Building Our Industrial Strategy

Exeter City Futures Response

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 1 Exeter City Futures Response

Exeter City Futures is incredibly excited and supportive of the government’s proposed approach to developing a modern industrial strategy. We are the only privately funded whole city transformation programme in the UK. Through harnessing data and analytics, our team are creating a world lead- ing sustainable city, with the ambitious goal of making Exeter energy independent and congestion free by 2025. Delivering on this target will require the successful interaction of many elements - at a local, national and international scale. It is an approach that embodies the 10 pillars set out in the government’s green paper.

We stand on the brink of a technological transformation that will revolutionise and redefine the way we live, work and govern. The scale and scope of this global transformation will be unlike anything that has gone before it. This new phase of growth, dubbed the ‘Fourth Industrial Revolution’, offers huge potential for those regions that can position themselves to benefit. But international competition is fierce and set only to get fiercer. How the UK responds to maximise the opportunity of this new Industrial Revolution will define our place in the world and our success for subsequent generations. Getting our response right is absolutely essential.

Our response may seem grand, but we believe at a local level we have a mirror of the government’s industrial strategy that can be made to work to deal with global investment imperatives, local economic need (financially sustainable change) and create places with drastically improved health and quality of life. Throughout this document we have indicated where sections of our narrative address the consultation questions.

Our response presents a bold approach to stimulating an industrial and economic renaissance in the deep South West region and positions it as a driving force of national innovation, growth and exports in the Fourth Industrial Revolution. In summary, our response: • Outlines moves government should take to unlock huge untapped human and financial capital to overhaul the growth potential of regional economies without subsidy • Recommends changes to existing institutional structures to radically enhance the interaction between problems, research, commercialisation, business support and growth • Outlines how investment in science, research and innovation should be targeted to build a new practical industrial legacy for the UK that delivers economic return • Outlines the start to place based cultural changes needed in our education system. Promoting entrepreneurialism, but also responsibility and how that can relate to value; the basis of strong positive business • Outlines new methods for financing and equity investment that will jumpstart growth and investment where other initiatives have failed • Outlines how clean and sustainable growth is not only at the heart of the Fourth Industrial Revolution, but also how it will make places better, leaving a long-lasting national legacy of which we can be proud

Our vision and model provides a blueprint for a bold ‘New Industrialism’ that can reinvigorate every economy of England and Wales and help to level the disproportionate growth across the UK’s regions.

In our response we have indicated where the narrative responds to the specific questions set out in the consultation.

For more information about Exeter City Futures visit us at www.exetercityfutures.com

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 1 The Opportunity

Cities, and the unprecedented growth of urban Digitisation: New digital business models are the environments, present both the greatest challenge principal reason why just over half of the names of and opportunity of our lifetime. As drivers of eco- companies on the Fortune 500 have disappeared nomic growth, cities are essential to modern life, since the year 20005. The number of connected de- but unsustainable trends in energy use, congestion vices is currently growing more than five times faster and associated negative consequences threaten than the human population and as a consequence the health of cities and their citizens. Our strategy the amount of data is growing exponentially. Data focusses on three overarching global trends that will provides the power to understand cities, commu- shape the need for new products and services over nities and their values like never before. It enables the course of our lifetime. us to transform our lives for the better and present solutions not possible through any other means. Urbanisation: It is widely accepted that due to The possibilities of billions of people connected by urbanisation trends, 70% of the world’s population mobile devices, with unprecedented processing could live in cities by 20501. Cities represent a huge power, storage capacity, and access to knowledge, opportunity for the UK in a post-Brexit world. Cities are unlimited. account for more than 60% of global GDP2, and are increasingly defining their own networks and “The next phase of economic, scientific and policies3 . 70-80% of urban infrastructure that will social development has data as its core – the exist in India in 2050 does not yet exist4 - growth digital trace left by human activity that can and expansion of the world’s new mega-cities, along be readily gathered, stored, combined and with the replacement of ageing infrastructure in the processed into usable material. This data, to developed world will provide a major customer for optimise its value to society, must be open, smart, digital infrastructure, next generation plan- shareable and, where practical it should be ning services, analytical design services, financing free.” and integration. Rapid growth inevitably means an increase in cars on the road, increased strain on - The Shakespeare Review, May 2013 existing transport infrastructure and an increase in energy consumption. If unplanned and poorly Decarbonisation: Reducing carbon and creating managed, this rapid growth can give rise to inequali- services that mitigate the impacts of climate change ty, pollution and costly sprawling development plans is a huge global opportunity in which the UK can that have many negative and wide reaching effects play a leading role. Cities again are the drivers of – the most significant ones being a drop in produc- change in the transition to new energy systems. tivity, investments becoming locked into high-carbon Consuming between two thirds and three quarters assets, and a population whose well-being suffers. of the world’s energy6, cities are the primary driver Rapid urbanisation presents acute challenges for of how much energy is used, how it is used and, to all local and national governments with constrained a growing extent, what sources it comes from. The capacity and finance for infrastructure delivery. next 10 years will see stand-out leaders rethinking Current restraints on the public purse are likely to the entire urban energy landscape – buildings, compound matters unless tackled with solutions commercial and industrial sectors, transportation, drawn from both public and private arenas. generation technologies and integration with existing grid infrastructures – and embracing the deployment of technologies (solar and wind) that will be widely available without subsidy.

1 United Nations (2014). World Urbanisation Prospects: 2014 Revision, [online]. Available at: https://esa.un.org/unpd/wup/publications/files/wup2014-highlights.Pdf [accessed: 05/12/2016]

2 LSECities (2014). Cities and the new climate economy, [online]. Available at: LSE Cities work for the New Climate Economy, [accessed: 05/12/2016] 3 E.g. C40, Rokafella 100 Resilient Cities 4 Mckinsey Global Institute (2010). India’s urban awakening: Building inclusive cities, sustaining economic growth. Available at: http://www.mckinsey.com/~/media/mckinsey/global%20themes/urbanization/urban%20awakening%20in%20india/mgi_indias_urban_awakening_ full_report.ashx, [accessed: 05/12/2016]

5 World Economic Forum – Digital Disruption has only just begun 6 IRENA – Renewable Energy in Cities, IEA - Energy Technology Perspectives, Arup – Energy in Cities, IIASA – Urban Energy Systems. A range of values represents the range of accounting approaches in determining the urban share of consumption.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 2 even more attractive to the entrepreneur inclined to The role of the “place” in a exploit intellectual capital. modern industrial strategy For successful innovation of solutions to emerging Along with identification of high level trends, the challenges much of the technology exists but it consideration of the quality of a place is key to any exists in siloes and any industrial strategy must seek modern industrial strategy. Investment and people to break down the barriers to collaboration driven are now more mobile than ever. There is a much by regional smart-specialisations. Smart speciali- greater reliance on intellectual capital and its sation is a historic requirement of EU programmes application based on significant advances in for regions wishing to use ERDF for innovation communication and other technologies, as well as activities and can lead to companies, academics the management of data. and individuals who may have innovative ideas not applying or being declined funding because they are As the UK seeks to define a post-Brexit future in the wrong place. founded on knowledge and industry, services are already displacing manufacturing as a key UK ex- The role of place is essential in bringing together port; items that will not be constrained by available technologies to solve the challenges created by cul- shipping routes and import tariffs. One of the most tural and technological trends. It is also essential in important items that we can establish in the UK will arresting the cycle of decline experienced by many be examples of transformed places, “shop-windows” UK regional economies by creating better, healthier that global powers can look towards and learn from. places that are can attract an ambitious, innovative talent-pool. In the next section we will expand on Quality places retain and attract skilled and talent- what this means for Exeter. ed people. Talented people like places with natural, community, social, leisure, creative and cultural activities for themselves and their families, and therefore, combining this with effective professional networks, access to resources and opportunities is

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 3 BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 4 Exeter: Driving growth in a poorly performing region

The Industrial Strategy Green Paper articulates the that will unlock the city’s potential growth, create desire to build on the strongly-performing areas an external narrative that would excite potential that exist within every region. businesses, skilled workers or investors and create wider positive benefits that could extend through In January 2017 Exeter was named as the fastest the region. A successful industrial strategy identifies growing city in the UK. Our economic region is and supports the technologies of the future and the prospering and the local development framework regional clusters of the future. outlines ambitious plans for growth. Hosting the largest cluster of digital economy activity south west Key Facts of Bristol, our population is among the best trained in the UK; with a high level of educational attainment • City population: 127,000 and several excellent institutions. • Greater Exeter regional population: 467,257 Our economic success to date has been welcome, • Between 2000 and 2015 city’s total output but maintaining and expanding on that growth in the grew 50% faster than that of the HOTSW future brings challenges. Challenges that align well LEP with the focus of any modern industrial strategy. • In 2015, productivity per job in Exeter The Greater Exeter population is expected to (£44,224) was 25% higher than productivity increase by 40,000 within the next ten years and, across HOTSW (£34,947). unless solutions are found, will bring increased • Over the next 15 years, productivity per job in pressure on housing, employment, the environment Exeter is expected to rise almost three times and our transport network. A successful industrial as fast (26%) as the rise across HOTSW strategy identifies and supports the technolo- (9%). gies and regional clusters of the future. Exeter is growing fast by population and has a Despite our strengths, Greater Exeter experiences trained workforce but historically has not performed a significant exodus of skilled workers in the 25-34 well on innovation, nor is it creating the number year range. Access to high quality employment of start-up per head vs other cities. Strengthening opportunities ranks as the number one reason for Exeter can make the wider region more prosperous. moving post-graduation. Exeter needs to create a Exeter’s challenge is to secure a future that is both vibrant, connected place that is attractive to 25-34 prosperous and happy; with clean air, high quality year olds. A successful industrial strategy must employment opportunities, a vibrant city centre, focus not only on the development of skills but also good health and easy access to services. the impact of migration within the UK. This challenge is not unique, many cities throughout The existing smart specialisation approach creates the UK and Europe share the issues raised by the a major barrier to the development of regional emerging global trends, but this is where the strategies that provide high levels of aspiration opportunity lies. and ambition. Exeter has developed a clear and ambitious vision and supporting innovation strategy

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 5 Exeter is especially well-placed to develop a Our approach embodies the pillars of the industrial blueprint for tackling them and become a model strategy as indicated in Figure 1. city which is replicated globally. A world-leading university and several globally renowned organi- sations are testament to Exeter’s potential. It has an ambitious but achievable opportunity to thrive as both a vibrant and sustainable centre of excellence for the application of analytics as well as a model City that is replicated globally. Exeter’s private and public sectors are already working in partnership to tackle these challenges head-on. Exeter City Futures Founded as a joint-venture between Exeter City Council and leading local technology company Oxygen House, the Exeter City Futures movement is driving innovation, challenging pre-conceptions, changing perceptions and raising aspirations, in a region that has historically not been a high perform- ing innovator. Figure 1: Addressing emerging global trends will require cross-sector technologies Exeter City Futures is the only privately funded whole city transformation programme in the UK, investing to stimulate world-leading responses to the challenges we face.

Our vision is for a healthy and prosperous city with optimised and efficient energy and transport networks, a dynamic eco-system of commercial innovation and a high-skills economy that underpins growth and inward investment. We are creating an analytical city, focussed on statistical evidence and supported by an engaged, data-aware community, which has capacity to deliver goals of zero conges- tion and energy independence by 2025.

Our change programme combines full-cycle inno- vation, commercialisation and business support with wide-ranging local government innovation to maximise the impact on the region’s economy. It is our mission to deliver sustainable change and realise the growth potential of our economy without long-term reliance on govern- ment subsidy.

Engagement of people and place is fundamental to meeting our goal and to delivering an effective em- bodiment of a modern industrial strategy. The Exeter City Futures approach centres on constantly asking interesting questions and defining challenges that focuses on insights that show how we can deliver an energy independent and congestion free region.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 6 We believe that analytics, leadership and access to capital are fundamental to delivering change on a city scale.

• Big steps towards building better cities and a better world can happen when we embrace analytics. Through building understanding and focusing efforts, data analytics can move City Science is an ambitious, young technol- us from assumptions, conflict and inaction, to ogy company, created to optimise complex clear problems and targeted solutions. urban systems. They are bringing world-class • Data analytics can identify connections that talent to the region to help analyse local city previously weren’t visible, uncover new challenges. Their philosophy is that by sources of capital; things that people would developing an unmatched understanding of be willing to pay for or business models how cities work we can enhance existing worth investing in. infrastructure, reduce waste and improve • Everyone can play a part in creating change; lives for citizens. enabling people and communities to play a more active role in tackling social problems is www.cityscience.com the best way to effect change. • If we can develop a joint vision of the prob- By collecting and analysing data on a city and lems we face and focus our collaborative regional level, we can start to understand the impact energy to deliver shared goals then we can we each have on the Exeter region and how we inspire action that contributes towards sus- can influence, drive and believe in transformation. tainable change. We are working to establish a data platform for the • If we bring together citizens, entrepreneurs City and on-board data from local government and and public and private sectors around a businesses. shared understanding of the real challenges then we will stimulate innovation that devel- “STEAM” (Science, Tech, Engineering, Arts and ops the types of solutions that we need to Maths) will drive the fourth industrial revolution. find for our communities. Exeter City Futures are developing educational programmes for schools and young people to help • If we provide innovators with access to capi- them explore the power of data and to enable tal then we can accelerate the validation and them to analyse and create change for the Exeter deployment of optimised solutions that can region. These programmes are driving the place deliver impact on our goals and provide a based cultural changes needed in our education better quality of life for our citizens. system; promoting entrepreneurialism, respon- • Access to capital comes from unlocking the sibility and societal value - the basis of strong huge local cash-flows in inefficient city sys- positive business. tems which can be used to create investable propositions for capital markets. Once we identify key challenges, our accelerator programmes will help develop new products and The insights are generated from analysis of city data services that can make a genuine and sustainable and continuous engagement with local communities difference to transport and energy use in Exeter. and public sector organisations. With targeted support from expert mentors and close engagement with city procurement and plan- Exeter City Futures believe that data can enable ning teams, as well as customers and communities, change. Through our partnership with City Science we will help teams access investor networks and we are using data to develop new solutions, identify deliver impactful businesses at scale in Exeter and efficiency opportunities and inform policy options. beyond.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 7 Summary of Exeter City Futures Workstreams

Engage issued for innovative solutions that the City Council can either privately procure or otherwise invest in as launching cus- tomer. City assets are provided to validate solutions and de-risk procure- ment of innovation.

Collaborate • Community Listening Events. • Quarterly events to share ideas and. connect communities and stakeholders. • Online crowdsourcing platform to share ideas. • Challenge definition workshops. • Declaration of support from business community to build open innovation Analyse community within the City to drive change at scale. • Supporting businesses are donating data and offering pro-bono professional support and mentoring to teams within accelerator.

• Generation of City data platform for open • Creation of investible propositions that and shared data. can attract venture capital. • Education programmes to help • Businesses, education institutions, entre- build analytical capability within schools preneurs and residents jointly developing and communities. solutions to Community Challenges. • Creation of shared vision for the future of Accelerate Exeter.

Scale

• Helping grow new commercial and social enterprises to address specific • Targeted support via grow-on pro- city challenges. grammes to nurture ideas with • Phase 1: 15 weeks programme for teams real potential to ensure that they progress with early concepts or untested minimum to deliver impact on our energy and viable products (MVPs). Up to £15k congestion goals. funding as grant or loan.

• Phase 2: 9 month programme for teams Throughout the following sections we pro- to validate minimum viable products and vide specific responses to the 10 pillars that develop sustainable business models. Up address what we perceive to be the barriers to £200k investment. to delivering a modern industrial strategy and • City procurement programme runs along- present the Exeter City Futures approach as side Phase 1 and/or Phase 2. Challenges a model for driving regional growth.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 8 Investing in science, research and innovation

The global trends of urbanisation, digitisation and decarbonisation require the complex cross-cutting solutions that address services such as health, energy and transport.

Q5. What should be The key challenges to be highlighted Figure 2. Figure 2: Harnessing the eight great technologies to address global the priority areas for addressed by the UK and science, research and all Global cities, are com- innovation investment? plex and span more than a single technology focus. The industrial strategy green paper cites eight areas of priority focus for science, research and innovation investment that the UK has historically invested in to build a significant reputation globally.However, we believe that the priority must be to maximise the impact of this investment by focussing invest- ment on how to combine and commercialise this research to address emerging global challenges.

Key to a successful modern industrial strategy is realising the economic benefits from investment in research and innovation. The UK needs to unlock the hidden value in the specialisms that we have already developed by creating challenge-based trends of urbanisation, digitisation and decarbonisation innovation that drives collaboration. Key to a successful modern industrial strategy is Within the financial sector the UK has seen sig- realising the economic benefits from investment in nificant economic return through the continuing research and innovation. The UK needs to unlock applications of cutting-edge methodologies the hidden value in the specialisms that we have being applied to practical challenges. The UK can already developed by creating challenge-based now do the same to address the emerging trends innovation that drives collaboration. of urbanisation, digitisation and decarbonisation. Solutions to cross-cutting challenges of health, The current challenges Q6. Which challenge energy and transport will be generated from the identified within the areas should the development of new disruptive business models Industrial Strategy Green Industrial Challenge and cross-sector integration rather than from simply Paper focus on technolog- Strategy Fund focus focussing on incremental development of existing ical developments within on to drive maximum technology areas. distinct specialist areas. economic impact? There is huge economic Each of the areas has a contributory role to deliver impact to be realised from against the complexity of the three emerging themes investment in complex challenges that will require of urbanisation, digitisation and decarbonisation as collaboration of multiple sectors to be addressed.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 9 Many of the large innovative sectors emerging have Prosperity comes from ideas commercialisation. not been closely linked to fundamental academic Countries that innovate prosper; countries that do research – companies such as Uber, Air BnB and not decline. Innovation is at the heart of a strong UK Spotify – are undergoing rapid growth by providing economy – from transport and energy to sustainable new digitally enabled business models. These construction and healthcare – it keeps us attractive business models are not dependent on fundamental to investors, at the cutting edge, creates jobs and research, but on a skilled ecosystem of develop- maintains our high standard of living. The essence ers, business incubation and investors. Such an of innovation is discovering what our Cities, Regions eco-system is assisted by fundamental research in and people need in this period of Global change. some cases, but it is certainly not dependent on it. The Exeter City Futures approach – and the Q7. What else can Exeter City Futures approach we support within government – is to the UK do to create is defining innovation provide a framework whereby innovative people and an environment that challenges through linking businesses can respond to clear challenges that ad- supports the commer- problem-owners (custom- dress real need within our UK regions. Challenges cialisation of ideas? ers), global investment that have customers and investors lined up ready to themes (investors), SMEs accelerate impact and economic return. This value (innovators) and business support (growth coaching chain approach is essential to realising an environ- and mentoring) to deliver real impact. ment that supports commercialisation of ideas.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 10 Developing Skills

Exeter City Futures focusses on the role of place in skills. A world-leading university and acclaimed college are testament to Exeter’s potential, but building entrepreneurial capacity in the city and creating the vibrancy to retain talent are the other important characteristics and a key part of our strategy. The real skill missing in Education and data Q13. What skills all local areas across a Q14. How can we awareness must also be shortages do we have diverse range of sectors enable and encourage extended into the Commu- or expect to have, in is problem solving. The people to retrain and nity. Exeter City Futures is particular sectors or existing national education upskill throughout their supporting local commu- local areas, and how system teaches young working lives? nities via data upskilling can we link the skills people that problems can workshops, to understand needs of industry to be solved quickly and the the truth, causes and impact of their perceived local skills provision by solutions are readily avail- challenges. educational institutions able. Any problem worth in local areas? solving in industry takes We are working collaboratively within the local a considerable amount of communities to identify the required data, to find time. The national curriculum needs a far stronger ways to collect or access this data and to build skills focus on problem solving in order to deliver the next in the community to clean, analyse and interpret generation of leaders and entrepreneurs. insights from that data. This process results in understanding and clarity of the cause and scale of At Exeter City Futures we are linking urban chal- local challenges which can be used to find lenges all the way through the school curriculum the optimal pathway to achieve resolution and through our education programme. We are building positive change. capacity that shows how enhancing STEAM provi- sion can have significant local impact. Starting from Skills Retention is as important as Skills Devel- Primary through to Apprenticeships we are develop- opment. The Industrial Strategy recognises that ing a very strong understanding of the relationship development of skills is important, but it does not between place, skills and value. address the impact of migration within the UK; a key contributor to the two-tier performance of the UK’s Data gives us the power to understand our commu- regional economies. nities and their values like never before. It enables us to transform our lives for the better and present Bold and visionary leadership is required to arrest solutions not possible through any other means, the exodus of skills in regional economies. Through yet the understanding and acceptance of data and Exeter City Futures, we are articulating a clear analytics in not widespread within the population. story and brand that differentiates Exeter from the Because of this people are limited in their ability competing national and international location to make choices that maximise the opportunities choices; positioning our City as a fantastic place to available to them. live and work.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 11 A successful industrial strategy will support the ef- new clusters. This approach is absolutely necessary forts of “forgotten” regions to attract skilled workers if we are to carve out and develop the new indus- within the target age group through the generation tries that can transform the region’s economy. of policies that create regional packages to develop

Case Study: Recycling Data & Exeter Mathematics School

Exeter’s Recycling Centre currently has large amounts of data about recycling across the city and the money that is generated from it. Exeter City Futures is working with Exeter Mathemat- ics School to access and analyse this data, and try and turn it in to something more useful.

As the project progresses it is hoped that the outputs of their analysis can be disseminated to the recycling centre for them to look to adapt the service they offer, or investigate ways to reinvest new income generated.

An ideal extension would be to disseminate to primary and secondary school pupils to develop local campaigns to improve recycling rates in their communities.

As the recycling centre continues to capture data, they will be creating new data sets which can be further analysed to monitor the success of campaigns.

This type of project not only represents a wonderful learning opportunity for the students; helping them to apply their study to the real world around them and also helps them to identify the benefits (environmental, social, and financial) of engaging with these sorts of questions. It builds their capacity as analytical thinkers of the city.

We expect that there are many other examples of data that can be analysed in this way; bringing benefit to the city.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 12 Upgrading Infrastructure

Upgrading infrastructure doesn’t have to mean replacement. Exeter City Futures are working to define new services that allow existing infrastructure to be used more efficiently. We are seeking to increase the capacity of roads without adding concrete. We are seeking to create new businesses, build UK competitive advantage and deliver extraordinary knock-on benefits for health and housing. Significant inefficiencies exist in the UK’s current in this sub-market of intelligent infrastructure are infrastructure. This can be evidenced by the peak staggering. hours observed in commuting traffic or energy consumption. Our systems have been designed to deal with these peaks but not to maximise utilisation of the assets we already have. Upgrading infrastruc- ture offers a huge economic opportunity for the UK.

The clean drive in our economy towards electrifi- cation, particularly of transport, will create serious challenges for our energy distribution network. The route to solve this is by looking at the issue of battery storage, intelligent supply and demand, load balancing and aggregation.

On the transport demand side, alternative journey patterns, ride sharing and automated vehicles are just a few of the challenges and opportunities which If the intelligent infrastructure sector could need to be addressed almost entirely within our be realised within the UK then there would be urban environments. significant scope for private investment with economic return. Q15. Are there further Through the application actions we could take of modern analytical and Q16. How can local Infrastructure in our region to support private data handling processes infrastructure needs be is a key barrier to growth. investment in (e.g. AI, machine learning incorporated within na- It is perceived to be a infrastructure? and intelligent systems) tional UK infrastructure high-cost problem that we will be able to extract policy most effectively? requires major capital significant efficiencies and avoid upgrade costs. investment, and for that This will give rise to new ways of connecting supply reason the infrastructure challenges of our region and demand across a range of intelligent infrastruc- have gone unaddressed for too long. ture systems; energy and transport but also water and waste. A successful infrastructure strategy requires us to stand back and ask what we require our Intelligent mobility is transport infrastructure enabled infrastructure to do. Vast amounts of government by data and analytics. Projections for the growth funding is sunk into infrastructure projects focused

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 13 on roads that merely shift congestion bottlenecks huge opportunity because these types of challenges between junctions. We are currently failing to meet are experienced in city environments worldwide. the mobility needs of the regions populations. In Many of the current challenges are due to the the continuing environment of public revenue and ingrained behaviours of people and commissioning capital constraint, it is vital that each pound spent by bodies which are naturally risk-adverse. Exeter City the exchequer delivers the maximum value. Futures is providing leadership to guide these local processes to create opportunity for deep innovation. Q17. What further To really understand the actions can we take to realisation of intelligent It is our view that by doing this first, practically in UK improve the infrastructure requires Cities, we will be in a strong position to export intel- performance of transformational public-pri- lectual property in intelligent infrastructure services. infrastructure towards vate partnership pro- international grammes such as Exeter benchmarks? How City Futures. can government work with industry to ensure The design of our urban we have the skills and environment (distribution supply chain needed to of land, housing, jobs, deliver strategic entertainment) will be infrastructure in the both a cause of, and UK? be constrained by, the sophistication of the infrastructure. Developing strategies to plan cities holistically would put the UK at the forefront of digital infrastructure globally. Analytical enablement of infrastructure systems is a

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 14 Improving Procurement

Exeter City Futures has created a new venture capital inspired approach to procurement that exposes the levers of city transformation to start-ups and entrepreneurs.

Q23. Are there further Procurement is a massive of R&D followed by commercialisation of the results. steps that the issue for the UK. It is an These methods are too slow and the pool of talent Government can take expensive process that they draw upon is too narrow. There is no place for to support innovation in its current form rarely bureaucracy and poor procurement practices. through public achieves best value for Exeter City Futures understands that the National procurement? the taxpayer. There have Advisory Group for Local Government Procurement been numerous attempts is looking specifically at how to improve innovation to improve government within these processes, and look forward to engag- procurement in recent years. Successive govern- ing with the group’s recommendations. ments have sought to address the challenges in public sector procurement. The 2003-04 Gershon Challenges of the scale faced by the UK (and Review has been followed by further investigations globally) today, need new, more agile methods of into government spending, but procurement remains procurement which can draw the attention of a large a significant issue for the UK. community of innovators. Local government must become a proactive and forward-looking customer Over the past decade there have been increasing for the procurement of new services and infrastruc- calls for more public contracts to go to small com- ture. Both current and potential suppliers have panies to drive innovation and economic growth. valuable experience across many industry sectors But this is an ambition that, in practice is proving and can help the UK deliver the services it requires hard to realise. Traditional procurement processes in increasingly efficient and effective ways. continue to exclude new firms from government contracts. Local authorities merging purchasing To improve procurement in the UK will require a power to make bigger contracts may have the result cultural shift towards better risk-taking/innovation of raising barriers to entry for innovative SMEs as in public services. It will require a shift of mind-set large organisations with proven track records and away from procuring predetermined items (e.g. considerable resources will always win. Pooling bigger waste collection vehicles) to procuring contracts doesn’t mean the client gets better value capability (e.g. a solution to handle our increasing either because a smaller company may be able to waste generation). It will require procurers to learn offer a more innovative solution. to intelligently manage risk and deploy collaborative procurement techniques that enable early contractor Innovation in procurement is crucial if the govern- involvement; opening up procurement to small ment is to respond to meet its objectives of reducing firms and supporting pre-commercial enterprises to costs and improving public services. Tackling chal- develop skills, capacity and capability. It will require lenges with the urgency and complexity brought by flexibility in defining local regulations, such as rapid urbanisation mean that national and local gov- planning, in recognition that national standards are ernments can no longer afford to wait for solutions not always appropriate. generated through corporate or government funding

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 15 An example from UK Defence Sector: Within the Exeter City Futures Accelerator UK we have seen the defence sector move towards more collaborative methods of procurement; funding BENEFITS FOR START-UPS the development of suppliers’ innovative ideas and • Develop products & services that address providing support through to potential application. complex local challenges UK MoD regularly announces themed competitions to address specific defence and security capability • Work alongside city leadership to create challenges, and promotes a monthly ‘Enduring solutions that have positive impact on the city Challenge’ to more broadly capture potential inno- and people who live and work there vations that address the most important problems in • Receive mentorship from experts and city defence. leaders

The time is right for this collaborative, capability • Work with real data and assets to help vali- based approach to be more broadly adopted date ideas across UK government, not just for procurement • Fast-track procurement process that can lead of innovation but also to bring new talent into to contract at the end of the programme more traditional procurement areas (housing, waste management and transport infrastruc- BENEFITS FOR CITY AUTHORITIES ture). It is vital that we do not constrain procurement • Showcase city leadership as a driver of inno- to technologies, systems and suppliers that we vation and a model of data-driven decision already identify but instead to find a way to manage making the risk of inviting new innovations to address these complex challenges. • Help drive bold innovation, change culture and tackle big problems Exeter City Futures are redefining City procurement • Find solutions that give confidence and op- systems to be more agile, participatory and open portunity to make change to new ideas in response to increasingly complex public and social challenges. • Empower officers to approach challenges in new ways with minimal risk Key to our approach is the adoption of chal- lenge-based competition models of procurement. BENEFITS FOR RESIDENTS We are identifying key challenges that our City • Have a clear voice in defining the way the needs to solve through analysis of data and city transforms public engagement. • Chance to be part of defining the root cause These challenges are announced as open calls of the problems the city faces for current and new suppliers. The city is providing • Help to turn good ideas into valuable solu- access to assets such as housing and transport tions to social issues infrastructure to enable real-world validation and • Meet entrepreneurs and input to solutions comparison of competing solutions to determine that are being built to ensure need is met whether they will work for our city as well as reduc- ing the risk of selection. This approach enables local authorities, start-ups and existing suppliers to jointly explore ways to Early stage businesses responding to challenges make our City more efficient and responsive and will be eligible for the growth phase of the Exeter provides a way for local authorities to have bespoke City Futures accelerator programme. This pro- services that fit their cities unique problems. Poten- gramme supports business for up to 9 months to tially they can even invest as a launching customer develop and validate a minimum viable product to create future revenue streams. ready to deploy at scale. They will be supported to develop their business and receive venture capital This approach to procurement not only stimulates investment of up to £200,000 to enable them to innovation and provides government with a better compete with incumbent suppliers in addressing the choice of solutions but the new commercial and City procurement challenge. social enterprises established can boost the UK

economy.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 16 Supporting businesses to start and grow

The UK requires new ways of thinking and innovative new products and services. The Exeter City Futures accelerator offers an exemplar support provision for entrepreneurs to build solutions that address real need and to achieve high impact and growth. The complexity of the Q22. What are the networks in the City are barriers faced by those so strong that it can be businesses that have hard for start-ups and the potential to scale- social entrepreneurs to up and achieve greater get access to the people growth, and how can who understand the value we address these bar- of what they do. Further- riers? Where are the more, access to scale-up outstanding examples capital and fund-raising of business networks advice can be a major for fast growing firms barrier to achieving which we could learn growth. Compared to from or spread? Silicon Valley, UK venture capital is less likely to make longer pre-revenue investments, limiting the companies we can create outside of universities to only those technologies and markets with low barriers to entry.

Exeter City Futures is working towards a local eco-system of finance focussed on full-cycle support for incubated companies. We have spent the past two years building deep networks and understand- ing into how the City of Exeter and the surrounding travel-to-work region works.

As part of our Accelerator programme, Exeter City We have recently launched our first early stage 15 Futures is helping new commercial and social week programme aimed at businesses who do not enterprises to find ways to build impactful business- yet have a minimum viable product. Our first cohort es that address real need. We are guiding them has demonstrated how Exeter can attract high-qual- through how our City runs, facilitating introductions ity early stage start-ups with only a modest amount to people, customers and investors as well as of funding on offer (£15k). enabling access to City networks. The accelerator offers programmes for both early stage and growing Our challenges are underpinned by insights from enterprises. our region’s data and residents, so right from the start growing businesses are working on a solution

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 17 to a real need. Plus we are supporting them to Recommendation Actions access the latest data and analysis and champion- ing their ideas to help develop sustainable, impactful • Local, expertly-managed co-investment fund solutions that can be delivered at scale, not only in to put Exeter on a level playing field with Exeter, but across the globe. Scotland/Wales and established eco-sys- tems. This could be achieved via a £50m It’s vital that ideas with real potential progress initial investment and could be a revolving to deliver impact on our energy and congestion facility (i.e. investment in the government bal- goals and transform our City, so following an initial ance sheet) matched to private sector capi- 15 week programme teams have the opportunity tal. This could be part of a UK fund of funds to pitch for up to a further £200k investment and promoting investment in the English regions. access to ongoing, targeted support through our growth programme. They will also be eligible to • Innovate UK provision of an expertly-man- apply for City procurement challenges and compete aged underwriting facility to help promote for public sector contracts to make impactful change larger crowd-funded technology deals (to in our city. align the UK VC landscape more to Silicon Valley). In particular this could be used to establish major local companies. Q20. Given public sec- It is well accepted that tor investment already a key tenant of any • SEIS linked to regional enterprise zones. successful business and accounts for a large • Increased local control over Innovate UK share of equity deals entrepreneurial eco-sys- tem is access to finance grant making to support further R&D within in some regions, how accelerated companies or core local themes. can we best catalyse and a network of private investors. This would need to be managed to ensure uptake of equity cap- commercial projects are supported and that it ital outside the South aligns to UK themes. East? EIS and SEIS schemes have seen early stage This could be enabled capital flow into start-ups but these new start-ups Q21. How can we by holding crowdfunding have not been regionally spread and funding gaps drive the adoption of events in different areas have still been present. new funding opportuni- around the country and ties like crowdfunding providing a mechanism Regions would gain significant benefit from provi- across the country? sion of a more localised ability to borrow and invest for people to get funding. in infrastructure. There are plenty of investors There has never been an event of this kind held in looking to finance smart city projects, the challenge the South West for example. Fintech has a small but is making them desirable. We need to join up all the growing presence in Exeter. This includes compa- small components into a package that is investable. nies such as Crowdcube – the UK’s market leader in This will be enabled by having the right incentives the emerging equity crowdfunding sector. The firms and a clear framework large enough to have a are attracted to Exeter due to the unique benefits considerable return. that the city and wider region can offer – including a pool of skilled graduates. By their very nature these Regional funds currently offer a real incentive to cannot be replicated in every part of the country, SMEs wishing to establish themselves but this also and therefore serve to underline the importance means that certain regions are at an advantage of the industrial strategy working with the grain of when attracting SMEs. different places.

We know many SMEs that have established Whilst Exeter and financial services have not been in Edinburgh (Scottish Enterprise), opened facilities traditional bed fellows, there is no reason why this in Wales (Welsh enterprise) or chosen sector cannot continue to develop; drawing on to move to Cambridge to access their own Exeter’s heritage as a county capital. One area Cambridge Investments. that has been identified by businesses as requiring improvement concerns the availability of good Innovators, investors and customers need to be networking opportunities. Exeter City Futures is encouraged to meet and collaborate in regional looking to respond to this by creating an ‘Exeter City economies. Futures Declaration’ for local businesses.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 18 Encouraging trade and inward investment

Natural and financial resources can be harnessed to create “investable places”. ransformationT of a place serves to stimulate new services (which can be exports), provide evidence of outcome – “a shop window” – and provide clean local growth. The balance of trade is a critical consideration for Q25. What can the The first step is to focus the UK, and it is ever more important as we move Government do to im- our activities on areas towards our new post-Brexit future. At Exeter City prove our support for where there is a clear Futures our thought process about the balance of firms wanting to start international need. trade starts locally. For example, in Greater Exeter, The Exeter City Futures exporting? What can we spend £0.9bn on energy fuels every year, that is programme has been the Government do to cash which largely flows out of our region. Our view designed with international improve support for is that the first step to encouraging trade and invest- need in mind. This is why firms in increasing their ment within the UK is to ensure that we minimise at the core of our strategy exports? the outflows from our economy. Our Energy report we have identified the 3 demonstrates that we have the resources to deliver global mega-trends of Urbanisation, Digitisation and a sizeable proportion of our energy needs within our Decarbonisation. By defining these areas of focus own region. we have a clear set of customers for whom we can add value and we can act as a broker between Our vision for clean growth aims to stimulate trade those international customers and locally trialled and investment. Our forthcoming economic report solutions. will demonstrate the potential immediate GVA im- pact from the recommendations of our Energy and The second step is to build exports and invest- Transport strategies. However, our work aims to go ment into the broader economic strategy. Our further. There is clear demand for smart city invest- focus on the key stages of the accelerator process ments, but despite the rhetoric, smart city infra- aim to demonstrate technologies and business structure investment remains low. Our programme models within a place and deliver a clear change. is designed to demonstrate through the accelerate The aim of this is to begin to provide a ‘shop phase, how new business models can be expanded window’ – a demonstration zone that we can bring rapidly to “make the city investible” achieving critical people to, to show the beneficial impact we were scale with reduced risk profiles to be attractive to able to have. Exeter’s size makes it ideal to deliver pension funds and other infrastructure investors. real cutting-edge change at pace and demonstrate the UK’s leading role in smart cities. By creating a pipeline of new business models within our programme we aim to create a sustaina- Thirdly we need to internationalise all aspects ble demonstrator that can provide a ‘shop window’ of the economy. Our region has traditionally not for the UK’s smart city capabilities responding to a been strong at this – our LEP has the lowest share growing global need. of foreign owned employment of all LEPs. This likely implies that foreign direct investment into the region is also low. Our region needs an immediate strategy to increase its international offer. This can be achieved in part through the creation of an international brand and leveraging existing global

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 19 connectivity. within 200 miles of coastline, we need a clear port It is clear that Exeter already has a far-reaching strategy to offer far greater efficiency in the move- international brand in some areas. The University ment of goods. But we also need a clear strategy has a high degree of internationalisation and to export services. This involves routes to market international partnerships and attracts students and for intangible assets such as software, and much researchers from across the world. The Met Office better networks to enable UK companies to bid for provides an internationally recognised brand. With overseas work. A network of visionary cities led by a commercial approach, the Met Office could play the UK would be a welcome step. a leading role in providing insights to international cities, forecasting the impacts of climate change Finally we endeavour to make the whole city and introducing UK goods and services that could Investible. This is because we know that our mitigate them. Exeter also has more IPCC chapter exports aren’t just goods and labour, they are also authors than any other city in the world, so is transactions. This is why the City of London is so well-placed to play a leading role in international successful – it is the conduit for international deal- responses to climate change. It is the goal of Exeter flow. Exeter City Future seeks to create a legacy City Futures to build on this branding, using a target of urban deal-flow, we seek to securitise smart for the city (Energy independent by 2025) to mirror city investments so that the UK can play a leading the elevated brands of Copenhagen (Zero Carbon role in the design and implementation, but also the by 2025) and Helsinki (no car ownership by 2025). funding of the major urbanisations taking place.

As well as branding however, we also need to enhance our routes to market. As a region, sat

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 20 Delivering affordable energy and clean growth

The locked-in inefficiencies of city systems and infrastructure are a huge drag on productivity. Heavy focus on data analytics allows business models to break down the siloes of services in a place. Exeter City Futures is sponsoring and nurturing new businesses to unlock these inefficien- cies, using the power of the whole city. Clean, sustainable growth is not only at the heart of The regional challenges facing Greater Exeter the Fourth Industrial Revolution, but will also make include the forecast growth of the domestic, com- places better, leaving a long-lasting national legacy mercial and industrial sectors which is anticipated to of which we can be proud. commit the region to further expenditure on energy. This is due to the low existing design standards of Q29. How can the Greater Exeter has ac- new building stock alongside the associated rise in Government, business cess to abundant natural transport with economic and researchers work energy resources due to Q27. What are the activity. Growth of the together to develop its position in the South most important steps regional energy deficit the competitive op- West. Vast opportunities the Government can be limited, moreover portunities from inno- exist to further exploit should take to limit reversed, through the vation in energy and existing renewable ener- energy costs over the tightening of standards our existing industrial gy technologies such as long-term? concerning energy strengths? wind and solar, alongside consumers such as new more regional resources dwellings, implementation of demand reduction such as Geothermal. Exeter City Futures seeks to initiatives such as domestic building retrofit to stimulate innovative and collaborative responses Passivhaus EnerPHit standard for the existing to a regional whole systems energy strategy which building stock, and increased electricity supply from makes best use of the resources and cross-sector renewable energy sources. skills available in the region. Q28. How can we Focus on sustainability for Exeter City Futures recognises the government’s move towards a posi- a region not only provides commitment to developing a modern energy land- tion in which energy is long term energy and scape fit for future demand through the inclusion of supplied by compet- price security but also energy storage as one of the eight great technolo- itive markets without boosts productivity, growth gies. However, Exeter City Futures understands that the requirement for and jobs. The estimated the key issue in achieving this goal is the integration on-going subsidy? £0.9B annual energy and automation of energy systems through the cost for Greater Exeter is development of smart grid infrastructure. value that is currently lost from the region. Through investment in low carbon energy infrastructure, a The key ask is that they see and recognise significant proportion of this spend could be retained the benefit of the South West and Greater Exeter in locally stimulating employment, clean growth and particular as providing an integrated whole affordable energy. system demonstrator for the energy transition – ranging across retrofit, smart grids and generation technologies.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 21 services and are seeking the government’s support Certain changes, such as the EU’s introduction of a for this alongside the identification of challenge tariff for imports of solar equipment from China, are areas where market solutions could be stimulated. counterproductive towards achieving a long-term, Support is also required for policy that allows value unsubsidised market for clean energy. The Greater from low carbon development to be retained locally Exeter Energy Report provides 10 recommenda- within the region. tions for overcoming the current challenges which are being taken forward by Exeter City Futures. Further deployment of de-centralised low carbon generation is currently hindered by technical limita- Q30. How can the The forthcoming economic tions such as electrical grid infrastructure which was Government support report for Greater Exeter, designed for legacy infrastructure. Investment in businesses in realising which complements the enabling technologies which will address cost savings through energy report, will show these challenges, such as a smart grid and energy greater resource and how even the remaining storage, is required to unlock the regional energy efficiency? ‘easy win’ activities can low carbon value proposition. Exeter City Futures generate a positive contri- continues to engage with stakeholders to under- bution to GVA, drive local employment and reduce stand current barriers, to break these down health costs within the region. and to facilitate the shift towards investment into these enabling technologies. Exeter City Futures believes that the installation of low carbon and energy efficiency technologies could be funded through energy bills over the long-term and is seeking support for the development of reg- ulation that can deliver this effectively. Exeter City Futures is also championing commercial and indus- trial demonstrator projects for new technologies and

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 22 Driving growth across the whole country

The Exeter City Futures approach is designed to unlock the wealth of a city region to drive purposeful change and clean growth. Throughout the Industrial Strategy Green Paper, it In order to unlock the wealth of our city Exeter City is acknowledged that more must be done to devolve Futures is identifying ways in which we can break growth to new world-leading clusters across the the cycle of decline. It is our belief that transforma- UK’s regions. tional growth will only be achieved in “Forgotten” economies through aspirational, long-term, pri- The productivity performance of most places outside vate-sector-led programmes like ours. But achieving the South East lags behind the national average, alignment between diverse stakeholder groups, which is itself about 20% below countries like building capacity to raise aspiration, securing buy-in France and Germany. A huge opportunity exists for from vested interests and obtaining critical mass the UK if it can transform its regional economies, to make the necessary change is not without its but in order to deliver real change the approach challenges. for regional economies must be bolder than it has been in the past - it cannot merely be an evolution of Driving growth across the whole country existing strategies. Many previous reviews Q34. Do you agree and strategies have In our analysis we observe two categories of local the principles set out recognised the challenge economies in the UK – the “Fortunate” and the above are the right presented by the UK’s “Forgotten”. The “Fortunate” regions are categorised ones? If not what is regional economic differ- by a virtuous circle of strong business leadership, missing? ences. None, however, inward migration of skills, new innovations, products have so far managed to and services, a wealth of financing and a culture achieve material sustainable transformation in the of entrepreneurship, aspiration and mobility. In relative performance in regional economies. contrast, the UK’s “Forgotten” economies are cate- Many economists have tried to assess what makes gorised by a cycle of decline exhibited in Figure 3. a place a successful magnet for innovation and economic growth. One such example is the Localis report – The Making of an Industrial Strategy which exemplifies the 4 key features that strong economies share. The report summarises these as follows: • Strong & Skilled Labour Market • Mobility within and between places • Attractive and fair place to live work and invest • Enterprise Culture

We would add to this list a strong and vibrant finan- cial eco-system. Figure 3: Cycle of decline in forgotten regions

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 23 Regional R&D investment could also be added, for growth that is supported beyond the political although we would caution against too much em- cycle. We need a bold vision to create a new nar- phasis on research-led innovation at the expense of rative to address the crippling exodus of skills and other pre-requisites for growth. Certainly, in our ex- ensure that the region becomes a place of inward perience a focus on existing business and research skills migration. We need new leadership to create strengths puts many regions in the “Forgotten” camp a culture of entrepreneurship and address the low at a clear disadvantage – naturally these are regions risk-appetite of existing institutions. And most impor- without established clusters or without critical mass tantly, leadership is needed to develop a focus on in research and innovation areas attracting funding. the clusters of the future, not those determined by There is a clear tension between supporting existing activities and strengths of the past. clusters (the “smart specialisation” approach) and developing strategies that can truly deliver growth Exeter City Futures is systematically addressing for the UK’s regions. The smart specialisation the factors that lead to economic and productivity mind-set is endemic in traditional approaches to underperformance as described below. regional development, but has failed to deliver transformational outcomes. Strong & Skilled Labour Markets: In our respons- es to other pillars we have discussed how although In keeping with the traditional approach, the industri- development of skills is important, the industrial al strategy green paper currently proposes to create strategy must also address the impact of internal “new competitive funding streams to support world- migration within the UK. Exodus of skills is a key class clusters of research and innovation in all parts contributor to the two-tier performance of the UK’s of the UK”. In a competitive bidding process against regional economies. a city like Cambridge or London for example, it is difficult to see how Exeter can be expected to win Mobility within and between places: The In- in the most commercially exciting technology areas dustrial strategy green paper acknowledges that outside of Environmental Science. weaknesses in infrastructure and connectivity can limit growth in areas with lower productivity. These We believe the technologies of the future can be connectivity challenges restrain the region’s growth defined in Exeter, can be demonstrated and com- potential and attractiveness to new businesses. The mercialized here, but on paper, regional economies cost of regional connectivity is a significant barrier to like ours will always seem like an outside bet, many new businesses. because of our lower productivity, lower innovation activity and difficulties attracting the right skills. It is unclear therefore how the approach proposed in the Exeter – London by Rail green paper is sufficiently strong to really address the cycles of decline experienced in regional econo- To get to London for 9am from Exeter St David’s mies. costs £250

Exeter City Futures approach The Exeter City Futures approach puts the vision Attractive and fair place to live work and invest: of our place at the centre of our strategy as the As investment and people are now more mobile essential platform upon which we can jump-start than ever, the consideration of the quality of a place the regional economy. To truly transition the UK’s become much more important. Placemaking as a regions to high-productivity, world-class high-growth tool in economic development is not new but its time economies we need a much greater focus on is certainly now in view of the significant transfor- future-thinking, pump-priming and place-making. mation towards a knowledge-based economy taking The success of now well-known clusters such as place. Canary Wharf, Dubai and Las Vegas, had far more to do with the ambition of a collection of individuals It is crucial that support is provided to create the than with the identification of “smart specialisation right environment to attract and retain talent to assets” in those places. “Forgotten” regions, which can offer as much of a complete and more affordable package to secure Driving regional growth requires leadership to growth in investment and employment away from develop a clear story, brand and broad-range of the massive metropolitan areas. forward-looking activities to create a major catalyst

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 24 Key drivers to establishing a successful knowledge Enterprise Culture: In order to establish the UK as economy inextricably linked to place-making. one of the most competitive places to start and grow a business we must create a culture of entrepre- neurship across our entire economy. CEBR analysis • Creating the physical requirements – having evidences that a culture of entrepreneurialism is the the architecture and accommodation that third most important feature of successful regional businesses and workers require. economies. In regions where the private sector and • Building on what’s there – recognising the the commercial eco-system is strong, a culture of city’s existing strengths and weaknesses and entrepreneurialism is well established, in particular playing to these. at the university level. • Attracting and retaining high skill organisa- tions – organisations that rely on Vibrant Financial Eco-System: Fundamental to productivity through high quality jobs and maximising growth is making best use of the Capital highly skilled people. that exists across the city today. Every journey made, every electron consumed and every brick • Distinctive ‘knowledge city’ offer – for busi- laid across our city has an associated cash flow. nesses and people who are considering Every capital allocation decision, every public sector investing, working and living in the city, sup- procurement and every pension allocation is an ported by a diverse cultural offer. opportunity to do things more innovatively and to • Maintaining and improving strong connectiv- retain more value within our local economy. ity within and outside the city economic area with major economic hubs. The Green Paper proposes establishing Ministerial Forums on Industrial Strategy with each devolved • Strong leadership – around an administration. Whilst this is welcome, a successful economic vision. modern industrial strategy must benefit all corners of the UK. Areas that do not currently hold devolu- tion agreements must receive similar support and dialogue with central government. We would request that an extended set of forums build upon and enhance the ongoing work ministerial local growth champions.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 25 Cultivating world-leading sectors

Analytical city services and infrastructure has the potential to be as big as financial services for the UK. Enhancements to existing sectors for instance finance will be explored as part of the Exeter City Futures programme. Exeter City Futures believes that the establishment There are two things to draw from this approach that of discrete sectors will not be sufficient to addresses we believe are of national importance. the complexity of the problems that are faced around urbanisation, digitisation and decarboni- 1. Gains in efficiency and productivity will sation. It is vital that we cultivate a strategy where come from bringing modern data analyti- siloes of investment are broken down in real places. cal techniques to the systems of the city. We believe that benefits will be realised by focusing These could create a significant competi- on the outcomes that regions need tive advantage for UK cities. rather than focussing on specific technologies or specialist sectors. 2. ‘Infrastructure as a service’ will be a truly significant global industry, and the op- portunities to exploit these opportunities Q34. Do you agree A successful modern can and must be spread across a number the principles set out industrial strategy must of regions (see also response under the above are the right include support for Infrastructure pillar). ones? If not what is new sectors like data missing? services that sit across traditional specialist There is absolutely no reason why we should allow technology ‘sectors’. responses to this new sector to be taken by non-UK firms. The UK has the most impressive reputation The key will be to create an environment in a place for bringing analytics to a service industry, as where genuine big data innovation can occur. Often demonstrated by the phenomenal explosion of this will be about encouraging larger organisations Financial Services after the Big Bang. to share data. To take advantage of this opportunity, continuing These new service sectors will be incredibly to focus on building entrepreneurial, analytical and valuable in the next 10-20 years, and are perfectly problem solving skills in our workforce will be es- aligned with the UK’s service orientation and skill sential. The Exeter City Futures approach of making base. cities into practical analytical training grounds for our future workforce is an approach that can be copied, The Exeter City Futures approach is about creating, and indeed already is. in the main, new service sector businesses, with data at their very heart, designed to survive and grow on the cash flows that exist already within a city (i.e. seeing the city as a customer).

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 26 Creating the right local institutions

The benefits from the other pillars can only be unlocked by providing coordinated local institutions that share the same strategy. Exeter City Futures is achieving this through constant local lobbying and ground-breaking innovations such as “city accounts”. Exeter has a world leading frameworks in which Institutions operate can act as Q36. Recognising the University building a a barrier to collaboration. The government recog- need for local initiative significant reputation in nises that political alignment and clear democratic and leadership, how the area of environmental accountability is a pre-requisite to delivering change should we best work futures. We have one of at pace which is why the preferred option for devolu- with local areas to cre- only two specialist maths tion deals has been to cities with mayors. This clear ate and strengthen key schools in the UK, a preference remains the case. local institutions? Further Education college named as outstanding and Collaboration: At Exeter City Futures we believe an excellent hospital. Individually our Institutions are that impactful growth for regions across the UK can thriving. However, as a region we can do more to be achieved through Institutional Collaboration. In- capitalise on this excellence and deliver growth. stitutions such as Councils, Hospitals, Universities, LEPs etc not only have significant human resource Creating a vibrant environment for start-ups and but are also responsible for considerable levels of other innovators to thrive and contribute to our investment, and oversee very large asset bases success in the fourth industrial revolution requires (particularly commercial and residential property). visionary leadership at multiple levels across region- With alignment across the region and clear shared al institutions and, critically, must cut through what is delivery structures existing resources could be often low value, short sighted local politics. deployed for greater impact, within existing political frameworks. The Challenges for Institutions The institutions that have grown up in any city like We believe we have a clear vision that can catalyse Exeter work the way they do because they have the regional economic performance and are working been successful in their silos. Transport responds tirelessly to achieve such alignment. However, we to housing and job locations. Health responds to an also concede that maintaining consistently harmo- increasingly inactive population. Energy responds nious relations with a diverse range of stakeholders to an increasingly energy intensive lifestyle. The has its challenges. Not least because institutions aggregate of these silos (and many others) is an offer so many points of contact it is costly and time unsustainable city, which is continuing to grow. consuming for businesses to engage with them.

Alignment: Clear alignment within and between in- A strong modern industrial strategy will support stitutions around a single unifying vision is essential regional leadership to recognise ambitious to moving that vision forward. Institutional structures goals involving collaboration of multiple institu- that encourage a “them and us” culture can be dis- tions and will support institutions to collaborate ruptive and destructive to progress. The regulatory for delivery.

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 27 Managing Risk: Existing institutions are risk-ad- Changes are needed within existing institutional verse. They are driven by requirements from funding structures to ensure that they are fit to support bodies such as the EU and have become con- delivery of a modern industrial strategy and also to strained by bureaucratic rules and regulations. This radically enhance the interaction between problems, means that it becomes difficult to determine what research and commercialisation. the right performance measures to apply are; those that meet the funding rules or those that truly benefit Catapults were introduced following the 2010 Haus- growth of the economy? Additionally state aid is a er review which recommended new institutions to law that has made the UK systematically risk-averse bridge the critical gap between research and com- in its support of innovation and new businesses. In mercialisation which was identified as a weakness order to build the places we envisage and to enable of the UK compared to international competitors. increased business model innovation, we need greater freedoms to remove local regulatory hurdles Exeter City Futures welcomed the introduction of the and encourage alignment. catapults and has consistently sought to work with them over the last two years. However, our overall The skill levels and regulations in these institutions experience is that they are doing very little to move are not appropriate for transformational decision research on, nor commercialise it. This may be a making. As a result institutional strategies are forced response to the EU and WTO bureaucracy of state to become incremental rather than visionary. aid. The UK’s response to this, is embodied in the behaviours of innovate and the catapults who have Enhancements to these institutions to provide hired large numbers of research oriented staff, often an ability to take long term investment rule bound and therefore unattractive to genuine decisions is an important quality for creating a business people, and spreading ‘jam’ very thin vibrant region. across the U.K., always through technology-oriented competitions. In our opinion this stifles the demand Decisions like this are difficult for officers and side of innovation. finance directors to make if they don’t have a long term investment mind-set for the building of a place. The gap between fundamental research and Many institutions are not currently set up to function commercialisation is as strong as ever for us in in this way and it is of course unreasonable for Exeter. Exeter City Futures is addressing this gap decision makers in such positions to take ‘venture through the challenge process and incubator taking capital’ style risks. the view that much new industry comes from the exploitation of existing rather than new advances in Providing support to the development of these research (e.g. Air Bnb, Uber). This is not to say that new skills and driving closer collaboration between investment in fundamental research is not crucial to private and public institutions will be key for delivery ensure that there is a pipeline of exploitable knowl- of a successful modern industrial strategy. edge, but that this must not be the sole focus. In the UK we are historically poor at exploiting our knowl- edge and therefore are limited in our realising of the An example of collaborative investment economic value of that investment in research.

Partners of Exeter City Futures and incubated • Many institutions in a city require significant companies are choosing more frequently to deal car parking, and in line with their own busi- directly with forward-thinking universities through ness strategies might invest public or private Innovate UK grant applications or KTPs rather than money in car parking facilities. entertain what has become a bureaucratic process • Across a city, very significant resources are of dealing with the catapults, but it is unclear that tied up in such investments. this addresses the historic weakness that the Haus- • Coordinated re-investment of this land and er review aimed to address. capital could provide very significant support for alternative transportation businesses and Exeter City Futures approach to city change is free up land in valuable urban areas. pulling together start-ups, SMEs, Investors and Aca- demics to address our specific city challenges. This would be better supported by scaled down, highly motivated, highly skilled catapults (comprised of

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 28 five entrepreneurs / VC investors with deep industry vital is the attraction of ‘the right kind of private connections and international experience). money’. There are many kinds of money. We have often come across major institutional investors Adjusting the focus of Innovate UK can open up the ‘prepared’ to lend at sub market rates, providing a major balance sheets of the UK to innovation and council provides a back-stop guarantee. Such deals support entrepreneurs directly to solve problems enable investors to hold capital against sovereign with existing technology. This is an approach risk, meaning they essentially make unreasonable that can unlock creativity and growth across the profits. whole country. The right kind of money, is in general an investor Bridging the gap in regional capital allocations with some kind of long term relationship with a In order to bridge the gap between the shift in capi- place. Local authority pension funds, institutional tal allocations desirable by city institutions, regional investors with long term exposure to city centre venture funds are required. As an alternative to assets, universities and councils with significant previous failed quasi-public funds, place-based, property assets, businesses with long term com- revolving evergreen funds would fill a gap in the mitment, etc. This goes against traditional asset institutional investment capability of a region. It is allocation approaches, to avoid correlation risk. clear that Local Enterprise Partnerships, at least in our region, are not capable of playing this role. Finally, coordination of institutions within cities and the attraction of ‘the right kind of private money’ to Q38. Are there in- There is a lack of venture optimise a place based industrial investment strate- stitutions missing in capital risk takers in the gy is a role that doesn’t really exist in cities today. certain areas which we regions of the UK and could help create or Exeter City Futures is Exeter City Futures and Exeter City Council strengthen to support working to improve this are actively discussing how to create such an local growth? by creating an opportunity institution in Exeter, drawing on skills from pipeline for Institutional the private sector to build capacity within the investors. This pipeline will leverage private equity public sector. and in time even bond markets – however, the high risk capital remains the greatest challenge. Also

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 29 Concluding Statements

We have shown how Exeter City Futures has a clear strategy aligned with the government’s indus- trial strategy, outwardly focused on major global trends, but firmly founded on a clear future vision for our place.

We have shown how our vision supports, and aspects of our delivery can enhance, the government’s identified pillars. Most notably:

Delivering affordable energy and clean growth The locked-in inefficiencies of city systems and infrastructure are a huge drag on productivity. Heavy focus on data analytics allows business models to break down the siloes of services in a place. Exeter City Futures is sponsoring and nurturing new businesses to unlock these inefficiencies, using the power of the whole city.

Developing skills Exeter City Futures focusses on the role that a place can have in developing skills. A great university and college are part of the story but building entrepreneurial capacity in the city and creating the vibrancy to retain talent are the other important characteristics and a key part of our strategy.

Upgrading infrastructure Exeter City Futures, through the use of modern analytics, focuses on new kinds of infrastructure. Services that allow existing infrastructure to be used more efficiently (e.g. transport), create new businesses, com- petitive advantage and have extraordinary knock-on benefits (e.g. for health and housing).

Improving procurement Risk aversion and bureaucracy in public and private sector purchasing stifles innovation. Exeter City Futures has created a new venture capital inspired approach to procurement that exposes the levers of city transformation to start-ups and entrepreneurs.

Driving growth across the country The Exeter City Futures approach is designed to unlock the wealth of a city region to drive purposeful change and clean growth.

There are many ways in which the government can help accelerate our activities and we look forward to working closely with you over the coming months and years to deliver a new industrial future for the UK.

For more information about Exeter City Futures visit us at www.exetercityfutures.com

[email protected] facebook.com/exetercityfutures @ExeCityFutures

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 30 Embodying the 10 Pillars

We highlight the global trends Exeter City Futures focusses on of urbanisation, digitisation and the role that a place can have in decarbonisation and how our developing skills. A great university specialist sector knowledge must be and college are part of the story but harnessed to develop solutions to building entrepreneurial capacity in cross-cutting challenges of health, the city and creating the vibrancy to energy and transport. retain talent are the other important Investing in Developing characteristics and a key part of our science, research skills strategy. & innovation

Exeter City Futures, through the use The UK requires new ways of think- of modern analytics, focuses on new ing and innovative new products and kinds of infrastructure. Services that services. The Exeter City Futures allow existing infrastructure to be accelerator offers opportunities for used more efficiently (e.g. transport), entrepreneurs to build solutions that create new businesses, competitive address real need. advantage and have extraordinary Upgrading knock-on benefits (e.g. for health Supporting infrastructure and housing). businesses to start & grow

Risk aversion and bureaucracy in Our approach shows how natural public and private sector purchasing and financial resources can be har- stifles innovation. nessed to create “investable places”. Exeter City Futures has created a Transformation of a place serves to new venture capital inspired ap- stimulate new services (which can proach to procurement that exposes be exports), provide evidence of the levers of city transformation to outcome – “a shop window” – and Improving start-ups and entrepreneurs. Encouraging provide clean local growth. procurement trade & inward investment

The locked-in inefficiencies of city Analytical city services and infra- systems and infrastructure are a structure have the potential to be as huge drag on productivity. Heavy big as financial services for the UK. focus on data analytics allows Enhancements to existing sectors business models to break down the for instance finance will be explored siloes of services in a place. Exeter as part of the Exeter City Futures City Futures is sponsoring and programme. Delivering nurturing new businesses to unlock Cultivating affordable energy these inefficiencies, using the power world-leading & clean growth of the whole city. sectors

The Exeter City Futures approach The benefits from the other pillars is designed to unlock the wealth can only be unlocked by providing of a city region to drive purposeful coordinated local institutions that change and clean growth. share the same strategy. Exeter City Futures is achieving this through securing buy-in from local decision makers and ground-breaking Driving growth Creating the innovations such as “city accounts”. across the right local whole country institutions

BUILDING OUR INDUSTRIAL STRATEGY: EXETER CITY FUTURES RESPONSE | 31

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