Written evidence submitted by and Local Enterprise Partnership (INS0039)

The Cornwall and Isles of Scilly Local Enterprise Partnership (LEP) was launched in May 2011. Private sector-led, it is a partnership between the private and public sectors and is driving the economic strategy for the region, determining local priorities and undertaking activities to drive growth and the creation of local jobs.

Executive Summary

The Government’s Industrial Strategy should be refreshed to include wider economic, social and environmental factors that are now in play post Covid 19 by building on all of England’s Local Industrial Strategies. Industrial Strategy Grand Challenges should be updated and localised, within a national framework, and should consider the levelling up agenda, climate change, regional imbalances and measures to reduce inequality/social inclusion. The refresh should use the guiding principle of devolving decision making and delivery. The focus on key sectors in the current Industrial Strategy is sufficient if a narrow view on “growth” is used or if “trickle down” economic policies are adopted. However, whilst this approach will raise the productivity and growth of some areas it will not benefit all areas equally and those areas furthest from key industrial centres will see little or no benefit. As the future prosperity of the UK depends on unlocking the potential of all its areas, towns, high streets businesses and residents the revised Industrial Strategy needs to be more inclusive and allow for different areas to make different contributions to overall productivity levels and growth. The immense productivity gap that currently exists between the prosperous South East of England and the rest of the country on the other must be therefore be levelled-up by investing in the LEP areas that are currently lagging behind. The economic shock caused by Covid 19, which the OBR estimates as the largest ever shock to the UK economy1, has also hit some areas in the UK worse than others and this impact is expected to exacerbate the need for significant and sustained levelling up. The current economic impact of Covid 19 on Cornwall and Isles of Scilly is outlined in Appendix 1.

1. Industrial Strategy (IS) Priorities: how does the Government understand, diagnose and monitor the underlying constraints on UK economic growth and is

1 OBR ‘Fiscal sustainability report’ July 2020 this informing the IS? How has Covid-19 impacted this evidence-base and should the IS change to reflect this?: The majority of Government policy is top down or centralised relying on “trickle down” benefits to local areas from national interventions. It is largely designed to benefit large metropolitan areas and/or City Regions and is not designed to stimulate growth in rural and peripheral areas such as Cornwall and the Isles of Scilly. To support this conclusion a large body of recent research reports2 highlight that the current centralised system of government funding and policy design, delivery and decision-making delivers sub optimal results in terms of economic growth and addressing economic inequalities between different areas of the UK. They all support a more localised approach with devolution of budgets and decision making to local areas as a key design principle for future Government policy design and implementation. The evidence base that was used to support the creation of the Industrial Strategy is now dated and was created at a spatial scale that was too large to clearly identify regional inequalities and regional opportunities. Covid 19 has exacerbated regional inequalities and therefore the Industrial Strategy needs to be revised to provide a supportive environment that not only re-frames the narrative around ‘the central and the local’ but provides areas such as Cornwall and the Isles of Scilly a greater level of control over their own policymaking, development and delivery. A place- based and sector ‘inclusive’ approach is required not only because of the place-based variation in the size of economic contraction caused by the pandemic, but also because different regions have different strengths and opportunities. The productivity challenge in Cornwall and the Isles of Scilly is multi-faceted, requiring orchestrated and long-term action across the foundations of productivity. Therefore, the focus for recovery should not only be on national priorities for certain specific sectors but on the challenges, goals and vision for the future economy at a local level. Continued focus on the Five Foundations of productivity allows local areas to define how these relate to their local economy, sector mix, etc. Conditions attached to future support should focus on the delivery of the productivity outcomes required for sustainable and inclusive growth for the identified local area rather than arbitrary outputs (e.g. number of businesses supported). 2. Relevance of the IS: how can the IS be made more relevant and accessible for the UK’s supply chain, LEPs, Growth Hubs and for individual companies,

2 Grant Thornton’s Placed Based Growth – Unleashing counties’ role in levelling up England report; the UK2070 Commission independent inquiry into City and Regional inequalities in the UK; Joseph Rowntree Foundation research; the Local Government Association/ Localis study into “Fiscal Devolution” and the opportunity to adopt an international approach “Rethinking Local”; and The Institute of Fiscal Studies report entitled “Sharing Prosperity? Options and issues for the UK SPF” investors and entrepreneurs? Has it helped SMEs grow and innovate? Is it helping Ministers decide on broader market interventions and policies to recover the economy following Covid-19?: The Industrial Strategy sets out Grand Challenges to put the UK at the forefront of the industries of the future, ensuring that the UK takes advantage of major global changes, improving people’s lives and the country’s productivity. In considering how the current Grand Challenges apply at place level, Local Industrial Strategies have tried to articulate priority interventions. Our Local Industrial Strategy suggests the following: -  Clean growth: CIoS is committed to carbon neutrality and has many of the resources, assets, R&D capabilities and expertise, including floating offshore wind (FLOW), to support the clean growth agenda. It can build on recent innovative projects such as Smart Islands, Cornwall Local Energy Market and the Deep Geothermal Power project.  Ageing society: CIoS is ahead of the curve in experiencing the challenges of supporting older people to have healthier lives and this makes it a potential test bed for healthy ageing initiatives. It can build on R&D expertise and projects such as EPIC, Smartline and Kernow Health CIC.  Future of mobility: CIoS can support the transition to zero-emission vehicles by providing low-carbon, sustainably sourced lithium for EV batteries and developing a supply chain of locally produced biomethane. It can build on the CIoS mining expertise and partnership, working with geothermal developers and the Energy Independent Farm project.  Artificial intelligence and data: CIoS can play a strategic role in offering access to the ‘Environmental Intelligence Accelerator’, artificial intelligence expertise and assets such as Goonhilly Earth Station and Spaceport. The four Grand Challenges are focused on the global trends which will transform the future of the UK economy, but their focus is not universally relevant to the business base in Cornwall and the Isles of Scilly. When considering a post Covid 19 Industrial Strategy the grand Challenges are still relevant but require a refresh informed by the sectoral impacts of Covid-19 (e.g. in retail, tourism and manufacturing) and the societal/workplace shifts underway. Rather than start from scratch, Government should build on the work undertaken at local level to develop Local Industrial Strategies and use them to empower local areas to consider their contribution to the Industrial Strategy. Building upon existing policy and delivery strategies will speed up Post Covid 19 recovery. Although the focus on driving up productivity is accepted, revision would provide opportunity for additional consideration to the climate emergency, environmental growth and social inclusion. Post COVID 19, the Grand Challenges should be localised within a national framework and should consider climate change, regional imbalances/the levelling up agenda and inequality/social inclusion. Empowering local economies to find the solutions to these local, national and global challenges, whilst supporting and driving innovation, investing into infrastructure, and training and education will ultimately give local economies an opportunity to build on their local strengths and natural resources to develop solutions that will be exportable and improve both local and UK productivity. 3. IS Delivery: is the IS deliverable within the current institutional framework? Does the IS Council have sufficient insights and powers? Are Whitehall departments delivering on their respective IS obligations and how is the IS being optimised over time? How has the IS operated in the Devolved Administrations and how does it compare to our key competitors?: The current institutional framework is not focussed on encouraging growth in rural and peripheral areas and requires a significant increase in place based resource and delivery focus. The role of Whitehall Departments in delivering the IS is complicated by the emergence of new and revised departmental directives and priorities, both pre and post Covid. 4. IS Foundations: what data exists to evidence the impact the IS has had on the five foundations (ideas, people, infrastructure, business environment and places)? How has the IS impacted existing embedded policy areas – such as R&D funding and skills and education delivery – across Government departments?: The 5 foundations are measured using a variety of macro-level economic indicators, tracked of long periods, evidence of direct impact of IS is problematic due to other external variables. Going forwards, the additional datasets gathered as part of the Local Industrial Strategy process alongside localised investment packages provide opportunity to measure IS foundation impact more easily. IS has further targeted government policy areas, a clear narrative has followed for R&D funding through UKRI and partners to focus (co)investment in line with the IS. However, this has not been followed by an increase in R&D investment in Innovate UK ‘coldspots’ such as the UK’s South West peninsula.

5. IS Grand Challenge Missions: is the Government focusing on the right grand challenge missions (artificial Intelligence and data, ageing society, clean growth, future of mobility) and, if not, which are missing? Are missions addressing the right problems and are they the best approach? Where the Government has established additional capacity to deliver them (e.g. the Office of AI), has it succeeded, how is this evidenced, and can they be improved? : Cornwall and the Isles of Scilly’s business base is predominantly micro and small business, we have the highest level of micro businesses and the lowest number of large businesses than any other LEP area. The Grand Challenge missions are relevant to any size of business but how businesses of different scales engage with them will be different. For example, a large businesses with a dedicated R&D department is more likely to engage with a national Grand Challenge mission than a small one or two person business located in a rural area.

6. IS Support: is existing IS support (e.g. British Business Bank and Innovate UK), effective? Are IS priorities properly financed and how is value for money assessed? What type of businesses/organisations have benefited from R&D funding under the IS Challenge Funds? Where investment risks are taken, how does Government assess and mitigate them? Does the IS merely bolster existing strengths or balance it against frontier innovation work?: IS support follows previous government strategy approaches, largely designed to benefit large metropolitan areas and/or City Regions and not designed to stimulate growth in rural and peripheral areas such as Cornwall and the Isles of Scilly. Effective BBB and R&D investments in Cornwall and the Isles of Scilly have emerged through effective ESIF funding rather than IS support e.g. £40m debt/equity Cornwall and the Isles of Scilly Investment Fund.

7. IS Sector Deals: is the Government focusing on the right sectors and, if not, which are missing? Have they delivered growth in goods or services output, solved underlying problems (e.g. productivity or decarbonisation) and/or created or improved jobs/pay? Does the Government need to rethink/re-prioritise sector deals because of Covid-19 and ?: The inclusion of sector focus on Tourism and Food and Drink was welcomed. However, the delay/retreat from aspects such as the Tourism Sector Deal and its flagship tourism zone initiative signals the limited government appetite for investment in bedrock industries through the Sector Deal process. Both Covid 19 and EU Exit provide opportunity to re-visit sector deal prioritisation.

8. Measuring Success: has the IS increased national and regional GDP and GDP per capita and should it aim to deliver a more inclusive and sustainable economy? How should IS success be measured and are current tools/metrics adequate, especially if seeking to deliver goals broader than GDP? The Industrial Strategy will have inevitably increased national GDP but whether this increase has been shared equally across the UK is less clear. The Cornwall and the Isles of Scilly Local Industrial Strategy recognises that metrics such as GDP that measure productivity are an insufficient measure of economic success for the region, so the strategy will measure and monitor progress against three metrics: Productivity gap; Quality of life and; Carbon neutrality. Productivity gap Productivity is considered an important economic statistic. Cornwall and the Isles of Scilly is at risk of falling further behind the country as a whole so this is an important metric to be closely monitored. Productivity is measured by GVA per hour worked. The gap between Cornwall and the Isles of Scilly and the UK figure can be measured which shows the productivity of the LEP area relative to the average UK performance. Measuring this gap over time will show the performance, in productivity terms, of the Cornwall and the Isles of Scilly economy relative to the national economic picture and other LEP areas, and how attempts to level up the economy have been successful. The relative productivity of different sectors in Cornwall and the Isles of Scilly can also be measured. This is measured by GVA per job and shows the productivity gap between different sectors, alongside figures on how many people are employed in these sectors. Looking at changes here over time will be important in understanding whether levels of employment are increasing or decreasing in the more productive sectors. Whilst GVA is a useful measure at economy level, there is a time lag of at least two years before figures for an area are released and therefore mean little at individual business level. Therefore, business level metrics will be developed to enable them to measure their performance against industry averages and track their progress over time. Metrics such as turnover per FTE or ratio between £ of input and £100 output are examples of outcome measures that could be used. Adopting this approach will also help to measure the outcome of interventions and provide real time KPIs to measure the trajectory of change. Quality of life The ONS Annual Population Survey collects data on life satisfaction and produces a score out of 10 at the local authority area level. Changes in life satisfaction over time can also be measured, as well as relative to other parts of the UK. For example, whilst Cornwall’s score is ‘high’ at 7.74 out of 10, it is the median score of other UK local authority areas and it has decreased slightly from previous years. Another way of looking at quality of life is through the IMD, which measures relative deprivation across a number of domains at neighbourhood, ward and local authority level. Overall IMD rankings can be measured for individual domains such as income and employment deprivation, and against other local authority areas. Relative deprivation within Cornwall and the Isles of Scilly can also be captured to see if there are neighbourhoods with more serious concerns in the domains of health and education, skills and training than the overall Cornwall and the Isles of Scilly averages indicate. Despite its usefulness, the ONS agree that IMDs do not adequately record deprivation in rural areas as it is possible that pockets of deprivation are hidden within more affluent areas. There is an opportunity to explore available data and tools to measure quality of life and align it with other Cornwall and the Isles of Scilly strategies including the emerging Health and Wellbeing Strategy. Carbon neutrality Emissions indicators aligned with Cornwall’s Climate Action Plan will be used to measure changes in emissions against the target to be carbon neutral by 2030. There are economic benefits to be had from the push to carbon neutrality. These will come out in the longer term through growth in low-carbon technology sectors in terms of GVA, and the number of businesses and jobs, particularly clean energy and geo-resources. Longer-term economic gains across the Cornwall and the Isles of Scilly economy, through innovation and digitalisation driving energy efficiency improvements across the business base, should also be noticed. Whilst these indicators are not stand- alone metrics, they form the basis of the strategy and supporting evidence base, which will both be used and updated by local institutions working together on economic strategy.

Appendix 1 - Covid 19 Impact evidence In order to gain an early understanding of the impact of COVID-19 and the social distancing measures put in place by the UK Government. The Cornwall and Isles of Scilly LEP undertook an online survey of businesses. As of 9 May 2020, there had been a total of 625 responses to the survey. The sample of responses was made up of mostly sole traders and micro-sized businesses with 69% of the sample having four or less employees. All businesses which responded, apart from 1, reported at least some disruption from COVID-19, of the businesses that responded, 92% said that there was a significant impact thus far due to COVID-19. This initial analysis pointed to a very significant impact on the majority of the 23,795 enterprises and 28,045 workplaces across Cornwall.

Figure 1: Main Operation/Sector (self-identified) of Businesses Who Responded Findings Businesses identified the top three impacts as: reduced sales/bookings (86%), cashflow issues (73%) and travel restrictions (31%). A small number of businesses responded at the time stating they had seen a positive impact on sales due to COVID- 19 driven by increased demand (2%). The warning signs were clear the vast majority of businesses were experiencing significant trading impacts. If the lockdown and ongoing trading situation had continued this way for six months, then 86% of the businesses who responded stated they would not have been able to survive. Just under 4% of businesses at the time said that they could survive indefinitely. It remains unclear how many businesses were able to survive the initial lockdown period of 7 weeks, where only going out for food shopping, medicine or exercise were permitted. The lockdown period for many businesses was far longer than this. Non-essential retail was closed for a period of 12 weeks and hospitality a total of 14 weeks and 5 days. Around 21% of companies surveyed had to laid off staff between the beginning of the outbreak and the early weeks of the lockdown. Many organisations were forced to reduce staff hours with those on zero-hour contracts seeing significant decreases in income. This was reflected in the survey with 47% of business reducing hours during the first phase of the UK wide lockdown. Of the businesses who laid off staff during this initial period, the average number of employees laid off was 4 per business and totalled 1136 jobs. It is worth noting that survey was published before the government announced the Coronavirus Job Retention Scheme and many businesses chose to furlough staff stemming the level of job losses; it is however clear from the small sample size of the survey, the level of job losses across Cornwall in the initial period of uncertainly was significantly higher than the survey figure.

sales/bookings/demand Q2. If there is an impact, how is the outbreak affecting your business?

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Travel

customers/suppliers

Event restrictions issues

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supplies/components Difficulty

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absence Increased illness/isolation

exporting/accessing sourcing

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0 10 20 30 40 50 60 70 80 90

Percentage of Respondents Experiencing Impact

Figure 2: Q2 COVID-19 Business Survey - Impact on Businesses in CIoS in May 2020, Cornwall and Isles of Scilly LEP The evidence paper “COVID-19 The Impact on the Cornish Economy” of the 15 May 2020 attempted to estimate the impact on Cornwall’s Economy of the COVID-19 lockdown and pandemic. The report contained the following estimates drawn from a number of sources:  Using the ISER research outcomes, it was estimated that Cornwall could experience potential net job losses of 72,800 as result of COVID-19 (27% of Employment). (Employees – 58,700, Self-Employed – 14,100). Whilst the Royal Society of Arts predicted that 66,878 jobs in Cornwall were at risk, equal to 31% of the sectors covered by the research.  Assuming that changes in output also mirror changes in employment as the ISER analysis suggests the estimated potential loss to Cornwall’s GVA was predicted to be £1,984 million or 22% of total annual output. Whilst the Centre for Progressive Policy analysis forecasted that GVA will decline by 34% in Cornwall for Q2 2020.  The Centre for Towns found as the most exposed town in England in Wales in terms of sectorial impact from COVID-19, with 56.2% of employees working in shutdown or at-risk sectors. Other towns highlighted included St. Ives, , Falmouth and St. Blazey. The research also identified St. Blazey as the Cornish town with the highest economic exposure to COVID-19, ranked 8 out of 805 in England and Wales.  Using McKinsey research, it was estimated that 60,900 employees in Cornwall or 28.5% of the total may have be furloughed in May and 65,000 jobs may be at risk. As the crisis has progressed the impact on the economy has become clearer. As is often the case there is a lag in statistical releases which hasn’t allowed for real time analysis of the current economic situation. Data is however beginning to allow us to retrospectively analyse the impact of the initial lockdown on Cornwall and the ongoing impact in the labour market. Spending Work undertaken by Tortoise Media looking at spending has been invaluable in providing an ongoing snapshot of the economic impact of the lockdown especially in the absence of any other indicators. Whilst this weekly analysis has now stopped the last release of data provided evidence of a slow uptick in consumer spending (see table 1). Table 1: Percentage Change in Sales Comparison Week Ending 14 April 2020 vs 22 June 2020 Across Cornwall, Tortoise Media 2020. Percentage change in sales compared with same week in 2019 Wk.end - 14 April Wk.end - 22 June

Town or City Non-Grocery Non-Grocery Ranking All Sales All Sales (TTWA) Sales Sales (Previous Rank) -67% -85% -51% -55% 1 (3) ↑ Penzance -69% -89% -42% -57% 2 (2) - and -56% -73% -20% -30% 17 (22) ↑ -45% -73% -17% -33% 26 (80) ↑ St. Austell and -48% -71% -17% -29% 31 (59) ↑ Newquay Falmouth -54% -77% -14% -25% 39 (29) ↓ -46% -67% -11% -27% 52 (70) ↑ Launceston -42% -66% -8% -20% 81 (98) ↑

As you can see from table 1, whilst drops in consumer spending compared to last year were not as severe during the week ending 22 June as they were in week ending 14 April. Many towns in Cornwall were still experiencing significant drops in expenditure. The majority of Cornish towns had moved up the rankings and were experiencing higher impacts relative to other areas than before. Data has also been released looking at the impact on monthly sales by MSOA. This data is from the same source as the Tortoise Media Analysis and looks at total sales linked to geo-tagged consumer-facing merchant IDs for active debit card customers in England and Wales. This data accounts for between 12%-27% of consumer spending in a specific area so gives an indication of the pattern of sales but it doesn’t cover the full sales universe in each MSOA3.

Figures 3 and 4 show a similar pattern to table 1 with the majority of Cornwall seeing a less severe impact on sales in June compared to April the period of severe

3 https://socialeconomydatalab.org/2020/05/13/covid-19-and-communities-mapping-the-covid-19- effect/ restrictions. Some areas are seeing increases compared to normal levels of spending driven by very high percentage increases in grocery spending. This pattern is likely the result of an increased reliance on corner shops above normal levels.

Figure 3: Percentage Change in Consumer Sales April 2020 compared to April 2019, Imfoco 2020

Figure 4: Percentage Change in Consumer Sales June 2020 compared to June 2019, Imfoco 2020 Benefit Claims – Universal Credit The release of the latest Universal Credit (UC) statistics from the DWP for June provide a stark contrast with the pre-lockdown figures in March. Overall, across Cornwall numbers rose from 24,876 in March to 48,458 in June, up by 23,582 or 95%. A large proportion of this increase were claimants in the “Searching for Work” conditionality. The number of people ‘Searching for Work’ on UC rose from 7,993 in March to 18,480 in June, up by 10,487 or 131%. The number of people claiming in the searching for work conditionality dropped by 1,390 between May and June. A reason for this drop alongside people finding employment, could be that a number of self-employed workers required Universal Credit support prior to the Self- Employment Income Support Scheme launching on the 13 May and were paid before the June count was undertaken. Table 2: People on Universal Credit in Cornwall between March and June 2020, DWP 2020. People on Universal Credit – March to June 2020 Total on Universal Date Searching for Work Credit March 7993 24,876 April 17,570 40,278 May 19,870 47,397 June 18,480 48,458

Percentage Change In order to identify the impact COVID-19 has had on the number of claimants, figures for all Universal Credit claimants for March 2020 has been compared to the position in June 2020. Percentage change allows us to identify areas which have seen large increases whether from a low base or a high claimant level prior to the lockdown. It is worth noting that large relative percentage increases can mask the absolute scale of the changes this is why it is useful to look both the relative and absolute changes. Data has been sorted into percentiles. Figure 5: Percentage Change in People on Universal Credit between March and June 2020 by MSOA in Cornwall, DWP and Cornwall Council, 2020 Numerical Change Absolute change allows us to identify areas which have seen large numbers of additional claimants. This gives an idea of the scale of the impact for different parts of Cornwall. As stated before, it is worth noting that small increases in absolute numbers can mask the relative size of the changes hence, we have presented both the relative percentage changes and the absolute numerical changes.

Figure 5: Numerical Change in People on Universal Credit between March and June 2020 by MSOA in Cornwall, DWP and Cornwall Council, 2020 Figures 4 and 5 show that areas such as Newquay and St.Ives have seen both large percentage increases and numerical increases in people claiming Universal Credit. This highlights these areas as some of the most severely impacted in Cornwall. What is also clear is that the impact has not just been felt in towns across Cornwall. Many rural areas which historically have had low levels of Universal Credit claims are seeing large % increases. This indicator reveals that the geographical impact is not just solely focused on the traditional areas of employment deprivation. Government Support Coronavirus Job Retention Scheme4 Over a third of eligible jobs in Cornwall and the Isles of Scilly have been supported by the Coronavirus Job Retention Scheme since its launch. HMRC received 79,700 claims to furlough jobs across Cornwall and the Isles of Scilly (CIoS) up until the end of June 2020. This means that 35% of eligible jobs have been protected by the scheme in CIoS compared with 31% across the South West and 31% across the UK. The levels of government intervention across CIoS are some of the highest in the country (see figure 5), this highlights the severe impact the crisis has had on the business base and economy of Cornwall. The scaling back of the scheme in August is therefore likely to be particularly challenging time for the local economy and will more than likely result in a number of job losses as businesses are forced to make staffing decisions and adjust their expenditure according to current levels of demand.

Figure 5: Employment Furlough Take-Up Rate by Local Authority and Parliamentary Constituency as of June 30, HMRC 2020. Self-Employment Income Support Scheme

4 The CJRS figures are cumulative and therefore do not show us the current levels of furlough. The government also announced a support package for the self-employed the Self- Employment Income Support Scheme. As of the 30 June 30,600 people in Cornwall and the Isles of Scilly (CIoS) have applied to the Self-Employment Income Support Scheme. The take up rate for this grant support in CIoS stands at 75% of the potentially eligible population.

Figure 6: SEISS Claims as a Proportion of the Potentially Eligible Population by Local Authority and Parliamentary Constituency as of June 30, HMRC 2020. Cornwall and Isles of Scilly is an area with a significant take up rate compared to many parts of the country (see figure 6). The total value of claims made by people in Cornwall and the Isles of Scilly amounts to £85.6 million. Self-employed workers will have access to a second and final grant in August. September 2020