the project. This is:

“To build a Low Carbon Innovation hub that delivers business led Innovation programmes‖.

The key scope areas to deliver tangible outputs and desired outcomes are defined by the two components of the project:

Advanced Manufacturing Centre - construction of a new 40,000 ft2 Advanced low-carbon Manufacturing centre (AMC).This will be built to achieve BREEAM ―Excellent‖ standard and will comprise 2,500 and 5,000 ft2 units accommodating 8 - 12 new manufacturing businesses, creating 160 high value new technology jobs. This project will allow us to grow from being a successful enterprise hub to a thriving Low Carbon Innovation hub and is a critical step towards the realisation of the Lotus Technology Park.

Business Led Innovation programme - Through the Hethel Innovation programme the revenue element of this bid seeks to engage engineering and manufacturing businesses in 20 collaborative open innovation projects leading to increased productivity, competitiveness, knowledge base and the commercialisation of new low-carbon products and services. The project will deliver a significant business development programme, engaging 600 and assisting 240 SMEs, to build regional low-carbon innovation networks with the objective of creating new businesses and supply chains to develop, manufacture and supply new low-carbon products services

Confidential (Jan 12) 68 of 111 The following image gives a visual breakdown of the scope of the Hethel Innovation project:

This following Framework provides an overview for developing business led innovation networks, it has been

broken down into revenue and capital components although it should be noted that the two are intrinsically linked through the Hethel Innovation project:

Revenue Component – The Hethel Innovation Programme.

Building the network has four distinct components of:  Marketing  Engagement  Business Support  Innovation

This section breaks these 4 areas down into objectives and outputs and highlights the delivery activities that occur within each framework. However, it should be noted that many of the activities are not mutually exclusive and can be seen across several of the frameworks, illustrating the depth, effectiveness and breadth of outputs that can be provided by each delivery component.

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This provides a breakdown of outputs as illustrated by the table below:

MARKETING ENGAGEMENT BUSINESS SUPPORT INNOVATION

6. Asset Mapping reports. 7. 8 workshops per year. 7. Support 240 10. 20 Pilot Innovation Minimum of 6 8. 2 conferences per year. Businesses across the programmes. 7. Gap Analysis reports. 9. Build a database of project. 11. Run Supply Chain Minimum of 6 businesses. 8. Develop an Open Development 8. Build a database of 10. 200 business visits per Innovation toolkit. Programmes. businesses. year. 9. 4 x Best practice report 12. 2 Conferences per year 9. Vision(s) & 11. 40 Business/Academic / Case studies per year 13. Run Collaborations. Prospectus(es) collaborations 10. Benchmarking activities 14. Create 18 new 10. PR, Communications & (Knowledge Transfer 11. Develop Open business start-ups. Social Networking. Partnerships) across 3 Innovation standards. 15. Create 220 new jobs & years. 12. Awareness raising safeguard 60 jobs. 12. Networks – Clean Tech activities. 16. Create sustainable new & Low Carbon. products and services. 17. Support business growth. 18. Become a Low Carbon Innovation hub

Confidential (Jan 12) 70 of 111 Framework Breakdown:

MARKETING: Component 1 of developing business led innovation networks

The first component of the Hethel Innovation programme framework is marketing and involves:  Mapping the assets  Matching assets to opportunities  Communication

The diagram below outlines the activities within the marketing component that will help to build the picture ie identify the assets and potential of the network.

MARKETING Prepare programme material MD, IM, IE1, IE2 Develop website IM, AD PR and marketing MD, IM, IE1, IE2,AD Social networks (Linkedin etc) IM, IE1, IE2, AD Develop procedures & systems MD, IM Develop database IM, IE1, IE2, AD Programme delivery Benchmarking Asset Mapping & gap analysis reports IM, IE1, IE2,

Asset Mapping – introduction. The diagrams overleaf give an indication as the how the assets of an existing or future cluster can be ‗mapped‘ and shown as ‗cluster‘ maps. The cluster maps along with relevant marketing and PR material can communicate a clear story that can attract businesses to move into the cluster, and for those already within the cluster – identify where the business opportunities lie.

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As well as mapping the assets and identify opportunities, it is also important to define sectors within which the network will operate. This is best achieved through identifying innovation platforms, such as those detailed below.

Diagram – Cluster map outlining the Low Carbon Vehicle assets of the East of England

Diagram – Cluster map outlining the Energy assets of the East of England Coast

Confidential (Jan 12) 72 of 111 THE ‘ENVELOPE’: DIAGRAM BELOW DEFINES THE TECHNOLOGY & INNOVATION PLATFORM OPPORTUNITIES WHEN CROSS CUTTING MANUFACTURING & ENGINEERING PROCESSES WITH CORE BUSINESS SECTORS IN THE EAST OF ENGLAND SO DELIVERING LOW CARBON INNOVATION IN ADVANCED MANUFACTURING & ENGINEERING

Some mature sectors of CORE BUSINESS SECTORS IN THE EAST OF ENGLAND engineering and manufacturing

are often referred to as

“declining”. This diagram

demonstrates that when vertically integrated with core

/

business sectors in the East of

England opportunities continue ICT / PLANT

to be created in up and coming ENERGY MATERIALS

sectors such as Meditech, TRANSPORT

MICROBIOLS

ELECTRONICS ENVIRONMENT Clean Tech and Composites. LIFE SCIENCES

/ In

-

/PRINTING /PRINTING

/ /

LOW CARBON /

INNOVATION ROBOTICS

IN

digestion)

MAN UFACTURING LEENERGY

& ENGINEERING MEDITECH (egBio

Infrastructure) ELECTRONICS

ENERGY CLEAN CLEAN TECHNOLOGY CLEAN -

RENEWAB

LIGHTWEIGHT COMPOSITES LIGHTWEIGHT TECHNOLOGIES / TECHNOLOGIES

TRANSPORT LOW CARBON

Range Extenders / Hybrids / / Plug Hybrids Extenders Range (eg Wind / Tidal / Waste / Tidal(egNuclear) / Waste Wind /

MICRO

ALTERNATIVE & SUSTAINABLE FUELS ALTERNATIVE SUSTAINABLE & eg eg (

INNOVATION & TECHNOLOGY ‘PLATFORMS’

… MANUFACTURING IS TRANSFORMING NOT DECLINING … (EEDA‟s Regional Manufacturing Strategy)

Diagram- highlights the opportunities for the advanced manufacturing sector in the East of England

Key delivery activities within the Marketing Framework.

Asset Mapping reports. Minimum of 6 across 4 years

Hethel Innovation will investigate, research and map the various sectors in the region. These reports will provide valuable regional knowledge on content areas such as Clean Technology, Low Carbon Automotive and the Knowledge Economy.

Gap Analysis reports. Minimum of 6 across 4 years

Gap Analysis reports will be produced based upon the outcomes identified in the Mapping reports.

Build a database of businesses.

This database will be an important tool in mapping the sector and providing valuable business support to companies in the region. It will detail a range of information about the businesses in the region and support the research delivered through the mapping reports. It will allow interventions to be tracked and act as an invaluable tool for HIL Innovation Engineers.

Vision(s) & Prospectus(es) 1Documents will be created to communicate the project vision and activities to the region. This will highlight the aims and objectives of the project and provide an insight into the delivery activities.

Programme Website - OI (Open Innovation) Group Collaborative Environment (1 per OI Project Group) Hethel Innovation will create an online presence which will raise awareness of OI and the project and establish a suitable online environment for businesses supported and OI groups to share project relevant

Confidential (Jan 12) 73 of 111 information, host discussion forums and access OI support tools. The environments will have a high level of security that will be appropriate to enable the sharing of commercially sensitive materials. Access to the environment will be through the programme website that provides details of the activities, partners etc.

PR, Communications & Social Networking. We will utilise a wide variety of media channels to ensure that businesses in the region are aware of the project and can access the business support offered through it. These communication methods include:

 Email  Enewsletter  Web site  Telephone  Meeting  Workshop  Conference  Flyers/Posters  Other printed materials – reports, prospectus, case studies  Social Media (Twitter, Facebook, LinkedIn)  Networks  PR and media connections

ENGAGEMENT: Component 2 of developing business led innovation networks

Engagement component of growing business led innovation networks

Confidential (Jan 12) 74 of 111 After identifying the assets, matching the assets to the opportunities and putting in place communication tools, the focus needs to move to engagement.

Engagement involves two stages:

 building relationships  building collaborations

Building relationships involves identifying and targeting specific organisations, and undertaking both sector focused and broad based engagements. Building relationships is through strategic push with outputs such as building a database, visits to businesses and organisations, and running workshops and events.

Building collaborations is through focusing on the three areas of technology, commercial and corporate. Building collaborations must be through market pull and be assessed through such outputs as number of knowledge based collaborations.

As already explained, this project will allow existing and startup businesses to:  Diversify into new low carbon sectors  Engage with academia, develop wider networks, build strong supply chains, identify new customers  Better understand how to innovate within a low carbon context  Develop new low carbon products, services and markets through pilot innovation programs

It is expected that these small businesses and startups will be engaged in fundamental and industrial R&D and that although their activities will also as lead to new product / service development for sale in the market place it will not directly affect trade between EU member states. In this case, not all of the four State Aid tests would be satisfied and the funding would therefore be deemed compliant with European State Aid regulations.

It is also possible to view NCC as an intermediary recipient, with the funds ―washing through‖ to the businesses engaged through the project who become the ultimate beneficiaries. (The ―wash through principle‖ has been established by precedent as a means of compliance with European State Aid regulations.) In this instance, and based on historical evidence (5,690 businesses supported in 5 years), HEC would expect to support 240 businesses over a 3 year period with each micro or small SME receiving less than the €200k ―de minimis‖ threshold. The grant funding would therefore be deemed compliant with European State Aid regulations.

Key delivery activities within the Engagement Framework.

Engagement SME assists – OI readiness SME workshops IM, IE1, IE2 Conferences IM, IE1, IE2, AD Business Visits IM, IE1, IE2 Preparation action delivery MD, IM, IE1, IE2 Build business/academic collaboration MD, IM, IE1, IE2 Develop innovation networks IM, IE1, IE2

Confidential (Jan 12) 75 of 111 SME assists – Open Innovation readiness

Business Visits

Engagement with business and academia is at the heart of the Hethel Innovation Programme project. We will visit a large number of businesses across the region to raise awareness of Innovation and the project aims, stimulate interest in the project to deliver a major business development programme that will build regional low-carbon innovation networks with the objective of creating new businesses and supply chains to develop, manufacture and supply new low-carbon products services. Each business will have different issues and needs from the project, so we will be flexible in our approach to the support provided.

Through these visits and business engagement in the project we can prepare the SME for participation within an OI Project Group. Over three phases the Assist provides the SME with awareness of OI concepts, helps define an appropriate OI Project (including collaboration partners) and enable it to understand what internal preparations are required, i.e;  OI Workshop (one to many, 1 day per SME) Presentation of OI concepts and benefits. Introduction to support tools and techniques. Group discussions providing early project scoping  OI Tool kit – for diagnostic purposes and project support. (one to one, 0.5 day per SME) Use of the tool to establish the cultural and structural capacity of the SME to participate within an OI project. This will provide suggested actions that can be developed via telephone support  OI Preparation Action Delivery (one to one, 0.5 day per SME) Development and completion of OI preparation actions through one to one support and targeted internal company development.

Outcomes: Tool kit diagnostic results, Completed OI Readiness Actions, Early Project Scoping Obviously these activities are also incorporated into the Business Support Framework as covered later in this business case.

Introductory Awareness and support Workshops (8 per year, 4 years) The workshops will cover a broad range of relevant topics within the spheres of Innovation and Low Carbon. Each workshop will promote the benefits of incorporating OI practises and techniques within innovation collaborations through case studies and hands-on activities. Expected audiences at each workshop would be anywhere from between 12 – 150 delegates during one or multiple sessions. These workshops will be integrated within existing conference events organised by HEC. Typically one event will be at EAME and a second would be as part of the Open Innovation/ knowledge transfer service promotion conference. Workshops will be delivered to businesses and hosted at venues across the region. Workshops can be seen as an extension of the work done in the networks and have great potential to lead on to Pilot Innovation Programmes through linking businesses and academia. Workshops will include real advice and surgeries, and cover content such as:

 Best practice tools and techniques  Product innovation and market realisation  Beyond lean to open innovation

Open Innovation (OI) Conference (2 per year, 3 years) From 2012 the programme will organise a regional OI conference at which leading industrial and academic practitioners would be invited to present alongside leading case studies from the programme itself. In order to promote a national relevance to the conference and organising committee will be established that would include such organisations as CBI (Confederation of British Industry), NESTA (National Endowment for Science, Technology and the Arts), ISPIM (International Society for Professional Innovation Management),

Confidential (Jan 12) 76 of 111 Procter & Gamble, Ernst & Young plus others. A second conference will be organised for later in the year with a sectoral focus, live demonstrations, conferences and speakers from industry leaders, the opportunity to showcase regional business and develop further knowledge on innovative ideas.

Open Innovation Centre

The HEC will provide neutral meeting points for the OI Groups act as resource centre and help to promote general awareness of the project.

Low-carbon innovation networks

The project will deliver a major business development programme to build regional low-carbon innovation and Clean Technology networks with the objective of creating new businesses and supply chains to develop, manufacture and supply new low-carbon products services. Regional SMEs, academia and public sector organisations will engage in pilot innovation projects using open-innovation and knowledge-transfer to develop new low-carbon products and services. As these Pilot Innovation Projects move from R&D, through product development and on to manufacturing, the participants attach growing value to the co-located networked communities that HEC delivers and there is now demand for grow-on and manufacturing workspace.

Build business/academic collaborations.

The project will build links between industry and RTDI (Research Technology Development Innovation) organisations leading to collaborations. A multi-strategy approach will be employed to make links, build networks and support relationships to joint project activity resulting in Pilot Innovation projects and successful outcomes. Through such collaborations the project can help the businesses engaged to:

 Access qualified people to spearhead new projects  Access experts who can help take the business forward  Develop innovative solutions to help the business grow  Develop the business for today‟s market  Increase competitive advantage  Improve performance/business operations  Increase profitability

Business performance outputs vary considerably from case to case, given the variety and type of projects. Latest information shows that, on average, the business benefits that can be expected from a single collaborative project (typical duration 1-3 years) are:

 An increase of over £220,000 in annual profits before tax  The creation of three genuine new jobs  An increase in skills of existing staff 43

BUSINESS SUPPORT: Component 3 of growing business led innovation networks

The business support component of growing business led innovation networks identifies three key focuses:  Open innovation

43 http://www.ktponline.org.uk/what-can-ktp-offer-your-company Confidential (Jan 12) 77 of 111  High growth enterprise support  Technology and innovation skills support

It is crucial to achieve innovation networks to give businesses the understanding and skills to be able to innovate and create cultures within their businesses that not only value but embrace open innovation, the understanding to achieve high growth and the need for technology driven business plans.

The framework diagram on the previous page outlines the business support component in more detail. Key programs that need to be developed urgently include benchmarking tools, innovation and cluster standards / kite marks and the appropriate training in order to build into the business the ability and knowledge to be able to continue to deliver beyond for example an intervention. In other words, the ability to be able to innovate must be embedded not only within the business but also within the network so that there is a high level of sustainability.

Key delivery activities within the Business Support Framework

Business Support SME assists – OI Delivery Project launch event MD, IN, IE1, IE2, AD SME support IM, IE1, IE2 SME impact survey IM, IE1, IE2, PC Develop an Open Innovation Toolkit MD, IM, IE1, IE2 Create best practice reports IM, IE1, IE2, PC Develop Open Innovation Standards MD, IM, IE1, IE2

Launch event A launch event will introduce the project and instantly begin to raise awareness of the opportunities available to companies through a low-carbon economy. With guest speakers and tailored workshops delegates will

Confidential (Jan 12) 78 of 111 benefit from the project from the very start and begin to make contact and networks. Of course, any physical launch event will be accompanied by the virtual equivalent, with the web site providing an effective portal for businesses in the region.

SME Support Assists The project will offer businesses a range of relevant support activities that will provide information, guidance, support and expertise in the areas of low carbon innovation. An SME Assist consists of a minimum of 2 days of direct support activity for each SME. Each SME will benefit from two distinct Assists each having a specific purpose and outcomes that support it with focused ―OI (Open Innovation) Project Groups‖. With 600 separate businesses visited across the duration of the project, we anticipate 240 receiving support/Assists of this nature.

Impact survey

Once a business has been visited and it has been established that support is required, then a baseline report will be created. At the end of the intervention (whenever and whatever this may be) an impact survey will document the support provided, the outcomes and the impact on the business involved.

OI Best Practice Knowledge Base (Report based evidence of knowledge transfer) Each successful collaboration partnership, Pilot Innovation Project and subsequent activity will create a case study document .The programme will have access to current OI research undertaken at Cranfield University. The research has already completed over 500 separate searches in 45 leading academic journals has been undertaken in a fully systemised literature review. Over 1500 relevant articles and papers being identified from which 240 key papers have to date been extracted and are now undergoing further detailed review and analysis. The research is currently formulating a rules based advisory methodology that uses the literature database plus existing innovation expertise within Cranfield University. This methodology will be accessible all the participants in the programme and will be representative of the latest global thinking in OI. Project leaders and businesses will be encouraged to share their experiences and best practice through project workshops, conferences, project website and other media channels.

Develop an Open Innovation Toolkit.

Through the project we will design, develop and produce an innovation toolkit to support the businesses that we engage with. This will provide practical information and advice, management tools and methodologies. The toolkit will help organisations to implement innovative solutions to meet key challenges, needs and targets. It will support the creation, assessment and development of creative ideas, their refinement to more detailed solutions and finally the construction of robust business cases for actions that are new in their conception or genuine alternatives or enhancements to current practice.

It will help to overcome many barriers, such as operational pressures that restrict the time, space and resource that can be dedicated to bringing together different disciplines and potential partners in the, by providing a way to think afresh about challenges in an informal yet structured and practical manner.

The benefits of using an Innovation Toolkit are that it:

 Demonstrates your current capacity for Innovation  Highlights areas for improvement  Can be administered in a number of ways  Requires minimum time investment from staff

Confidential (Jan 12) 79 of 111  Provides a comprehensive report and action plan  Allows for variable cost options  Complements existing tools  Works at all levels within an organisation

Develop Open Innovation Standards.

According to Europe Innova 44

„Standards play a crucial role in the definition of market conditions in many industry sectors, not only high- technology ones. They influence technological advances and determine innovation performance. They influence the innovation process through "path dependency"; in other words, when (technical) specifications are defined, the options for future technological developments are by definition narrowed, since alternatives are ruled out through a combination of technical and market choices.

The merit of applying standards lies in the possibility of reducing the transaction costs involved in the development and application of (new) technologies and of generating positive network externalities through economies of scale. Standards can play a major role in promoting innovative products and services by providing legal security for innovative companies, creating large scale markets and building confidence among consumers. Hence, standards can be considered to be an important driver of innovation in Europe.‟

Through this project we will work with a variety of contacts to develop innovation standards for the region.

Hotline Support (3 years from programme commencement) Throughout the entire programme Hethel Innovation will provide an advice and support ‗hotline‘ via telephone, SKYPE and email. The ‗hotline‘ would be available to all participating SMEs that are either completing or have completed their formal Assists. The hotline would help to ensure that the OI projects progress and reach satisfactory outcomes.

PILOT INNOVATION: Component 4 of growing business led innovation networks

The three key elements of the innovation component of growing business led innovation networks are:  Network collaborations  Supply Chain Development programs  Pilot Innovation Projects

44 http://standards.eu-innova.org/ Confidential (Jan 12) 80 of 111

Key delivery activities within the Pilot Innovation Framework

Pilot Innovation Pilot Innovation Collaboration building events IM, IE1, IE2, AD Programmes (LCPIP Collaborations) Establish LCPIPs IM, IE1, IE2 Secure industry partners MD, IM, IE1, IE2 Define LCPIPs project scope MD, IM, IE1, IE2 Develop project plans (inc cost and timing) MD, IM, IE1, IE2 Develop LCPIP business cases MD, IM, IE1, IE2 Establish partnership structures MD, IM, IE1, IE2 Address IPR issues MD, IM, IE1, IE2 Create Supply Chain Development IM, IE1, IE2 Programmes

Confidential (Jan 12) 81 of 111 This innovation component brings together all the previous components and activities to deliver the outcomes:

 Start-up knowledge based businesses employing a skilled workforce  more innovative and therefore competitive large and small business sectors and supply chains  joined-up, value adding partnerships between the public and private sector

Thus delivering world renowned clusters and a low carbon innovation hub that builds a knowledge based economy. Component activity summary

 Promotion and implementation of open innovation and knowledge transfer  Engagement of regional businesses in low-carbon innovation networks  Establishment of business-led low-carbon pilot innovation projects  Development a low-carbon supply chains  Promotion of advanced manufacturing and engineering  Manufacture and production of new-technology low-carbon products and services

The activities in support of open innovation are detailed below:

Networks/Cluster/Eco-systems Clusters in the past may just have been a group of businesses operating in a specific sector(s), such as engineering or manufacturing. But going forward, for the UK to be globally competitive, it cannot rely on its traditional sectors but must innovate and develop new areas of expertise / excellence. These new areas of expertise need to be based around knowledge ie employing a high skilled workforce undertaking research, technology development and innovation. These future knowledge based sectors can be grown from developing low carbon clusters. Through developing knowledge based low carbon clusters the UK can focus on building a ‗knowledge economy‘. Hethel Innovation will create two Networks, Clean Tech and Low Carbon Vehicles to bring together businesses and academia to forge strong relationships and develop a culture of Open Innovation in the region.

Low Carbon Pilot Innovation Programme – Build LCPIP collaborations The aim is to facilitate Pilot Innovation Programs that focus on bringing academia, small and large businesses and RTDI (Research, Technology Development & Innovation) organisations to work together to commercialise a particular business idea or find solutions to specific societal challenges We will work closely with industry partners and academia to define the scope, timing and cost of the LCPIPs. HEC will support in the development of business cases, partnerships and IPR arrangements.

Type 1 Assist – OI Readiness This Assist prepares the SME for participation within an OI Project Group. Over three phases the Assist provides the SME with awareness of OI concepts, helps define an appropriate OI Project and enable it to understand what internal preparations are required, i.e;  OI Workshop (one to many, 1 day per SME) Presentation of OI concepts and benefits. Introduction to support tools and techniques. Group discussions providing early project scoping  Online line OI Readiness Tool Diagnostic (one to one, 0.5 day per SME) Use of OI Readiness Diagnostic to establish the cultural and structural capacity of the SME to participate within an OI project. The tool will provide suggested actions that can be developed via telephone support  OI Preparation Action Delivery (one to one, 0.5 day per SME) Development and completion of OI preparation actions through one to one support and targeted internal company development.

Confidential (Jan 12) 82 of 111 Outcomes: Diagnostic Tool Results, Completed OI Readiness Actions, Early Project Scoping, OI toolkit development, benchmarking & case study creation.

Type 2 Assist – OI Delivery This Assist will provide active support for each SME during its participation within its OI Project Group. Three intervention phases are offered;

 OI Project Launch (one to many, 1 day per SME) Full workshop introducing SMEs to their Collaborative Environment (see below) plus new OI tools, establishing Project objectives plus timescales and agreeing collective IP strategy (based on one-to-one discussions).  OI Project Support (one to one, 1 day per SME) Direct project support during project implementation. Activities could include technical, management or commercial advice, access to additional resources, introductions etc.  OI Impact Survey Completion of online surveys (typically 2) by SMEs to access OI process impact and provide both improvement opportunities and overall programme output statistics.

The subject of this project will be a portfolio of business led low carbon pilot innovation such as those summarised in the following table.

Projects Brief Lead organisation Private sector participants Technologies Public sector Academic Deliverables Timing Cost stakeholders participants Wind energy Develop a UK-based wind ERWE Ltd * Gardline Marine * Marinisation * EEDA * Hertfordshire Phase1:- Capability, Capacity, and 2007-10 £100k turbine manufacturing sector. * Active Technologies * Automotive manufacturing * HEC * UEA Feasability Document from PI and Utilise exisiting skill base in * Cooper Roller Bearings * Advanced Bearings * BWEA PS funding to attract investment marine, aerospace and * Smiths Aerospace * Aerospace composites * Renewables East and overseas interest automotive to bring new * PPi Electro * Electro devices/switch gear * EEEGr Phase 2:- Draw down funding from 2010-13 £10m technology and techniques to a * Mason Trust * Venture capital Gov innovation funding to develop monopolised market * RLE/PE concepts (Germany) * Engineering services demonstration equipment * Lotus * System engineering * Nexxtdrive * Advanced transmissions Phase 3:- supply to OEM wind 2013 £160m turnbine components from region in coordinated supply chain opperation, either Uk developed OEM or overseas attracted OEM Tidal Develop a regional technology Peebles Parsons * PPI * Electro generation * EEDA * Hertfordshire Produce a cluster of technology 2009 Q3- £25k base for Tidal power generation, (PPI) * Gardline * Marinisation * HEC * Swansea leaders in Tidal Energy Generation based on the regional expertise, * API Engineering * Switch gear and controls * Renewables East in the Eastern coastal region. geography, and growing market * Europus * Tidal energy expertise * EEEGr Develop a test site and new interest in sector. * Orbis technology and potential of new * Norfolk CC tidal generation equipment. * Suffolk CC DME Develop the UK's first Dimethyl First in UK for Fuel, and technology 2008 Q3- Ether Centre of Excellence incorperating:- Generation and Distribution Sapient * Mgaze * Pilot gasification site * EEDA * Hertfordshire Pilot plant for plasma gasification 2009-11 £300k Develop innovative technology to Engineering * Sapient Engineering * Project management * HEC * UEA process, development of DME produce DME from alternative * Olive Eng * Cluster development * Renewables East continuous production from waste sustainable sources. * SE Waste Mangement * Waste management/recycling * InCrops stream. * Active Technologies * Engineering design * EEEGr Development of fuel handling £50k * Phase 4 Research * Technology research * Norfolk CC equipment and UK's first expertise * Aquablast * Test and analysis * Suffolk CC in handling of DME as skill base. * Palm Paper * Waste generation/conversion * S Norfolk DC * Snetterton (Motorsport Vision) * Distribution point and local power * Southend UA generation * Gt Yarmouth BC * Gt Yarmouth Outer Harbour * First stage fuel distribution DME Applications Olive Engineering * Mgaze * Fleet trials * EEDA * Hertfordshire Ultra-low carbon engines for 2009  tbe Develop the technology to utilise * SE Waste Management * Fleet trials * HEC * Anglia Ruskin. commercial and fleet transport, DME in Transport, Power * Sapient Eng * Project management * Renewables East advanced fuel injection systems, Generation, and CHP. Through * Olive Eng * Cluster development * EEEGr Waste heat recovery and efficiency engine development, range * Active Tech * Engineering design * Norfolk CC optimisation, advanced electric extention on electric hy-brids, * Delphi * Gaseous fuel injection * Southend UA hybrid vehicles with ultra-low and Marrine applications to * Ford * OEM carbon DME range extender reduce Nox, Co2, and * Bertrandt * OEM (Ford partner) engine. particulates and improve air * IBC (General Motors) * OEM quality inline with, Sweden, * ADP (Taxis) * OEM Canada, Japan, and Districts of * Maersk * Marine applictions China. * Yvonne Mason * Venture capital * PTL (Shoreham) * Engine technology * SWRi (Texas) * Powertrain research * Climate Change Capital * Venture capiltal * BP * Fuel interest * Shell * Technology development * Volvo * OEM (DME experience) * MAN (Nuremburg) * OEM * Navistar (Chicago USA) * OEM * Nexxtdrive/Integral Powertrain * Turbocompounding technology * EDF * Fleet trials Marine Hybrid Develop technology to optomise * Magnus Marine Shoreline grid integration Reduction in Engine count on 2009 Q4- £100K power and propulsion in marine * Nexxtdrive board shipping, reduction in Co2 applications, and develop a * Active technologies Variable hybrid transmissions emmisions from private and hybridised power train * ABB Marinised Electric Power Control commercial shipping. * Maersk Generation capabilities, On-board * Gardline power storage, * PowerSi Technologies * API * Perkins/Caterpillar Elec Motorsport Develop a lowcarbon racing Keith Gerard, Dove Design, vehicle dynamics, power train, Reduction in Co2 emmisions from 2009 Q3- £1M technology to futureproof Peter Stevens, Caterham Cars, battery technology, charging and Motorsport, improved effeciencies motorsport and maintain the Nexxtdrive, regeneration, composites, range in battery and charging systems. A sector as a major contibutor to and reliability, safety. change in public perception in new automotive technologies. motorsport. Develop an all electric racing series GEVCO Develop an affordable electric Petrobas, Mahindra, ADP Lightweight structures, battery A new shared vehicle platform for 2009 Q2- power vehicle to provide zero Confidential (Jan 12) technology, electro drive train. an affordable electric car. 83 of 111 emmision transport to Manufacturing technologies Introduction to lower Co2 vehicles developing countries. to developing countries. A manufacturing facility producing 25K units per year. Hydrogen Support the development of a River Simple, 40 Fires Hydrogen fuel cells, fueling A new Hydrogen powered "open 2009 Q2- £200K Hydrogen test vehicle for inner infrstructure, light weight source" developed vehicle. Fueling city applications, using Open composites. Small vehicle technology and development in source design techniques. dynamics. Hydrogen generation.

Sub-Sea Coms Support the development of SonarLink, Gaurdline, Large bandwidth comms. Develoment of a cross sectorial 2008 Q4- unique subsea communication Underwater, reduction in umbilical comms. System technology to support the costs. Safer technology for developing regional focus on environment. offshore wind, carbon capture and storage and optimised oil and gas exploration. Projects Brief Lead organisation Private sector participants Technologies Public sector Academic Deliverables Timing Cost stakeholders participants Wind energy Develop a UK-based wind ERWE Ltd * Gardline Marine * Marinisation * EEDA * Hertfordshire Phase1:- Capability, Capacity, and 2007-10 £100k turbine manufacturing sector. * Active Technologies * Automotive manufacturing * HEC * UEA Feasability Document from PI and Utilise exisiting skill base in * Cooper Roller Bearings * Advanced Bearings * BWEA PS funding to attract investment marine, aerospace and * Smiths Aerospace * Aerospace composites * Renewables East and overseas interest automotive to bring new * PPi Electro * Electro devices/switch gear * EEEGr Phase 2:- Draw down funding from 2010-13 £10m technology and techniques to a * Mason Trust * Venture capital Gov innovation funding to develop monopolised market * RLE/PE concepts (Germany) * Engineering services demonstration equipment * Lotus * System engineering * Nexxtdrive * Advanced transmissions Phase 3:- supply to OEM wind 2013 £160m turnbine components from region in coordinated supply chain opperation, either Uk developed OEM or overseas attracted OEM Tidal Develop a regional technology Peebles Parsons * PPI * Electro generation * EEDA * Hertfordshire Produce a cluster of technology 2009 Q3- £25k base for Tidal power generation, (PPI) * Gardline * Marinisation * HEC * Swansea leaders in Tidal Energy Generation based on the regional expertise, * API Engineering * Switch gear and controls * Renewables East in the Eastern coastal region. geography, and growing market * Europus * Tidal energy expertise * EEEGr Develop a test site and new interest in sector. * Orbis technology and potential of new * Norfolk CC tidal generation equipment. * Suffolk CC DME Develop the UK's first Dimethyl First in UK for Fuel, and technology 2008 Q3- Ether Centre of Excellence incorperating:- Generation and Distribution Sapient * Mgaze * Pilot gasification site * EEDA * Hertfordshire Pilot plant for plasma gasification 2009-11 £300k Develop innovative technology to Engineering * Sapient Engineering * Project management * HEC * UEA process, development of DME produce DME from alternative * Olive Eng * Cluster development * Renewables East continuous production from waste sustainable sources. * SE Waste Mangement * Waste management/recycling * InCrops stream. * Active Technologies * Engineering design * EEEGr Development of fuel handling £50k * Phase 4 Research * Technology research * Norfolk CC equipment and UK's first expertise * Aquablast * Test and analysis * Suffolk CC in handling of DME as skill base. * Palm Paper * Waste generation/conversion * S Norfolk DC * Snetterton (Motorsport Vision) * Distribution point and local power * Southend UA generation * Gt Yarmouth BC * Gt Yarmouth Outer Harbour * First stage fuel distribution DME Applications Olive Engineering * Mgaze * Fleet trials * EEDA * Hertfordshire Ultra-low carbon engines for 2009  tbe Develop the technology to utilise * SE Waste Management * Fleet trials * HEC * Anglia Ruskin. commercial and fleet transport, DME in Transport, Power * Sapient Eng * Project management * Renewables East advanced fuel injection systems, Generation, and CHP. Through * Olive Eng * Cluster development * EEEGr Waste heat recovery and efficiency engine development, range * Active Tech * Engineering design * Norfolk CC optimisation, advanced electric extention on electric hy-brids, * Delphi * Gaseous fuel injection * Southend UA hybrid vehicles with ultra-low and Marrine applications to * Ford * OEM carbon DME range extender reduce Nox, Co2, and * Bertrandt * OEM (Ford partner) engine. particulates and improve air * IBC (General Motors) * OEM quality inline with, Sweden, * ADP (Taxis) * OEM Canada, Japan, and Districts of * Maersk * Marine applictions China. * Yvonne Mason * Venture capital * PTL (Shoreham) * Engine technology * SWRi (Texas) * Powertrain research * Climate Change Capital * Venture capiltal * BP * Fuel interest * Shell * Technology development * Volvo * OEM (DME experience) * MAN (Nuremburg) * OEM * Navistar (Chicago USA) * OEM * Nexxtdrive/Integral Powertrain * Turbocompounding technology * EDF * Fleet trials

Marine Hybrid Develop technology to optomise * Magnus Marine Shoreline grid integration Reduction in Engine count on 2009 Q4- £100K power and propulsion in marine * Nexxtdrive board shipping, reduction in Co2 applications, and develop a * Active technologies Variable hybrid transmissions emmisions from private and hybridised power train * ABB Marinised Electric Power Control commercial shipping. * Maersk Generation capabilities, On-board * Gardline power storage, * PowerSi Technologies * API * Perkins/Caterpillar Elec Motorsport Develop a lowcarbon racing Keith Gerard, Dove Design, vehicle dynamics, power train, Reduction in Co2 emmisions from 2009 Q3- £1M technology to futureproof Peter Stevens, Caterham Cars, battery technology, charging and Motorsport, improved effeciencies motorsport and maintain the Nexxtdrive, regeneration, composites, range in battery and charging systems. A sector as a major contibutor to and reliability, safety. change in public perception in new automotive technologies. motorsport. Develop an all electric racing series GEVCO Develop an affordable electric Petrobas, Mahindra, ADP Lightweight structures, battery A new shared vehicle platform for 2009 Q2- power vehicle to provide zero technology, electro drive train. an affordable electric car. emmision transport to Manufacturing technologies Introduction to lower Co2 vehicles developing countries. to developing countries. A manufacturing facility producing 25K units per year. Hydrogen Support the development of a River Simple, 40 Fires Hydrogen fuel cells, fueling A new Hydrogen powered "open 2009 Q2- £200K Hydrogen test vehicle for inner infrstructure, light weight source" developed vehicle. Fueling city applications, using Open composites. Small vehicle technology and development in source design techniques. dynamics. Hydrogen generation. Sub-Sea Coms Support the development of SonarLink, Gaurdline, Large bandwidth comms. Develoment of a cross sectorial 2008 Q4- unique subsea communication Underwater, reduction in umbilical comms. System technology to support the costs. Safer technology for developing regional focus on environment. offshore wind, carbon capture and storage and optimised oil and gas exploration.

Supply chain development HIL through its HEC history will exploit its unique position at the centre of regional business networks to match the aspirations and capabilities of SMEs to the opportunities presented by the low-carbon innovation agenda. HIL will build regional low-carbon clusters, help identify market opportunities for technical innovation and support the realisation of product.

Through the process of growing business led innovation networks and working through the four framework components, HIL will:

Create the Environment: HEC is a low carbon Enterprise Hub and, through this project and construction of an Advanced Manufacturing facility (AMC), will become a thriving Innovation Hub. It is a neutral location where businesses, R&D organisations and the public sector can come together and in an ‗open‘ environment start to share information and knowledge, work-up ideas and concepts, and develop new products and services that are cutting edge and often radically different from the norm. HEC provides meeting rooms and facilitators, incubation space (ie desk / office / workshop space), expert project managers and directors, and relevant support. The AMC building will provide ‘grow-on’ space to accommodate high-growth start-ups, and free up space within HEC. It will be focussed entirely on encouraging, inspiring and supporting innovation, not only providing an environment, culture and eco-system that provides innovation space in terms of workshops, meeting rooms, but that also supports the wider Hethel Innovation programme of innovation based business support. This will be a thriving innovation hub, incubating innovative businesses that will be pioneering the next generation of low carbon products and services. The outputs from the businesses based in the AMC will provide massive carbon savings globally each year. On top of this we will be visiting businesses across the region and utilising the fantastic venues that are available. We will also create a virtual, web based environment to support the project.

Identify the Low Carbon Demand: The new idea, challenge or, identification of a market failure or need can come from a wide variety of sources. It is important to listen, be open-minded and constantly on the look out for an opportunity. This is achieved through:  Visiting businesses to understand their core skills and aspirations  Meeting with public and private sector organisations to understand their demands, and future requirements and constraints  Keeping abreast of both local and global issues as highlighted on the web and in the media

Confidential (Jan 12) 84 of 111 Network, Connect & Build Partnerships: Through understanding the core skills and aspirations of both public and private sector organisations, when a demand ie a potential supply chain development project is identified, then the right partners can be brought together. Often in the early stages some organisations, for a variety of reasons, fail to remain engaged but often other more appropriate organisations are found to replace those that leave. A facilitator, at the current time the HIL Innovation Manager, ensures the supply chain development project stays on track and ensures all participants remain engaged through regular communications eg through e-newsletters. The facilitator also ensures the right mix and level of expertise.

Within a learning environment use new tools and techniques: The facilitator will encourage new tools and techniques to be used such as the latest Project Management Tools, and new approaches such as Open / Structured Innovation. Where appropriate, the facilitator may bring in experts in the form of trainers, consultants or mentors.

Identify and secure appropriate funding: The facilitator will, with help from the supply chain ‗team‘, seek to access all appropriate funding whether from the public sector eg TSB, EEDA Access to Finance, ERDF or private sector ie VC, Business Angels.

Man / Resource accordingly: Finally, as the collaboration, program or project gathers momentum, the facilitator will seek to bring on board a project manager and / or director to move the project forward quickly with the right experts in charge. This often allows the project manager and director to seek to start-up a business – a key performance indicator for HEC, a low carbon innovation hub, and to allow the facilitator more time with supply chain development projects that are at early stages in their development. As a result of economic downturns senior managers expert in particular areas are sadly being made redundant. But this problem is an exciting opportunity as these ‗experts‘ are available to pick-up, manage and direct cluster development programs. Often the senior managers do not want to or cannot get back into mainstream employment and the opportunity to manage and direct a cluster creates a challenge / opportunity that they are willing to commit to, forgoing payment for the greater goal of commercialising an idea, ie innovating - for an entrepreneur / innovator this is a prize worth striving for.

Critical success factors Critical success factors will include the ability of existing and new businesses and their associated supply chains to grow through the progression from innovative product development to advanced manufacturing and production. This will be objectively measured by growth in turnover, employment and innovative new low- carbon products and services, as well as the expansion and development of Lotus Technology Park. Subjectively success will be a measure of the increase in the region‘s profile as a centre of excellence for advanced manufacturing and engineering and low-carbon innovation.

Programme delivery support

Programme delivery support Introductory awareness workshops (2/yr) IM, IE1, IE2 Group collaborative environment IM, IE1, IE2 Best practice knowledge base IM, IE1, IE2, Hotline support IM, IE1, IE2, AD OI conferences IM, IE1, IE2, AD Regional exhibitions (2/yr) IM, IE1, IE2, AD Regional events/workshops (6/yr) IM, IE1, IE2, AD Supply chain development IM, IE1, IE2 PR and marketing IM, IE1, IE2, AD

Confidential (Jan 12) 85 of 111

The content of delivery support permeates all components of the framework and has been documented in previous paragraphs. Project management

Project management Control Project management IM, IE1, IE2 Facility and resource management MD, IM Project accounts IM, AD Cost control and reporting IM, AD Monitoring Interim report IM, IE1, IE2, AD Final report IM, AD Audit MD, IM, AD

Evaluation MD, IM, AD

Control HIL will lead and manage the programme. This will include management of resources and facilities at Hethel, maintenance of project accounts, cost control and project reporting

Monitoring HIL will compile and issue all relevant reports.

Capital Component – The Advanced Manufacturing Centre & Incubation space.

Planning Business case HEC Resource

Market analysis HEC MD

Specification HEC MD

Architects plans NPS MD, CM

Planning application NCC (Ec Dev) M Kenney

Planning approval NCC (P&T) D Dukes

Implementation Project management TBC Planning Committee

Construction TBC Project manager

Groundwork/services TBC Project manager

Foundations TBC Project manager

Structure TBC Project manager

Roof TBC Project manager

Exterior TBC Project manager

Elec/mech TBC Project manager

Interior TBC Project manager

Commissioning TBC Project manager

Sign-off HEC Project manager

Operation Marketing HEC MD, CM

PR HEC CM

Advertising HEC CM

Sales HEC CM

Management HEC CM

Reporting (financial and KPIs) HEC CM

Confidential (Jan 12) 86 of 111 Maintenance HEC CM

Monitoring and control HEC Stakeholders CM

HEC Board

The capital element of this project sees the construction of a new 40,000 ft2 Advanced low-carbon Manufacturing facility (AMC). This will be built to achieve BREEAM ―Excellent‖ standard and will comprise 2,500 and 5,000 ft2 units accommodating 8 - 12 new manufacturing businesses, creating 160 high value new technology jobs. The Advanced Manufacturing Centre (AMC) will provide a much needed innovation space for SMEs in the sector. It will allow the Hethel Engineering Centre, to build upon its incubation space for design/engineering and enterprise led business support to, through Hethel Innovation Limited, add ‗grow-on‘ space for incubating start-ups/businesses seeking to move into manufacturing and deliver innovation led business support. Hethel Engineering Centre is at capacity and there is much demand from existing tenants and external individuals/organisations for high quality workshop space with an innovative and collaborative environment where they can thrive. This project will allow us to grow from being a successful enterprise hub to a thriving Low Carbon Innovation hub and is a critical step towards the realisation of the Lotus Technology Park.

Advanced Manufacturing Centre Construction of a Low Carbon Innovation hub (i.e. Advanced Manufacturing Centre), driven by increasing firm demand from new technology businesses for start-up and grow-on space (see appendix 8). Building 8 - 12 new workshop/office units of grow-on space totalling 40,000sqft to BREAAM Excellent construction. The Low Carbon Innovation Hub (Advanced Manufacturing Centre) will incubate 8 hi-tech start-ups, and in turn create 160 high skilled jobs.

The AMC will:

 showcase low carbon technologies (eg Wind turbines, PV, Biomass) through providing tours, exhibitions, workshops, and web based info - so creating physical / virtual ‗windows‘.  be a prestigious building (BREEAM Excellent) designed to incorporate wide corridors, open plan work spaces, flexible factory space complimenting the existing facilities of HEC - encouraging engagement / networking / collaboration  incubate high-tech start-ups that will develop low carbon products and services eg next generation wind turbines (Windcrop), high efficiency heating systems (Heatstream), rotating PV panels / bio digesters (Active Technologies) and low emission fuel injection systems (Scion Sprays). Over the first 3 years the

tenants of the AMC will save over 600,000 tonnes of CO2  be a real manifestation of the demand for manufacturing space, and the next key component in the development of the Lotus Technology Park

The HIL/HEC team has extensive experience of managing a capital build programme through the creation of HEC and subsequent Phase 2 development. The County Council has provided extensive detail in the past in relation to previous projects, including the earlier HEC phases and the contract will be issued in line with procurement procedures as followed by NPS.

Confidential (Jan 12) 87 of 111 5.2 Communications

Hethel Innovation Limited will use a multi channel approach to deliver communications to key stakeholders of the project, many of which have been documented throughout this business case to evidence how we will promote the project (and ERDF role), engage businesses and academia, document activities and report on successes. Communications methods include:

Confidential (Jan 12) 88 of 111  Email  E-newsletter  Web site  Telephone  Meeting  Workshop  Conference  Flyers/Posters  Other printed materials – reports, prospectus, case studies  Social Media (Twitter, Facebook, LinkedIn)  Networks  PR and media connections

The table below illustrates the communications strategy for the project.

This strategy provides a framework for which we can ensure all internal and external stakeholders have the necessary information required to access, benefit from, manage and deliver the project.

Communications within the project – Internal stakeholders.

We will ensure that all relevant information is available to colleagues, partners and funding body when it is needed. Activities will include regular team meetings, monthly management meetings and a quarterly strategic review. Reports on progress will be provided at such meetings. A project board will be created, this will meet quarterly. The project team will share an office space making interaction easy on a daily basis and will be connected via the internal network system, email, office based and mobile telephone, skype and via social media platforms. The office space will provide resources such as a white board, an interactive whiteboard with projector, project noticeboard, computers with web camera technology, internet capability and access to a printer/scanner/fax machine. Through the IT system, the team will have access to the necessary software to create and share word processing, presentations, graphics and spreadsheet documents. Individuals will benefit from access to a network to enable the sharing of information, images etc.

Confidential (Jan 12) 89 of 111 The HIL Innovation Manager will report to the HIL Managing Director and will conduct regular meetings with his team of HIL Innovation Engineers. Meetings will also take place between the Innovation Manager and each individual to ensure management, support, drive, direction and development of the project and the individual. Administration processes will be put in place to record activities, monitor project progress and to deliver the required documentation to the funding body. The Project Co-ordinator will undertake the administration duties as part of his/her role.

The internal stakeholders will also benefit from the project newsletter, training and support and team building/milestone celebration events.

Records will be kept and provided to funding body requirement in line with the EEDA document ‗Introductory guide to managing an ERDF project‘.45 This includes:

Core Documentation

 The ERDF Business Case (application.)  The Offer Letter and any revised versions.  Copies of any correspondence with EEDA.  Copies of any agreed changes to the project.  Copies of all quarterly or monthly claim forms.  Working papers showing how the claims were calculated, including a schedule of costs for each claim and an outputs and results schedule

Expenditure

The original documents that support all expenditure relating to the project including:

 Internal staff costs - salary records, detailed timesheets (to show time allocated to the project), and any apportionment methodology.  External staff costs - invoices, detailed timesheets  Other Costs - invoices, payment receipts, apportionment methodologies, depreciation methodologies, copies of leasing /hire agreements, source documentation for overheads

Records of Match funding & income

• Details of Match Funding • Details of any income received • Bank Statements • Audited Accounts (if applicable) • Working Papers

Project specific records

Business Support Projects

Evidence of the eligibility of the SMEs on the project:

45 http://www.eeda.org.uk/919.asp Confidential (Jan 12) 90 of 111  Proof that the organisation meets the SME eligibility criteria eg. size and type of organisation.  A signed declaration of eligibility by the beneficiary organisation and the project manager.  Proof that the individuals involved work for eligible companies.  A record of the support provided to each organisation (think about how you may categorise this support).  Compliance with State Aids rules.

State Aids Rules

 An individual company should not gain unfair competitive advantage through ―state aid‖ (public expenditure).  However, there are exemptions; for example, under the ―de minimis‖ exemption, private sector organisations can receive state aid as long as its value is under 200,000 Euros over any 3 year period.

Keep records to show:

 Those who receive assistance are SMEs  Confirmation of SMEs receipt of state aid in the last 3 years  We have provided SMEs on the project with a record of the cash value of any assistance provided

Business Networks

Keep records to show:

 Eligibility of groups and individuals, including a signed declaration by the beneficiary and project manager.  What we did and how we did it.  Attendance at training sessions, meetings etc. linking individuals to eligible organisations.  Advice sessions.  How networks were formed, minutes of meetings etc.  Copies of questionnaires, details of distribution, final reports.  How grants were administered, monitored and what was achieved.

Publicity Records

 Infrastructure projects must comply with the requirements for billboards /plaques as stated in the Offer Letter.  Any publicity used for the project must note the EC‘s contribution, the EC logo should be displayed  Keep copies of all publicity (e.g. adverts, press releases, photos, leaflets and posters).

Reaching the wider audience – External stakeholders

We will undertake a wide variety of activities to communicate and promote the opportunities and sharing of information to potential beneficiaries of the project and the wider stakeholder audience across the region. Many of these activities can be seen in the bullet points and communication diagram on the previous page. In the past five years, HEC has built a good relationship with the local press and will continue to nurture this relationship to ensure that the project gains effective coverage to inform, promote, celebrate and share best practice. We will also draw upon our wide network of contacts (as illustrated in section 3.3.1) we will be able to gain assistance in communication with specific stakeholder groups, sectors or across a wider target group.

Confidential (Jan 12) 91 of 111 Through a thorough recruitment process we will gain a team of able communicators who will be able to communicate across all platforms, but who will also be very effective out in the field visiting businesses, attending events, organising events, delivering presentations/workshops/conferences/focus groups and building strong relationships across the region. Events will be well promoted through a mixture of digital and printed methods using communication partners (such as those already illustrated) and social media methods to reach a wider audience.

Funding organisation

We will follow ERDF guidelines to ensure that the general public is aware of the role played by ERDF in relation to the project and the benefits that are delivered as a result. We will adhere to the guideline set out in the ‗ERDF identity guidelines‘46 and ‗Using the EEDA identity and East of England marque‘47 documents to ensure that any digital or printed literature meets requirements. ERDF will be mentioned in all project events/activity and through project internal and external communications.

The varied and correct use of communications channels is of the utmost importance to the success of this project. We have extensive experience of communicating with a vast number and range of different organisations on a daily basis and can call upon a large network of support partners. Through effective processes and communication we will ensure that key stakeholders are kept informed of the project, its activities, progress towards targets and that the project itself is managed and delivered effectively.

We will ensure that detailed reports are produced to deadline for funding requirements and for key stakeholder groups.

5.3 Cross Cutting Theme: Equality of Opportunity This project contains measures that will ensure the consideration of equality and diversity issues are integrated into all aspects of project planning and implementation, including monitoring and evaluation. This is in line with Norfolk County Council protocol and the Equality Act 2010, covering all aspects of the project. Equality refers to disability, gender, sexual orientation, transgender/gender re-assignment, race, religion & belief and age. Hethel Engineering Centre itself meets all legal accessibility requirements.

Every aspect of the project meets with equal opportunities guidelines, from recruitment of delivery personnel through engagement with the business community, academia and anyone who may be interested in starting up a business in the low-carbon sector. Regardless of gender, age, ethnicity, or disability, you can gain access to the Hethel Innovation project if you have a project/business idea and can collaborate with other individuals or organisations across the region through networks, pilot innovation programmes or sharing of best practice. Due to the low-carbon and advanced manufacturing/engineering nature of the project, it means that it will not be applicable or suitable to everyone but can easily be seen to embrace cross sector working and collaboration. The project, its events, activities and outputs will not have a detrimental effect on any group, community, organisation or individual. HEC as a venue is fully compliant with legislation in regards to disability and equal opportunities. The centre is on a single level and has widened door for ease of access. It also has specialist facilities such as disabled

46 http://www.eeda.org.uk/files/ERDF_guidelines.pdf 47 http://www.eeda.org.uk/files/EEDA_branding_guide_21_May_2008.pdf Confidential (Jan 12) 92 of 111 toilets and showers. For any project events or activities that are taking place outside of HEC, we will ensure that venues are fully compliant with legislation and needs of the wider community and take the relevant action to ensure all opportunities are easily accessible for all interested parties. The project is inclusive and actions will be taken to ensure that awareness of the project and its benefits are communicated across all groups within the regional community, particularly with regards to the output targets regarding female engagement in the project. The use of targeted communication will be used and support will be offered as required with regards to specific transport, training or possible funding. Through our County Council, industry and academic links we will be able to ensure that the message is disseminated effectively throughout the region.

As part of NCC, HEC is an equal opportunity employer as are all its tenants. HEC embraces the principles of equality and diversity and actively strives to promote this within its own operation and among its wider networked community. This project will create and grow new direct jobs in engineering and manufacturing in addition to a much larger number of potential new positions in the extended community of the supply chain. These new businesses and positions represent a real opportunities to extend increased aspiration and attainment to more geographically and socially diverse communities across the region. In particular, this project targets a significant increase in the proportion of women employed in these new high-value advanced manufacturing and engineering positions.

HEC and HIL are owned, operated and managed by Norfolk County Council in line with NCC‘s equality strategy48. This brings together the following equality schemes: age, corporate, disability, faith, gender, race, sexuality. There are four priority outcomes:

 Strong and positive relationships within different communities and between people from different backgrounds.  Accessible and inclusive services, opportunities and information for all, regardless of age, disability, gender, religion or belief, race, sexuality or geographical location.  A county where people feel safe and free from harassment, and can report incidents in the knowledge that issues will be handled sensitively and effectively.  A workforce and work environment where diversity is valued, where employees are treated fairly on the basis of merit, and where all employees have the opportunity to fully contribute towards the success of the Council.

Hethel Engineering Centre

Additionally HEC proactively ensures diversity through focusing on:  Social and economic deprivation – Programs of enterprise, innovation and skills targeted towards low-skill businesses and workforces. Encouraging individuals made redundant to retrain / upskill and start new careers.  Gender – encouraging women to take up careers in engineering and manufacturing. Promoting initiatives such as ‗Women in Enterprise‘ and offering an environment which allows flexible working.  Age – Encouraging students of all ages and academic backgrounds to be inspired to raise their aspirations and attainment levels.

This new project increases capacity, scope and outreach to progress this equality and diversity agenda, covering areas such as:

Implementation

48 Norfolk County Council: Equality Strategy for Norfolk, April 2008 – March 2011 Confidential (Jan 12) 93 of 111

 Consideration of beneficiaries and potential target groups. Awareness under-represented groups in the sector/community and how we will reach them.  Recruitment – Ensuring that the recruitment process provides equality of opportunity and representation.  Have you worked out how you will recruit your beneficiaries and what equal opportunities support you should build in? Have you added these costs into your budget?

Monitoring

 We will gather equalities information throughout the life of the project to assess progress against plans and make decisions about changes.  We will set up equality indicators e.g. how many people from black and minority ethnic backgrounds have joined the project, in what capacity and what are the outputs.  We will measure the impact of the project in terms of equal opportunities.

Evaluation at the end of the project

 We will use evaluation as an opportunity for structure of future project activity. It‘s a useful way to investigate problems and change in the future.  We will assess the actual equalities targets and outcomes against expectations and examine the effectiveness/efficiency/impact of the project in terms of equal opportunities.

5.4 Cross Cutting Theme: Environmental Sustainability

As part of NCC, HEC and HIL fully embrace the principles of environmental sustainability and the project will operate in alignment with the NCC Environmental Policy and ‗Towards a Low Carbon Norfolk Strategy.49

The Environmental Policy covers the following key areas:

As part of its commitment to foster the environmental, social and economic well being of the community, Norfolk County Council will work towards enabling people in Norfolk to benefit from an enhanced environment and quality of life. The County Council will ensure that these principles are integrated into the decisions of all its services and will:

 Endeavour to protect and enhance the county‘s wildlife and the quality and character of the Norfolk landscape and coast; working towards conserving the variety of habitats and species covered by the Norfolk Biodiversity Action Plan.

o Through consideration of activities in terms of transport, energy consumption, carbon production, and waste management, the project will avoid any potential impact on the regional environment. o The HEC site provides a natural environment for many types of flora and fauna – notably the drainage lagoons – which attract wildlife, including water voles.

 Promote the economic and social health of urban and rural areas. Providing a quality environment for current and future generations of Norfolk people to live and work.

49 http://www.norfolk.gov.uk/view/NCC063581 Confidential (Jan 12) 94 of 111 o The project will work with businesses across the region on low carbon products & services, engaging and sourcing sustainable suppliers utilising venues that support this focus.

 Continually improve its environmental performance by reducing any actual or potential pollution and comply with all legislative, regulatory or other requirements, within the framework of an environmental management system.

o The project will regularly review its environmental performance and seek to continually improve through close management of its activities.

 Encourage the reduction and reuse of waste to minimise its environmental impact, following the principles of: reduce, reuse and recycle.

o The project team will embed an environmentally friendly culture within their operations to ensure that resources are utilised efficiently, effectively and reused/recycled whenever appropriate.

 Take measures to: reduce the emissions of greenhouse gases through the adoption of energy and transport initiatives; reduce water consumption

o The project team will minimise their transportation requirements by conducting conversations and meetings, in the first instance, through telephone calls, skype, email and social media methods. Engage businesses will be encouraged to follow suit. Bicycles will be used for local visits, along with public transport for local/regional transport. The HEC site provides an effective energy management system.

 Encourage a shift towards more sustainable transport, including appropriate public transport, and cycling and walking. For County Council employees and within the wider Norfolk community.

o Public transport, cycling and walking where appropriate will be utilised effectively throughout the project.  Consider the environmental impacts when decisions are taken on the purchasing of goods and services and engage with suppliers and contractors to encourage them to adopt environmentally responsible business practice.

o Not only will the project source from sustainable suppliers but it will be working to generate Pilot Innovation programmes and collaborations that will produce new low carbon products and services for the market place.

The ‗Towards Low Carbon Norfolk‘ document50 states that:

‗Industry and business, together with the public sector, accounts for the highest proportion of Norfolk´s carbon footprint (38.3%), but the sector has had relatively little attention from councils to date. The new role of local authorities in relation to promoting economic development51 now promises a more proactive partnership approach.‘

Under the heading of ‗Economy & Business‘ it has identified 3 key priorities:

50 http://www.norfolk.gov.uk/view/NCC063581 51 Under the Review of Sub-National Economic Development and Regeneration published in July 2007. Confidential (Jan 12) 95 of 111 1. Communications.

i. This is about raising awareness of energy efficiency and low carbon activity. The Hethel Innovation project will support this priority through its engagement with regional businesses and Pilot Innovation programmes.

2. Knowledge Transfer

i. This is about promoting greater communication between partners and across sectors to identify and disseminate best practice, providing businesses with real examples of how changes made and use of technology can reduce environmental impact. The Hethel innovation project will involve sharing of best practise and collaboration through Pilot Innovation Programmes focussed on Low Carbon product development.

3. Support Development of Sustainable Technologies.

i. The document states ‗We will develop a network of physical and virtual centres for sustainable technologies. We will support the Hethel Engineering Centre to develop supply chain opportunities to develop low carbon manufacturing across Norfolk. Also, we will work to assist businesses to exploit the commercial opportunities associated with climate change mitigation‘. This project and it activities will enable HEC to work with businesses across the region to develop sustainable technologies.

The new and growing businesses that this project delivers will, by design, manufacture and supply new low-carbon products and services to a global customer base. These new products and services

will contribute to improved resource efficiency, reduced CO2 emissions and enhanced environmental sustainability in the region, and beyond, through their very application and use. To further support our activities within the area of environmental sustainability the project will:

 Operate within buildings that minimise energy and resource usage.  Recycle waste, paper, resources etc.  Source from sustainable suppliers.  Minimise transport through using telephones, skype and digital technologies.  Use bicycles and public transport.  We have an Electric Vehicle Charging point at HEC which can be used by team members and the wider community.

The Advanced Manufacturing centre will be designed to incorporate wide corridors, open plan work spaces, flexible factory space complimenting the existing facilities of HEC - encouraging engagement / networking / collaboration. It will Incorporate Low carbon technologies such as PV, wind turbines, biomass, air source heat pumps & other Low carbon technologies. These technologies will be easily viewed by tenants and visitors to the AMC through transparent panels/windows in the walls, so that they can see the technology and workings of the building and appreciate the low carbon innovation that is inherent within the building.

Undoubtedly the building will create public interest through its low carbon nature, architectural design and nature of the opportunities available to businesses in the sector. We will offer factories for the future tours and seek media coverage and communicate its innovative nature, low carbon benefits and distinctive design/construction to the wider community.

Confidential (Jan 12) 96 of 111 It will incubate high-tech start-ups that will develop low carbon products and services eg next generation wind turbines (Windcrop), high efficiency heating systems (Heatstream), rotating PV panels / bio digesters (Active Technologies) and low emission fuel injection systems (Scion Sprays). Over the first 3 years the tenants of the AMC will save over 600,000 tonnes of CO2.

Such tenants will also benefit from:

 Reduced operating/running costs  Enhanced asset value and profits  Improved employee productivity and satisfaction  Optimised life-cycle economic performance  Life-Cycle Savings from: o Energy & Lighting Efficiency o Water Efficiency o Materials Efficiency o Employee Productivity o Employee Health o Construction & Debris Recycling  Employee health & productivity, less sick days and retention of staff.  Social impact & reputation  CSR opportunity and marketing  Environmental impact  Meets future legislation/fiscal policy

The AMC will allow tenants and the wider community to showcase new technologies (through an environment and culture of collaborative innovation and best practice) and is the next phase in creating a low carbon technology park.

Quality Standards.

BREEAM

The design of the Advanced Manufacturing Centre will undergo a BREEAM pre-assessment. The report of this pre-assessment gives a predicted score that will result in it falling into the excellent category.

Travel plan

In preparation for the Advanced Manufacturing Centre planning application a comprehensive travel survey was undertaken by HEC. A full report is available on request.

Confidential (Jan 12) 97 of 111 5.5 The Excellence Framework

Rating Review

Thriving The Centre is thriving, with an impressive record of creating new businesses and jobs. It has had a significant impact on promoting the engineering and advanced engineering sectors in the region. The Centre is now at full capacity and has on occasion recently been unable to accommodate enquiries. HEC also has a wider focus in terms of delivering the vision to create a science & Technology Park. This will create a thriving community of over 2500 - 3000 jobs either in or supporting high-tech engineering and manufacturing.

Well designed and built The original building was designed to a high standard within a strict budget. A strong image, good quality execution and a sensitive response to its context was deemed absolutely essential for its success - both through the planning system and for the Centre‘s ability to attract tenants and clients. The scheme received a local design award and has matured well into its setting. The same is true for the extension, which also complemented and enhanced the original architectural statement. It is perhaps revealing that a planning meeting to discuss the extension held especially with the local community at Bracon Ash was widely publicised and well attended. It is clear that community values Lotus and the cluster of engineering that we have expanded. However, despite the rural aspect, the community does not feel at odds with the development and all of the comments were constructive and positive. Although not being delivered to official BREEAM standards, a rigorous workshop has been undertaken that demonstrates the building comfortably meets the ―Very Good‖ standard.

Confidential (Jan 12) 98 of 111 Active, inclusive and safe The Centre runs or facilitates over 500 events per year, as well as being a popular venue for room hire across a range of local business, school and other community activities. The extension of the Centre grew and built on this reputation for vibrant activity within the local community. It is a completely safe environment where Health and Safety is taken very seriously and in the first 5 years of operation there have been no notable incidents or accidents, despite large numbers of children and young people attending regularly. Indeed, the presence of young people, in some number, lends weight to the assertion that this is a vibrant and active community that schools want to buy into.

Well run The Centre is regarded as an exemplar of its type and receives plaudits locally regionally, nationally (from senior civil servants and ministers) and even internationally (CEO of Ford). It always exceeds its performance targets and is clearly making a major impact on the local economy. Staff turnover is virtually non-existent. More importantly, tenant turnover is very low as well, with all except one tenant leaving as part of a planned progression either to expand or relocate close to their supply/customer base. Repeat business for conferencing is also very strong, with very high satisfaction levels.

Well connected HEC is extremely well connected with the engineering sector. Not just locally, within Norfolk – where engineering and HEC are synonymous – but on a regional basis. There are numerous examples of regional collaboration and the Local Enterprise Partnership regularly seeks HEC‘s input into regional strategies and policies. From a physical perspective, HEC is well located just off the A11 near to Wymondham. Our aim is for the HEC cluster to be superbly connected both internally as well as with the regional/national/international engineering community

Well served The access strategy initiated at the project outset and enshrined in the Centre‘s Travel Plan prioritizes the ease of movement for pedestrians and wheelchair users once on site. This continued with the extension. The accommodation is principally at ground floor level (though each new incubator will include a mezzanine level area). Careful consideration is given to level access inside and out, suitable doorway widths, quality sanitary accommodation, helpful colour choices and convenient parking.

Environmental sensitivity Accepting the fact that the Centre is clearly a new building on what was arable land, the building has settled well into the landscape. A ‗green‘ approach continues to influence many aspects of the design process. This is being developed in detail, but will focus on adopting the ‗Merton Rule‘ – with at least 10% of on-site energy being provided by low carbon source technologies.

Apart from the fundamental, but highly effective, decisions taken to achieve good quality daylight, controllable natural cross ventilation and the selection of suitable materials, a highly efficient air to water heat pump system provides underfloor heating. The various cases for biomass, for PVs, for solar water heating, for rainwater harvesting and even for a wind turbine are under review. Energy management will be used to reduce use and encourage awareness of energy consumption and water saving devices and taps will be fitted in the extensions. The sustainable on site dispersal of rainwater (SUDS) strategy for the site as a whole has been extended and a new on-site sewage treatment plant installed.

The natural environment that has been created – notably the drainage lagoons – is attracting wildlife, including water voles. A further package of ecological enhancements has been implemented as part of the

Confidential (Jan 12) 99 of 111 BREEAM assessment that builds upon the natural environment created so far, including the introduction of bat boxes and at least 6 new species of flora and fauna.

Fair for everyone The Centre‘s vision as an exemplar enterprise hub is strongly focused on its beneficial impact, in the immediate and in the long term, on both the local and regional communities, from pupil to student to fledgling business. The continued expansion and success of the Centre in the community in a financially viable state hinges on its ability to increase income by growing with the demand. We also take the view that some businesses that may not yet be fully commercially viable, but which could become significant can qualify for rent reductions if the benefits to the economy can be demonstrated

6 Project Outcomes

THIS PROJECT WILL CREATE A LOW CARBON INNOVATION HUB THAT WILL ACHIEVE SIGNIFICANT INCREASED PRODUCTIVITY, COMPETITIVENESS AND KNOWLEDGE BASE OF REGIONAL SMES THROUGH:  THE CONSTRUCTION OF A LOW CARBON MANUFACTURING FACILITY TO INCUBATE HI- TECH START-UPS CREATING HIGH SKILLED JOBS.  WORKING IN PARTNERSHIP BE A CATALYST FOR INNOVATION, DELIVERING INNOVATION LED BUSINESS SUPPORT PROGRAMMES THAT ENCOURAGE SMES TO DEVELOP NEW AND NOVEL LOW CARBON PRODUCTS AND SERVICES

The primary project objective is to build a Low Carbon Innovation hub that delivers business led Innovation programmes. As detailed, the capital element of this project sees the construction of a new 40,000 ft2 Advanced low-carbon Manufacturing centre (AMC).This will be built to achieve BREEAM ―Excellent‖ standard and will comprise 2,500 and 5,000 ft2 units accommodating 8 - 12 new manufacturing businesses, creating 160 high value new technology jobs. This project will allow us to grow from being a successful enterprise hub to a thriving Low Carbon Innovation hub and is a critical step towards the realisation of the Lotus Technology Park. The principle outcome is to create globally competitive knowledge based clusters. This will be achieved through the support, incubation, development and growth of business led innovation networks through Hethel Innovation. This support will help realise the potential of regional SMEs to exploit opportunities to increase output and productivity in the development and manufacture new low-carbon products and services through low-carbon innovation. This will be achieved by engaging businesses in regional innovation networks, promoting open innovation and knowledge transfer and providing state-of-the-art advanced low-carbon manufacturing facilities. This will support business incubation and growth, create new high-value jobs and establish a centre of excellence for advanced low-carbon innovation and manufacturing, a thriving low carbon innovation hub, as an important step towards the realization of the Lotus Technology Park.

Confidential (Jan 12) 100 of 111

The objectives, outputs and outcomes are summarised:

Objectives

 Support the creation and growth of business start-ups through innovation and innovation led networks  Create and strengthen SME innovation networks  Promote open-innovation and knowledge transfer  Exploit opportunities for new technology development  Provide an environment for business growth  Deliver new low-carbon products and services  Grow successful, effective, business demand driven and sustainable low carbon clusters

Confidential (Jan 12) 101 of 111  Develop low carbon clusters that include businesses that are both large and small, and both OEMs and supply chains, as well as R& D organisations such as local universities and relevant public sector organisations  Ensure that a culture of open and structured innovation is at the core of networks so encouraging trust, knowledge transfer and exchange, research & development particularly through the use of enterprise / innovation hubs  Expand / enhance the knowledge based economy regionally to deliver more world class products and services through globally competitive low carbon collaborations

Outputs

MARKETING ENGAGEMENT BUSINESS SUPPORT INNOVATION

1. Asset Mapping reports. 1. 8 workshops per year. 1. Support 240 1. 20 Pilot Innovation Minimum of 6 2. 2 conferences per year. Businesses across the programmes. 2. Gap Analysis reports. 3. Build a database of project. 2. Run Supply Chain Minimum of 6 businesses. 2. Develop an Open Development 3. Build a database of 4. 200 business visits per Innovation toolkit. Programmes. businesses. year. 3. 4 x Best practice report 3. 2 Conferences per year 4. Vision(s) & 5. 40 Business/Academic / Case studies per year 4. Run Collaborations. Prospectus(es) collaborations 4. Benchmarking activities 5. Create 18 new 5. PR, Communications & (Knowledge Transfer 5. Develop Open business start-ups. Social Networking. Partnerships) across 3 Innovation standards. 6. Create 220 new jobs. years. 6. Awareness raising 7. Create sustainable new 6. Networks – Clean Tech activities. products and services. & Low Carbon. 8. Support business growth. 9. Become a Low Carbon Innovation hub

 600 businesses visited and 240 Businesses supported.  18 New start-up businesses with Innovation at the heart of their activities.  High-value jobs created and safeguarded  Extended business development scope and outreach  New low-carbon products and services

Outcomes

 Business-led low-carbon innovation networks – world renowned low carbon innovation clusters  Low carbon innovation hub  Increased regional innovation and productivity.  Supply chain development for low-carbon products and services  Increased GVA  Economic, environmental and socio-cultural benefits as follows

This project extends business development support through a new 40,000 ft2 advanced low-carbon manufacturing centre. This will be built to achieve BREEAM ―Excellent‖ standard and will have roof-mounted photovoltaic array. The manufacturing centre will comprise 2,500 and 5,000 ft2 units accommodating 8 - 12 new manufacturing businesses, creating 160 high value new technology jobs. This project will allow us to grow from being a successful enterprise hub to a thriving Low Carbon Innovation hub and is a critical step towards the realisation of the Lotus Technology Park

Confidential (Jan 12) 102 of 111 In terms of the capital element, the AMC will:

 showcase low carbon technologies (eg Wind turbines, PV, Biomass) through providing tours, exhibitions, workshops, and web based info - so creating physical / virtual ‗windows‘.  be a prestigious building (BREEAM Excellent) designed to incorporate wide corridors, open plan work spaces, flexible factory space complimenting the existing facilities of HEC - encouraging engagement / networking / collaboration  incubate high-tech start-ups that will develop low carbon products and services eg next generation wind turbines (Windcrop), high efficiency heating systems (Heatstream), rotating PV panels / bio digesters (Active Technologies) and low emission fuel injection systems (Scion Sprays). Over the first 3 years the

tenants of the AMC will save over 600,000 tonnes of CO2  be a real manifestation of the demand for manufacturing space, and the next key component in the development of the Lotus Technology Park

The Advanced Manufacturing Centre outputs and outcomes can be summarised as below:

Component Immediate outputs Intermediate outputs Ultimate outputs Outcomes

Advanced  Business case  Groundwork  Units operational  Sustainable  Business plan  Structure in month 11 Innovation hub by Manufacturing Centre  Architects plan  Roof  Tenancy at 90% end of year 3 - Incubator  Planning  Mechanical in y4  Delivers application  Electrical  160 high skilled strategically  Planning  Fit-out jobs created important start-ups approval  Sales and high-value jobs  Marketing

Confidential (Jan 12) 103 of 111 6.1 ERDF Project Indicators

Output description 2011 2012 2013 2014 2015 TOTAL

O 1.1 Number of start-up businesses 6 12 14 8 40 receiving Priority 1 assistance

O 1.2 Number/type of SMEs receiving 17 43 43 17 120 Priority 1 assistance - innovation

O 1.3 Number/type of SMEs receiving 12 28 28 12 80 Priority 1 assistance - non innovation

O 1.4 Number of businesses assisted to improve performance through ICT initiatives

O 1.5 Number/type of low carbon 1 1 construction enterprise hubs

O 1.6 Number of businesses within the region engaged in new collaboration 4 16 16 4 40 with the new knowledge base

O 2.1 Number/type of start-ups receiving Priority 2 assistance

O 2.2 Number/type of SMEs receiving Priority 2 assistance - risk capital

O 2.3 Number/type of SMEs receiving Priority 2 assistance - non risk capital

O 2.4 Number of social enterprises receiving Priority 2 assistance

O 2.5 Number of organisations/SMEs supported engaged in promotion of clean technology/renewable energy

O 2.6 Increase in number of Businesses within the region engaged in business to business networks

O 3.1 Number of organisations receiving Priority 3 assistance

O 3.2 Number/type of low carbon construction and refurbishment initiatives

O 3.3 Number of sq meters of new or upgraded specialist premises achieving BREEAM standard of 'very good' of better (Sqm)

O 3.4 Number of energy efficiency demonstrator projects

Confidential (Jan 12) 104 of 111 Results description 2011 2012 2013 2014 2015 TOTAL

R 1 Number of jobs created (FTE and by 30 50 60 80 220 gender)

R 1 (F) Number of jobs created (Female 17 28 33 44 122 55% of R1)

R 2 Number of jobs safeguarded (FTE 3 24 24 9 60 and by gender)

R 2 (F) Number of jobs safeguarded 3 14 14 2 33 (Female 55% of R2)

R 3 Number/type of successful 6 9 9 9 33 innovation related initiatives in SMEs

R 4 Number/type of successful non 8 21 21 4 54 innovation related initiatives in SMEs

R 5 Number/type of successful environmental related initiatives in 4 6 6 6 22 SMEs

R 6 Number/type of successful start-up 4 6 8 18 businesses

R 7 Leverage of private sector funding Euro M

R 8 Leverage of public sector funding 1.000 3.3 4.3 £M

R 9 Occupancy rate of new or upgraded specialist premises 3 years after 30 60 90 90 90 opening (%)

R 10 Return (IIR) on OP risk capital investments – 10 years

R 11 Number of new or existing businesses locating to eco-efficient, 1 2 2 5 high quality work spaces

R 12 Number of businesses supplied 5 5 5 5 20 with low or zero carbon energy

R 13 Number of businesses integrating 4 14 14 4 36 new products, processes or services

6.2 Methodology for setting Project Indicators 2014 & 2011/2012 2013 Mar 2015 Total Businesses visited 120 240 240 600 Businesses supported 36 85 119 240 No. Priority 1 assistance 7 14 19 40 Innovation related 17 43 60 120 Non-innovation related 12 28 40 80 Businesses Connected 17 47 70 134 Business Collaborations 4 16 20 40 Pilot Innovation Projects 4 8 8 20 Start-ups created 4 14 18 Jobs Created 30 50 140 220

Jobs safeguarded 12 24 24 60

Confidential (Jan 12) 105 of 111 The projector indicators have been set based upon the work of three key personnel – the HIL Innovation Manager and two HIL Innovation Engineers. A wide range of activities will take place to communicate awareness of the project to organisations, individuals and communities in the region, including marketing activities (printed and digital), events, workshops and networks. The number of business visited is calculated at an initial:

Businesses Visited HIL Role 2011/2012 2013 2014 & Mar 2015 Innovation Manager 30 70 70 Innovation Engineer 1 45 85 85 Innovation Engineer 2 45 85 85 120 240 240

Businesses supported figure takes into consideration the lead-time required to build relationships and generate action. Figures are split with each innovation Engineer dedicating 100 % of their time to support businesses. The HIL Innovation Manager is 100% on the project, dedicating 80% of time to support and using the other 20% for the management of all operations. This can be seen as follows:

Businesses Supported HIL Role 2011/2012 2013 2014 & Mar 2015 Innovation Manager 6 25 29 Innovation Engineer 1 15 30 45 Innovation Engineer 2 15 30 45 36 85 119

Businesses supported figures are based on a third of businesses visited requiring support over the first two years of the project (weighted slightly heavier in the second year to account for mapping and relationship building in the first year) and rises to a half in year 3.

Confidential (Jan 12) 106 of 111 Ref Indicator Target Measure of Calculation Methodology Evidence of Roles Description benificiaries attainment Owner Number of start- Number of Initially taken from a baseline Proof of HIL up businesses start-up figure of the number of business company Innovation receiving businesses visits that can be visited on a registration. Manager Priority 1 weekly basis by the HIL assistance Innovation Manager & 2 x HIL Innovation Engineers. We can then generate a figure for businesses supported by taking a view that a third of visits will turn into a support activity in the first 2 O 1. 1 40 years and half in the third year & taking into account the Innovation Managers 60% contribution. By splitting this support figure 60% - 40% we can represent the support activities in terms of innovation & non-innovation. The number of start-up businesses is derived from one sixth of the business supported with some slight weighting in years 2 and 3/4. Number/type of Number of Initially taken from a baseline Signed HIL SMEs receiving SMEs figure of the number of business agreement Innovation Priority 1 receiving visits that can be on a weekly documents. Manager assistance - assistance - basis by the HIL Innovation Visit logs. innovation Innovation Manager & 2 x HIL Innovation Action plans & Engineers. We can then generate meeting a figure for businesses supported minutes. by taking a view that a quarter of Spreadsheet & O 1.2 120 visits will turn into a support database activity & taking into account the Innovation Managers 60% contribution. By splitting this support figure 60% - 40% we can represent the support activities in terms of innovation & non- innovation.

Confidential (Jan 12) 107 of 111 Number/type of Number of Initially taken from a baseline Signed HIL SMEs receiving SMEs figure of the number of business agreement Innovation Priority 1 receiving visits that can be on a weekly documents. manager assistance - non assistance – basis by the HIL Innovation Visit logs. innovation non- Manager & 2 x HIL Innovation Action plans & Innovation Engineers. We can then generate meeting a figure for businesses supported minutes. by taking a view that a quarter of Spreadsheet & O 1.3 80 visits will turn into a support database. activity & taking into account the Innovation Managers 60% contribution. By splitting this support figure 60% - 40% we can represent the support activities in terms of innovation & non- innovation O 1.5 Number/type of Number of 1 building required BREEAM HIL low carbon 1 construction certification Innovation construction providing Construction Manager enterprise hubs enterprise contracts / hub contract infrastructur specification. e that meet Physical BREEAM existence very good or better standards. O 1. 6 Number of 40 Number of This figure is just over double the Database HIL businesses businesses the number of start-ups created output. Innovation within the within the and is derived from our Signed Manager region engaged region experiences of creating Agreements. in new engaged in industry/academic collaborations. Case Studies. collaboration new with the new collaboration knowledge base with the new knowledge base

R 1 Number of jobs Number of This figure is based upon our Employer HIL created (FTE jobs created experience through tenants statements. Innovation and by gender) occupying our last (phase 2) build, Company Manager (160 jobs generated on the capital documentation. 220 side) plus a figure of just over 3+ Spreadsheets employees positions being & Database generated per start-up created through the innovation programme element of the project.

Confidential (Jan 12) 108 of 111 Number of jobs Number of 55 % of total jobs created Employer HIL created (Female female jobs statements. Innovation 55% of R1) created Company Manager R 1 122 (F) documentation. Spreadsheets & Database Number of jobs Number of Number of jobs safeguarded is Employer HIL safeguarded jobs anticipated as being inline with statements. Innovation (FTE and by safeguarded number of jobs created through Company Manager R 2 60 gender) the Innovation programme. documentation. Spreadsheets & Database Number of jobs Number of 55 % of total jobs safeguarded Employer HIL safeguarded female jobs statements. Innovation (Female 55% of safeguarded Company Manager R 2 33 (F) R2) documentation. Spreadsheets & Database Number/type of Number of Number is based on between a Signed HIL successful successful third and a quarter of businesses agreement Innovation innovation innovation receiving priority 1 assistance documents. Manager related related delivering successful innovation Visit logs. R 3 initiatives in 33 initiatives in related initiatives. This figure is Action plans & SMEs SMEs gained from our experience of meeting working with start-ups and SMEs minutes. over the past 5 years. Spreadsheet 7 database Number/type of Number of Number is based on two thirds of Signed HIL successful non successful businesses receiving priority 1 agreement Innovation innovation non non-innovation assistance documents. Manager related innovation delivering successful innovation Visit logs. R 4 initiatives in 54 related related initiatives. This figure is Action plans & SMEs initiatives in gained from our experience of meeting SMEs working with start-ups and SMEs minutes. over the past 5 years. Spreadsheet 7 database Number/type of Number of This figure is based upon our Signed HIL successful successful experiences of incubating start-up agreement Innovation environmental environmental companies and delivering documents. Manager related related business support programmes Visit logs. R 5 initiatives in 22 initiatives in over the past five years. The Action plans & SMEs SMEs figure is just over half of that of meeting start-up businesses receiving minutes. priority 1 assistance. Spreadsheet & database

Confidential (Jan 12) 109 of 111 Number/type of Number of Successful start-ups have been Proof of HIL successful successful recognised as coming into effect company Innovation start-up start-up one year after the initial registration. Manager R 6 18 businesses businesses intervention and calculated at a Signed 50% drop out rate against O1.1 documentation. Case study R 7 Leverage of HIL private sector Innovation funding (£M) Manager Leverage of £million Evidence of HIL public sector receipt of Innovation funding (£M) funding into Manager company accounts Contracts / funding R 8 4.3 agreements In kind – valuations, timesheets, hourly rate salary calculation Occupancy rate Percentage Figure has been based upon our List of HIL occupiers of new or occupancy experiences from the Phase 2 Innovation Rental / upgraded rate opening and anticipated project Manager occupancy R 9 specialist 90 progress. agreements premises 3 yrs after opening (%) Return (IIR) on OP risk captial R 10 investments - 10 years

Number of new Number of Figure has been based upon our List of HIL or existing SMEs experiences from the Phase 2 occupiers Innovation businesses opening and anticipated project Rental / Manager locating to eco- progress. occupancy R 11 5 efficient high agreements quality work BREEAM spaces certification/rep ort Number of Number of Figure is based upon our Reported as HIL businesses SMEs experiences of working with SMEs part of the Innovation R 12 supplied with 20 over the past 5 years project Manager low or zero evaluation carbon energy process

Confidential (Jan 12) 110 of 111 Number of Number of Figure is based upon our Reported as HIL businesses SMEs experiences of working with SMEs part of the Innovation integrating new over the past 5 years project Manager R 13 36 products, evaluation processes or process services

6.3 Other Project benefits

Economic benefits Beneficiaries will be SMEs that succeed in exploiting new technology market opportunities for low-carbon products and services. These will include businesses based at Hethel and the wider groups of businesses that form low-carbon innovation networks and supply chains. These businesses have been consulted and informed of HECs plans and have played a major role in driving this project through their immediate business requirements. Other beneficiaries include the wider local and regional communities who gain from the injection of up to £20m annually into the local economy as well as the local authorities who will see increased business rates and council tax revenues.

Environmental benefits

The wider community will benefit from reduced CO2 emissions as a direct result of the low-carbon products and services produced in the advanced manufacturing centre. Quantitative benefits have not been specified because of the uncertainty at this stage as to the specific CO2 reductions that will be delivered from the as yet undefined new low-carbon products and services and also the size of market and market penetration. Qualitatively it is clear that these new products will have significant potential (and will indeed be essential) in helping meet UK targets for carbon emission reduction. We will ensure that each organisation assisted throughout the project (whether it is through business supported or engaged in Pilot Innovation programmes) will estimate the environmental benefit of the intervention, benchmark, set targets as KPIs and then record the subsequent results to share best practice.

Socio-cultural benefits Beneficiaries will be local communities. Notwithstanding the world renowned localised centres of technical excellence, economic activity and growth in the East of England, the region in general, and Norfolk in particular, suffer from low-aspiration, educational under-achievement, lack of skills and lack of visionary, entrepreneurial management. This disparity is reflected in a wide income gap, relatively low GVA and localised areas of deprivation and social exclusion. As the HEC community and network grows larger advanced manufacturing businesses and extended regional supply chains the outreach of Hethel will bring opportunity and prosperity to more geographically and socially diverse communities.

Confidential (Jan 12) 111 of 111