Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 2014-2020 ASSISTED AREAS MAP Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 DECEMBER 2013 1 Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 Contents 1. Foreword from the Minister of State for Business and Energy ............................................................3 2. Introduction ..........................................................................................................................................4 3. Background to the Update of the Assisted Areas Map ........................................................................5 4. How to Respond and Make Any Queries.............................................................................................8 5. Confidentiality & Data Protection .........................................................................................................9 6. Analysis of Responses and Government Response to the First Stage Consultation ..........................9 7. Responding to the Consultation.........................................................................................................20 8. What Happens Next?.........................................................................................................................20 Annex A: Principles for Government Consultations...............................................................................22 Annex B: The Draft Assisted Areas Map for the UK 2014-2020 ............................................................23 Annex C: Areas Requiring Criterion 5 Applications ...............................................................................24 Annex D: Proposed Assisted Areas Coverage by Ward........................................................................25 Annex E: List of Individuals/Organisations Consulted in Stage 2 ........................................................103 Annex F: List of Respondents to the Stage 1 Consultation .................................................................104 Annex G: Consultation Stage 2: 2014-2020 Assisted Areas Map Response Form.............................107 2 Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 1. Foreword from the Minister of State for Business and Energy On 31 July 2013, the Government launched a first stage consultation on updating the Assisted Areas Map for 2014-2020, in response to new European Commission guidelines on regional aid. Assisted Area status allows small businesses and large enterprises in less economically advantaged locations to benefit from additional financial support under EU Regional Aid Guidelines. This support is offered to encourage business in these communities to grow, innovate and thrive. It is important to stress though that regional aid is only one of the many ways in which we address areas of economic need across the country. In fact, many business support schemes do not depend on regional aid. Other types of funding are available aimed at tackling specific market failures that can occur regardless of geography, such as aid for R&D, risk capital, SME investments, training, or environmental protection. In order to inform decisions about where regional aid can have the most impact, the Government sought local intelligence, as we believe that businesses and other local stakeholders should help set the strategic direction for their area. The responses we received to the first stage consultation have confirmed this belief. The assistance of local authorities, local enterprise partnerships and development agencies has helped identify those locations best placed to make an important contribution not only to their local economy, but also to UK growth. Our priority is to secure the recovery and ensure sustainable growth in the economy. Updating the Assisted Areas Map for 2014-2020 delivers an opportunity to help rebalance the UK economy and drive sustainable growth. Rebalancing the economy is about spreading our success - both geographically and by sector - and supporting the world class industries we already have, as well as the new ones that we are developing. The first stage consultation on updating the Assisted Areas Map ended on 30 September. The Government has carefully considered all the responses, and is grateful for the evidence which has helped shape the draft UK Assisted Areas Map. This document forms the second stage consultation, and contains our draft Map and Government’s response to the first stage consultation. Over the next seven weeks, we will welcome your views on our conclusions and on the draft Map. The finalised Map will then be submitted to the Commission for approval in early spring 2014. The Rt. Hon. Michael Fallon MP 3 Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 2. Introduction 1. This document sets out the Government’s Response to the 2014-2020 Assisted Areas Map Consultation Stage 1: Common Principles and Local Intelligence (which ran between 31 July and 30 September 2013). It also includes the draft proposal for a new Assisted Areas Map for the period 2014-2020. Assisted Areas are those areas where regional aid can be offered to undertakings, typically businesses, under state aid rules. 2. The Government is consulting on the draft Map, which has been developed using: information submitted during Stage 1 of the Assisted Areas consultation; Government held intelligence on the potential to use regional aid to lever further investment and growth; and assessing economic need against a set of criteria. Stage 1 consulted on draft principles for defining the areas that should be included on the draft Map, and sought local intelligence and priorities on areas of economic opportunity and need. Local Enterprise Partnerships (LEPs) took the lead preparing responses in England, and Local Authorities (LAs) led on responses in Scotland and Wales. Almost 90% of respondents supported the Government’s proposed principles for developing the draft Map1. There was also widespread support for Government having localised the process for identifying economic opportunities for potential inclusion. 3. The draft Map has been developed in conjunction with both the Welsh Government and Scottish Government. The Government announced earlier this year that Northern Ireland should continue to benefit from 100% coverage for the medium term. 4. The purpose of this consultation is to seek views on the draft Assisted Areas Map, taking into consideration the Government’s response to Stage 1 of the consultation, and the need to comply with the Commission’s Regional Aid Guidelines. The closing date for responses to the Stage 2 consultation is Friday 7 February 2014. 1 See paragraph 29 below 4 Consultation Stage 2: Draft Assisted Areas Map and Government’s Response to Stage 1 3. Background to the Update of the Assisted Areas Map The EU Regional Aid Guidelines 5. The new Regional Aid Guidelines2 (RAG) were issued on 19 June 2013. The RAG is one part of a wider package of State Aid frameworks. All of these State Aid frameworks are being reviewed by the Commission through a ‘State Aid Modernisation’ programme which was launched in May 20123. The modernisation programme aims to promote a more efficient use of public resources, ensuring that aid is well-designed and targeted, and fosters sustainable, smart and inclusive growth in a competitive internal market. Revision of the Procedural and Enabling Regulations, and the guidelines on Broadband and Regional aid, have been completed. Revision of the remaining guidelines, which includes those on Environmental and Energy aid; aid for Research & Development & Innovation and for Risk Capital, is on-going. 6. The new RAG will apply from 1 July 2014 to 2020, replacing the current RAG, due to expire on 30 June 2014. In line with the wider State Aid Modernisation process, the current RAG has been kept in force by the Commission for a further six months from its original expiry date of December 31st 2013. The 2014-2020 UK Assisted Areas Map must be drawn in accordance with the new RAG. The Stage 1 consultation provided a summary of the main changes from the current RAG. Relevance to Growth Policy in the UK 7. The Government announced its ‘Plan for Growth4’ in 2011, which included an objective to achieve sustainable and balanced growth that is more evenly distributed across the country and sectors. The Government wants to ensure that regional aid helps geographically and sectorally rebalance the economy, addresses local economic need, increases productivity and raises employment rates. In addition to the UK Government’s Growth Plan, the Devolved Administrations - Scotland, Wales and Northern Ireland - also have regional development plans. 8. The Government's approach to Industrial Strategy5 was announced in September 2012, and builds on the ‘Plan for Growth’. It explores how the Government can work with the private sector to encourage economic growth. It analyses which industrial sectors could make the greater contribution to future economic growth and employment in the UK, and then considers which Government action could add most value. Sectors considered include parts of advanced manufacturing, including aerospace, automotive and life sciences. Manufacturing is considered particularly relevant to the granting of regional aid, given its capital intensive nature and its deep, sometimes local, supply chains. Assisted Areas and Use of