Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 4 November 2013
Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Contents
1. Introduction ...... 1 2. EU Structural & Investment Fund Strategies ...... 4 3. The LCEGS sector in the North East ...... 11 4. The basis for building competitive advantage ...... 22 5. Wider themes influencing direction and content ...... 28 6. Initial thoughts on possible priorities for support ...... 35 7. Summary of key themes and next steps ...... 40
Annex A: Study Approach ...... A-1 Annex B: Low Carbon Core Growth Sector ...... B-1 Annex C: A&RCC Sector Growth Projections ...... C-1 Annex D: Workshop Details ...... D-1 Annex E: Consultees ...... E-1
Contact: Sam Cammiss Tel: 0161 475 2115 email: [email protected]
Approved by: Richard Hindle Date: 04/11/2013 Director
www.sqw.co.uk Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 1. Introduction
1.1 This report details findings of the Sustainable Growth Study, commissioned by the North East LEP (NELEP) and delivered by SQW Ltd between June and September 2013.
Terms of Reference
1.2 This study is part of the evidence base informing NELEP’s EU Structural and Investment Fund (2014-20) strategy1. The focus on sustainability reflects NELEP’s use of the ‘smart’, ‘sustainable’, and ‘inclusive’ growth objective of the European Growth Strategy2 to guide commissioning of the evidence base. Other studies have focused on smart and inclusive growth.
Objectives
1.3 At the outset, the study was charged with answering five critical questions, they were:
What are the key areas of potential low carbon growth present in the NELEP area and how do they link to existing and emerging regional strategic sites?
What opportunities are there for small and medium-sized enterprises (SMEs) in the NELEP area in relation to low-carbon growth and what challenges exist?
Where are the highest potential supply chain opportunities for local SMEs in low carbon industries?
What support is required to enable SMEs to access these opportunities?
What infrastructure is required to maximise the opportunities from the low carbon economy?
Approach, findings and limitations
1.4 This research study incorporates the findings from: a policy and literature review, consultations with key stakeholders identified with NELEP at the study’s outset (including follow-up with contacts identified by these stakeholders), and a final stakeholder discussion workshop. Findings and outcomes of each element are referenced throughout this report.
1.5 Alongside the NELEP brief, guidance for European Structural and Investment Fund strategies published by Central Government in July 2013 have influenced the study’s line of inquiry. The influence of the latter is most apparent in the broadening of the focus: incorporating treatment of potential adaptation and evolution in existing sectors, and sustainability in the round, alongside a detailed look at ‘low carbon sectors’.
1 NB: proposals are to be issued to Central Government in autumn 2013 2 aka. ‘Europe 2020’
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1.6 Recognition that the sustainability agenda has permeated all sectors of the economy was a key theme of the study, and this has clear implications for business opportunities and economic growth in the North East.
1.7 Input from stakeholders representing public, private, and third sectors has been critical to the study (the list of consultees is detailed in Annex E). However, this study has only sought to engage representatives of key sectors and has not completed a wide consultation with the business base. If the findings set out at the end of this report are to be taken further, we recommend that the pointers to possible priorities and actions are tested further, directly with businesses, as well as being brought together with the studies on smart and inclusive growth.
1.8 Annex A presents an overview of the approach, as determined at the study’s inception.
Sustainable Growth
1.9 Within the European Growth Strategy, ‘Europe 2020’, ‘Sustainable Growth’ is defined as3:
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.
1.10 In this form, the ‘Sustainable Growth’ theme integrates the EU’s long-standing ’20-20-20’ targets4.
Rationale
1.11 The prioritisation of ‘Sustainable Growth’ is driven by multiple factors, familiar from much- visited ‘climate change’, ‘resource depletion’, and ‘environmental protection’ debates, including:
Risk to energy security inherent in the dependence on oil, gas, and coal resources
3 EC. 2013. ‘Sustainable growth - for a resource efficient, greener and more competitive economy’. http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/priorities/sustainable-growth/index_en.htm 4 20/20/20 targets are: 1) Reducing greenhouse gas emissions by 20% compared to 1990 levels by 2020, 2) Increasing the share of renewables in final energy consumption to 20% by 2020, and 3) Moving towards a 20% increase in energy efficiency by 2020.
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Environmental degradation and polluting effect of high-emission energy production and industry
Intensifying competition for natural resources
Socioeconomic threat of anthropogenic climate change
Leverage of ‘green solutions’ to improve EU productivity and competitiveness.
Delivery
1.12 Two flagship initiatives sit at the heart of the EU ‘Sustainable Growth’ theme, they are:
Resource-efficient Europe – focussed on progressive decoupling of economic growth from resource and energy use. The initiative includes objectives targeting:
Reduction in CO2 emissions
Promotion of energy security
Reduction of resource intensity (consumption and production).
An industrial policy for the globalisation era – focussed on supporting businesses, particularly SMEs, to respond to the challenges and opportunities of globalisation, economic downturn, and low carbon transition.
Report Structure
1.13 This report is structured as follows:
Chapter 2 reviews the latest guidance on EU Structural and Investment Fund strategies, concentrating on content relevant to the EU ‘Sustainable Growth’ theme
Chapter 3 introduces the North East LEP area’s Low Carbon Environmental Technologies, Goods, and Services (LCEGS) sector
Chapter 4 profiles competitive advantage in the North East LEP area’s Low Carbon Environmental Technologies, Goods, and Services (LCEGS) market
Chapter 5 highlights wider development themes in complement to the treatment of ‘competitive advantage’
Chapter 6 reviews feedback on support needs for enhanced ‘Sustainable Growth’ from stakeholders consulted during the study
Chapter 7 overlays the findings of Chapters 3 and 4 upon the framework for EU Structural and Investment Fund strategies reviewed in Chapter 2.
1.14 Annexes to this report are referenced throughout.
3 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 2. EU Structural & Investment Fund Strategies
2.1 In April 2013, and then in more detailed form in July, LEPs were issued with guidance for the development of EU Structural and Investment Fund Strategies5. The latest guidance provides the framework which shaped this study’s approach.
Thematic Objectives
2.2 In headline terms, UK Government policy priorities for the 2014-2020 Structural and Investment Fund Strategies are:
…innovation/research and development, support for micro, small and medium sized enterprises, the low carbon economy, skills, employment and social inclusion
2.3 These headline priorities translate into ten thematic objectives (see Table 2-1):
Table 2-1: Thematic Objectives for the 2014-2020 Structural and Investment Funds
1 Strengthening Research, Technological Development & Innovation
2 Enhancing access to, and use and quality of, Information and Communication Technologies
3 Enhancing the Competitiveness of Small and Medium Enterprises
4 Supporting the Shift towards a Low Carbon Economy in All Sectors
5 Promoting Climate Change Adaptation, Risk Prevention and Management
6 Protecting the Environment and Promoting Resource Efficiency
7 Promoting Sustainable Transport and Removing Bottlenecks in Key Network Infrastructures
8 Promoting Employment and Supporting Labour Mobility
9 Promoting Social Inclusion and Combating Poverty
10 Investing in Education, Skills and Lifelong Learning Source: UK Government, 2013
2.4 Three of these thematic objectives chime with the Europe 2020 ‘Sustainable Growth’ agenda (as introduced in Chapter 1), they are:
Supporting the Shift towards a Low Carbon Economy in All Sectors (Thematic Objective 4)
Promoting Climate Change Adaptation, Risk Prevention and Management (Thematic Objective 5)
Protecting the Environment and Promoting Resource Efficiency (Thematic Objective 6)
2.5 Amongst the three, the ‘Shift towards a Low Carbon Economy in All Sectors’ is emphasised, with LEPs required to allocate at least 15%-20% of ERDF to that thematic objective (the other
5 UK Government. 2013. ‘European Structural and Investment Funds strategies: supplementary guidance to local enterprise partnerships’. www.gov.uk/government/publications/european-structural-and-investment-funds-strategies- supplementary-guidance-to-local-enterprise-partnerships
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two have no minimum allocation). However, commitment to thematic objectives 5 and 6 is bolstered by an underlying requirement to respect the EU commitment to ‘sustainable development’6, guidance states:
EU law requires programmes to promote environmental sustainability. Local Enterprise Partnerships will have to include sustainable development principles into their proposals and framework for investment decisions. Strategies should show how Local Enterprise Partnerships intend to promote environmental protection requirements, resource efficiency, climate change mitigation and adaptation, disaster resilience and risk prevention and management in the selection of operations. Appropriate partners will need to form part of these discussions.
2.6 This commitment to ‘sustainable development’ indicates the pervasive quality of the sustainable growth agenda (i.e. it is not simply restricted to thematic objectives4, 5 and 6).
Smart Specialisation
2.7 Alongside specific guidance pertaining to ‘Sustainable Growth’, the EU Structural and Infrastructure Fund strategy must reflect the EC’s ‘Smart Specialisation (RIS3)’ agenda7:
Smart specialisation is a new innovation policy concept designed to promote the efficient and effective use of public investment in research. Its goal is to boost regional innovation in order to achieve economic growth and prosperity, by enabling regions to focus on their strengths. Smart specialisation understands that spreading investment too thinly across several frontier technology fields risks limiting the impact in any one area.
2.8 The implication of this agenda is that area strategies featuring an innovation aspect must follow ‘The Four Cs of Smart Specialisation’, which are:
(Tough) Choices and Critical mass: limited number of priorities on the basis of own strengths and international specialisation – avoid duplication and fragmentation in the European Research Area – concentrate funding sources ensuring more effective budgetary management
Competitive Advantage: mobilise talent by matching RTD + I capacities and business needs through an entrepreneurial discovery process
Connectivity and Clusters: develop world class clusters and provide arenas for related variety/cross-sector links internally in the region and externally, which drive specialised technological diversification – match what you have with what the rest of the world has
Collaborative Leadership: efficient innovation systems as a collective endeavour based on public-private partnership (quadruple helix) – experimental platform to give voice to unusual suspects.
6 UK Government. 2013. ‘European Structural and Investment Fund strategies: preliminary guidance to local enterprise partnerships’. www.gov.uk/government/publications/development-of-eu-structural-and-investment-fund-strategies- preliminary-guidance-to-local-enterprise-partnerships 7 EC. 2013. ‘Smart specialisation’. http://ec.europa.eu/research/regions/index_en.cfm?pg=smart_specialisation&lg=en
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Framework for European Growth Programme Priorities
2.9 As discussed above, the detail of EU Structural & Investment Fund strategy guidance has developed over the April to July 2013 period, most recently, a framework for the treatment of each thematic objective by LEPs has been provided.
2.10 Table 2-2 provides a summary of the ERDF-component of the framework for thematic objectives 4, 5 and 6 (the ‘Sustainable Growth’ objectives).
2.11 The core architecture of ‘thematic objective’ and ‘EU growth programme framework priorities’ are therefore used to frame the opportunities, challenges, and support needs identified during the research.
6 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Table 2-2: Framework for European Growth Programme Priorities: Background Analysis (2013) Thematic Objective EU Growth Programme Framework Illustrative ERDF Activities Target ERDF Results priorities 4 Supporting the Shift Build the market in low carbon Adoption of domestic energy efficiency and low carbon construction An increase in the energy efficiency towards a Low environmental technologies, goods techniques, including ultra-low carbon exemplar demonstrator buildings of companies, buildings and Carbon Economy in and services Adoption of low carbon technologies to build the market in the LCEGS transport All Sectors sector supply chain (including support to SMEs to deploy local carbon An increase in companies deploying solutions and support to diversify technologies from one sector to low carbon practices, processes, another) services or products. Assist the market to develop, design and manufacture materials, goods and services with embedded low carbon technologies Deployment of localised Carbon Capture and Utilisation, Energy Storage and Waste to Energy projects and infrastructure Support business to engage in knowledge transfer with HEIs and FEIs to encourage commercialisation of Low Carbon technologies.
Non domestic low carbon Energy efficiency in enterprises including industrial processes, designing technologies and energy efficiency out waste, recovery of ‘waste’ heat energy and CHP Moving to renewable and low carbon fuels to generate heat and power Actions aligned to the Government’s Waste Prevention Programme which drive low carbon innovation in relation to waste and re-use Building retrofit and energy efficiency especially whole building solutions exemplifying next phase technologies which are near to market.
Whole place low carbon solutions Whole place low carbon initiatives such as smart cities including low carbon transport, urban design/ land use, energy efficiency, low carbon energy, smart meter/ smart grid programmes, waste infrastructure and demand management Decentralised and off grid renewable energy schemes such as district heating & cooling networks, deep geothermal heat, renewable heat, CHP, micro-generation, biomass Resilient energy infrastructure Green and blue infrastructure to reduce whole place energy requirements ICT applications that contribute to reducing carbon emissions and energy efficiency Low carbon modal shift/ smarter choices, smart systems, electric/ ultra- low carbon vehicle infrastructure and supply chain development Low Carbon financial instruments to deliver whole place solutions.
7 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Thematic Objective EU Growth Programme Framework Illustrative ERDF Activities Target ERDF Results priorities Innovation and adoption of low carbon R&D, innovation and supply chain development for low carbon technologies technologies and materials (including small scale pilot programmes that test the market with new low carbon solutions) Development of technology centres of excellence, manufacturing clusters and the development of appropriate test facilities and deployment infrastructure Demonstration and deployment of renewable technologies in the UK renewable energy roadmap (onshore wind, offshore wind, marine energy, biomass electricity and heat, ground and air source heat pumps and renewable transport) Development of mitigation related adaptation technologies, such as cooling, and low carbon water management Research, development, demonstration and adoption of low carbon vehicles and fuels Support business to engage in knowledge transfer with HEIs and FEIs to encourage commercialisation of Low Carbon technologies.
5 Promoting Climate Enable economic development Investment in aspects of emerging local authority Flood Risk Management Improving the economic viability of Change Adaptation, through investment in flood and Plans (including shoreline and catchment management actions) that deliver areas through infrastructure Risk Prevention and coastal risk management emerging local Economic Strategies, Local Plans and appropriate investments. Management developments that stimulate sustainable growth for communities affected by increasing flood and coastal risks. Support innovative approaches to management of coastal squeeze that: Maximise sustainable growth for local coastal communities and the tourism economy Mitigate harbour development impacts Deliver flood and coastal risk management as well as habitat and place- making outcomes Support natural process driven and community-led initiatives that address coastal and surface water flood risk in rural, coastal and urban areas that are most in need of environmental regeneration to deliver sustainable growth. Sponsor knowledge transfer and inter-regional co-operation initiatives between communities who are at increasing flood and coastal risk. Devise an investment programme to deliver sustainable economic futures for communities at risk that complement and match FCRM capital programme (which focus on protection of existing households, infra-structure and businesses).
8 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Thematic Objective EU Growth Programme Framework Illustrative ERDF Activities Target ERDF Results priorities 6 Protecting the Investments in Green and Blue Investments in Green Infrastructure (which includes freshwater habitats), as Improving the economic viability of Environment and infrastructure and actions that support part of integrated actions for sustainable development to support better areas through infrastructure Promoting Resource the provision of ecosystem services places for people to live, work and do business, helping to secure: investments including Green Efficiency on which businesses and The rehabilitation of land and regeneration of brownfield sites Infrastructure communities depend to increase local New and enhanced recreational routes and infrastructure that attract An increase in companies deploying natural capital and support low carbon practices, processes, sustainable economic growth business through their contribution to coherent and resilient ecological networks. For example restored and safeguarded rivers, estuaries and services or products. coasts, and terrestrial habitats with improved ecological status, improved air quality, and economic value to an area.
Investment in the uptake of innovative Potential exchange of new and existing solutions for water quality and technologies and resource efficiency quantity issues between users and other regions sharing these problems measures to increase environmental Investment to support regional assessment, networking and local water protection, resilience and resource and materials use planning for SMEs in areas of resource performance of businesses and stress, e.g. water where supply exceeds demand. This could generate communities export, match-making, exchange and reuse of materials and licenses and uptake of innovative approaches Develop and support materials reprocessing sector capacity in England. Also investment in the uptake of new products. Market analysis to identify growth opportunity areas Increase awareness of waste as a resource, novel and innovative uses including the opportunity of recycling to enable cost savings Sponsor regional knowledge transfer hubs in regions with key environmental challenges such as high flood or coastal erosion risk or water quality issues to develop innovative solutions that maximise sustainable outcomes to local environmental challenges. Source: UK Government, 2013
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Implications
2.12 The guidance provides a strong steer to this study, specifically, the structure and forms of intervention are subject to significant prescription. In this context, a key task for this study is to inform the targeting of this framework.
2.13 Critically, the framework indicates a need to develop the strategy on two fronts:
Interventions focussed on developing the market in low carbon environmental technologies, goods, and services, including support for supply chains and consumers, with a focus on exploiting areas of competitive advantage
Interventions focussed on resilience, preparedness, and adaptation in the wider economy beyond the low carbon environmental technologies, goods, and services market.
2.14 The discussion of opportunities and challenges in the following Chapters follow this structure.
10 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 3. The LCEGS sector in the North East
3.1 An overview assessment of the Low Carbon Environmental Technologies, Goods, and Services (LCEGS) sector in the North East provides a foundation for subsequent assessments of strengths, opportunities, and support needs.
3.2 The LCEGS sector has proved difficult to characterise statistically as the national system used for industrial classification does not readily enable its analysis by its component markets, technologies, applications, and skills. As a result, alternative approaches to mapping the sector have emerged, this section reviews the findings of two such approaches.
kMatrix LCEGS Analysis
3.3 In 2008, BIS (then BERR) commissioned Innovas Ltd to undertake a market assessment of the UK LCEGS sector (resulting in 4 annual updates in the period 2007/08 to 2010/11)8. The analysis was performed at the level of ‘NUTS1’ (12 UK regions)9, adopting a definition of the LCEGS sector outlined in Table 3-1:
Table 3-1: Definition of the UK LCEGS sector Environmental Renewable Energy Low Carbon Air Pollution Biomass Additional Energy Sources Contaminated Land Geothermal Alternative Fuel (Vehicle) Environmental Consultancy Hydro Alternative Fuels Environmental Monitoring Photovoltaic Building Technologies Marine Pollution Control Wave & Tidal Carbon Capture & Storage Noise & Vibration Control Wind Carbon Finance Recovery & Recycling Renewable Consulting Nuclear Power Waste Management Energy Management Water Supply & Waste Water Treatment Source: BIS/Innovas LCEGS Analysis
Relative Performance
3.4 The North East LCEGS sector represents a larger proportion of the UK Low Carbon sector than it does Environmental and Renewable Energy sectors (see Table 3-2):
Table 3-2: NE Region LCEGS as % of UK (2010/11) LCEGS Sub-Sector Total Sales (£m) Total Companies Total Employment Environmental 2.77 2.42 3.16
Low Carbon 4.78 4.92 4.92
Renewable Energy 2.16 2.27 2.40 Source: BIS 2012
8 BIS. 2011. ‘Market Data’. http://webarchive.nationalarchives.gov.uk/+/http://www.bis.gov.uk/policies/business- sectors/green-economy/market-intelligence/market-data 9 UK NUTS1 Regions – North East, North West, Yorkshire and The Humber, East Midlands, West Midlands, East of England, London, South East, South West, Scotland, Wales, and Northern Ireland.
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3.5 Comparison of North East and UK LCEGS sector profiles reveals a degree of consistency in the relative weight of sector segments (see Table 3-3):
Table 3-3: Levels of concentration: North East LCEGS sector profile compared with UK LCEGS profile (2010/11) LCEGS Segment NE% minus UK % Sales Employment Number of (£m) Companies Air Pollution 0.4 0.6 -0.5
Contaminated Land Reclamation & Remediation 0.3 0.5 -0.2
Environmental Consultancy & Related Services -0.2 0.0 -0.6
Environmental Monitoring, Instrumentation & Analysis 0.0 0.0 -0.1
Marine Pollution Control 0.0 0.0 -0.1
Noise & Vibration Control 0.0 0.1 -0.2
Recovery & Recycling -1.4 -1.2 -1.6
Waste Management -1.7 -1.5 -1.3
Water Supply & Waste Water Treatment -3.4 -3.6 -3.4
Additional Energy Sources 0.5 0.3 0.4
Alternative Fuel (Vehicle) 8.2 6.6 9.4
Alternative Fuels 3.1 0.6 3.6
Nuclear Power -0.2 -0.5 -0.1
Building Technologies 2.6 2.9 2.3
Carbon Capture & Storage 0.2 0.5 0.0
Carbon Finance -5.0 -2.5 -3.7
Energy Management 1.2 1.4 0.7
Biomass -1.2 -1.1 -1.6
Geothermal -1.0 -1.1 -0.6
Hydro -0.1 -0.1 -0.1
Photovoltaic 0.1 0.0 0.6
Renewable Consulting -0.1 0.0 0.1
Wave & Tidal 0.0 0.0 -0.1
Wind -2.4 -2.0 -3.0 Source: BIS/Innovas LCEGS Analysis
3.6 The analysis reveals that Building Technologies, Alternative Fuel (Vehicle), and Alternative Fuels segments are relatively large in the North East compared with the UK average. Conversely, Water Supply & Waste Water Treatment, Wind, and Carbon Finance are relatively small in the North East, in terms of their share of the LCEGS sector.
3.7 Finally, it is important to highlight that this data is framed at the North East regional level, incorporating activity in Tees Valley. The inclusion of the Tees Valley process cluster
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potentially explains the relatively strong performance of the region in Alternative Fuel (Vehicle), and Alternative Fuel, and Carbon Capture and Storage segments.
North East Sector Size & Shape
3.8 In headline terms, the Innovas estimate for the North East region reveals the sector to be composed of 2,033 companies, employing 38,793, with sales of £4,831m in 2010/11 (see Table 3-4):
Table 3-4: North East LCEGS Sector (2010/11) LCEGS Segment Sales Employment Number of (£m) Companies Air Pollution 59.7 613 9
Contaminated Land Reclamation & Remediation 55.3 551 14
Environmental Consultancy & Related Services 21.4 292 3
Environmental Monitoring, Instrumentation & Analysis 5.9 65 0
Marine Pollution Control 7 60 0
Noise & Vibration Control 7.7 119 0
Recovery & Recycling 217.2 1,864 91
Waste Management 125.5 1,252 64
Water Supply & Waste Water Treatment 168.3 1,623 79
Environmental Total 668 6,439 260
Additional Energy Sources 76 588 32
Alternative Fuel (Vehicle) 926.4 6,874 430
Alternative Fuels 863.5 6,166 380
Nuclear Power 143.3 1,301 69
Building Technologies 709.1 5,758 295
Carbon Capture & Storage 32.4 386 10
Carbon Finance 8.9 44 2
Energy Management 168.4 1,506 63
Low Carbon Total 2,928 22,623 1,281
Biomass 167.9 1,612 60
Geothermal 375.1 2,942 163
Hydro 15.6 186 8
Photovoltaic 217.2 1,674 95
Renewable Consulting 17.1 183 12
Wave & Tidal 3.9 28 0
Wind 438.3 3,106 154
Renewable Energy Total 1,235 9,731 492
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LCEGS Total 4,831 38,793 2,033 Source: BIS/Innovas LCEGS Analysis
3.9 The 2010/11 analysis indicates major contributors to the North East sector totals include:
Alternative Fuel (Vehicle) Recovery and Recycling
Alternative Fuels Geothermal
Building Technologies Wind
3.10 This profile of strength in the regional sector is extended by significant contributions from Energy Management, Biomass, Photovoltaic, Nuclear, and Water Supply and Waste Water Treatment segments. Again, we must consider how these clusters are distributed between the North East region’s LEP-areas, with the Tees Valley process cluster clearly playing a role in the Fuels segment strengths and the Hartlepool Power Station appearing to account for Nuclear-segment capabilities.
Growth Pattern
3.11 Understanding of the North East’s LCEGS sector can be further developed through an assessment of growth in the 2007/08 to 2010/11 period (see Table 3-5):
Table 3-5: Percentage Change North East LCEGS Sector Growth (2007/08 to 2010/11) LCEGS Segment % Growth (2007/08 to 2010/11) Sales Employment Number of Companies Air Pollution 6.5 -0.3 0.0
Contaminated Land Reclamation & Remediation 8.8 6.8 -6.7
Environmental Consultancy & Related Services 10.5 0.7 0.0
Environmental Monitoring, Instrumentation & Analysis 10.7 0.0 0.0
Marine Pollution Control 11.5 1.7 0.0
Noise & Vibration Control 11.0 3.5 0.0
Recovery & Recycling 10.2 2.5 3.4
Waste Management 8.0 5.5 -1.5
Water Supply & Waste Water Treatment 5.1 -0.4 1.3
Environmental Total 8.0 2.3 0.8
Additional Energy Sources 10.7 3.3 0.0
Alternative Fuel (Vehicle) 6.0 -4.3 -1.8
Alternative Fuels 24.7 7.7 6.4
Nuclear Power 4.2 2.1 -5.5
Building Technologies 14.1 4.2 -1.0
Carbon Capture & Storage 9.6 9.7 0.0
Carbon Finance 24.8 18.9 0.0
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Energy Management 10.1 6.4 1.6
Low Carbon Total 13.3 2.4 0.7
Biomass 14.7 3.7 0.0
Geothermal 16.2 4.5 0.0
Hydro 8.9 3.3 0.0
Photovoltaic 18.8 3.2 2.2
Renewable Consulting 7.3 3.4 0.0
Wave & Tidal 15.4 100.0 0.0
Wind 21.2 2.4 -6.7
Renewable Energy Total 18.0 3.6 -1.8
LCEGS Total 13.7 2.7 0.1 Source: BIS/Innovas LCEGS Analysis
3.12 Taken as a whole, the sector has shown significant growth in sales during the 2007/08 to 2010/11 period (13.7%), albeit with only limited growth in employment and number of companies (2.7% and 0.1% respectively). This pattern of growth may indicate activity in the region led by businesses based, or with significant activities, outside the region.
3.13 In terms of sales growth, strongly performing sectors include: Wind, Geothermal, Photovoltaic, Geothermal, Wave & Tidal, Carbon Finance, and Alternative Fuels. In part, this profile of growth may reflect a positive influence of regulatory measures incentivising renewable energy installations in the UK during the 2007/08 to 2010/11 period.
BRES Low Carbon (core) Growth Sector Analysis
3.14 A companion to the Innovas LECEGS analysis takes the form of a sector ‘recipe’ applied to the UK Business Register and Employment Survey (BRES). This approach has previously been applied by the Mersey Partnership in 201110 – a ‘recipe’ based on 5-Digit SIC (2007) sector classifications is provided in Annex B of this report.
3.15 In relative terms, the North East contributes a relatively high proportion of national sector employment in:
Manufacture of batteries and accumulators
Manufacture of other electronic and electric wires and cables
Manufacture of bearings, gears, gearing and driving elements
Environmental consulting activities.
3.16 At the level of the North East LEP area, the profile of the ‘Low Carbon (core) Growth Sector’ is outlined in Table 3-6:
10 Low Carbon Liverpool – www.lowcarbonliverpool.com
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Table 3-6: Low Carbon (core) Growth Sector in the North East LEP (2011) SIC(2007) Category North England NE LEP East LEP as % of England Low Carbon (core) Growth Sector Total 31,035 779,822 4.0%
Manufacture of metal structures and parts of structures 2,105 42,514 5.0%
Manufacture of electric motors, generators and 284 13,002 2.2% transformers
Manufacture of electricity distribution and control 1,134 18,196 6.2% apparatus
Manufacture of batteries and accumulators 414 978 42.3%
Manufacture of other electronic and electric wires and 1,093 6,542 16.7% cables
Manufacture of engines and turbines, except aircraft, 1,159 15,488 7.5% vehicle and cycle engines
Manufacture of fluid power equipment 203 5,926 3.4%
Manufacture of pumps 260 10,387 2.5%
Manufacture of compressors 3 3,210 0.1%
Manufacture of other taps and valves 812 8,590 9.5%
Manufacture of bearings, gears, gearing and driving 1,054 8,525 12.4% elements
Manufacture of non-domestic cooling and ventilation 1,747 19,619 8.9% equipment
Remediation activities and other waste management 28 3,020 0.9% services
Engineering design activities for industrial process and 886 38,512 2.3% production
Engineering related scientific and technical consulting 1,334 48,356 2.8% activities
Other engineering activities (not including engineering 5,304 178,757 3.0% design for industrial process and production or engineering related scientific and technical consulting activities)
Other research and experimental development on natural 2,906 98,167 3.0% sciences and engineering
Environmental consulting activities 1,745 4,980 35.0%
Production of electricity 1,732 18,524 9.4%
Transmission of electricity 19 3,429 0.6%
Distribution of electricity 2,529 31,398 8.1%
Construction of utility projects for electricity and 30 8,780 0.3% telecommunications
Construction of other civil engineering projects nec 2,171 98,876 2.2%
Agents involved in the sale of fuels, ores, metals and 167 3,077 5.4% industrial chemicals
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SIC(2007) Category North England NE LEP East LEP as % of England Wholesale of fuels and related products (other than 79 7,530 1.0% petroleum and petroleum products)
Collection of non-hazardous waste 737 57,231 1.3%
Treatment and disposal of non-hazardous waste 1,100 26,209 4.2% Source: BRES 2013
3.17 The data indicates significant concentration in the North East in the following sub-sectors:
Manufacture of metal structures and parts of structures
Other engineering activities (not including engineering design for industrial process and production or engineering related scientific and technical consulting activities)
Other research and experimental development on natural sciences and engineering
Distribution of electricity
Construction of other civil engineering projects.
3.18 Again, this analysis provides some insight into potential exploitation of relative strength (in terms of the largest sectors in the NE LEP area and those particularly well represented in terms of their contribution to the UK sector).
Geographic Distribution
3.19 The geographic distribution of the North East’s ‘Low Carbon (core) Growth Sector’ is outlined in Table 3-7:
Table 3-7: Geographic Distribution of the North East LEP area’s ‘Low Carbon (core) Growth Sector’ (2011) Employment in 2011 % of NELEP Area Total Authority Area All Sectors Low Carbon Sector All Sectors Low Carbon Sector North Eastern LEP 810,000 31,035 100% 100%
County Durham 188,700 7,730 23% 25%
Gateshead 81,500 2,751 10% 9%
Newcastle upon Tyne 202,600 7,542 25% 24%
North Tyneside 60,800 2,612 8% 8%
Northumberland 110,700 3,895 14% 13%
South Tyneside 44,700 1,652 6% 5%
Sunderland 121,000 3,895 15% 13% Source: BRES (2013)
3.20 This analysis indicates that distribution of the ‘Low Carbon (core) Growth Sector’ broadly matches that of employment across all sectors.
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3.21 This simple overview indicates dominant contributions from the Newcastle and Durham business clusters. A more detailed inquiry reveals the top five ‘Low Carbon (core) Growth Sector’ segments in each Authority area (see Table 3-8):
Table 3-8: Top 5 ‘Low Carbon (core) Growth Sector’ segments in each Authority area (2011) Authority Industry Segment Employment Area County Production of electricity 1,676 Durham Other research and experimental development on natural sciences 999 and engineering
Other engineering activities (not including engineering design for 866 industrial process and production or engineering related scientific and technical consulting activities)
Manufacture of non-domestic cooling and ventilation equipment 799
Manufacture of bearings, gears, gearing and driving elements 681
Gateshead Other engineering activities (not including engineering design for 588 industrial process and production or engineering related scientific and technical consulting activities)
Manufacture of metal structures and parts of structures 446
Construction of other civil engineering projects nec 315
Manufacture of non-domestic cooling and ventilation equipment 312
Manufacture of other electronic and electric wires and cables 190
Newcastle Other engineering activities (not including engineering design for 2,030 upon Tyne industrial process and production or engineering related scientific and technical consulting activities)
Environmental consulting activities 1,544
Manufacture of engines and turbines, except aircraft, vehicle and 881 cycle engines
Manufacture of other taps and valves 582
Other research and experimental development on natural sciences 444 and engineering
North Other research and experimental development on natural sciences 790 Tyneside and engineering
Other engineering activities (not including engineering design for 506 industrial process and production or engineering related scientific and technical consulting activities)
Distribution of electricity 282
Agents involved in the sale of fuels, ores, metals and industrial 138 chemicals
Manufacture of batteries and accumulators 131
Northumberl Other engineering activities (not including engineering design for 491 and industrial process and production or engineering related scientific and technical consulting activities)
Manufacture of non-domestic cooling and ventilation equipment 427
Treatment and disposal of non-hazardous waste 412
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Engineering related scientific and technical consulting activities 401
Construction of other civil engineering projects nec 395
South Other engineering activities (not including engineering design for 299 Tyneside industrial process and production or engineering related scientific and technical consulting activities)
Manufacture of electricity distribution and control apparatus 287
Manufacture of engines and turbines, except aircraft, vehicle and 270 cycle engines
Engineering design activities for industrial process and production 154
Construction of other civil engineering projects nec 132
Sunderland Distribution of electricity 2,056
Other engineering activities (not including engineering design for 525 industrial process and production or engineering related scientific and technical consulting activities)
Manufacture of electricity distribution and control apparatus 346
Manufacture of metal structures and parts of structures 328
Construction of other civil engineering projects nec 254 Source: BRES (2013)
3.22 This analysis of geographic distribution of the ‘Low Carbon (core) Growth Sector’ indicates:
A broad distribution of engineering manufacturing capabilities
Concentration of electricity production and distribution capabilities in Sunderland, County Durham, and North Tyneside
Research and development strengths in County Durham, Newcastle upon Tyne, and North Tyneside
Concentration of environmental consultancy capabilities in Newcastle upon Tyne.
Business Directory Analysis
3.23 A final insight into the shape of the North East (region) LCEGS sector is through an analysis of the Thompson Business Directory11. The directory reveals 1,497 firms potentially engaged in LCEGS sectors. Construction firms represent 43% of this group (see Table 3-9):
Table 3-9: Five Largest Sectors in the Thompson Business Directory Search SIC Description Number of Proportion of firms Search Architectural and engineering activities and related technical 417 27.9% consultancy
Other building completion 235 15.7%
General construction of buildings and civil engineering 213 14.2% works
Other building installation 196 13.1%
11 Thompson Business Directory – http://businesssearch.thomsonlocal.com
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SIC Description Number of Proportion of firms Search Manufacture of furnaces and furnace burners 50 3.3% Source: Thomson directory
3.24 A large proportion of the businesses in the directory are SMEs with 50 employees or fewer (1,349 of 1,497). Large enterprises with a substantial employment base in the region include:
British Energy Generation Ltd Saia Burgess (Gateshead) Plc
Bullock Construction Start Energy
Conoco Phillips EDF Energy Ltd
Entec (UK) Ltd Ideal Stelrad Ltd
Fastflow Pipeline Services Ltd Carillion Energy Services
Frank Haslam Milan Co Ltd Nissan Motor Manufacturing (UK) Ltd Myson Radiators Northumbrian Water Ltd Rolls Royce
Summary of Key Points
3.25 This Chapter reviews the shape and size of the LCEGS sector in the NELEP area using two datasets:
3.26 A regional account of the North East’s LCEGS sector indicates regional strength in the following subsectors:
Alternative Fuel (Vehicle) Recovery and Recycling
Alternative Fuels Geothermal
Building Technologies Wind
3.27 This profile of strength in the regional sector is extended by significant contributions from Energy Management, Biomass, Photovoltaic, Nuclear, and Water Supply and Waste Water Treatment. Of these, Building Technologies, Alternative Fuel (Vehicle), and Alternative Fuels account for a relatively larger component of the North East (region) LCEGS sector than the UK average.
3.28 However, this analysis is clouded by the inclusion of activities in the Tees Valley within the data: the Tees Valley Process cluster and Hartlepool Power Station clearly playing a role.
3.29 A complementary assessment, this time restricted to the NELEP area, reveals significant concentrations in metal manufacturing, general engineering and civil engineering construction, with research and experimental development foci in natural sciences and engineering. Distribution of electricity is also a strength in the NELEP area.
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3.30 LCEGS sector capabilities in engineering and manufacturing are broadly distributed across the area. Research and development is found in County Durham, Newcastle upon Tyne, and North Tyneside, and Newcastle is also the focus for environmental consultancy. Electricity production and distribution capabilities are strongly represented in Sunderland, County Durham, and North Tyneside.
3.31 This overview provides a base understanding of the profile of the LCEGS sector for development in subsequent Chapters. However, the following issues must be considered when seeking to apply these findings in subsequent work:
As illustrated by the two datasets considered here, the LCEGS sector is ill-defined. Therefore, multiple perspectives must be employed and no single dataset can be preferred
Datasets tend to force new and emerging sectors into established frameworks for characterising sectors (i.e. SIC2007). As a result, niches may be conflated and insight lost. This may be the case in the conflation of onshore and offshore wind: two sectors with distinct value chains
Many sectors exist in a ‘knife-edge’ condition in which exponential growth is possible, subject to regulation and policy. The offshore wind sector is a particularly significant example in the North East, with Forewind currently pursuing development of 9GW of offshore wind farm projects by 2020 on the Dogger Bank Round 3 Zone (equating to approximately three times the currently installed capacity in the UK)12.
3.32 Therefore, the ‘hard’ data viewpoint is useful, but cannot be considered a definitive vision of the sector.
12 www.forewind.co.uk
21 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 4. The basis for building competitive advantage
4.1 Guidance for EU Structural and Investment Fund strategies highlights investment in the exploitation of competitive advantage in the Low Carbon Environmental Technologies, Goods, and Services (LCEGS) market.
4.2 In order to identify where there might be competitive advantage in LCEGS sectors in the NELEP area, a series of consultations were undertaken with stakeholders. The findings are discussed below.
Underlying Asset Base
Commercial Capabilities
4.3 The analyses of Chapter 3 reveal a breadth and depth of LCEGS capabilities within established sector strengths in the North East LEP area, namely13:
Subsea and offshore engineering (inc. oil and gas)
Power generation and distribution
Construction (commercial, civil, and domestic)
Advanced manufacturing and engineering
Digital technology and software development
Professional and advisory services
4.4 Specialisms in neighbouring LEP areas complement those in the North East, and further enhance LCEGS capabilities and potential: we believe the most significant of these, from a partnership or strategic alignment standpoint, are the:
West Cumbria Energy Innovation programme, incorporating the mooted marine energy test and generating facility, led by Britain’s Energy Coast14
North of England’s nuclear sector15 capability, incorporating the new-nuclear generation projects scheduled for Sellafield, Hartlepool, and Heysham, and the nuclear disposal strengths of Sellafield and Capenhurst (including the ongoing Geological Disposal programme16)
13 North East Independent Economic Review – www.nelep.co.uk/ne-economic-review/ 14 www.britainsenergycoast.co.uk/EXEC-SUM-Marine-Energy-Test-Centre-WC-Feasibility-Study.pdf 15 NIA Members in the NELEP area include: AMEC, Arup, Deloitte, L2 Business Consulting Limited, Parsons Brinckerhoff Limited, Rolls-Royce plc, M+W Group, Redhall Nuclear Ltd, Studsvik (UK) Limited, Assystem UK Ltd, and EDF Energy http://issuu.com/nuclear_industry_association/docs/jobsmap_uk13 16 www.ft.com/cms/s/0/41b0cf18-1bc1-11e3-b678-00144feab7de.html#axzz2jbCzc5kR
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Teesside sustainable processing and sustainable fuels capabilities (the Centre for Process Innovation’s Sustainable Engineering and Anaerobic Energy capabilities17 and the Progressive Energy Carbon Capture and Storage project18 each present opportunities to position the North of England’s inward investment offer)
Humberside offshore energy cluster, including the Able Marine Energy Park19 and Green Port Hull20 projects (each orientated towards the North Sea offshore wind development sites)
Teesside offshore wind investment proposition21.
4.5 These established business bases provide an important local skills-base and supply chain capability for LCEGS sector growth and attraction of inward investment.
Institutional Capabilities
4.6 LCEGS research capabilities are distributed across the North East’s Universities (with a wide array of manufacturing, engineering, industrial design, materials, digital technology, and chemistry specialisms having LCEGS applications).
4.7 Table 4-1 identifies research centres within the University of Newcastle, Durham University , University of Sunderland, and the University of Northumbria with a direct LCEGS sector identity:
Table 4-1: LCEGS-Orientated Research Centres in the North East LEP Area
Institution Research Centre University of Newcastle Institute for Research on Sustainability Newcastle Neptune National Centre for Subsea and Offshore Engineering Newcastle Centre for Railway Research Design, Manufacture and Materials Research Group Gear Technology Centre Centre for Earth Systems Engineering Research (CESER) Global Urban Research Unit (GURU) Centre for Rural Economy (CRE) Newcastle School of Mechanical & Systems Engineering Sir Joseph Swan Centre for Energy Research (SWAN) Centre for Knowledge, Innovation, Technology and enterprise (KITE) Centre for Urban and Regional Development Studies (CURDS)
Durham University Durham Energy Institute Centre for Advanced Instrumentation Climate Impacts Research Centre Centre for Crop Improvement Technology Centre for Economic Growth & Policy Institute for Commercial & Corporate Law Centre for Materials Physics
17 www.uk-cpi.com 18 www.progressive-energy.com 19 www.ableuk.com/sites/port-sites/humber-port/amep/ 20 www.greenporthull.co.uk 21 www.teesvalleyunlimited.gov.uk/media/43909/tees_valley_offshore_wind-full_prospectus_interactive.pdf
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Institution Research Centre Centre for Research into Earth Energy Systems CeREES Centre for Geoenergy Centre in Sustainable Chemical Processes Researching Fracking in Europe (ReFINE) consortium Unconventional Hydrocarbon Research Group
University of Centre for Architecture, Built Environment and Planning Northumbria Built Environment Visualisation Centre (BEVC) Building Information Modelling (BIM) Academy Centre for Design Research Centre for Environmental and Spatial Analysis (CESA) Northumbrian Environmental Training Research Centre (NETREC) Sustainable Cities Research Institute (SCRI) Power and Wind Energy Research Group Environmental Geochemistry and Ecology Group Northumbria Photovoltaics Applications Centre
University of International Centre for Research in Innovation, Sustainability and Sunderland Entrepreneurship Institute for Automotive and Manufacturing Advanced Practice (AMAP) Source: SQW
4.8 This illustrative map of capabilities reveals expertise in key fields, including:
New energy and power technologies
Low carbon, resource efficient engineering
Environmental protection and biodiversity
Sustainability in the built environment
Social dynamics of sustainable growth.
4.9 The forthcoming Research Excellence Framework may provide an objective assessment of ‘excellence’ for these research capabilities. At this time, the funding commitment to each institute or group by institution and research council indicates competitiveness in their proposition.
4.10 Again, this overview indicates a rich talent base that may be invested into an LCEGS sector growth programme (a talent-base that is further extended by connectivity through the N8 research partnership22).
Potential Investment Targets
4.11 Stakeholders highlighted three LCEGS ‘propositions’ comprising commercial, institutional, and infrastructure assets located in the North East LEP area. These were seen as being based on a credible claim to competitive position in a growth market, with clear prospects for future development within the North East.
22 N8 Research Partnership - www.n8research.org.uk
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4.12 Critical to these ‘propositions’, alongside the commercial and institutional capabilities considered above, are a set of innovation actors enabling collaborations between and across supply chains. Examples of these innovation actors include:
Narec
Low Carbon Futures
CPI at NETPark
Newcastle Science City
NOF and Energi Coast
4.13 These examples blend with a wider regional resource that includes the CPI at Wilton and TWI.
4.14 Table 4-2 summarises the nature and components of each proposition:
25 Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Table 4-2: Three Competitive Propositions Proposition Outline Component Assets Commercial Institutional Infrastructure Other Offshore and An innovation infrastructure, business Narec Sir Joseph Swan Centre for Port of Blyth Dogger Bank Marine Energy cluster, and marine engineering Energi Coast Consortium Energy Research Port of Tyne (Crown Estate infrastructure centred on the Round 3) NOF Sector Group Newcastle Institute for Port of Sunderland development, deployment, and Research on Sustainability CORE Status servicing of offshore wind, tidal, and novel marine energy technologies. Durham Energy Institute Neptune National Centre
Ultra-Low An R&D and manufacturing base Zero Carbon Futures Institute for Automotive & Sustainable Sustrans R&D Carbon Vehicles focussed on resource efficiency and Sector cluster incorporating Advanced Manufacturing Manufacturing & Activity (and Transport) novel power technologies for road and OEMs (e.g. Nissan), Practice Renewable rail vehicles. established enterprises (e.g. Newcastle School of Technology Park Smith Electric), and innovative Mechanical & Systems Plugged in Places start-ups (e.g. Hyperdrive Engineering network Technologies) Design and Manufacturing Agility Trains Consortium Research Group Durham Energy Institute Newcastle Institute for Research on Sustainability
Low Carbon Built Research centre and business cluster Narec Distributed Energy Building Information Modelling Domestic and Warm Up North Environment focussed on the management of Low Carbon Construction (BIM) Academy commercial buildings Project energy efficiency, renewable energy, Cluster Built Environment Visualisation stock Customer-Led and environmental performance in the Sector cluster incorporating Centre (BEVC) Northeast Powergrid Network built environment (inc. domestic, Revolution commercial, and infrastructure). CES, Centrica, and innovative Sustainable Cities Research landlords such as Gentoo Institute (CLNR) project NOF Nuclear Sub-Group Newcastle Institute for Lynemouth Power Station Research on Sustainability Durham Energy Institute Source: SQW
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Future Prospects
4.15 The markets associated with three propositions highlighted above are considered by stakeholders to be relatively developed. With regard to future prospects, and potential leadership positions in future markets at an earlier stage of development, stakeholders highlighted three further propositions (see Table 4-3):
Table 4-3: Three Future Propositions Proposition Components Geothermal Energy Sir Joseph Swan Centre for Energy Research Centre for Research into Earth Energy Systems Science Central Geothermal Borehole Project Stublick Fault Zone
Unconventional Gas23 Durham Energy Institute Five-Quarter North Sea Coal Field Researching Fracking in Europe (ReFINE) consortium Unconventional Hydrocarbon Research Group
Carbon Capture and Storage North Sea depleted gas reservoirs Teesside Low Carbon consortia* Source: SQW
4.16 Reflecting their status as ‘prospects’, the commercial side of each proposition is currently underdeveloped relative to the academic dimension.
4.17 Overall, the highlighted ‘potential investment targets’ provide a steer with regards to a profile of ‘Sustainable Growth’ in the North East LEP area that also meets the requirements of the ‘smart specialisation’ agenda. Subsequent Chapters will consider the development of a support framework.
23 NB: Unconventional Gas does concern fossil fuel combustion and the generation of GHGs. Therefore, the technology cannot be considered ‘low carbon’. However, the technology does play a role in the development of a sustainable, secure, and lower carbon energy mix in the UK. For this reason, Unconventional Gas is included within this analysis.
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 5. Wider themes influencing direction and content
5.1 As discussed in Chapter 2, the ‘Sustainable Growth’ agenda is not simply an issue of targeting investment in low carbon technology sectors: it must extend to support sustainable transitions in existing sectors.
5.2 Complementing the preceding discussion of ‘Competitive Advantage’, this section explores these wider development themes. Specifically, reflecting the emphasis of consultations, two aspects of this wider development are highlighted:
Enabling the transition to resource and energy efficiency in sectors and communities
Avoiding the costs of climate change to the regional economy through adaptation.
5.3 These are discussed in turn below:
Enabling the Transition to Resource & Energy Efficiency
5.4 Exponential rises in resource costs, driven by competition for increasingly depleted natural resources (including metals, minerals, fuels, and water), have emerged as a real threat to businesses and economies24. In response, business leaders and governments have sought to reduce exposure to resource markets through ‘reduce, recycle, and reuse’ strategies.
5.5 Bolstering the drive behind resource efficiency encoded in market prices, the UK Government has implemented a series of legislative and fiscal measures including Integrated Pollution Prevention and Control Directive, Packaging Regulations, Producer responsibility requirements (inc. WEEE, RoHS, and ELVs), energy market instruments, and the Landfill Tax.
5.6 Market dynamics and policy drivers combine to present significant challenges and opportunities to those businesses that are successful in limiting their resource exposures through ‘reduce, recycle, and reuse’ behaviours. The EIC’s review of potential benefits highlights the following figures:
There is a great deal of evidence of the opportunities for improved resource efficiency – and the benefits it can bring to businesses. ‘The Resource Security Action Plan: Making the most out of valuable materials’ (DEFRA, 2012) highlights the environmental and economic benefits of resource efficiency actions which demonstrates that there are around £23 billion worth of savings per year available to UK companies through simple measures that would pay back in less than a year, delivering a saving of around 4% on our annual CO2 emissions, and further benefits if we look at longer pay back times.
24 Ecorys. 2012. ‘Mapping resource prices: the past and the future’. European Commission - DG Environment. http://ec.europa.eu/environment/enveco/resource_efficiency/pdf/summary_mapping_resource_prices.pdf
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The Action Plan also indicates potential global savings of between $2.9-$3.7 trillion by 2030 through a range of resource productivity measures, 70% of which would have investment returns of 10% or more per year25.
5.7 Reviews of resource efficiency in the North East indicate an ongoing need to improve the management of resources in the region (and within its sectors and communities)26:
The North East has a poor historical record on recycling and reusing the waste it produces. Total commercial and industrial waste (C&I) in the North East amounted to 2.4m tonnes in 2009 of which only 46.1% was recycled, composted or reused (compared to 52% from across England), the lowest rate of any of English region. The North East also generated 1.18m tonnes of household waste in 2010/11 of which 37% was recycled, reused or composted. This is again poor in comparison to the rest of England where, of the English regions, only London has a worse recycling rate.
5.8 Our, consultees gave a strong steer towards supporting key sectors, such as manufacturing and construction, to reduce exposures to resource markets and regulatory pressures. The aim would be to enhance their competitiveness, through interventions focussed on resource reduction and waste management technologies.
5.9 The context for this is a series of established market failures inhibiting resource efficiency. In 2007, the Commission on Environmental Markets & Economic Performance (BIS) cited behavioural inertia, enforced by lack of skills, understanding, and information, paired with inhibitive upfront costs as the root of market failure in the resource efficiency market27.
5.10 The position was supported by BERR, also in 2007, in a report which observed the following market failures impinging on resource efficiency and the sustainable waste management sectors28:
Environmental costs are not included in the price of the goods or services
Lack of awareness and understanding of costs and benefits of energy and resource efficiency
Lack of tailoring of support offers to different business needs
Risk aversion in the investment behaviour of businesses
Lack of capacity in the environmental services sector to support uptake
Enduring ‘niche’ status of resource efficiency in corporate strategy.
5.11 This account of market failure has also been recognised more recently:
25 EIC. 2012. ‘Driving Resource Efficiency for a Competitive Britain’. www.mrw.co.uk/Journals/2012/07/27/q/z/l/EIC- Resource-Efficiency-Policy-Paper.pdf 26 FOE. 2012. ‘State of the region: North East England’. www.foe.co.uk/resource/briefings/state_of_play_ne_2012.pdf 27 Commission on Environmental Markets and Economic Performance 2007 28 BERR. 2007. ‘Promoting resource efficiency and sustainable waste management’. BSSP Product
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In 2011, reports from the CBI highlighted weakness in the supply29 and demand30 sides of the low carbon sector that were broadly attributed to a change of priorities in government and commerce resulting from austerity and recession.
In its 2011 position paper ‘Roadmap to a Resource Efficient Europe’ Defra cited limitations in the UK access to finance market, particularly in terms of the provision to SMEs and those seeking support to invest in resource efficiency, as a key market failure31.
5.12 These interpretations of the breadth and nature of market failures provide a useful backdrop in considering and beginning to shape options for support in the North East LEP area.
Avoiding the Costs of Climate Change through Adaptation
5.13 Stemming from the Stern Review32, a series of studies have sought to establish the threat and opportunity presented to the North East regional economy by climate change.
5.14 In tandem with the UK Climate Change Risk Assessment (CCRA) 2012, Defra commissioned the Climate Change Partnerships across England to review threats and opportunities from climate change within each area. Table 5-1 reviews the North East analysis33:
Table 5-1: Threats and Opportunities of Climate Change Domain Threats Opportunities Business The main threat to business activity in Development of new adaptation North East England is likely to be products and services. Nearly a flooding associated with intense third of businesses surveyed in rainfall. This will have significant the region believe that climate implications for business transport, adaptation presents opportunities staff availability, increased damage to to their business commercial property and business Encouraging businesses to continuity consider and address longer- Approximately one third of North East term threats presented by climate businesses are already (or planning to change can benefit resilience to a start) incorporating weather/climate variety of other impacts. risks into continuity planning, leaving two thirds potentially exposed A lack of effective adaptation will impede the ability of the North East to realise the economic opportunities presented by climate mitigation and adaptation and is likely to have a detrimental impact on the North East’s unique identity and sense of place We have no clear understanding of potential impacts that may fall outside the UK but impact the regional economy. For example, the impact of
29 CBI. 2011. ‘Colour of growth’. www.cbi.org.uk/business-issues/energy-and-climate-change/ 30 CBI. 2011. ‘Buying into it’. www.cbi.org.uk/media-centre/publications/2011/03/buying-into-it-making-the-consumer- case-for-low-carbon-6/ 31 Defra. 2011. ‘Roadmap to a Resource Efficient Europe’. www.gov.uk/government/uploads/system/uploads/attachment_data/file/69422/resource-efficient-europe.pdf 32 HM Treasury. ‘Stern Review on the Economics of Climate Change’. http://webarchive.nationalarchives.gov.uk/+/http:/www.hm-treasury.gov.uk/sternreview_index.htm 33 ClimateUK. 2012. ‘A Summary of Climate Change Risks for North East England: To coincide with the publication of the UK Climate Change Risk Assessment (CCRA) 2012. www.climatenortheast.com/contentControl/documentControl/North%20East%20LOW%20RES.pdf
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Domain Threats Opportunities climate change on security of supply regarding energy, on external markets affecting import and export conditions, supply chain vulnerabilities, and so on Research indicates possible impacts on the tourism sector resulting from potential damage and degrading of natural and cultural heritage
Buildings & Although the extent of river flooding is It is estimated that a significant Infrastructure unlikely to be considerably wider due proportion (over 50 percent) of to climate change, the frequency of expected climate impacts can be flood events for areas already avoided through cost-effective susceptible is likely to increase. This adaptation. For example, climate- has potentially significant impacts for proofed building and transport, energy and water infrastructure design standards, infrastructure, residential and changes to land management commercial properties and the historic practices and adaptive capacity environment building Increasing frequency of intense rainfall There is significant commercial events is likely to result in surface opportunity presented in the water flooding due to overloading of adaptation response, for instance the drainage systems, particularly in retro-fitting of existing homes and built-up areas commercial properties to improve A significant proportion of existing resilience housing stock was built between 1850 and 1920 to standards unlikely to be suitable for the future climate without intervention. Relatively low house values make such interventions difficult to finance Degradation of our historic assets resulting from increased intensity of rainfall, heave and flooding may adversely impact the tourism industry and lead to increased maintenance costs Maintenance and inspection regimes, particularly of infrastructure assets, may need to be enhanced to minimise damage and disruption
Agriculture Increasing number and severity of Growing season will potentially and forestry extreme rainfall events may lead to soil start earlier, making sowing in erosion, saturation and crop damage spring more viable Natural water sources may become Increased and earlier flush of inadequate for livestock on moors and Spring Grass could have positive uplands impacts on productivity Increased risk of wildfires on moorland, Potential for new and more rough grazing and forest areas tender crops Reduced soil moisture in summer may Potential for better and earlier lead to erosion of soil ripening Potential for increased water stress in Potential for increased outdoor crops and grassland lambing and calving resulting in Wetter winters may delay stock turnout reduced feed and housing costs to avoid structural damage to soils, increasing housing and feed costs Warmer winters may impact on the required germination temperatures affecting cropping potential
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Domain Threats Opportunities Potential requirement for species mix to be adjusted due to changes in rainfall and temperature Source: ClimateUK (2012)
5.15 The analysis emphasises the flood threat to the regional economy, particularly the commercial and domestic assets located close to the region’s coast, estuaries, and river flood-plains. In market terms, opportunities for enterprise will be linked to actions businesses take in limiting their own exposure and the scoping and actions taken to bring adaptive products and services to market.
5.16 Quantification of the potential cost of climate change to the North East is provided by a 2009 study produced by ClimateNE, Arup, and Cambridge Econometrics which concluded that the minimum annual costs of climate change, in the absence of adaptive or mitigating interventions, would be c.£600m per annum by 2050. It is important to note that this estimate includes only the economic damage dealt by flooding (c.£560m) and negative impact on transport and healthcare derived from overheating (c.£31m)34.
5.17 Wider climate change impacts with significant economic impacts that cannot be readily quantified but were also identified by the study. These include:
Increased marine temperatures leading to impacts on marine biodiversity and ecosystem health (e.g. decline in commercial fishery stocks)
Increased average seasonal temperatures leading to impacts on biodiversity (e.g. changes to key upland economic habitats and species)
Increased average seasonal temperatures leading to impacts on land/soil quality (e.g. potential changes to agricultural yields and land productivity)
Increased average seasonal temperatures leading to increased weeds, pests and crop disease (i.e. changes to ecosystem health and resilience)
5.18 Responding to this economic impact, the study estimated a ‘minimum adaptation cost’ of £80m-£100m per annum would be required to avoid the full cost of climate change (chiefly focussed on flood prevention and response measures).
5.19 However, climate change adaptation is not simply a cost, regulatory and economic drivers behind adaptation and mitigation support significant market opportunities. The aforementioned ClimateNE, Arup, Cambridge Econometrics study estimated the adaption market opportunities for key North East sectors (see Table 5-2). The analysis highlighted opportunity for Manufacturing, Utilities, Construction, and Financial and Professional Services.
34 ClimateNE, Arup, CE Econometrics. 2009. ‘The economic implications of climate change: a North East England study’. Summary report
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Table 5-2: Adaptation Market Opportunities in the North East Sector GVA (£m) 2010 2020 Agriculture 0 0
Mining and quarrying 0 0
Manufacturing 58.4 136.3
Utilities (energy and water) 9.8 624.7
Construction 90.8 90.2
Distribution, hotels, and catering 0 0
Transport and communications 0 0
Financial and business services 7.3 8.3
Government and other services 0 0
Total 166.4 859.5 Source: ClimateNE, Arup, and Cambridge Econometrics (2009)
5.20 It was calculated that this equated to an additional 10,000 jobs by 2020 (4,000 of which were projected to be concerned with utilities and renewable power)35.
5.21 Updating and extending that study, BIS analysed ‘Adaptation and Resilience to Climate Change (A&RCC)’ sector opportunities. For the NE, this indicates modest figures focussed on the Construction and Transport sectors (see Table 5-3)36:
Table 5-3: A&RCC Sector – NE (2011/12) A&RCC Sector Sales (£m) Number of Companies Employees Architectural 10 6 88
Climate Change Management 4 1 48
Construction & Retrofit 21 14 207
Enviro Finance 8 3 70
Finance Investment & Insurance 5 4 62
Risk Management & Business Continuity 4 5 38
Sustainable Drainage & Water Management 3 3 27
Transport Infrastructure 12 8 100
Water Irrigation 0 0 1
Total 67 44 641 Source: BIS (2013)
5.22 Despite, its small scale in 2011/12, the A&RCC sector is projected to grow at a high rate to 2020, driven by the regulatory and economic pressures highlighted above. Sector forecasts for the UK are presented in Table 5-4:
35 ClimateNE, Arup, CE Econometrics. 2009. ‘The economic implications of climate change: a North East England study’. Summary report 36 BIS. 2013. ‘Adaptation and Resilience to Climate Change (A&RCC): Report for 2011/12’. JULY 2013
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Table 5-4: A&RCC Sector Growth Forecasts Growth % Growth % Growth % Growth % Growth % Growth % 2012/ 13 2013/ 14 2014/ 15 2015/ 16 2016/ 17 2017/ 18 4.6 5.2 5.4 6.1 7 7.2 Source: BIS (2013)
5.23 Sectors expected to adopt particularly steep growth trajectories include (a more detailed breakdown of growth forecasts is presented in Annex C):
Agriculture Water Irrigation
Industrial Sustainable Drainage & Water Management
Agricultural Risk Management & Business Continuity
Domestic Climate Change Management
Architectural Project Management Services
Manufacture of Retro Fit Engineering Equipment
Suppliers of Temporary Accommodation For Renovation Projects
Supply of Retro Fit Engineering Equipment
Equity Investment Services
Enviro Finance.
5.24 As with the case for resource efficiency, the arguments for, and proposed benefits of, investment in adaptation in the North East are compelling, and constitute a strong case for prioritisation. .
5.25 Overall, this review of ‘wider development themes’ has highlighted critical components of ‘Sustainable Growth’ in the North East LEP area, and pointed towards possible intervention in the broad areas of resilience, preparedness, and adaptation in the wider economy beyond the LCEGS sectors. These possible opportunities, and the associated threats, provide the basis for our initial scoping and thoughts on broad priorities which might form part of LEPs ‘Sustainable Growth’ strategy. These are set out in chapter 6, which follows: as noted, they will need to be tested and refined through a process of business engagement.
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 6. Initial thoughts on possible priorities for support
6.1 Drawing on the preceding analysis, we now consider the specific forms of support which could drive ‘Sustainable Growth’ in the LEP area.
6.2 The Chapter begins with a review of established ‘market failure’ arguments pertaining to ‘Sustainable Growth’ as a starting point for thinking about support needs. This is followed by feedback from the stakeholder workshop, at which we sought to develop a working framework for thinking about support for ‘Sustainable Growth’ in the North East LEP area.
Headline Market Failures
6.3 Established arguments of ‘market failure’ underpinning support interventions focussed on the low carbon economy and sustainable growth include the following elements37:
Table 6-1: The Rationale for Public Sector Intervention in the Low Carbon Economy Failure Explanation Negative The costs resulting from greenhouse gas emissions are not internalised in Externalities economic decision making processes
Positive Spill-overs from new investment in workforce skills, and innovation are not Externalities captured by firms and therefore lead to systemic underinvestment
Information Inefficient markets created where information costs are high. In the case of the Asymmetry and low carbon economy this includes: Uncertainty Uncertainty regarding the benefits from investing in low carbon goods and services from the perspective of innovators and consumers. This is a particular issue when considering the returns to investments which will be in place for an extended time period, and can result in commitment problems Poor information available to consumers regarding the carbon and environmental footprints of alternative consumption decisions Many firms lack the managerial, risk assessment, finance and management capacities required to bring innovations to market Time inconsistent preferences can lead to firms and individual deferring decisions that impose more immediate costs. This is a particular issue here since the rapidly developing nature of low carbon technologies may reduce early adoption as firms and consumer avoid committing to a single technology type High search costs for information may deter change, leading to a sub- optimal rate of adoption for low carbon technologies.
Principal Agent Incomplete information and asymmetries give rise to a set of issues where Issues principals and hired agents may have conflicting interests with respect to change associated with this agenda. Contrasts between the interests of tenants and landlords regarding the installation and use of energy efficient technologies is a readily understandable example of this
Market Power Highly concentrated and uncontested market structures can result in lower output, higher prices and less consumer choice as well as reducing incentives to innovate, to be entrepreneurial, and to adopt new technology. Together these factors may reduce the drive for such organisations to peruse resource efficient behaviours
37 BIS. 2009. ‘Towards a Low Carbon Economy – economic analysis for a low carbon industrial strategy’
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Failure Explanation Institutional and Highlights the potential impacts of other government interventions on these Regulatory markets such as: Failure Specific taxes, customs duties, subsidies and purchasing rules/standards can restrict the free movement of goods, services and capital across international borders, potentially negatively impacting on competition and innovation Planning regimes may be highly restrictive and cause delays to major new infrastructures Confusion caused by frequently changing regulations can impede investment decisions Policy conflicts can create uncertainty and unintended consequences The complexity of a regulatory system can impose significant costs on businesses. Source: BIS 2009
6.4 In 2013, the inhibition of investment in grid-scale low carbon energy technologies, such as offshore wind, by uncertain national regulatory and policy conditions is particularly pronounced: impacting the development of domestic supply chain capabilities38.
6.5 To a great extent, these failures are ‘universal’ and are apparent in stakeholder reviews of the North East ‘Sustainable Growth’ landscape (provided during the consultation phase of this study). As such, this outline provides a useful starting point for focussing intervention.
Workshop Feedback
6.6 A stakeholder workshop held on the 25 July 2013 was used to develop ideas regarding the nature of support required to drive ‘Sustainable Growth’ in the North East LEP area (full details, including a list of those who participated, are provided in Annex C).
6.7 Key outcomes are summarised below.
Sustainable Growth Priorities
6.8 In headline terms, the dominant structure for determining ‘Sustainable Growth’ priorities will be the stated ‘Thematic Objectives’ of the EU Structural and Investment Fund Strategy. Within the 10 objectives, a ‘Core’ and ‘Sustainable Growth’ set can be resolved (see Table 6-2):
Table 6-2: Thematic Objectives of the EU Structural and Investment Fund Strategy ‘Set’ Thematic Objective ‘Core’ 1. Innovation those objectives which must form the 2. ICT major portion of 3. Enhancing the Competitiveness of Small and expenditure Medium Sized Enterprises
‘Sustainable Growth’ 4. Low Carbon those objectives corresponding to the 5. Climate Change Europe 2020 definition 6. Protecting the Environment and Promoting of ‘Sustainable Growth’ Resource Efficiency
38 www.ippr.org/publication/55/11006/pump-up-the-volume-bringing-down-costs-and-increasing-jobs-in-the-offshore- wind-sector
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‘Set’ Thematic Objective 7. Promoting Sustainable Transport and Removing Bottlenecks in Key Network Infrastructures
8. Promoting Employment and Supporting Labour Mobility
9. Promoting Social Inclusion and Combating Poverty
10. Investing in Education, Skills and Lifelong Learning Source: SQW
6.9 Deeper discussion of ‘Sustainable Growth’ priorities highlighted potential components of a framework, these included:
Targeted sector support measures seeking to enable
Adaptation, transition, and resilience (‘future-proofing’) of the North East’s key sectors (inc. Manufacturing, Energy, Engineering, Construction, Process Sectors, Land-Based, and Services sectors)
Development and exploitation of emerging sectors in which the North East has a potential competitive advantage (based on institutional, commercial, or environmental assets)
Leverage of key enabling sector competences to drive development in emerging ‘Sustainable Growth’ sectors (inc. Digital, Process Engineering, Manufacturing, Consultancy, etc).
Parallel investments in workforce skills through the promotion of STEM and Digital skills in the educational system and retraining of sector workforces, leveraging the North East’s specialist FE/HE capability
Influencing the development of underpinning infrastructures in the urban and rural landscape to support adaptation (inc. Energy and Transport systems, together with Land-Use Planning, SUDs, and Flood Defence)
Recognising the role of ecosystem services (provisioning, regulating, and cultural) and green infrastructure in economic development and resilience
Promoting and enabling the mainstreaming of efficiency and adaptation across government, commercial, and community domains.
6.10 Within this framework, specific proposals would be developed under the ‘Smart Specialisation’ agenda, based on the leveraging existing competences and specific competitive advantages in the North East’s commercial and institutional landscape. .
Key Principles
6.11 Key principles to be followed in developing this framework included:
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Focussing investment, avoiding dilution of impact across too great a portfolio of interventions
Securing buy-in to proposals from the business-base in order to ensure proposals are feasible, credible, and answer specific needs
Reconciling the growth frameworks articulated with the North East’s Growth Plan, Independent Review, and EU Structural and Investment Fund Strategy.
Potential Support Interventions
6.12 A wide-ranging discussion of potential support interventions centred on the need to balance targeted sector support with investment in the establishment and update of critical hard and soft infrastructures (workforce skills, networks, power supply, transport, etc). The discussion included the following themes, which are summarised here as an outline support framework for ‘Sustainable Growth’ in the North East LEP area.
Support for collaborative research, development, and deployment projects, uniting commercial and institutional assets in the North East, targeting development on the theme of adaptation in existing sectors and on the development of emerging sector capabilities
Including cross-sector collaborations, fusing existing competences and novel technologies or applications in the context of new market opportunities
Delivery of adaptation and resilience packages to existing sectors, incorporating product/process innovation, business development (technology and markets), and skills/awareness interventions on the theme of ‘Sustainable Growth’
Including support for the ‘future proofing’ of key sectors and its critical components, anchoring key actors in the region and supporting the value chain in updating capabilities and outlooks
Targeted engagement of OEMs and major supply chain actors with the capacity to amplify competitive advantage in emerging ‘Sustainable Growth’ sectors, incorporating inward investment and internationalisation/export programmes
Establishing networks, and network platforms, to help connect sectors and competences (horizontals and verticals), providing opportunities for collaboration, partnership, knowledge-sharing, and market access
Incorporating brokerage of relationships between competences in existing sectors to establish connectivity and critical mass in emerging sectors
Investment in upskilling key workforce components to fuel development of emerging sectors and aid the transition/resilience of existing sectors (incorporating key capabilities including: STEM, digital, and cleantech, low carbon, resource efficiency)
Engaging the North East FE/HE base in targeted workforce development and retraining activity
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Exploring the potential for redeployment of existing competences within emerging sectors
Developing novel models of business-institutional funding for high level qualifications and employment of graduates
Coordination of the ‘non-adaptation’ threat, including the programming of infrastructure updates, such as sustainable transport, power grid development, and land-use planning, together with adaptive interventions (e.g. flood defence)
Development of a coordinated biodiversity offsetting offer from the environment sector to improve habitats, and provide certainty and clarity for businesses when they make investment decisions
Development of a simple, accessible ‘match’ fund or signposting operation, supporting the design and development of bids for EU Structural and Investment Fund support.
6.13 The need for a coordinating broker, working to ensure coherence and connectivity between delivery agents and beneficiaries of the ‘Sustainable Growth’ programme, emerged in discussion as a key requirement. A collectively understood and endorsed strategy will be fundamental.
6.14 Finally, the coordination of physical infrastructure investment and spatial planning emerged as a key theme within the ‘Sustainable Growth’ landscape. The North East LEP has no planning powers and EU Structural and Investment Fund’s infrastructure investment will be limited. However, influence of the governing principles for development in the LEP area to favour ‘Sustainable Growth’ and adaptation may form part of the North East LEP programme.
SME-Focussed Support
6.15 Discussion of approaches to the specific support of SMEs included the following key principles:
Appeals to SMEs must be specific and tailored, a deep understanding of the SME-base, its structure, competences, opportunities, and threats, must inform the development of support packages
The opportunity to reinvest the learning and experience of successful interventions from the 2007-14 programme should be explored
SMEs cannot be expected to specify their support needs in response to a wholly-open agenda: effective design and delivery of adaptation and resilience support packages will require effective communication of rationale and benefit
The development of ‘bidding consortia’ incorporating SME beneficiaries with collaborating support providers presents a potentially effective approach
SME awareness and understanding of the EU Structural and Investment Funds ‘offer’ can be expected to be low: simple, accessible support propositions will be required
Support providers, such as HE institutions, will require collaborative support in developing tailored support offers and connectivity with potential SME beneficiaries.
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership 7. Summary of key themes and next steps
7.1 This study has aimed to inform the NE LEP’s EU Structural and Investment Fund strategy for the ‘Sustainable Growth’ theme. The implications of the findings set out in preceding chapters are summarised below, together with an indicative listing of future direction and priorities in the form of an indicative framework for support.
Key themes
7.2 Based on the market failures and growth opportunities identified earlier in the report, the key themes shaping priorities for further development and intervention in ‘Sustainable Growth’ should be:
Network facilitation – focussing on access to markets, supply chains, expertise, and/or collaborators. Proposed support interventions include forums bridging communities of practice, out-region internationalisation and inward investment programmes, and funding for collaborative projects (e.g. University-business partnerships)
Information and awareness raising – focussing on building understanding and capability on the supply and demand sides of LCEGS markets. priorities are expected to include the stimulation of pro-low carbon, pro-sustainable procurement/purchasing behaviour through the provision of information regarding the availability, capability, and potential business benefit
Access to finance – focussing on the provision of financial support for key projects, including:
Innovative collaborative ‘research, development, and deployment’ projects
Installation of renewable energy or energy efficiency on commercial estates
Installation of medium to large scale renewable energy (inc. onshore wind, anaerobic digestion, solar PV, biomass/CHP, etc)
Innovative new ventures (e.g. start-ups and spin outs from the private sector or University base)
Skills development – incorporating investment in the future workforce, together with capacity building in the existing labour force as stimuli of inward investment and new venture.
7.3 It should be noted that specific projects have not been proposed by consulted stakeholders during this study, potentially indicating the early stage of current thinking regarding the 2014-20 EU Structural and Investment Funds. At this point, a flexible, adaptable framework is required, which can be developed as required and as opportunities permit, within a broader approach including smart specialisation and inclusivity.
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Indicative framework: basis for targeting and prioritising actions
7.4 In Table 7-1, we set out a framework to guide and structure potential ‘Sustainable Growth’ interventions for business support, and associated economic development interventions, in the North East LEP area. This maps directly onto the EU Growth Programme Framework Priorities. As noted at the outset, its further detailing should be guided by NELEP’s emerging strategic priorities and actions, and take place through a process of business consultation and engagement.
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Table 7-1: Indicative Framework – NELEP Sustainable Growth
Headline Objective Focus Support Theme Relevance to EU Growth Programme Framework Priorities To develop market position Support for growth in key emerging Inward Investment: Build the market in low carbon in emerging LCEGS sectors, including: Targeted engagement of global OEMs environmental technologies, goods and sectors for the North East Offshore Wind services based on focussed support Promotion of the North East as a start-up/expansion location in Sustainable Transport emerging LCEGS sectors Non domestic low carbon technologies and for the development and energy efficiency exploitation of competitive Geo-Energy Targeting, approach, and attraction of complementary supply Whole place low carbon solutions advantage within industry Built Environment chain components. and institutions Innovation and adoption of low carbon Carbon Capture and Storage Export Support: technologies. Novel Marine Energy (inc. Tidal Facilitation of out-region connectivity for North Eastern firms. and Algal) Novel Grid-Scale Power Skills: Generation and Distribution Support for the development of LCEGS-relevant skill-sets within technologies existing and future workforces, leveraging FE and HE Low Carbon Vehicles. capabilities. Start-Up and New Enterprise: Development of cluster-specific start-up and new enterprise initiatives, blending industrial, institutional, and business support capabilities.
Innovation and Routes to Market: Development of cluster roadmaps plotting growth prospects and support needs for key sectors Support for the exploitation of near-to-market technologies, leveraging industrial, institutional, and business support capabilities.
Collaborations and Networks: Investments in strategic partnerships between North Eastern and out-region collaborators (inc. businesses and research institutions) Establishment of cluster network groups, spanning public, private, and third sectors, facilitating connectivity within the cluster and access to the cluster for adjacent sectors.
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Headline Objective Focus Support Theme Relevance to EU Growth Programme Framework Priorities To establish, or maintain, Unconventional Gas39 As above: Whole place low carbon solutions market position in sectors (incorporating Coal Gasification Inward Investment with a role in the and Shale Gas) Export Support ‘sustainable energy Traditional Grid-Scale Power solution’ in the UK, Generation and Distribution Skills focussed support for the technologies Start-Up and New Enterprise development and exploitation of competitive Traditional Marine Energy (inc. Innovation and Routes to Market advantage within industry Oil and Gas) Collaborations and Networks and institutions
To support the resilience Support for resilience and transition in Skills: Build the market in low carbon and transition of the North key established sectors, including: Support for the development of LCEGS-relevant skill-sets within environmental technologies, goods and East’s key sectors through Manufacturing existing and future workforces, leveraging FE and HE services process, product, and Offshore and Subsea capabilities. Non domestic low carbon technologies and service innovations energy efficiency responding to the Ports and Logistics Innovation and New Enterprise: challenge and opportunity Whole place low carbon solutions Engineering Development of technology and market innovation focussed on: of low carbon regulation, Innovation and adoption of low carbon resource depletion, Construction Emerging LCEGS markets and applications technologies. environmental degradation, Services Resource efficiency and climate change Land Based. Regulatory and supply chain compliance Adaptation and resilience (specific to climate change, resource depletion, and ‘green’ regulation). Development of sector development roadmaps matching core competences in established sectors to potential opportunities in emerging LCEGS sectors.
Networks and Routes to Market: Investment in cross-sector partnerships matching competences in established sectors with novel LCEGS applications Establishment of network groups facilitating connectivity with LCEGS clusters.
To influence the Promotion of future-proofed Adaptation and Resilience: Investments in Green and Blue development of infrastructure investments on the Facilitation of coordinated approach to infrastructure updates infrastructure and actions that support the infrastructure – transport, following themes: focussed on minimising the costs of climate change, resource provision of ecosystem services on which energy, and businesses and communities depend to
39 NB: Unconventional Gas does concern fossil fuel combustion and the generation of GHGs. Therefore, the technology cannot be considered ‘low carbon’. However, the technology does play a role in the development of a sustainable, secure, and lower carbon energy mix in the UK. For this reason, Unconventional Gas is included within this analysis. 43
Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Headline Objective Focus Support Theme Relevance to EU Growth Programme Framework Priorities accommodation – to Sustainable Transport depletion, and environmental degradation on platforms critical increase local natural capital and support maximise the North East’s Energy Supply to the North East economy sustainable economic growth LCEGS domestic market, Flood Management Investment in decentralised and off grid renewable energy Enable economic development through minimise the economic schemes such as district heating & cooling networks, deep investment in flood and coastal risk impact of climate change, Energy Performance of the Built geothermal heat, renewable heat, CHP, micro-generation, management. and support the transition Environment biomass to low impact, resource Ecosystem Services efficient urban and rural Support for novel energy management systems for commercial systems Land-Use Planning and domestic buildings, local grids, and transport infrastructure Land Management. Support for implementation of coastal and river-basin flood risk management programmes (inc. investment in risk management partnerships between authorities, businesses, and communities) Investment in economic resilience programmes for communities at risk from flooding (inc. flood response capabilities and risk mitigation) Investment in protection and remediation of key ecosystem assets (inc. brownfield land, together with ‘servicing’, ‘provisioning’, ‘regulating’, and ‘cultural’ ecosystem services across coastal, rural, and urban domains).
Local Market Development: Investment in the uptake of innovative Promotion of a low carbon, resource efficient preference in the technologies and resource efficiency development of key infrastructure in the North East, supporting measures to increase environmental local demand for LCEGS protection, resilience and performance of businesses and communities. Investment in waste management and materials recycling/reprocessing sector capacity Investment in water management and treatment sector capacity Investment in the stimulation and facilitation of ‘reduce, recycle, and reuse’ behaviours in key sectors, spanning ‘supply’ and ‘demand’ sides Support for area-wide resource management plans spanning key resource classes Support for the development of ‘closed loop’ recycling and reuse relationships between businesses in key sectors. Source: SQW
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Annex A: Study Approach
Table A-1: Proposed Study Framework Theme Question Sources Consultations Literature/Data 1. Structural What types of project will be Number – up to 2 Issued guidance and funded under the consultations Investment ‘sustainable growth’ theme Fund (2014- of the 2014-20 period? (DCLG) 20) guidance Criteria Eligible activities Desired outputs
2. LCEGS Where does the North East Number – c.5 Material sourced innovation have a competitive consultations (alongside from consultees strengths advantage in the LCEGS information-sourcing) (commercial sector? and What is the nature of this institutional) Sector representatives focus of competitive (including advantage? subsea/offshore, low Assets carbon vehicles, Activities power generation (and transmission), Locations energy efficiency (built Connectivity (inside and environment). outside the NE) North East Scale Universities Developmental stage Area Stakeholders Direction of travel (e.g. ANEC) What are the developmental needs for each area of competitive advantage? Live development projects Key challenges, potential responses, and unmet needs Opportunities for exploitation What development initiatives have proven effective in the North East? How could LCEGS innovation strengths be employed within ‘positioning’ projects to deliver export and inward investment gains?
3. What opportunities are Number – c.5 (additional Material sourced Opportunities presented to the wider SME to theme 2) from consultees for existing population by the North National guidance sectors East’s LCEGS sector Sector representatives (including strengths? BIS/DECC What opportunities are North East LCEGS strategy presented to the wider SME Universities and Defra/DECC population by the LCEGS Area Stakeholders sustainable sector more broadly? (e.g. ANEC)
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Theme Question Sources Consultations Literature/Data What are the challenges of Business Support development ‘sustainable growth’ for Actors strategy) SMEs? Market/competitive Legislative/regulatory What opportunities are presented by the current sustainability performance of the North East What are the support needs of SMEs in: Securing opportunities Responding to challenges What SME support mechanisms have proven effective in the North East?
Synthesis Overlay of Themes 1, 2, and 3: 1 x - What support infrastructure presentation/discussion is required to realise workshop opportunities of ‘sustainable growth’ for: Study Steering Group LCEGS innovation NELEP (Task and strengths Finish Group) Existing SME sectors How could Structural and Investment Funds be employed to realise these opportunities? Source: SQW
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Sustainable Growth Study Final Report to the North East Local Enterprise Partnership Annex B: Low Carbon Core Growth Sector
B.1 The Low Carbon Core Growth Sector ‘recipe’ established by the Mersey Partnership in 2011 (see Table B-1):
Table B-1: Low Carbon Core Growth Sector Sector Group SIC(2007) Category Construction 25110: Manufacture of metal structures and parts of structures
42220: Construction of utility projects for electricity and telecommunications
42990: Construction of other civil engineering projects nec
Electricity 35110: Production of electricity
35120: Transmission of electricity
35130: Distribution of electricity
Engineering 71121: Engineering design activities for industrial process and production Activities; Technical Testing & Analysis 71122: Engineering related scientific and technical consulting activities 71129: Other engineering activities (not including engineering design for industrial process and production or engineering related scientific and technical consulting activities)
Waste Management 39000: Remediation activities and other waste management services
38110: Collection of non-hazardous waste
38210: Treatment and disposal of non-hazardous waste
Manufacture of 28110: Manufacture of engines and turbines, except aircraft, vehicle and Machinery & cycle engines Equipment 28120: Manufacture of fluid power equipment
28131: Manufacture of pumps
28132: Manufacture of compressors
28140: Manufacture of other taps and valves
28150: Manufacture of bearings, gears, gearing and driving elements
28250: Manufacture of non-domestic cooling and ventilation equipment
Manufacture of 27110: Manufacture of electric motors, generators and transformers Electrical Equipment 27120: Manufacture of electricity distribution and control apparatus
27200: Manufacture of batteries and accumulators
27320: Manufacture of other electronic and electric wires and cables
Research & 72190: Other research and experimental development on natural sciences Consultancy and engineering
74901: Environmental consulting activities
Wholesale Trade 46120: Agents involved in the sale of fuels, ores, metals and industrial chemicals
46719: Wholesale of fuels and related products (other than petroleum and petroleum products) Source: The Mersey Partnership (2011)
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Annex C: A&RCC Sector Growth Projections
Table C-1: A&RCC Sector Growth Forecasts Level 3 Level 4
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Architectural Architectural Design Services 3.4 3.9 4.1 4.6 5.2 5.4
Architectural Engineering 2.4 2.7 2.8 3.2 3.6 3.7
Architectural Project Management 5.8 6.5 6.8 7.7 8.7 9.0 Services
Climate Change Waterways and Barrier 5.2 5.9 6.1 6.9 7.8 8.1 Management Management
Weather Station Services 3.5 4.0 4.1 4.7 5.3 5.5
Construction & Adaptive Civil Engineering Services 5.4 6.1 6.3 7.2 8.2 8.5 Retrofit Agricultural 4.2 4.8 4.9 5.6 6.3 6.6
Domestic 5.0 5.7 5.9 6.7 7.6 7.8
Domestic Urban Enviro Redesign & 3.0 3.4 3.5 4.0 4.5 4.7 Re Engineering
Industrial 5.9 6.7 6.9 7.9 8.9 9.2
Industrial Urban Enviro Redesign & 2.5 2.8 2.9 3.3 3.8 3.9 Re Engineering
Manufacture of Retro Fit 6.7 7.6 7.9 8.9 10.1 10.5 Engineering Equipment
Manufacture of Retro Fit Materials 5.8 6.5 6.8 7.7 8.7 9.0
Manufacturers of Temporary 4.1 4.7 4.9 5.5 6.2 6.5 Accommodation For Renovation Projects
Public 5.0 5.7 5.9 6.7 7.6 7.9
Public Urban Enviro Redesign & Re 3.6 4.1 4.3 4.9 5.5 5.7 Engineering
Retro Fit Buildings Services 4.0 4.5 4.7 5.3 6.0 6.2
Suppliers of Temporary 5.1 5.8 6.0 6.8 7.7 7.9 Accommodation For Renovation Projects
Supply of Retro Fit Engineering 5.3 6.1 6.3 7.1 8.1 8.4 Equipment
Supply of Retrofit Materials 3.4 3.8 3.9 4.5 5.1 5.2
Enviro Finance Enviro Finance 6.0 6.9 7.1 8.0 9.1 9.4
Enviro Finance Planning 4.2 4.8 5.0 5.6 6.4 6.6
Banking Services 2.2 2.5 2.5 2.9 3.3 3.4
Equity Investment Services 4.7 5.3 5.5 6.3 7.1 7.4
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Level 3 Level 4
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
Finance Insurance Services 1.7 1.9 2.0 2.2 2.5 2.6 Investment & Insurance
Risk Management Business Continuity 1.9 2.2 2.3 2.6 2.9 3.0 & Business Continuity Risk Mitigation 3.3 3.7 3.8 4.3 4.9 5.1
Sustainable Agricultural 5.8 6.6 6.9 7.8 8.8 9.1 Drainage & Water Management Domestic 3.9 4.4 4.6 5.2 5.9 6.1 Industrial 6.4 7.3 7.6 8.6 9.7 10.1
Public 5.4 6.1 6.4 7.2 8.2 8.5
Transport Rail 5.2 5.9 6.0 6.9 7.8 8.1 Infrastructure Road 5.2 5.9 6.1 6.9 7.8 8.1
Waterways 5.2 5.9 6.1 7.0 7.9 8.2
Water Irrigation Agriculture 6.9 7.8 8.1 9.2 10.4 10.8
Leisure Areas 3.3 3.8 3.9 4.4 5.0 5.2 Source: BIS (2013)
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Annex D: Workshop Details
D.1 Hosted by the North East LEP and SQW Ltd, the workshop was held between 10am and 12pm on the 25 July 2013 at the Assembly Rooms, Newcastle upon Tyne (NE1 5XU). Workshop attendees are noted in Table D-1:
Table D-1: Workshop Attendees
Adrian Hilton, ClimateNE Jennifer Thompson, Durham University Adrian McLoughlin, Newcastle City Council Jenny Davidson, Newcastle Business Adrian Morris, University of Sunderland School Alison Fellows, Newcastle Science City John Bothwell, Durham University Allen Jones, Newcastle City Council John Musham, Newcastle City Council Cameron Ross, Manufacturing Advisory Kit England, Newcastle City Council Service Lorna McQueen, University of Newcastle Caroline Taukulis, NETPark Margaret Sambell, e-Skills Colin Heron, Zero Carbon Futures Martin Walker, Newcastle City Council Dermot Roddy, University of Newcastle Phil Taylor, University of Newcastle Graham Hillier, CPI Richard Hindle, SQW Ltd James Adamson, Sustrans Sam Cammiss, SQW Ltd James Davies, North East LEP Tom Bailey, Sustrans Jayne Winter, Defra Tony Ikuwe, Narec Jennifer Atkinson, ClimateNE Source: SQW
D.2 The workshop agenda was based on two elements:
Introductory Presentation, including reviews of:
The North East LEP’s work programme with regards to its Growth Plan and EU Structural and Investment Fund Strategy
‘Sustainable Growth’ definitions employed in the policy framework
Objectives and target outputs from the EU Structural and Investment Funds in the 2014-20 period
Approaches to developing some structure to the understanding of the ‘Sustainable Growth’ opportunity and challenge in the North East LEP area.
Discussion, spanning four key questions:
What are the priorities for ‘Sustainable Growth’?
Where is support required to exploit competitive advantage?
Where is support required to enable the ‘sustainable’ transition?
How can SMEs be supported to address challenge and opportunity?
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Workshop Presentation
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Annex E: Consultees
Table E-1: Study Consultees
Adrian McLoughlin – Newcastle City Council Graham Hillier – CPI Jennifer Thompson – Adrian Morris – University of Sunderland Durham University Alison Fellows – Newcastle Science City Jo Morrissey – Low Carbon Futures Cameron Ross – Manufacturing Advisory John Bothwell – Durham University Service Martin Walker – Warm Up North Catherine Johns – NETPark Phil Payne – Newcastle City Council Claire Prospert – Newcastle City Council Sam Neil – University of Newcastle Colin Heron – Zero Carbon Futures Simon Hanson – FSB Dermot Roddy – University of Newcastle Tim Pain – University of Sunderland Eddie Halstead – Environment Agency Tony Ikuwe – Narec Source: SQW
Table E-2: Workshop Attendees
Adrian Hilton, ClimateNE Jennifer Thompson, Durham University Adrian McLoughlin, Newcastle City Council Jenny Davidson, Newcastle Business Adrian Morris, University of Sunderland School Alison Fellows, Newcastle Science City John Bothwell, Durham University Allen Jones, Newcastle City Council John Musham, Newcastle City Council Cameron Ross, Manufacturing Advisory Kit England, Newcastle City Council Service Lorna McQueen, University of Newcastle Caroline Taukulis, NETPark Margaret Sambell, e-Skills Colin Heron, Zero Carbon Futures Martin Walker, Newcastle City Council Dermot Roddy, University of Newcastle Phil Taylor, University of Newcastle Graham Hillier, CPI Richard Hindle, SQW Ltd James Adamson, Sustrans Sam Cammiss, SQW Ltd James Davies, North East LEP Tom Bailey, Sustrans Jayne Winter, Defra Tony Ikuwe, Narec Jennifer Atkinson, ClimateNE Source: SQW
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