RESEARCH TO INFORM THE NORTH WEST S EU FUNDING STRATEGY. Evaluating the impact of past and current EU programmes

Transcription

1 RESEARCH TO INFORM THE NORTH WEST S EU FUNDING STRATEGY Evaluating the impact of past and current EU programmes New Economy October 2012 FINAL REPORT New Economy 1

2 Contents Executive Summary Introduction... 5 Context for this research... 5 Research questions... 5 Methodology... 6 Structure of the report Considering the impact of EU structural funding upon the NW... 7 The ability to drive local economic growth... 7 The benefits of having certainty of funding Innovations in service design and delivery Stronger partnerships The development of regional expertise Helping the NW to contribute to Government objectives Summary Measuring the impact of EU structural funding upon the NW The financial value of structural funding to the North West Spatial and topical profiles of structural funding investment into the North West.. 27 The gross impact of structural funding upon the North West Merseyside Objective 1 (ERDF & ESF) Gross Impacts, North West ERDF Gross Impacts, North West ERDF Gross Impacts, ESF Gross impacts, ESF Gross Impacts, Total Gross Impacts of ERDF and ESF in the NW since Calculating net impacts The net impact of structural funding upon the North West Gross value added calculation The importance of structural funds to the North West s economic performance Summary Conclusions Annex: Structural funding in the North West New Economy 2

3 Executive Summary The impact of structural funding since 2000 Structural funding has provided a range of benefits to the North West. The most obvious of these has been extra investment for the region as it moves from a period of decline to a period of regeneration. Combining ERDF and ESF programmes, this extra investment has totalled an extra 600m investment per year once match funding is included. This investment has helped the region to tackle many socio-economic issues, and the net benefits from this work have included: North West GVA has been increased by at least 2.3bn per annum due to structural funding activity within the region The creation of 56,800 additional jobs within the region; 127,200 people gaining a new qualification; The creation of 9,100 new businesses; 47,200 businesses being helped to become more productive; Over 1,000 social enterprises receiving support; and 440m in additional tourist spend; Beyond these direct impacts, the experience of designing, managing and delivering ERDF and ESF programmes over the past 12 years has considerably strengthened the ability of partners within the region to drive economic growth. Thanks to structural funding experiences, partners are increasingly able to work together to deliver innovative, large scale projects which address local priorities whilst also making a positive contribution towards national economic growth priorities. These indirect benefits have been greatest when local, sub-regional and sector partners have had the ability to influence the design and delivery of structural funding projects. This influence has been used to: Exploit regional and local knowledge of what is most needed and the methods that are most effective in tackling long-term barriers to growth; Design and deliver larger projects that have an economic impact that is of value nationally as well as locally; Ensure that structural funding projects are embedded within wider service delivery, thereby maximising their chance of success and delivering strategic added value; Foster the skills, capacity and knowledge that will be needed to ensure successful delivery of projects in future and which have made the region less vulnerable to external economic shocks; and New Economy 3

4 Design programmes and projects which retain and recycle investment within the region s private and voluntary sectors, reducing the region s dependency upon public sector support; If future rounds of structural funding are designed, delivered or commissioned at the national level these benefits could be lost. It is impossible to conclusively state what would have happened to the North West over the past twelve years if structural funding had not been available. However, from considering the size and impact of the alternative sources of investment that have operated in the region it can be concluded that: Structural funding does deliver added value and this added value is enhanced when this investment is targeted; The added value of structural funding has increased during the economic downturn; and In the NW, structural funding accounts for 20-25% of total non-private sector investment on social/economic cohesion, giving them an importance far greater than is suggested by their relatively small size visà-vis national government expenditure. The future role of structural funding in the North West As planning for the structural funding programme begins, this research has uncovered a range of insights relating to how the programme could best be configured. Case study evidence suggests a need to ensure that for the programme projects can be commissioned, designed and delivered at a range of spatial scales so that the programme s impact upon local barriers to economic growth are maximised. Also, ensuring that project sponsors demonstrate how their proposal is embedded within wider investment plans and/or how it draws in further sources of funding will mean that structural funds continue to deliver added value in excess of their actual financial size. In terms of project focus, there remains a need to make sure that whichever projects are funded these make a contribution to fundamental goals of net job creation and improved business productivity, as programmes to date have sometimes struggled to translate impressive rates of activity into longer-term impacts upon economic performance and potential. In terms of finance, establishing/retaining structures which can coordinate the investment of different pots of structural funding, and where possible align/pool this investment with non-structural funding expenditure, will deliver benefits in terms of allowing partnerships to fund large, long-term, holistic projects and to leverage match funding. Being able to create larger investment pots should also provide the scope for partners and projects to take more risks and to be more innovative. New Economy 4

5 1 Introduction Context for this research 1.1 Over the past fifteen years the European Regional Development Fund (ERDF) has directly invested more than 2bn into the North West of England (NW). To this figure can be added a comparable amount of public and private sector match funding, and a significant amount of funding carved from two national European Social Fund (ESF) programmes. 1.2 Planning is now underway for the next round of EU programmes ( ), with talk from both the EU and the UK Government of substantial change. 1.3 The European Economic Strategy Group (EESG) Post-2013 working group wants to ensure that the region plays a full and influential role in negotiations on the next round of funding. They have requested that three pieces of research be undertaken. These are: A review of past and current EU structural funding programmes (excluding agricultural and fisheries policies) to learn lessons from the current EU programmes and to understand the added value that is gained from delivering projects at different spatial scales (sector-based, locally, sub-regionally etc); A review of European financial Instruments to learn lessons from the current use of financial instruments and ensure their greater adoption under the programme; and The development of an evidence base to support the North West s priorities and case for EU funding This document is the main output from the first of these tasks. Separate reports on the NW evidence base and the use of innovative financial instruments will be produced later in Research questions 1.5 As a starting point, the question what has been the impact of EU programmes upon the NW? is too broad to inform the development of a research methodology. Therefore, the research has sought to answer the following sub-questions: Over the period , what has been the gross impact of ERDF and ESF programmes upon economic growth in the NW? Over the period , what has been the net additional impact of ERDF and ESF programmes upon the region, over and above the changes to be expected from other public spending and general economic trends? New Economy 5

6 What has been the added value to projects of having local or regional, as opposed to national, delivery structures? Has the nature of this growth been consistent with Coalition Government priorities? 1.6 The research has not sought to review in detail the mechanics of how previous and current EU programmes have been managed and governed. Methodology 1.7 We have sought to answer the research questions by taking a three stage approach: Stage 1: undertaking a desk-based review and analysis of published research and performance data on the impact of past and current ERDF and ESF programmes, both regionally and nationally; Stage 2: consulting with NW partners who take a lead on ERDF and ESF programmes to gain up-to-date information and intelligence on the performance of current programmes; and Stage 3: producing case studies of a number of structural funding projects and programmes that have operated within the region since 2000, looking at how their design has been influenced by local or regional considerations and what this has meant in terms of the added value projects have brought to the region. Structure of the report 1.8 The remainder of this report is structured as follows: Chapter 2 combines consultee views and project case studies to demonstrate the added value that has been realised from North West structural funding projects of having local or regional, as opposed to national, delivery structures; Chapter 3 complements the qualitative analysis by presenting quantitative evidence and analysis relating to the gross and net impacts associated with NW structural funding from , and considers the importance of these figures relative to overall regional economic performance; Chapter 4 presents conclusions from the research and considers the implications of these in light of ongoing work to identify funding priorities for the programme; The Annex provides contextual information on the history of the structural funds, and how they have been delivered and governed in the North West over the period readers who are unfamiliar with the region and/or structural funding should consult this chapter first. New Economy 6

7 2 Considering the impact of EU structural funding upon the NW 2.1 Since 2000, partners within the North West have gained considerable experience of designing and delivering structural funding programmes and projects. These programmes and projects have helped to create 2.3bn in extra GVA for the region, through the creation of over 55,000 new jobs and nearly 10,000 new businesses (more detail on the quantitative outcomes of structural funding since 2000 is given in chapter 3). In addition, this review has heard evidence and been provided with case studies of how this experience has provided the region with a wealth of impacts whose value cannot be reduced to specific numbers of outputs or increases in GVA. Instead, these impacts can be categorised under six broad headings: Structural funding has provided the ability to drive local economic growth; Structural funding has shown the benefits of having certainty of funding; Structural funding has fostered innovations in service design and delivery; Structural funding has created stronger partnerships; Structural funding has led to the development of expertise; and Structural funding has helped local partners to contribute towards national growth objectives. 2.2 In this chapter we discuss each of these impacts in turn, providing case studies which highlight each impact and demonstrate the added value that has been realised from projects having locally-led, as opposed to national, delivery structures. Where relevant, we highlight differences in added value due to the different governance and delivery structures operated by ERDF and ESF. The ability to drive local economic growth 2.3 For any publicly funded activity, be it at the European, national or local level, it is important to have performance targets in place so that those dispensing funds and those in receipt of these funds can be held to account. Both ERDF and ESF require programme and projects deliverers to demonstrate their contribution across a range of targets. 2.4 However, this review has found that performance targets can diminish the impact of a programme or project upon economic conditions, or undermine associated activities, if they are imposed without full consideration of local needs and challenges related to economic growth. This is felt to be for several reasons: New Economy 7

8 Nationally commissioned outcomes may not relate to local economic development needs and challenges 2.5 The localities and sub-regions of the North West have much in common but also much that differentiates them 1. These differences mean that a desirable outcome for one locality (for instance, improving basic skills) may be less of a priority (or not a priority) for another locality. 2.6 Having greater local involvement (including input from the private and voluntary sectors) in structural funding strategy and policy means that project outcome targets are more relevant to local needs. This in turn leads to more projects being funded which have a transformative impact upon local growth potential and, conversely, fewer projects having only partially relevant national output and outcome targets attached to them in order to qualify for funding and then attempting to deliver against these targets the Intensive Start-up Service project case study on the following page gives an illustration of how local design and delivery of a structural funding project has been beneficial in terms of the impact of that project. Nationally commissioned outcomes are not always the hardest to deliver 2.7 A further benefit of greater local involvement in funding strategy and policy is that it enables the delivery of harder to achieve outcomes. Within nationally designed and delivered frameworks the interests of project deliverers are aligned to national strategies as opposed to local needs. Projects are incentivised to deliver their contracted outputs/outcomes in the easiest and quickest way possible. However, if the project deliverer is a local agency, and the outputs they are seeking to deliver have been locally defined, then there is self-interest in tackling the deep lying factors that inhibit economic growth and scrutiny pressures (via elected Members, business representation on LEPs etc) for this activity to be successful. 2.8 The initial performance of the Work Programme shows how nationally commissioned systems can struggle to deliver outcomes. A recent BIS/NESTA/ESRC funded research report 2 looked at whether the Work Programme has led to innovations in how worklessness services are delivered and improved outcomes for society. The research found that Prime contractors are currently failing to meet the DWP s target for 40% of long-term unemployed clients (i.e. the hardest to reach/support group) on the Work Programme to return to sustained employment. It points out that the subregional, single purse approach to implementing the Work Programme in Cornwall is widely seen as the most successful model currently in operation because it draws upon a wide range of local knowledge of how to engage communities where worklessness is an issue. 1 See chapter 4 for more detail on the profile of the region. 2 The DWP Work Programme the Impact of the DWP Work Programme Procurement Model on personal service innovation (Maddock, 2012) New Economy 8

9 Intensive Start-up Service (ISUS) project ISUS is a 5-year, 35m project which aims to boost the number of businesses being started within the North West and thereby create jobs. The project is targeting specific disadvantaged groups (women, black and minority ethnic residents and the disabled) and deprived communities. Services delivered by the project include: online advice; group support and workshops; adviser support when developing a business plan; and up to 3 years ongoing support/mentoring for the new business. The design and delivery of the project demonstrate how NW partners have taken a mature approach to deciding which activities can be undertaken at the regional level, which at the sub-regional level and which at the local level. The bulk of 35m of funding for the project was secured at the regional level, through ERDF and NWDA Single Pot investment. The establishment of a panel of 50 business advisers with the expertise needed to support the target groups was also completed at the NW level. Subregions have then been given the freedom to decide how to best operate and manage the project. To use the example of Cumbria, the County Council is the ISUS managing body on behalf of both the region and the local districts. Within each of the 6 Cumbrian local authority areas, a minitender exercise has been undertaken to appoint local advisers from the regional panel. These advisers have then received referrals from sources such as local Job Centre Plus offices. By taking this multi-layered approach partners in the NW have been able to deliver the ISUS project at the appropriate scale (i.e. a large, early investment at the NW level has made it easier to secure local match) and remove duplicate administration processes (i.e. localities do not need to establish their own panel of providers, they just select from the regional panel, and regional partners do not need to spend time chasing up local monitoring information). And these benefits have not come at the expense of local knowledge and impact, with local providers who understand gaps in the local provision of start-up support being selected to support local business ideas, and managing agencies being able to use their local networks to align the project with other contracted initiatives such as the Work Programme. 2.9 As the Liverpool Intermediate Labour Market case study on the following page demonstrates, the tendency to prioritise easy to deliver outcomes is not restricted to the Work Programme. Past programmes such as the New Deal have also struggled to tackle long-term barriers to economic growth and have been improved through the application of local knowledge and additional funding via ERDF and ESF projects. New Economy 9

10 Liverpool Intermediate Labour Market project The Liverpool ILM programme was a transitional employment model which utilised ESF to add value to and compliment mainstream provision (the New Deal programme). Liverpool City Council used ESF to offer a waged option within the mandatory, unpaid national programme, and contracted 35 local social enterprises to offer employment and training to approximately 1,000 long-term unemployed residents. The aim was not just about addressing long-term employment but included a clear business development remit for the enterprises themselves. The programme widened and increased local delivery of a national programme to an extent where it could make a real impact upon the city and at the same time support local businesses to develop. During the final year of the programme nearly 70% of participants moved in to permanent employment, the highest performing contract in the country. By pooling the ESF funding, the city council was able to complement rather than compete with the national programme, whilst also ensuring the development of local infrastructure. Nationally commissioned outcomes can be influenced by other priorities 2.10 One of the reasons for the Work Programme s initial failure to meet its targets identified in the BIS/Nesta/ESRC report is the tension that is created when nationally-focused, vertical commissioning models attempt to deliver locallyfocused, horizontal outcomes. In respect of the Work Programme, the aim of the national commissioning model is to drive down the cost of worklessness provision through standardised provision and thereby contribute towards deficit reduction. But to deliver reductions in worklessness requires wraparound service provision at the local level, something which is very hard to fund through a two-tier Prime Provider / sub-contractor financial model. The report argues that devolved funding to local partnerships could better forge and sustain a closer connection between the needs of claimants and employers given the state of labour market Within the North West, the governance systems (Local Management Committee, LEP involvement etc) that have been developed around structural funding enable exactly these sorts of local, horizontal partnerships, through which a judgement on a project s value can consider more than just financial concerns. National commissioned outcomes are less likely to deliver strategic added value 2.12 Agencies need to be given the flexibility to support projects that are embedded within wider strategies (which may or may not relate to EU funding) and thereby make big but indirect contributions to sub-regional and regional growth priorities (see the case study on page 12 for an example of this). 3 Ibid. p 2 New Economy 10

11 The benefits of localised governance systems 2.13 ERDF and ESF operate differently in terms of governance (see Annex A for more detail on this issue). Under ESF a top-down approach is employed, under which a Co-Financing Organisation (CFO) contracts local provision The main CFOs in the UK are three national bodies, the Department for Work and Pensions, the Skills Funding Agency and the National Offender Management Service. For the majority of ESF provision in the North West, this means that local providers are working to nationally set priorities. However, the North West ERDF Operational Programme and ESF Framework did both contain a ring-fenced allocation for Merseyside. During the phasing-in period ( ), partners in Merseyside had additional flexibilities in how structural funds could be used to address sub-regional priorities, and during this time were able to draw on a much higher level of funding (on a per capita basis) than in the rest of the North West. For ESF, this meant increased flexibility for Merseyside to establish a Complementary Strand of ESF outside the cofinancing regime up to 2010, after which the additional phasing-in funding ceased. This strand was managed at a strategic level through the City Employment Strategy consortium, with ESF funded activity being cocoordinated/commissioned by the appropriate lead body for the nature of the activity. Where suitable, the lead body acted through consortia-based arrangements. Consultees feel that this ring-fencing allowed local partners greater control over determining what was being commissioned, resulting in provision that better reflected local needs and differences Under ERDF the approach to contracting provision is more bottom-up. Localities, through their presence on Local Management Committees (LMC) 4, have more scope to influence the design and delivery of projects, increasing the likelihood that projects will truly address local concerns and needs and that projects will be aligned with any non-eu funded activity that is designed and delivered locally Representatives of each of the 5 NW Local Enterprise Partnerships sit on the North West LMC, providing a way for local business communities to be made aware of proposed programmes and proiects. Several of the sub-regions said that they welcome this business input. They feel that involving business representatives in ERDF funding decisions has enabled businesses to gain an understanding of and dialogue with local, sub-regional and regional development priorities, and agencies understand better what businesses do/do not want. A better designed and more strategic package of ERDF projects, focused on the causes of economic growth as opposed to the consequences of low growth, has emerged as a result. 4 The North West LMC is comprised of 2 delegates from each sub-region plus representatives from stakeholders such as the universities and the 3 rd sector. New Economy 11

12 Spinningfields & Chapel Street projects Chapel Street is the historic core of Salford and acts as the city s prime link to Manchester city centre. Spinningfields is adjacent to Chapel Street, on the Manchester-side of the river Irwell. Both areas have experienced recent regeneration, in both cases part-funded through ERDF: Since 2000, 7m of ERDF has been invested to transform Spinningfields into a prime business location within Manchester city centre, with the European funds helping to pay for transport and public realm improvements; In 2010 a 1.5m ERDF investment was made to part-fund the remodelling of Chapel Street through the creation of widened pavements and the installation of high quality street furniture. The project was completed on time and to budget in March On their own, Spinningfields and Chapel Street are examples of relatively small, successful EU investments into Greater Manchester. However, the projects are also examples of how structural funding has been used to enable and catalyse wider developments which deliver strategic added value for GM and the wider region. At the individual level, in the case of Chapel Street it was decided that improving the public realm would act as a catalyst for a 15 year, 650m renewal plan, demonstrating public sector confidence in the area, providing leadership and boosting the likelihood of leveraging private investment. Likewise, public sector support for Spinningfields has underpinned the success of the wider 1.5bn development. But it is at the joint level that the real strategic added value of these ERDF investments can be seen. Chapel Street and Spinningfields are both integral parts of the Irwell River Park master plan, which will involve 3bn of investment and 280ha of land from the city centre to Salford Quays. The master plan works on the basis of linking stretches of land along the river through investments in access routes and the public realm, which in turn opens up riverfront sites for public and private development schemes. Chapel Street and Spinningfields are key elements of the master plan because they give access to Manchester city centre and important public transport links (Salford Central and Victoria train stations). New Economy 12

13 The benefits of having certainty of funding 2.17 Each EU funding settlement runs for seven years ( , etc). This is a longer period of time than is the case with many national programmes and projects. 5 Taking this long-term approach provides numerous benefits, examples of which have been seen in the NW over the past few decades: The potential to target longer-term outcomes the most obvious benefit of working to a six year timescale is the ability to design projects that deliver outputs and outcomes that take longer to materialise. Activities such as strategic site development often need to be undertaken in stages so that the risk of over-supplying the market is avoided and so that returns from early activity can be reinvested in later stage activity. The potential to design holistic programmes along with funding longer-term projects, SFs have also helped the NW to take a more holistic approach when designing interventions. Barriers to economic growth are often multi-faceted, covering demand-side (business engagement with HEIs) and supply-side (labour force skills, infrastructure) issues. Such complexity cannot easily be tackled by a cocktail of projects, working to different timescales at different geographical levels, and reporting against numerous outcomes frameworks. The potential to innovate/take risks multi-annual (and hence larger) funding settlements have allowed the NW to develop riskier and more innovative projects without the fear that the failure of one project will jeopardise the overall performance of the programme. An increased chance of leveraging private investment the ability to invest more money, over a longer timescale than is possible under national programmes, has helped NW organisations to leverage further investment from the private sector. This is because private investors can be assured that a project will not have its funding cut short by political considerations, and have the potential to enjoy larger returns because the project is being delivered at a larger scale. 5 For example, the Local Enterprise Growth Initiative involved three, single-year rounds of funding and the Working Neighbourhoods Fund ran for three years. New Economy 13

14 North West Evergreen Fund Evergreen is the urban development fund for the Cheshire & Warrington, Cumbria, Greater Manchester, and Lancashire sub-regions for the purposes of the European Commission s JESSICA initiative (see page 16 for more detail on revolving investment funds in general). The bid to establish Evergreen as an urban development fund was submitted to the European Investment Bank in June This bid was approved in July This decision allowed Evergreen to be capitalised with ERDF (drawn from the NWOP) and Single Pot funding. These investments will be matched locally, giving the fund a total initial value of 72m. Unlike previous financial models, Evergreen does not provide gap (i.e. grant) funding for projects but projects who already have gap funding can also receive Evergreen investment. Instead of gap funding, Evergreen can offer debt finance. Projects then need to make a commercial return in order to pay back the debt and provide further monies for Evergreen to invest. If this model is successful it means that the amount of money available to invest increases with each investment round. As the total pot gets larger, it will be easier for the partnership to attract further investment (for instance, discussions have been had with public sector pension funds and a debt facility has been agreed with banking partners. Evergreen s investment strategy is based upon regional and sub-regional economic development strategies and priorities. This means that it will support projects which are targeted upon local barriers to economic growth and which are integrated into wider strategies (the environment, housing development, transport links etc). In particular, the fund will focus on project which will create employment by; boosting science and innovation; developing the cultural and media sectors; improving town centres; diversifying the industrial base; and bringing forward strategic employment sites. An independent investment manager will be responsible for assessing projects that bid for funding against jointly agreed selection criteria and submitting quarterly reports to the Board. Each local authority within the 4 sub-regions is a partner in the Evergreen Fund Limited Partnership, and each sub-region nominates three people to sit on the Evergreen Board. The Fund anticipates legal sign-off of its first 10m of investments in the near future, with a similar quantum of potential investments currently being assessed. The performance of the fund will be reviewed in 2014/15. Evergreen has received praise from the Secretary of State for Communities and Local Government who sees the Fund as proof that when left to get on with it local areas will and do work together for the local good. Alongside being an excellent example of joint working by the sub-regions to meet common objectives, Evergreen is also an example of how NW localities have, through the application of structural funding, been able to introduce capital market disciplines to public expenditure decisions. New Economy 14

15 Innovations in service design and delivery 2.18 Over the course of the last two structural funding rounds there have been several examples of local partners developing innovative approaches to delivering and funding projects. Many of these innovations have now been mainstreamed, both within EU and UK government programmes. Delivery Innovation: Service co-location The Merseyside Objective One Programme contained specific provision to address worklessness, by helping residents in deprived areas to access work, skills, or further education. To achieve this Liverpool City Council opened JET (Job, Education, Training) centres in local neighbourhoods, with the intention of bringing job and education opportunities to people rather than expecting people to go and find them. JET staff were drawn from a range of city council departments and partner organisations and, in addition to their own expertise (in employment, training, welfare, education, economic development etc), had access to wider information and support from all parent organisations. This meant that they were able to provide a one stop service that included advice on job, education and training options. JETs also pioneered innovative approaches to accessing employment for hard to reach groups and individuals, including door-to-door, pro-active outreach, and the skills passport, where employers identified skills needed for a post and supported the JET to help individuals to attain those skills with a view to offering employment once achieved. EU funding was critical to the whole JET concept and was central in bringing all of the various departments and organisations together in a genuinely integrated approach. ERDF was used to pay for the cost of running JET premises (and in some cases paid for equipment and training facilities within premises), the cost of business support staff who worked with employers, and costs to co-ordinate and link activities of the individual JETs. ESF was used to provide advice to individuals and to support identified training and skills needs which would enable clients to access employment. The JET approach of integrated partnership provision has become the norm, with many public services now routinely delivered through one local facility (for instance, Sure Start centres) Some of these NW-led innovations might have come about without EU structural funding. However, there are characteristics of structural funding which differentiate it from national government funding and which help to encourage and accelerate innovation. For instance, the larger scale and longer-term profile of structural funding settlements compared to national funding streams has given local partnerships breathing space in which to think about new ways of delivering services and to take risks in terms of funding these new approaches. New Economy 15

16 Financial Innovation: Revolving investment funds In 1996 a portion of Merseyside s ERDF Objective 1 funding was used to establish the Merseyside Special Investment Fund (MSIF), a fund which makes small and medium sized loans to local businesses who cannot get loans elsewhere and uses the gains from these loans to fund further investments. Between 1996 and 2008 (the end date for funded projects) MSIF invested 135m in 1,350 businesses. Since then the NW has established one of the first JESSICA funds in Europe and has successfully developed two Urban Development Funds (Evergreen and Chrysalis) to deliver 50m of ERDF investment and associated match funding. By creating appropriate legal and governance structures the two Funds have the potential in the medium to long term to significantly grow their scope of investment and the size of the resources under their control in excess of 350m. The success of MSIF and JESSICA has not solely been due to their ability to channel money to businesses. The methods by which money is lent (loans, mezzanine finance, equity funding) and the provision of business support alongside finance have been equally important. The availability of JESSICA to provide real estate finance is important at a time when UK banks are more cautious about their exposure to property risk, especially in regeneration areas. By providing debt and equity where the private sector will not, the two JESSICA funds in the NW are tackling a real and present market failure. The ability of the funds to invest and support sustainable growth has been greatly enhanced by the state aid notification that the region negotiated with the Commission in This notification is an example of innovation in the delivery of Commission programmes using the basic structure of JESSICA provided by the Commission and then creating a bespoke state aid scheme to enable more comprehensive delivery in the NW. By embracing the new Financial Engineering Instruments created by the Commission as part of the programme, the NW has increased the role and presence of the European Investment Bank in the region which has the potential to lead to other larger investments by the EIB to support sustainable growth The potential to be innovative when it comes to the design, delivery and funding of strategies and policies exists at all spatial scales, from the European to the neighbourhood level. However, innovation theory and initial reviews of policies such as the DWP s Work Programme 6 suggest that the further the distance between the level at which an innovation is conceived and the level at which that innovation is implemented the less likely an innovation is to be successful. 6 The DWP Work Programme the Impact of the DWP Work Programme Procurement Model on personal service innovation (Maddock, 2012) New Economy 16

17 Stronger partnerships 2.21 Since 2000, considerable progress has been made in terms of partnership working across and within the five NW sub-regions. This development is in part due to EU structural funding. Strengthening partnerships within sectors Higher Education Enterprise Champions Enterprise Champions received 530,000 from the ERDF programme. The investment has paid for mentoring, workshops and events which aim to increase rates of entrepreneurship amongst NW graduates. At its most recent evaluation (2010) the project was found to have created 50 new jobs and 2.2m in GVA for the region. Alongside delivering jobs and economic activity that relate to regional economic priorities (boosting rates of entrepreneurship and overall business density), Enterprise Champions has had a significant positive impact upon partnerships between NW universities. The project was administered by the NW Universities Association and delivered by a team based at Manchester Metropolitan University. The team has helped to share good practice in relation to fostering graduate entrepreneurship, to the point where each university is starting to embed the lesson learnt through the project Alongside showing how structural funding has strengthened partnerships within the Higher Education sector, the Enterprise Champions project also demonstrates how being able to control the level at which project partnerships commission and deliver activity is fundamental to overall success. In the case of North West universities, opportunities to develop new centres of research and/or training excellence often emerge at the national level (i.e. NW universities are competing with other UK universities for government and research council funding). By combining their activities at the regional level, the region s HEIs are better able to compete with universities in other regions and can put larger amounts of structural funds on the table as match for other investments. Other issues where regional level delivery may be preferable include large capital projects such as transport schemes At the other end of the spatial scale, ESF and ERDF projects in relation to regeneration and worklessness rely upon detailed knowledge of local barriers to work and wrap around responses that combine the efforts of multiple local partners Therefore, these types of projects are seen as more effective when delivered by local partnerships. Strengthening partnerships between sectors 2.24 This review found many instances of ERDF and ESF being used to connect different sectors within the regional and sub-regional economies, to the benefit of both sets of partners. The following case study illustrates how links between universities and SMEs have been strengthened thanks to structural funding. New Economy 17

18 UNITE with business knowledge exchange project Unite with Business is a 7.7m project ( 3.9m ERDF). It provides support to SME's via the injection of knowledge and skills, sourced from the graduate talent base of six NW HEIs (covering 4 of the 5 sub-regions). The intention of the project is to increase business innovation through knowledge exchange activity, which in turn has a direct measurable impact upon productivity and overall business performance. Graduates with specialised and sector specific skills are matched with SME business needs. Alongside increased productivity within the host SME, the project also provides graduates with first hand experience of the world of work in a NW-based company, which should help them when they come to seek employment and boost graduate retention rates within the region. All three outcomes are strategic priorities for the region. Operating the project at the regional level gives SMEs access to a larger pool of graduate skills and gives graduates work opportunities in a larger number of businesses. Strengthening partnerships across EU funding streams 2.25 Outcomes from ESF projects are pre-requisites to the success of ERDF projects and vice versa. In response, local partnerships have sought to align or integrate ERDF and ESF projects (as noted in paragraphs , such alignment is not always easy to achieve due to differences in how ERDF and ESF delivery is contracted and governed). Sefton@Work Since 2005 Sefton BC has been aligning its ERDF and ESF activities through its Sefton@Work intermediate labour market. The ILM is based on the funding of an employer-facing team who bring forward employment opportunities, linked to an advisory/guidance, advocacy and mentoring function for local residents looking for work. The employer-facing element is ERDF funded. It includes working with employers to design and undertake recruitment activity, challenging perceptions about the value of employing workless individuals, running candidate tests and providing venues for interviews. The resident-facing element is ESF funded. It includes the delivery of/referrals to relevant training courses and the creation of a small bursary fund to help people make the final step into employment (to cover travel costs etc something that is hard to fund out of mainstream local authority funding). ERDF and ESF staff work together in the same accessible shop-front venue but carry out separate and complimentary duties with the overall shared aim of reducing worklessness and promoting business prosperity. New Economy 18

19 Strengthening partnerships across EU and non-eu funding streams 2.26 The integration of funding streams through partnerships structures has not been confined to EU funded projects. Partners have also used their influence over structural funding to ensure that EU funded activities are aligned with non-eu funded public services. For example: Blackburn and Darwen quality bus corridor scheme This project was a fundamental component of the East Lancashire Gateway Strategic Employment Zone initiative. It created and promoted accessibility to employment zones for 7 disadvantaged communities, thereby creating a more inclusive balance in terms of access to employment. The proposal was based around public transport solutions and delivered high quality, prioritised public transport services in four phases. Two transport corridors were improved and a sustainable integrated ICT network was developed to support strategic initiatives. The project ran from March 2003 until July 2005 and cost 2.38m, of which 714,000 was ERDF. This bus corridor scheme is a good example of how localities have used their influence over structural funding to design and deliver projects that link together EU-funded and non-eu funded activity in order to deliver economic and social regeneration objectives. Challenges to partnership working 2.27 Changes that have come into effect since 2000 have impacted upon how NW localities have been able to align EU (and non-eu) funding. For instance: Under the Programme Merseyside had Objective 1 status. This meant that the sub-region could link its ERDF and ESF projects more easily than was the case elsewhere in the region. For the programme Merseyside has held Phasing In Area status. This has meant that much of its ESF programme has been re-nationalised, with the exception of a small pot ( 15m) reserved for direct bidding. Since the closure of the NWDA, the Regional Leaders Board and the Local Management Committee has taken on a greater role in respect of the management and delivery of EU projects. By participating in these groups, consultees feel that each sub-region has become more aware of the economic priorities of its fellow sub-regions and has consequently been able to design and deliver projects locally which contribute to both sub-regional and regional economic development needs. The loss of the NWDA Single Pot as a source of match funding for EU projects has made NW partners seek out new sources of match funding within their own and partner budgets. This has had an adverse effect on the number and size of projects within the region but is also felt to have led to a more rigorous approach to assessing funding bids (see paragraphs for further discussion of match funding). New Economy 19

20 2.28 These latter two developments show how EU funding has been the mechanism through which agencies and partnerships have developed complementary, well informed and more robust approaches to economic development. However, stakeholders also feel that the positive developments described above could be at risk as uncertainty over the future management and delivery of structural funding is leading to confusion over what ERDF and ESF funding can and cannot support in different parts of the region. The development of regional expertise 2.29 To get a project from the initial call stage to delivery on the ground can be a long process. Agencies and partnerships have therefore been required to develop their project management skills to ensure that the full potential of the region s funding settlement is realised. Technical Assistance 2.30 The Technical Assistance Priority themes included within the and ERDF programmes are the most obvious examples of how structural funding has helped NW partners to develop this expertise. Under each programme up to 5% of the total budget has been spent on projects to monitor, evaluate or promote structural funding. Technical Assistance projects have allowed the NW and sub-regions to: Promote investment and match funding opportunities, and by doing so strengthening links to other programmes and the private sector; Support projects during their design and delivery phases, increasing the likelihood of success; Identify and disseminate best practice which enhances the impact of structural funding. Technical Assistance Greater Manchester secured 240,000 from the ERDF programme to pay for technical assistance activities across the 10 GM localities. Submitting a sub-regional TA bid enabled the region to pool in a single team the large amount of staffing expertise within the localities developed during previous ERDF and ESF programmes. The team has smoothed the application process for many GM projects and by addressing issues such as State Aid increased the amount of structural funding being drawn down within Greater Manchester. Similar TA projects have operated in the other four sub-regions Since the closure of the NWDA, partners have deployed TA funds to ensure that adequate resources have been in place to support the design and delivery of projects and, once these projects are delivering, that they are submitting monitoring information in line with EU timetables and standards. New Economy 20

21 Developing institutional and social capital 2.32 The development of regional expertise has not been limited to the administration of funding programmes. The more important point is that EU funds have played a major role in helping the NW to develop the institutions, actors and expertise required to deliver and retain the fruits of economic growth within the region. Building Cohesive Communities The Building Cohesive Communities Project was managed by Lifelong Learning within Blackburn with Darwen Borough Council and ran from January 2004 to September Expenditure on the project was 1,181,710 with 590,855 of it being ERDF. This project involved over 650 residents and 50 voluntary and community groups in the regeneration of their neighbourhoods. Residents developed their skills and knowledge so that they could take part in this process and thereby ensuring the impact they had on their communities. The project empowered residents to deliver regeneration activities by increasing their skills and knowledge, improved the services available by empowering residents to negotiate with the service providers and built bonding networks within communities and neighbourhoods and bridging networks across communities and neighbourhoods The point has already been made that local influence over funding strategy and policy has helped to deliver outcomes that directly relate to the barriers to economic growth that the region faces. Added to this, local influence has enabled the selection of local partners to develop and deliver projects (as opposed to providers being selected at the national level), who in turn have employed local residents. Local partners have increased their knowledge of what works and their capacity to deliver. This puts them in good stead as far as having a future role in the economic development of their localities is concerned. New Economy 21

22 Liverpool Arena and Convention Centre (ACC) The Arena and Convention Centre was part-funded by the largest single EU investment nationally. Merseyside partners used 50m from the Objective 1 programme, combined with a further 114m investment into the project with the additional money coming from Liverpool City Council, the NWDA and English Partnerships (now the Homes and Communities Agency). The facility opened in 2008 and hosts 200+ events each year, generating 200m per year for Liverpool s economy. Ninety percent ACC staff have been recruited locally, thereby helping to ensure that the benefits of the initial investment are retained within the conurbation. Along with its economic benefits, the Arena and Convention Centre development also demonstrates how EU funding has been used by NW partners to maximise the likelihood of strategic goals being achieved. Development of the ACC site at King s Dock had been identified in 2000 as a strategic priority in terms of improving the image of Liverpool and attracting more visitors to the city. Though local management, delivery of the project was timed to coincide with Liverpool s 2008 European Capital of Culture celebrations, thereby helping to enhance the benefits flowing from the city holding that title, and was linked to the ongoing regeneration of Liverpool city centre When EU projects and programmes operate national frameworks and payment models there is always a risk that smaller, local providers lack the capacity or cash flow necessary to take deliver high volumes of outputs straight away or to take on the financial risk that a project will not deliver its contracted outcomes. Helping the NW to contribute to Government objectives 2.35 Structural funding has brought considerable added value in terms of strengthening our ambition and ability to deliver projects that address local strategic needs. At the same time, structural funding projects within the region have been making a significant positive contribution to national objectives relating to economic growth The Coalition Government wants to deliver an economic recovery based on: A vibrant private sector; Innovation and skilled labour; Reduced dependency upon public services; Reforms in the way that public services are funded and held to account; and An increased role for economic centres outside the Greater South East. New Economy 22

23 2.37 As we note in chapter 3, regional partners have been able to use EU structural funds to make a direct and quantifiable contribution to several of these objectives. For instance: SFs have been used to create 56,800 net new jobs within the region. This represents 2% of the current total employment within the region 7 ; 127,200 people have been helped to gain a new qualification; and 47,200 of the region s businesses have received support via the structural funds. Within an overall regional business base of 251,000, this means that 19% of all companies in the NW could have benefitted from SF support The combined impact of these outputs and outcomes has been more people within the region being in employment and fewer being dependent upon the public purse At the same time as delivering jobs and growth, structural funds have helped to catalyse the emergence of strong and confident sub-regions, and in particular Local Enterprise Partnership (LEP) led business communities within each sub-region. Through their influence over EU structural funding, NW partners have been able to link funding strategy and action plans to new subregional governance structures. Stakeholders from across the region report that LEPs, through their seats on the LMC and regular dialogue with Regional Leaders and groups such as EESG, are starting to see EU funding as a tool to be used in their business planning process This strengthening of sub-regional awareness and activity has not come at the expense of the NW being able to take a strategic viewpoint when required. For instance, the Atlantic Gateway scheme links three of the region s LEPs and a range of EU and non-eu funding opportunities in support of a regionally significant economic development opportunity. 7 BRES 2010 North West employment figure. New Economy 23

24 Summary 2.41 The experience of designing, managing and delivering ERDF and ESF programmes over the past 12 years has delivered significant benefits to agencies and partnerships within North West. At the same time, the programmes and their individual projects have benefitted from being delivered through regional, sub-regional and sector-based infrastructures. These benefits can be summarised as relating to: Selecting projects that deliver the most relevant outputs in terms of addressing the long-term causes of the region s economic underperformance; The greater incentive that exists to deliver hard to achieve outcomes when accountability for delivery is held at the local level; Having greater certainty of funding has freed agencies and partnerships from the constraints of small, short-term, sticking plaster approaches, by making it easier to fund large projects which have an economic impact that is of value nationally as well as locally; Locally designed and delivered EU investments have been integrated within wider economic development and regeneration narratives. This has enabled the delivery of strategic added value for example, through the leveraging of private investment in the development of strategic sites; Creating strong, mature partnerships with and between sectors and within and between localities, and drawing on these partnerships to ensure that economic development priorities are complementary rather than competitive; an Deepening the impact of non-eu investments; Improving the capability of local partners to manage projects; Catalysing the emergence of the local infrastructures that will deliver and retain the fruits of economic growth within the region in future; and Encouraging the region to recapture its reputation for innovation, especially in relation to how initial public sector finance can catalyse longterm, sustainable investment and growth Structural funding has also helped the NW to make a significant positive contribution towards national economic growth priorities and provided a basis for the emergence of new sub-regional partnerships. New Economy 24

25 3 Measuring the impact of EU structural funding upon the NW 3.1 In the previous chapter we identified a number of beneficial outcomes that have resulted from local influence over the operation of structural funding within the North West. In this chapter we complement this qualitative commentary by presenting quantitative figures on the impact of structural funding upon the region in the following manner: The chapter begins by identifying the financial value of ERDF and ESF to the NW since 2000 and how this investment has been spread across priorities and across sub-regions; It then moves on to calculate the absolute gross outputs, results and impacts that this investment has delivered, and translates these figures into absolute net impacts; and The chapter concludes by looking at evidence relating to the relative importance of structural funding versus other sources of investment. The financial value of structural funding to the North West 3.2 Structural Funding has played and continues to play an important role in helping the region to address socio-economic challenges, both within localities and within sectors. 3.3 The amount of investment the region received from ERDF and ESF reached its highest point under the programmes, when over 2.3bn of EU funding was invested into the region. For the programmes this amount has fallen due to the need to spread SFs across a larger and relatively poorer group of EU members. New Economy 25

26 Table 3.1: North West ESF and EDRF settlements since 2000 (excluding public and private match funding) 8 ERDF ESF ,774M 600M M (at current exchange rate) 405M (assumes same national share as for ) Total 2,374M 1,005M Sources: ESF in the North West (DWP/DfES); Merseyside Objective Final Report and North West Objective Final Report (both DCLG, 2009); Interim Evaluation of the North West ERDF Operational Programme (Regeneris Consulting, Nov 2010) 3.4 These figures suggest that since 2000 the NW has received approximately 3.38bn in investment from ERDF and ESF. This investment has not been at a consistent level for every year since This is due to a number of factors, including: The tendency for projects to take time to be set up and then to accelerate delivery towards the end of their funding period; The ability of projects to deliver beyond a programmes end date for example, ERDF projects were still delivering outputs in 2008; and The pause caused by the change over in 2007 from one programme to the next. 3.5 Accepting these points, if we divide the total figure of 3.38bn by the twelve years over which this investment has been made, we calculate that the annual value of ERDF and ESF to the NW has been in the order of 280m. Match funding 3.6 To the total figure of 3.38bn we need to add public and private matchfunding. EU rules state that projects cannot be delivered only through the use of SFs. Instead, local or national partners need to match a certain percentage of the total project costs. This contribution can be drawn from public (e.g. national or local government pots) or non-public (e.g. private investors or third sector bodies) sources. 8 Producing exact NW settlement figures is complicated by the fact that for the entire period Merseyside has had special status within SF settlements, and also that ESF is administered nationally whereas ERDF is administered regionally. In addition, exchange rate fluctuations mean that producing a definitive figure is not possible. New Economy 26

27 3.7 The advantages of match funding are that it enables areas to deliver larger, more ambitious projects, the success of which they and their local partners have a direct financial interest in. This direct financial interest is felt to encourage the promotion of more robust projects. The disadvantages of match funding include the extra bureaucracy it creates (i.e. projects can be slowed down or scuppered by the search for match funding) and the argument that it channels EU structural funding towards projects that national or local agencies would have funded anyway (the concept of deadweight which is considered in more detail later in the chapter). 3.8 Leaving these arguments to one side, producing a single figure for the amount of match-funding that SFs have helped the NW to leverage is complicated by limitations in monitoring data and the ongoing delivery of the programme. Accepting these caveats, based on the available evidence we estimate that the NW has received in excess of 4bn in match funding since 2000 (NOTE: match funding can be in excess of the amount of EU funding). This raises the total annual value of ERDF and ESF to the region to at least 600m. Spatial and topical profiles of structural funding investment into the North West Balance of structural funding activity across sub-regions 3.9 Socio-economic conditions and priorities vary across the five NW sub-regions. Also, Merseyside s special status means that it is guaranteed a specific percentage of total SF spending within the region. From analysing the profile of SF projects since 2000 we can see how the region has applied structural funding in order to deliver against these differing sub-regional priorities Firstly, Merseyside s special status has meant that it has been possible to dedicate approximately 55% of total SF spending in the region since 2000 (which equates to over 1.85bn) to tackling the most entrenched elements of socio-economic deprivation within the region Secondly, the profile of projects that have been funded using SFs shows how EU investment has been channelled across and between sub-regions. For example, looking at a current sample of 150 ERDF projects: The largest number (circa one third) are focused on Merseyside; The next largest number (circa 20%) operate region-wide (e.g. business support schemes); Greater Manchester, Lancashire and a number of places in deprived subregions are home to the next largest number of projects (circa 15% of the total regional number of projects in each sub-region); and The smaller sub-region of Cumbria and the more affluent sub-region of Cheshire & Warrington are home to smaller numbers of ERDF projects. New Economy 27

28 Balance of structural funding activity across Priorities 3.12 NW partners have used ERDF investment to design and deliver a holistic package of economic growth priorities. To illustrate, within the current ERDF programme 236 projects are active or about to begin activities. Looking at the profile of these projects: Declared expenditure ( 307.5m to 31 March 2012) is broadly similar across the four Priorities 9, ranging from 71.6m for Priority 4 (Growing & accessing employment) to 85.5m for Priority 1 (Stimulating Enterprise & Supporting Growth in Target Sectors and Markets); The number of projects being delivered under each Priority is broadly similar, ranging from 43 under Priority 4 to 57 under Priority 3 (Creating the conditions for sustainable growth); Following on from the above observations, average spend per project is similar across the four Priorities, ranging from 1.3m under Priority 3 to 1.66m under Priority Under the current ESF programme there is a less even split across the two Priorities 10, with 65% of activity is focused on the extending employment opportunities priority. This is in recognition of the fact that in many parts of the region the greatest challenge to economic growth is tackling intergenerational dependency and getting these residents back into employment would represent a major short-term boost to the NW s economic prospects. The gross impact of structural funding upon the North West 3.14 Both ERDF and ESF require projects to submit evidence relating to the outputs and outcomes they have achieved before providers can receive payment. By analysing these submissions it is possible to build up a picture of the gross impact that both have had upon the NW since However, many SF projects are still operating and there are gaps in the evidence base relating to some past projects. This means that the analysis that follows should be seen as indicative of the Funds impact rather than an authoritative statement. 9 The four ERDF priorities are: Stimulating Enterprise & Supporting Growth in Target Sectors and Markets; Exploiting innovation & knowledge; Creating the conditions for sustainable growth; and Growing & accessing employment. 10 The two ESF priorities are: Extending employment opportunities; and Developing a skilled and adaptable labour force. New Economy 28

29 Merseyside Objective 1 (ERDF & ESF) Gross Impacts, Merseyside s Objective 1 programme had three types of targets against which it reported progress: outputs, results and impacts. Impacts related to the net impact of the programme upon employment and GVA and are, for the time being, excluded from the following analysis (a common gross to net calculation is performed for the whole region later in the chapter). Table 3.2: Merseyside Objective Programme Outputs (gross) Outcome Type of Target Target No % Outputs SMEs assisted 24,947 26, Business/enterprise start-ups 13,789 11, School-age beneficiaries 36,589 89, Non-school-age beneficiaries 214, , New/refurbished floorspace (m2) 744, , Land developed (ha) Result Beneficiaries obtaining qualifications 54,180 99, Beneficiaries accessing employment 33,904 52, Gross tourist visitors (000s) 6,541 29, Gross tourist visitors expenditure ( m) Gross new sales in SMEs ( m) 4,200 1, Gross safeguarded sales in SMEs ( m) 1,857 2, Total gross sales in SMEs ( m) 6,665 4, Gross new direct jobs (FTEs) 69,350 51, Gross direct safeguarded jobs (FTEs) 29,653 29, Total gross direct jobs in SMEs (FTEs) 99,001 81, Source: Final Programme Report, Merseyside Objective (DCLG, September 2010) 3.16 The Merseyside Objective 1 Final Programme Report found that the programme had met or exceeded the majority of its output and result targets. All ESF beneficiary-related targets were substantially exceeded and demand for enterprise initiatives was strong. Tourism related targets were also comfortably exceeded Where the Merseyside Objective 1 programme struggled was in relation to generating gross sales and gross jobs. This was felt to be due to under-performance within specific programme measures, as opposed to any underperformance of the programme as a whole. North West ERDF Gross Impacts, The North West s ERDF Programme had a similar set of targets to the Merseyside Objective 1 programme, although ESF related targets were not included due to the rest of the region having Objective 2 status and thereby being included in the national ESF programme. Table 3.3 New Economy 29

30 sets out the performance of the NW ERDF programme as reported in the final programme evaluation. Table 3.3: NW ERDF Programme Outputs (gross) Outcome Priority Type of Target Target No % Output New companies assisted 7,450 14, Business Premises provided (sq. m) 204, , and Ideas SMEs assisted 18,666 59, Community enterprises assisted 194 1, Community organisations provided with capacity building support 555 1, New community enterprises established 2 People and Number of employment and Community learning centres established People assisted towards employment 3,330 89, People given self employment support 2,220 2, People provided with learning support 16,650 50, Strategic Land serviced (ha) Regional Investment Premises provided (sq. m) 49, , Result Increased sales ( 000s 2,686,000 2,582, Business and Ideas 2 People and Community 3 Strategic Regional Investment gross) Jobs safeguarded 17,411 66, New jobs created 33,697 46, Sales safeguarded ( million) 1,407 3, Number of beneficiaries securing positive outcome 9,990 4, Number of people (residents) securing employment 4,440 21, Sales in community and micro enterprises ( 000s 178,200 36, gross) Increased sales ( 000s gross) 2,373, , Jobs safeguarded 23,273 13, New jobs created 30,598 12, Sales safeguarded ( million) 1, Source: NW England Objective 2 Programme : Final Report (draft), (DCLG, September 2009) New Economy 30

31 3.19 Comparing achievements to targets, the Final Report found that the NW ERDF Programme exceeded its targets in nearly all instances. It identified a weakness in relation to the conversion of investment in the strategic capital schemes under Priority 3 into jobs and sales. There was also under-performance in the return on sales arising from support given to community and micro enterprises, though this was felt to possible be more a reflection of the ambitious targets set. Consultees concurred with the views expressed in the Final Report, and also noted that favourable economic conditions at the time may have aided programme performance. North West ERDF Gross Impacts, Following the programme Merseyside s status changed from Objective 1 to Phasing In Area. In terms of performance management, this has meant that Merseyside and Rest of the North West (RONW) outputs have been reported in the same format and in the same document; it also means that ESF outputs are not included in the following analysis The NW ERDF programme is ongoing and hence yet to report final figures. An interim evaluation of the programme was undertaken in November This relied heavily on project level monitoring and contracting information on forecast/contracted job results (gross jobs created or safeguarded) as a way of assessing the likely impact of the Programme. The evaluation reported progress against each priority as follows: Table 3.4: NW ERDF Performance at 2010 Interim Evaluation Priority 1 Stimulating Enterprise & Supporting Growth in Target Sectors and Markets 2 Exploiting innovation & knowledge 3 Creating the conditions for sustainable growth Issues identified by interim evaluation On track to achieve business-assists and start up support targets. Progress on jobs safeguarded stronger than jobs created, attributed to recession impacts. Limited progress on business creation, but picking up through High Growth Business Support project (HGBS). On track to meet or exceed targets for net additional jobs and GVA. On track to achieve business collaborations target. Jobs created target will be challenging, although on track to significantly exceed jobs safeguarded target. Businesses created target proving difficult, with few projects committing to deliver substantial new businesses. Likely to be strong performance on net additional jobs/gva targets, reflecting higher value business activity. Strong position on contracted for private sector leverage and brownfield remediation and new floorspace targets. Day and overnight visitor outputs set to far exceed target, but may be methodological issues in verifying progress. New Economy 31

32 Priority 4 Growing & accessing employment Issues identified by interim evaluation Should comfortably exceed private sector leverage target. Brownfield target 50% contracted for. Day and overnight visitor outputs set to far exceed target, but may be methodological issues in verifying progress. On track to exceed job creation safeguarded targets but will depend o whether NWOP can claim indirect jobs. On track to exceed businesses created target. Source: Interim Evaluation of ERDF Operational Programme , (Regeneris Consulting, November 2010) 3.22 The interim evaluation noted that the performance of the programme was heavily related to a small number of key projects and that future performance would depend, to a large degree, on national economic conditions For this study we have reviewed the latest data on NW ERDF programme outputs, impacts and results to investigate whether the interim evaluation forecasts have come to pass. DCLG has provided us with declared outputs, impacts and results up to the end of March Table 3.5: NW ERDF Performance up to 31 March 2012 Declared Indicator M side RONW Total No. of Businesses Assisted to Improve Performance 4,166 7,474 11,640 Private Sector Investment Levered ( m) Brownfield Land Reclaimed (ha) Additional Day Visitors (000s) 1, ,872 Additional Overnight Visitors (000s) Visitor Spend ( ms) Firms Becoming Engaged in UK Knowledge Base ,131 No. People Assisted in Skills Development 467 1,955 2,422 No. of Business Start up Support Total 1,169 1,060 2,229 No. of social enterprises assisted New or upgraded floorspace - Sq m 43,286 10,931 54,217 No. of Gross Jobs Created 2,655 6,867 9,522 No. of Gross Jobs Safeguarded 730 3,593 4,323 No. of Businesses with improved performance 330 1,420 1,750 No of Business Created 1,722 3,577 5,299 No. of Businesses with Reduced Waste New Applications of Low Carbon Technology Source: DCLG, July 2012 New Economy 32

33 3.24 Comparing this level of performance to targets, comparing performance across the four Priorities, and comparing Merseyside to RONW performance is complicated by a number of factors, such as: The programme is still delivering and before it concludes will fund pipeline projects not included in the DCLG July 2012 analysis; Not all outputs, results and impacts apply to all four Priorities; and The decision to revise down some targets. The re-quantification of NW ERDF targets In 2010 a decision was taken to reduce ERDF targets in light of the adverse impact of the recession upon the speed with which projects were being commenced and the performance of already commenced projects. Consultees feel that this decision was the correct one to take and that it shows the importance of retaining flexibility within overall programme strategy. Having a local flexibility, backed by continual monitoring and dialogue with the Commission, allows for funding to be redirected down more effective avenues as external conditions change. Such redirection is harder to achieve under a more rigid, contractual reporting of project management information model Noting these caveats, analysis of the DCLG figures suggests that: Aspects of the programme s business support activity are working. To illustrate the point, 69% of the Firms becoming engaged in the UK Knowledge Base output target figure has been achieved, and over 50% of the businesses with reduced waste and applications of low carbon technology output targets have been achieved these figures are broadly in line with the 63% of total budget contracted to date. The programme is also performing well in terms of gross numbers of businesses created (currently at 82% of target). Where business support activities seem to be struggling is in delivering support to existing businesses (43% of target) which leads to improved productivity within these businesses (14% of target); The DCLG figures also imply that it is becoming harder to translate business support into longer-term impacts on employment rates. Under the ERDF programmes, performance against gross jobs created or safeguarded was recorded at % of targets. Under the programme, job creation and jobs safeguarded performance has fallen to 35% and 22% of the programme target respectively; The strong performance of the ERDF programmes against tourism related outputs has not been repeated for ; Average performance against all targets is slightly higher on Merseyside (45% average across all performance targets) than in the rest of the region (39%); and New Economy 33

34 A key reason for the NW programme struggling to meet its targets is the post 2008 economic downturn. This seems especially true in relation to capital focused outputs such as private investment leverage, where only 18% of the total target has been realised to date; ESF Gross impacts, As noted in chapter 2, ESF differs from ERDF in that it is mainly concerned with raising skills and employability levels within the population. Accordingly, its targets are more tightly focused on outcomes such as individuals entering employment or receiving a qualification as a result of ESF activity In a report published in , the performance of the Objective 3 element of ESF (i.e. excluding Merseyside ESF outputs, which have already been reported in table 3.2) up to 31 December 2004 was assessed at a NW level. Table 3.6 presents the main findings. It shows that nearly 90% of people supported completed their course, while nearly three quarters gained a positive outcome. Such outcomes included getting a job, moving into self employment, starting a business, undertaking further training or education, and voluntary work. Table 3.6: ESF Performance NW Objective 3, Indicator Target Figure up to December 2004 Individuals supported 282,767 % in work on leaving 41% 48% (136,000) % gaining a positive outcome 80% 70% (198,000) % completing their course N/A 87% (246,000) % gaining a qualification 50% 40% (113,000) Source: European Union, 2005 ESF Gross Impacts, For the ESF programme the targets have become more detailed and the targets for the percentages of ESF participants gaining employment or a qualification have been cut An interim evaluation of the ESF Programme undertaken by the Department for Work and Pensions (DWP) and published in contained details on the performance of the ESF at the NW level. Table 3.7: ESF Programme Performance, to January 2011 Indicator NW figure up to January 2011 Starts on employment support 158,600 Starts on skills support 142,900 Job outcomes from employment support 26,500 Qualifications gained through skills support 19,200 Source: DWP, ESF in the North West Promoting Employment Opportunities for all (European Union, 2005). We have not been able to uncover information on ESF 2005/6 performance in the NW. 12 European Social Fund Operational Programme : Synthesis of Evidence from the First Half of the Programme, (Department for Work and Pensions, 2011) New Economy 34

35 3.30 Combining the figures in Tables 3.6 (noting that 2005/6 data is missing) and 3.7, we calculate that, since 2000, ESF projects in the NW have led to more than 130,000 people gaining a qualification (at a variety of levels) and up to 160,000 entering employment (giving a precise figure for entries into employment is impossible because some of those in work upon leaving the programme may have already been in work when they started on the programme). Total Gross Impacts of ERDF and ESF in the NW since By adding together the figures presented in tables 3.2, 3.3, 3.5, 3.6 and 3.7 we can attempt to present an overall, rounded picture of the gross impact of ERDF and ESF upon the North West since NOTE: Differences and changes over time in how outputs and results were defined and which outputs and results were reported mean that the following figures should be seen as indicative rather than definitive (for instance, under the ERDF programmes there was a land serviced/developed output which changed to brownfield land reclaimed under the ERDF programme, and tourist visitor figures were recorded for the Objective 1 programme but not the Objective 2 programme). We estimate that since 2000 ERDF and ESF in the North West have: Created nearly 121,000 direct jobs; Safeguarded a further 114,000 jobs; Provided more than 1.1m people with skills or employment support; Helped more than 231,000 people to obtain a qualification; Assisted 86,000 SMEs; Helped to create 16,500 new businesses; Developed/remediated 612ha of brownfield land and delivered 1.16m square metres of new or upgraded floorspace; Boosted tourism spend within the region by 933m; and Helped to create over 400 social enterprises and to provide support for a further 1, The pace at which gross targets have been achieved has been slower under the programme than from As mentioned in paragraph 3.25, the worsening economic climate and the difficulties relating to accessing finance have meant that some ERDF projects have struggled to deliver against targets However, consultees feel that much of what has been achieved by ERDF and ESF since 2000 in terms of raising skill levels, preparing development sites, creating urban centres that are attractive to visitors and inward investors alike, and the introduction of external finance options represent supply-side interventions that make the NW better prepared to emerge from the current economic downturn than was the case following recessions in the 1980s and 1990s. New Economy 35

36 Calculating net impacts 3.34 The figures discussed so far in this chapter represent the total outputs and results of the various NW ERDF and ESF Programmes since 2000; that is, the gross performance. However, not all of these can be considered as ultimately impacting upon the NW, due to: Leakage: Some outputs will have benefitted people outside the NW; Deadweight: Those NW gross outputs that would have occurred anyway; Displacement: The proportion of NW gross outputs/results accounted for by reduced outputs/results elsewhere in the region; Substitution: Where a NW firm substitutes one activity for a similar one (such as recruiting a jobless person while another employee loses a job) to take advantage of structural funding; and Economic multipliers: Further economic activity in the region (jobs, expenditure or income) caused by an initial structural funding investment BIS has produced a guidance note 13, which provides ready reckoners to be used when seeking to account for leakage, deadweight, displacement and so on. In summary, the note recommends using the following factors when assessing regional level gross outputs: Business development and competitiveness 55% (i.e. 45% of gross outputs should be discounted); Regeneration through physical infrastructure 51%; People and skills 55%; and All other types of outcomes 47% 3.36 In the next section we apply these factors to the gross outputs and results reported in the previous section in order to estimate the net impact of structural funding programmes upon the NW since RDA Evaluation, Practical Guidance on Implementing the Impact Evaluation Framework (BIS, 2009) New Economy 36

37 The net impact of structural funding upon the North West 3.37 Applying the BIS recommended ready reckoners to the gross outputs for both ERDF and ESF reported earlier in the chapter provides the following approximate net impact figures (for headline targets that have been consistently report since 2000 only). Table 3.8: Net impact of ERDF and ESF in the NW since 2000 Output Net impact ERDF core outputs and impacts No. of Businesses Assisted to Improve Performance 47,200 Brownfield Land Reclaimed (ha) 312 Visitor Spend ( ms) 439 No. People receiving skills or employment support 613,000 No. of social enterprises established 235 No. of social enterprises assisted 1,040 New or upgraded floorspace - Sq m 590,000 No. of Jobs Created 56,800 No. of Jobs Safeguarded 53,400 No. of Business Created 9,100 ESF core outputs Qualifications gained 127,200 Source: New Economy calculations Gross value added calculation 3.38 Taking the net jobs created figure associated with ERDF (56,800) and multiplying it by regional gross value added (GVA) per worker of around 40,000, it is possible to produce an estimate for annual contribution to GVA the 56,800 net additional jobs created by ERDF funding generate an estimated 2.3bn in GVA per annum across the region i.e. if the NW had received no structural funding over the period then its economy would be at least 2.3bn smaller. It should be noted that this is just the additional GVA associated with the net number of jobs created by ERDF funding in the NW; the figure does not include GVA gains associated with outcomes such as more productive business processes nor any job outcomes associated with ESF provision Given that we lack detailed data on when these net jobs were created and exactly what types of net jobs have been created, we have not attempted to profile net GVA increases since 2000 nor to forecast future GVA impacts. In relation to future GVA impacts, the annual uplift in NW GVA due to structural funding activity will not sustain in perpetuity. As noted by BIS 14, benefits will persist where the intervention has built the capacity of the individual or organisation to sustain or continue to achieve further benefits. BIS advises 14 RDA Evaluation, Practical Guidance on Implementing the Impact Evaluation Framework (BIS, 2009) New Economy 37

38 that, depending on the type of intervention, benefits can be assumed to persist for between 1 and 10 years. For interventions related to the provision of business, sector and cluster support, BIS guidance provides a benchmark persistence rate of three years. Thus, we should assume that GVA uplift from the ERDF programme will sustain at least into the middle of the programme. The importance of structural funds to the North West s economic performance 3.40 Previous sections and chapters have demonstrated the extent to which, since 2000, EU structural funding has delivered benefits for the NW and how, in turn, the NW has been able to maximise the value of these benefits. We have shown how structural funding has: Been channelled towards key priorities, both at the NW and sub-regional levels; Delivered benefits at a scale that is significant given the size of the region s employment and business base including 56,800 net additional jobs, the creation of 9,100 new businesses, and 127,200 new qualifications for the region s labour force; whilst Also addressing the long-term causes of the region s economic underperformance; strengthening partnership working; allowing the region able to fund projects at the most suitable scale; enabling the region to be more innovative; and deepening the impact of associated national government investment in the region But in order to truly state the importance of structural funding to the region we need to ask whether or to what degree these developments would have occurred anyway Earlier in this chapter we explained the technical approach to assessing additionality, as promoted by BIS. Under this approach 40-50% of SF outcomes, dependent upon the category of outcome, are considered to be deadweight. This is a useful starting point. However, it does not help us to consider the importance of structural funds within different regions (i.e. it assumes that structural funding additionality is the same in all regions) or the importance of structural funding relative to other national government funding (i.e. we do not know to what extent structural funding adds value to national government expenditure). New Economy 38

39 Closing gaps in regional performance 3.43 The Third and Fourth triennial European Commission reports on economic and social cohesion both found that structural funding had helped the poorest countries (Portugal, Greece, Ireland) to close income, employment rate and productivity gaps on richer nations. But at the inter- and intra-regional levels there was less evidence of gaps being closed i.e. poor regions within rich countries, and poor sub-regions within regions, are remaining relatively poor despite structural funding The DWP repeated this exercise at the national level in their 2011 review of the impact of the UK ESF programme 16. In slight contrast to the EC reports, this found that ESF has helped to reduce differences in employment rates and benefit claimant rates between richer and poorer English regions, and that this finding is especially true in the most deprived sub-regions. 17 This outcome is due to ESF investment being targeted at more deprived areas and regions. Complementing national government funding 3.45 When compared to what national governments spend each year, structural funding is small in absolute terms. To illustrate the point, public expenditure in most EU countries is 45-50% of GDP, whereas the budget allocated to structural funding is 0.5% - i.e. national expenditure is up to 100 times greater than structural funding However, much national government expenditure is universal in nature (i.e. all citizens benefit) and related to policy areas outside of economic and social cohesion. In contrast, ERDF and ESF are targeted upon specific areas, and specific constituents within these areas. A fairer comparison therefore is to look at the value of structural funding relative to the amount that national governments spend in deprived regions and/or upon activity designed to reduce economic and social inequality In its Third Report on Economic and Social Cohesion, the European Commission calculated that EU government investment in human and physical capital (business support, higher education, R&D etc) averages 2%. 18 Thus, structural funding, at an average of 0.5% of national GDP, accounts for 1 in every 4 pounds spent on such policies. 15 Third Report on economic and social cohesion (European Commission, 2004), p. ix. Fourth Report on economic and social cohesion (European Commission, 2007), p. x. 16 European Social Fund Operational Programme : synthesis of evidence from the first half of the programme (DWP, 2011) 17 Ibid. p, Third Report on economic and social cohesion (European Commission, 2004) p. xiii. New Economy 39

40 3.48 Within the North West the UK government spent 65bn in Applying the 2% average for investment in human and physical capital, the amount the UK government spends on economic and social cohesion within the region can be estimated as 1.3bn per year. In chapter 3 we found that ERDF and ESF directly invest 280m per year into the region. Thus, the two funds account for approximately 1 in every 4.5 pounds spent on economic and social cohesion within the North West. The issue of match funding 3.49 ERDF and ESF rules require that all EU investment is matched by investment from other public and private sources. In chapter 2 we estimated that these rules have led to in excess of 4bn being invested in economic and social cohesion within the North West since When considering the counterfactual, match-funding complicates the picture because it suggests that funding for projects could have been found and that these projects have piggy-backed upon the availability of structural funds. However, an opponent of this view would state that structural funds encourage other public and private investors to back projects that they would not otherwise have considered. For instance, private investment in the types of capital projects support under ERDF priority 3 would have been unlikely without structural funding being used to deliver pre-requisites such as transport links and land remediation In the case of the North West, up to 2010 the NWDA Single Pot was available from which to draw match funding. Following the closure of the agency it has become harder for projects to source match funding. This is felt to have had both positive and negative consequences: On the one hand, it has made it harder for projects proceed and in turn led to imbalances between the amounts of activity under different strategic priorities. These imbalances could reflect the fact that in some spheres, and for some partners, alternative sources of match funding are more plentiful than in others for example, larger partners and/or those who operate at the national scale (e.g. the NW universities) are more likely to have access to national sources of match funding than smaller or local partners. On the other hand, there has been greater pressure on project sponsors to demonstrate the added value that their project will deliver to the region when seeking match funding, which has been a good thing in terms of ensuring strategic impact. 19 Public Expenditure Statistical Analyses (HMT, 2012) New Economy 40

41 Summary 3.52 A key aim of this review has been to identify the net impact of structural funding upon the NW since Using financial and project output information reported in various formats since 2000, we calculate that the two SFs have given the region an extra 600m investment per year with which to deliver its priorities This investment has helped to deliver, amongst other things, the following net impacts: North West GVA has been increased by at least 2.3bn per annum due to structural funding activity within the region; 56,800 additional jobs within the region; The safeguarding of a further 53,400 jobs within the region; 9,100 new businesses; 47,200 businesses being helped to become more productive; 127,200 people gaining a new qualification; Over 1,000 social enterprises receiving support; and Nearly 440m extra tourist spend within the region Taking these figures and conclusively working out their relative importance within the overall story of NW economic growth since 2000 is difficult due to differences between structural funding rules and the presence of other sources of public and private investment. However, from the available evidence we can conclude that: Structural funding does deliver added value; The added value of structural funding is enhanced when this investment is targeted upon more deprived areas or pressing issues; The added value of structural funding has increased during the economic downturn due to the decreased likelihood of projects finding alternative or match sources of funding, especially from the private sector, and the corresponding pressure to justify how reduced funds are spent; In the NW structural funding accounts for approximately 20-25% of total non-private sector investment in economic/social cohesion, giving them an importance far greater than is suggested by their relatively small size vis-à-vis national government expenditure; and If structural funding for the NW was to cease or be significantly reduced this could have a major negative impact upon regional GVA, and hence national efforts relating to deficit reduction. New Economy 41

42 4 Conclusions 4.1 Previous chapters have considered a wide range of qualitative and quantitative evidence relating to the impact of structural funding upon the North West since 2000, and whether different approaches to how funds have been delivered have added value overall. What has been achieved? 4.2 The challenge of managing nearly 300m per year of European investment into the North West has necessarily improved the capability of local partners to manage projects. This capability has been deployed through a range of new and/or strengthened partnerships, with and between sectors and within and between localities. 4.3 Through structural funding the North West has started to recapture its reputation for innovation and in the design and delivery of EU funded projects partners have further developed their ability to think holistically in relation to economic development and regeneration. This is particularly evident in the way in which EU investments have been integrated within wider economic development and regeneration narratives. 4.4 As a consequence of these benefits, structural funding has had a significant positive impact upon employment, enterprise and capital (economic, human and social) within the North West, to a greater extent than would be supposed given the relatively small overall size of structural funding when compared to other sources of public sector spending. What has been learnt? 4.5 The primary lesson from this and other evaluations of the impact of structural funding is that ERDF and ESF do deliver added value for NW localities and for the region as a whole. Above and beyond the creation of jobs, the benefits to businesses, the physical regeneration etc, structural funding plays a significant role in maintaining policy focus on economic and social cohesion between UK regions and providing the funds to achieve this cohesion. 4.6 At various points in this review the need for flexibility in how structural funds are managed and in terms of what they can be spent on has become apparent. Being able to use local priorities to guide how structural funds are spent helps to ensure that activity is focused on local barriers to growth and that activity is integrated into other programmes/projects and contributes to wider strategy. Having local flexibility also means that as external conditions change, programme aims and targets relating to these aims can also change. As one consultee put it, structural funding programmes are most effective when they operate as a dialogue between localities and the European Commission, as opposed to a single contract. New Economy 42

43 4.7 The point about contributing to wider strategy highlights the value of projects being linked into other projects, programmes and strategies. On their own, structural funds are relatively small in terms of financial value. But when the activities they fund are linked to other publicly-funded programmes and in particular private sector developments, they can have an impact well in excess of their financial value. 4.8 Enabling local flexibility does not mean that national or regional frameworks should be completely dispensed with. By developing a wider framework of objectives/core outcomes, and backing up this framework with an effective governance system, it is possible to ensure that local/sector based projects have regard to other projects with which they have synergies and it provides a platform for delivering projects which are naturally suited to large scale delivery (large transport schemes, international trade issues etc). 4.9 In chapter 2 the report described how being able to coordinate several strands of funding, where necessary combining these into a single pot at the necessary spatial scale, delivers benefits in terms of allowing partnerships to fund large, long-term, holistic projects and to leverage match funding. If structural funding is divided between too many programmes or action areas without the ability to coordinate investment decisions taken under each programme/action area, there is the risk of creating a situation akin to that which exists with certain streams of UK public expenditure i.e. lots of ring-fenced budgets, each operating to slightly different timescales or objectives, thereby making it hard to fund long-term, holistic and ultimately effective projects Being able to coordinate investment decisions at the appropriate spatial level also provides greater scope for partners and projects to take risks. Major service reform ideas such as revolving investment funds and service co-location have come about in part due to structural funding. Similar reforms are more likely to emerge during the programme if as many agencies and partnerships as possible are able to use their local knowledge and contacts to design and adopt new ways of delivering and/or funding ERDF and ESF projects Having some co-ordination in the management of structural funds also makes it easier for projects to learn from the successes and failures of other projects. The North West has not always got structural funding right over the past 12 years but it has learnt from these experiences through investments in technical assistance, the involvement of a wider range of partners in governance processes, and the willingness to revisit strategies and targets. New Economy 43

44 What are the implications for the programme? 4.12 As noted in the introduction, planning is now underway for the next round of EU programmes, which will run from The question of what these programmes fund within the North West will be the subject of further research. This report however provides a number of insights relating to how the programmes could be run in order to maximise their impact Perhaps the most important insight to emerge from the research is the need to ensure that for the programme projects can be commissioned, designed and delivered at a range of spatial scales. Efforts to align ERDF and ESF, and the initial performance of the Work Programme, demonstrate how interventions designed at one spatial level do not always translate to another spatial level or align to interventions designed at an alternative spatial level. Localities, sub-regions, regional networks and combinations thereof all need the opportunity to define appropriate economic development and regeneration priorities and to develop interventions for structural funding based upon this analysis. Projects which involve multiple partners should be encouraged, as theory and evidence suggests that these types of projects are best able to deliver wrap-around and innovative support This does not mean that the programmes should take a laissez faire approach. The research has shown how maintaining an overarching structure has helped North West partners to bring forward projects that can contribute to both local/sector and sub-regional/regional objectives, and to integrate projects that are operating on the ground Within the likely future public spending context, it will become even more important to ensure that project sponsors demonstrate how their proposal is embedded within wider investment plans and/or how it draws in further sources of funding (private investment and other public sources such as the Growing Places fund) and hence what strategic added value it will bring The previous two NW structural funding programmes have both been successful at delivering what could be termed intermediate outputs such as the delivery of information, advice and guidance to businesses, the connecting of businesses to universities/research centres, and the offering of training opportunities and the awarding of qualifications to individuals. However, both programmes struggled to translate these outputs into key impacts such as net jobs created and net increases in business productivity. The new programmes may benefit from a more detailed understanding of which projects deliver these impacts and a tighter focus on monitoring against these impacts This mention of monitoring links to the recommendation that some form of central, technical assistance function be retained. Having this capability ensures that EU standards are met and it enables partners to treat the structural funding programme as a dialogue rather than a contract. This means that timely decisions can be taken on when to ramp up or curtail projects. New Economy 44

45 Annex: Structural funding in the North West This annex provides contextual information, covering in particular the history of the European Regional Development and European Social Funds, the socioeconomic make-up of the North West, and how these two things have been aligned through the development of Operational Programmes, under the oversight of various governing bodies. The EU structural funds Structural Funds are the tools by which the EU implements its regional policy objectives. They aim to reduce regional disparities in terms of income, wealth and opportunity. In line with this aim, the poorest regions in the EU receive most money from the Funds. The term Structural Fund covers a number of different initiatives. The two largest of these are: The European Regional Development Fund which focuses on supporting projects that stimulate economic growth through the creation of jobs and businesses, improvements in infrastructure, establishing links between business and academia and so on; The European Social Fund which focuses on promoting economic and social cohesion through projects which raise the employability and skills of residents (both those in and out of work) and remove barriers to labour market entry. Thus, the two SFs can be seen as being linked; ERDF creates economic opportunities for beneficiaries of ESF to access, and beneficiaries of ESF use their skills in economic activities that take advantage of the infrastructure created via ERDF. There are other SFs covering areas such as agriculture (Common Agricultural Policy) and fisheries. However, the impact of these types of funds upon the NW is not the focus of this report. New Economy 45

46 The North West region The North West region is made up of five sub-regions: Cheshire and Warrington; Cumbria; Greater Manchester; Lancashire; and Merseyside. Figure A.1: Map of North West sub-regions The five sub-regions have much in common in terms of their socio-economic profiles. For example, labour force skills and productivity levels are generally below the national averages across much of the region, as are average earnings. And levels of self-employment, innovation and entrepreneurship are below the rates seen in areas such as Greater London. New Economy 46