Written Evidence Submitted by the West of England Combined Authority (COV0171)

Written evidence submitted by the West of England Combined Authority (COV0171)

Background The West of England Combined Authority (WECA) is the devolved regional government body responsible for economic growth in the West of England. It is chaired by an elected Mayor and composed of three of the region’s Unitary Authorities – Bath & North East Somerset, Bristol and South Gloucestershire. WECA also supports the Local Enterprise Partnership, which is business- led, and also includes North Somerset Council. Our aim is to deliver sustainable and inclusive economic growth for the 1.1 million people that live in the region by improving our productivity, skills, housing and transport. The coronavirus pandemic has had a significant impact on business and workers in the West of England, as it has across the country. Temporary closures and furloughing are high, in line with national conditions: 132,600 West of England employees have been furloughed, 22% of the workforce. 41,500 claims have been made from the region to the Self-Employment Income Support Scheme. Businesses in the tourism and hospitality are clearly particularly affected. Businesses are facing both immediate and medium-term cash flow crises and supply chain challenges. Unemployment benefit claims in the region doubled in April alone. This submission outlines the high-level impacts of coronavirus on businesses and workers across the West of England. We identify the challenges we have seen through the short-term response phase, through medium-term adaptation and into longer-term recovery. We outline how national recovery should be led by regional priorities, set within a national framework and how support will be needed to ensure that recovery is inclusive and low carbon, and catalyses the Government’s ‘levelling-up’ agenda.

Outstanding short-term challenges We support the Government’s financial support packages; businesses have been able to access support rapidly and this has helped preserve the region’s economic base. To date, the level of business failures in the region has remained relatively restrained. We welcome the Government’s flexibility and responsiveness in refining the support package in response to representations by WECA and others (in particular, the introduction of the Top-Up Grant Scheme) to ensure they provide the support intended for different types of businesses. However, in common with our counterparts across other Combined Authorities, we recognise that there are still some areas where gaps have yet to be addressed and we believe further support could be provided.  Access to, and terms, of business loans. We recognise and welcome the Treasury’s progressive moves over time to widen access to CBILS and other business loans (for example through increasing the under-writing for some loans, introducing ‘bounce back’ loans for start-ups etc). We would welcome a continued and open dialogue about access to finance as we have direct connections to firms on the ground and can highlight additional issues as they emerge, particularly as demands on businesses change as lockdown restrictions are eased (for example, we have identified case where businesses without existing banking relationships have struggled to access loans).  Flexibility in the furlough scheme. The Coronavirus Job Retention Scheme (or ‘furlough’ scheme) has been integral to minimising economic damage from CV-19. And the Government’s announced extension into the Autumn was welcome, as was the confirmation that they will explore the potential for the scheme to allow part-time return-to-work. We believe that over time the furlough scheme needs to become more flexible, potentially differentiating between different sectors for example (to recognise the medium-term impact on some firms, such as those in the leisure, hospitality, and aerospace sectors). We recognise the complexity of this, for example the risk of ‘edge cases’, but believe an alternative and uniform approach poses too great an economic risk and risks a cliff-edge situation for businesses that have been without revenue for months.  Support for newly self-employed people. People who started in self-employment since April 2019 do not currently qualify for the Government’s self-employed support packages. This group includes people who are more likely to be in a vulnerable financial position than others: young people starting out with their businesses who may be renting rather than owning; people who freelance in the creative industries (of which there are a great number in the West of England); and older workers who have taken an entrepreneurial leap and, in some cases, have invested many years of savings to get their businesses up and running.  Apprenticeships: there is a significant concern that capacity will be lost in the apprenticeship provider market due to lack of certainty over funding and businesses furloughing or laying off apprentices. In addition, uncertainty over future employment needs may also start to undermine the market for new starters. The number of apprenticeships across all of the MCA areas was falling in the lead up to Covid-19, and this trend is expected to be exacerbated with early indications through employers and training providers, pointing to a 60% reduction for September 2020 starts. Whilst some of these might be delayed until November 2020 or January 2021, it is unlikely that without intervention or support, the full number of apprenticeships will be created. This risks a scarring effect on a cohort of young people who may never recover from this. In addition, there is a real risk that young people currently on apprenticeships will be made redundant, particularly as support from the Job Retention Scheme tapers off.

How we have responded The Covid-19 pandemic has created an unprecedented challenge for the businesses, residents and public services across the West of England. WECA and the LEP have been working to support businesses and residents through this crisis period and seeking to ensuring the support and infrastructure is in place to prepare for recovery e.g.  We have expanded the capacity and reach of our West of England Growth Hub with a significant spike in business enquiries since the outbreak. We are building on our core offer by developing new specialist support including financial resilience, trading better online and mental health/wellbeing support, helping businesses adapt to the new landscape.  Through discussions with business of all sizes both informally and through a new Covid- 19 Business Response Panel, chaired by the Mayor and including key business leads and the banking sector, building a picture of the specific challenges for the region and identifying any gaps in Government support. WECA has led the region’s economic analysis of emerging trends, published weekly as an economic bulletin.  WECA has also made changes to existing funded programmes to support the response to Covid-19. For example, the DCMS funded Creative scale-up programme has switched support from ‘scaling’ to ‘surviving and supporting’ with expertise and experience being shared across the programme cohort. The training and coaching is being delivered on-line.  A £3.2m Research and Innovation Challenge Fund to support SMEs with research and innovation activity is being expanded in response to Covid-19 and will award grants to SMEs developing digital, engineering or epidemiology products and services, and building business resilience. The project launch is scheduled for July 2020.  Support for SMEs through our innovative Low Carbon Challenge Fund continues with another funded round planned for a few months’ time.  In addition, WECA has worked to refocus and adapt existing skills programmes to reflect the changing needs of businesses and residents, including the £8m Workforce for the Future programme which will play a fundamental role supporting SMEs respond to the current crisis, whilst also helping connect individuals with new training and employment opportunities.  WECA has also expanded the career coaching and support service, Future Bright, to help those residents whose jobs and income have been affected by coronavirus. This includes those who are eligible for Universal Credit due to redundancy, reduced hours / income, furloughed employees and self-employed workers.

Adapting in the medium term It is clear that the coronavirus crisis will not end with a quick return to normality. Rather, businesses face a protracted period of disruption, as well as the evolution of longer-term trends in customer and market behaviour that will shape the economy for years to come. The full impact of these is difficult to assess, but a number of issues are of particular salience in the West of England:  Impact of ongoing social distancing requirements. As lockdown measures are eased, public-facing businesses in the transport, retail, leisure and hospitality sectors will continue to face significant stresses on their financial viability. Customer confidence is likely to be slow to return, and social distancing measures will limit capacity, such that many businesses will be unable to operate profitably. As a region with a highly attractive visitor economy, this will present an acute challenge. Again, we recognise that this is a complex situation and that Government should not indefinitely subsidise businesses. Nonetheless, a continuing and flexible financial support package may be necessary to ensure that the temporary but medium-term requirements of social distancing do not lead to significant permanent damage to otherwise healthy businesses. Furthermore, as much clarity as possible over the Government’s expectations for the duration of these measures would enable businesses to make informed decisions about when and how to return to partial or full operations. There is also a role for national and regional campaigns to promote confidence amongst consumers that it is safe to return to these industries. The Covid secure poster from the Health and Safety Executive is a welcome addition that should be promoted both to businesses and the wider public as a ‘trustmark’ scheme. Economic adjustments. Beyond the short-term challenges posed by the current lockdown, a range of medium- to long-term challenges are also coming. These include structural readjustments we are likely to see in our economy. Some firms or sectors are likely to find that demand has permanently shifted and their business model is no longer viable, while others may find demand soaring. These changes will have knock-on impacts on employment and skills requirements. Through our regional recovery taskforce, we are exploring the nature of these longer-term challenges, but it is already clear that sectors including the West of England’s nationally-significant aerospace industry faces a great deal of uncertainty. Major local employers including Airbus and Rolls-Royce have recently announced redundancies. There may also be long-term effects on retail (for example, an acceleration of movement towards online shopping) which present challenges in maintaining the traditional High Street as a centre of employment and visitor attraction. On the other hand, there may be opportunities for businesses in building supply chain resilience or leveraging the region’s strengths in digital services. National support, delivered on a regional basis via devolved funding, should be explored to help economies adjust to changes, particularly in relation to skills retraining, and to mitigate the effect of any economic shocks, but it is already clear that sectors including the West of England’s nationally-significant aerospace industry faces a great deal of uncertainty. We have appended to this submission an assessment of this sector in the West of England to aid the committee’s understanding of the breadth of the potential impact on our regional economy.

 Responding to opportunities. As a region, we are seeking to ensure that, where possible, we use the disruption that the pandemic has caused as a catalyst for positive change and economic renewal. In particular, the modernisation of working practices through increased use of digital technology and improved digital connectivity (including through infrastructure) could help to stimulate future innovation and productivity growth. For example, the West of England Local Enterprise Partnership is leading a partnership proposal across the wider South West region to digitise the manufacturing supply chain under the Made Smarter programme, and this has become even more relevant with increased concerns about resilience and diversification. Furthermore, the West of England is committed to addressing the climate emergency, and will look to ensure that recovery planning identifies potential to remove carbon from the economy, including through embedding changes to transport behaviour and supporting low-carbon innovation and technology development.  Transport. It cannot be over-emphasised just how significant an impact the Covid-19 crisis has had on the long-term prospects of a commercially successful bus network in the West of England. This is made all the more notable when the West of England was previously one of very few regions in the country to see steadily increasing bus patronage. Whilst to a large extent the Government funding, through the COVID Bus Services Support Grant (CBSSG) and the Coronavirus Job Retention Scheme, has allowed many businesses to survive, such support cannot realistically continue indefinitely.  The huge loss of core customer base upon which significant investment has been built over recent years is likely to take many more years to re-establish and operators are likely to incur sustained losses unless they cut back their network to reduce costs and/or increase fares. Both of these actions will reduce the attraction of travelling by bus and risk generating a vicious cycle which the authorities in the West of England have worked hard to break out of in recent years. This could be further exacerbated if there is a significant switch to car travel as an alternative to bus use, as people tentatively return to normal life and passengers ‘break the habit’. Whilst wholesale car use is not likely as many do not have that option, a swift return to the pre-Covid levels of bus patronage cannot be expected.  The focus of our Bus Strategy on infrastructure investment will need to be complemented by a concerted investment in communications and marketing from ourselves, Government and operators to rebuild confidence in bus travel. The reliance on public sector funding provides an opportunity to shape the network to meet expectations and aspirations set out in our Bus Strategy, particularly around efficiency and connectivity improvements, as well as progress on multi-operator ticketing, bus priority measures and improvement of interchanges. For the foreseeable future the bus system will need to work on the basis of co-ordination, co- operation and partnership. Centralised response, localised recovery The Mayor of the West of England has established a regional recovery taskforce, made up of a cross-section of our region’s economy, to drive our planning. The taskforce will consider how we can use the region’s strengths in innovation and collaboration, and our highly-skilled workforce, to accelerate our region’s economic renewal. It brings together employers, innovators, educators, trade unions and community champions to identify the challenges and opportunities that businesses and workers across the region are facing. By building this understanding of the complexities of the local situation through local contacts, we will be able to better design and target the support that is needed. There is a real opportunity through the recovery phase to embed the role of devolved economic decision making in England. We would like to see a public sector response which works in partnership across multiple levels of government; with central government action on those areas only it can influence (e.g. tax), and setting a broad framework, aligned to regional recovery plans designed and led by Combined Authorities. These regional plans will be developed with public and private sector partners in the Combined Authority regions to stimulate the economy in a way that best responds to locally identified challenges and opportunities, and should draw on devolved, flexible, locally-controlled funding streams (e.g. a Covid-19 Recovery Fund). This action will need support from central Government, and close partnership between Combined Authorities and all government departments, recognising the insight, levers, capacity and capability that exists in devolved Combined Authorities. This approach presents the opportunity to deliver an economic recovery which also fulfils the Government’s policy objective of levelling-up regional economies. The economic stimulus provided by improving infrastructure should be a considerable part of economic recovery, using the opportunity to accelerate the timescale for existing plans already underway. The Mayor of the West of England has already stated a preference for using the funding provided by the Department for Transport to improve cycling and walking in the wake of the pandemic to expedite existing plans to improve cycling and walking infrastructure in the region. Likewise, we continue to press forward with our plans for the new MetroWest rail network, including re-opening the line to Portishead, and Government’s help to accelerate this work would not only bring additional capacity to the public transport network but will also provide a short-term economic boost through the construction phase. As well as action to stimulate the economy, the need for close partnership also applies to the government’s approach to easing (and any potential re-introduction) of the lockdown. Meaningful engagement with local areas will ensure essential preparatory actions can be taken to support safe and efficient reopening (e.g. ensuring sufficient transport capacity is available). Advance notice of government’s future intentions to ease lockdown and stimulate the economy are welcomed, and indeed essential to support planning. Through enhanced partnership working between central, regional and local tiers of government, we can best support our places, our people and our businesses to emerge from the crisis in ways that are safe, sustainable and resilient.

Appendix: West of England aerospace sector report.

June 2020