Engaging with Government

Understanding the new Government Departments designed to support Business

BFPA CEO, Chris Buxton seeks to shed some light on the structure of at-least part of the new Government Structure that seeks to help UK Business forge
a strong future in the post-Brexit economy.

In what is still only a matter of weeks since the seismic event that was not just a Brexit vote but a complete restructuring of the UK Government, it would be a brave person that could claim to understand all of the structural changes that have taken place or indeed, those that are bound to follow when the inevitable after-shocks of this particular earthquake bring further change and confusion!
However, as the dust settles and trade associations, including the BFPA, seek to re-engage with the ‘walking wounded’ currently staggering around Whitehall a clearer picture is slowly emerging and I would submit; even speaking as a strong ‘remainer’, there is much for business to be pleased about.

The most obvious change has been the evolution of our much loved Department for Business Innovation and Skills (BIS) into the department for Business, Energy and Industrial Strategy or BEIS for short;  (pronounced phonetically; ‘baze’).  BEIS is in fact a merger of BIS and the Department for Energy and Climate Change (DECC) and now consolidates responsibilities for business, industrial strategy, science, innovation, energy, and climate change under one authority.

To this extent they will be responsible for:
•    developing and delivering a comprehensive industrial strategy and leading the government’s relationship with business
•    ensuring that the country has secure energy supplies that are reliable, affordable and clean
•    ensuring the UK remains at the leading edge of science, research and innovation
•    tackling climate change

As businesses, the first of the above bullets will be of prime interest but where, you may well ask, have ‘Skills’ gone?  The answer is a logical one – the Department for Education.  However, for those of us who have been around Whitehall long enough this will raise alarm bells.  The importance of skills as an integral part of any industrial strategy is paramount and Government departments are renowned for being ‘stove-piped.’  Like fiefdoms, they are reluctant to cross communicate let alone co-operate.
Again Business can take comfort. Recognising this failing, the May Cabinet has established a new Ministerial Commission comprising of eleven Cabinet Ministers and Chaired by the PM herself.  One of their primary roles will be to ensure that the required cross departmental co-operation actually takes place and they have introduced a stakeholder engagement plan which includes a range of key interested parties such as Unions and Local Councils but significantly, the UK Trade Associations.
BFPA is currently the Chair of the UK Trade Association Forum and we have been invited by the new team to have discussions around key issues for our membership.

The key staff within BEIS are:-
•    Rt Hon Greg Clark MP, Secretary of State for Business, Energy and Industrial Strategy
•    Nick Hurd MP, Minister of State for Climate Change and Industry
•    Jo Johnson MP, Minister of State for Universities, Science, Research and Innovation (joint minister with Department for Education)
•    Baroness Neville-Rolfe, Minister of State for Energy and Intellectual Property
•    Margot James MP, Minister for Small Business, Consumers, and Corporate Responsibility
•    Jesse Norman MP, Minister for Industry and Energy

These new ministerial portfolios; (so claims the new Cabinet), “reflect the key priorities for the department to develop a comprehensive industrial strategy; continuing to ensure the UK remains at the cutting-edge of science, research and innovation; tackling climate change; and ensuring affordable, clean and secure energy supply for the UK.”
(Gregg Clark’s September 27th address to the Institute of Directors on the importance of Industrial Strategy can be read verbatim at www.gov.uk/government/speeches/the-importance-of-industrial-strategy)
So; this covers Business interests and Industrial strategy.  What about Trade?  This activity is going to be the focus of a new department called, not surprisingly; the Department for International Trade or DIT – not, I am told by its new Director, Rosa Wilkinson, to be pronounced ‘ditt’ but to be spelt out in full; D. I. T.
The Department for International Trade has overall responsibility for developing, coordinating and delivering a new trade and investment policy for the UK, including preparing for and then negotiating Free Trade Agreements and market access deals with non-EU countries. Working side by side with the Department for Exiting the EU (see below), the Department for International Trade will help support the negotiation of the UK’s new relationship with Europe.

Working across the whole of government, industry and the UK’s extensive overseas network, the Department supports UK businesses in scaling up and taking advantage of the global appetite for British goods and services, as well as to demonstrate that there has never been a better time for international companies to partner with UK suppliers. It is a specialist body, with significant new trade negotiating capacity, and Government claims that it is revolutionising the way UK businesses access international markets.

There are three groups in the Department for International Trade:
1)    The Trade Policy Group, led by John Alty.
2)    International Exports and Investment (ITI, formerly UKTI), led by Catherine Raines.
3)    UK Export Finance, led by Louis Taylor.

These activities remain essentially as they were under the old regime but under new guidance and authority.

The purpose of the Trade Policy Group is to promote open and fair international markets for the UK.
This means:
–    Identifying our detailed policy priorities and flexibilities.
–    Securing ambitious free trade agreements.
–    Ensuring effective implementation of trade and investment rules.
–    Supporting the interests of developing countries.
–    Delivering efficient and effective import/export licensing services.
–    Engaging with stakeholders in government, business, civil society & internationally to explain, advocate and deliver Government goals.

The purpose of DIT’s International Exports and Investment Directorate is; (as it was as UKTI),  to drive growth in the value of UK exports and attract the highest value foreign direct investment into the UK.
This means:
–    Working overseas to identify and deliver high-value export campaigns in the markets and sectors of highest value.
–    Working with commercial and public partners in the UK to prepare businesses to export, or to work with businesses to grow their exports.
–    Working with local partners and sector experts to deliver high-value foreign direct investment and capital investment into the businesses and areas where it will most benefit the UK economy.
–    Delivering scalable export and foreign direct investment support solutions to ensure that mass market export and investment support are ‘digital by default’.

The purpose of UK Export Finance (UKEF) – the UK’s Export Credit Agency – remains essentially unchanged and is to provide assistance and support to exporters and investors where the private sector cannot. This is principally in the form of insurance to exporters and guarantees to banks against non-payment of contract sums or loans. UKEF also provides loans directly to foreign buyers for the purpose of buying UK goods and services. As it always did, UKEF works closely with banks and insurance brokers as well as with exporters and overseas buyers.

So; we now have Business, Industrial strategy, Trade and Exports covered.  We then come to the all- important role of managing our exit from the EU.
This, it seems, will fall to the new Department for Exiting the European Union.  (No-one can say that it doesn’t ‘do what it says on the tin!’ )  This is such a new concept that policy is still emerging but the Government states that it is ‘responsible for overseeing negotiations to leave the EU and establishing the future relationship between the UK and EU.’  This is perhaps the most challenging and hazardous Government portfolio.

Their remit includes:
–    the policy work to support the UK’s negotiations to leave the European Union and to establish the future relationship between the EU and the UK
–    working very closely with the UK’s devolved administrations, Parliament, and a wide range of other interested parties on what the approach to those negotiations should be conducting the negotiations in support of the Prime Minister including supporting bilateral discussions on EU exit with other European countries
–    leading and co-ordinating cross-government work to seize the opportunities and ensure a smooth process of exit on the best possible terms
Early discussions reveal that their priorities will be:-
–    ensuring the government is able to take initial decisions on the UK’s withdrawal on the basis of the best possible advice
–    strengthening capability across government in preparation for the work ahead
–    reaching out to stakeholders in order to understand and capture their views
–    establishing the department and setting it up to succeed

One would hope that the latter point was never in question!
The key senior management team in this new venture includes:
>Oliver Robbins CB, Permanent Secretary
>Sarah Healey, Director General
>Creon Butler, Director of Analysis
>Chris Jones, Director of Justice, Security and Migration
>Joanna Key, Director of Strategy and Planning
>Antony Phillipson, Director of Trade and Partnerships
>Thomas Shinner, Director of Cross-Government Policy Coordination
>Catherine Webb, Director of Market Access and Budget

For those of us with a need to engage with this team the following organogram has been published:-

screen-shot-2016-10-06-at-10-00-55

So there we have it.  A new set of politicians and civil servants with whom to engage and a future which we would all have to admit, may be precarious but is at the very least – exciting!
As Rupert Hodges (secretary to our Engineering & Machinery Alliance) put it; “UK Manufacturing – What’s not to like?”  His question may have been rhetorical but it is born of a widely held and arguably, justifiable optimism amongst those of us who engage with Whitehall.
He went on;
“You have to admit it’s an unexpected and impressive list.
•    A cabinet committee chaired by the Prime Minister with the remit to drive the economy and an industrial strategy for the nation
•    A network of seven world leading open innovation centres where industry and academics can collaborate using highly advanced machinery to speed commercialisation of new UK processes and products and help ensure they come to market here rather that in another country [part of the Catapult network]
•    A tax structure that encourages both research and development and even pays up on past activity that’s not been claimed before
•    A permanent annual investment allowance of £250,000 that supports industrial investment
•    A new government department that’s identified export potential for UK companies in certain overseas markets for sectors such as pumps, taps and valves and fluid power [ITI]
•    Six national initiatives helping firms explore new technologies such as flexible manufacturing, mass customisation, additive layer manufacturing/3D printing, the internet of things and through life engineering support services for new business opportunities.”
I have to agree with him.  The building blocks for a strong UK economy; which means a strong industrial base whether in supply or manufacture, are, in many ways for the first time, now in place.  Only time will tell if the full potential of all of this new ‘machinery and resource’ is realised.  Certainly the BFPA will continue to work hard on behalf of its members in contributing to the efforts associated with doing so.

An opportunity to engage or a Government scheme to pass its responsibilities onto the private sector?

BFPA CEO Chris Buxton reviews the function and role played by the Local Enterprise Partnerships in helping industry at a more local level and the funding opportunities that they present.
The tensions between central Government policy, (driven in the main, by civil servants from Whitehall), and the local impact that such policy has upon what are often rural communities in remote and in some cases, depressed areas of the UK, are well recognised.
The much claimed disconnect between the two communities has been the ‘stuff of political elections’ for decades.
Indeed, many argue that the result of the recent EU referendum could be attributed to a protest vote from those that felt that Whitehall had ‘lost touch’ with the wider population beyond the confines of London, the South East and other predictably affluent areas.  This debate is not the subject of this paper but the fact remains that there has always been a ground swell of opinion that decentralisation of Government and a network of local authority, in whatever form it takes, is generally well received by most communities.
The level of autonomy enjoyed by such authorities and the form that it takes, depends very much upon the Government of the day and perhaps most importantly, the health of the economy.

Inevitably, it is the latter that tends to determine the funds that are made available for more local initiatives.  In recent years, dwindling government funds and the ever increasing burden being placed upon them have led to a plethora of what might be termed ‘creative’ contracting means such as the Private Finance Initiative (PFI), later to evolve into the Private Public Partnership or PPP.

Upon closer examination of these models, the more cynical eye would say that they were an inevitable attempt by an under-resourced Government to pass the burden of funding and even the risk associated with the commercial success or failure of a local project onto the shoulders of the increasingly burdened private sector.  The Government case for doing so was of-course, one of self-determination and potential profit for the companies with whom they engaged.

screen-shot-2016-10-06-at-10-09-43Sadly, all too often, it led to a price war at tendering stage and the long term decay of service quality whilst brow-beaten middle management and project leaders struggled valiantly to make an under-priced contract profitable over what could be 25 year agreements
But aside from the decentralisation arguments and the cut and thrust of Government contracting, it has long been recognised by all parties that some form of network with nodes that have a local focus and responsibility for their own community is a good thing.
The first tangible manifestation of this concept was introduced in 1998 with the creation of the Regional Development Agencies or RDA’s. In the United Kingdom, regional development agencies (RDAs) were nine non-departmental public bodies established for the purpose of development, primarily economic, of England’s Government Office regions. There was one RDA for each of the NUTS (Nomenclature of Units for Territorial Statistics), regions of England. (See adjacent map)

Similar activities were carried out in Wales by the Welsh Government Department of Economy and Transport, in Northern Ireland by the Department of Enterprise, Trade and Investment and in Scotland by Scottish Enterprise and Highlands and Islands Enterprise.  They were funded from HM Treasury via six different central government departments of the day:
1.    Department for Business, Innovation and Skills
2.    Department for Communities and Local Government
3.    Department for Energy and Climate Change
4.    Department for Environment, Food and Rural Affairs
5.    Department for Culture, Media and Sport
6.    UK Trade and Investment

Unfortunately, the performance of these Agencies was very variable.  Some; most notably Yorkshire and The Humber, branded ‘Yorkshire First’, were very successful and well managed.  Others were far from successful and led to much controversy around what was perceived to be a waste of public money.  Consequently, in June 2010 the UK government announced the abolition of the RDAs (which actually took place on 31 March 2012), with a view to reducing the government deficit.

On 29 June 2010 a letter was sent from the Department for Communities and Local Government and the Department for Business, Innovation and Skills, also to local authority and business leaders, inviting proposals to replace regional development agencies in their areas by 6 September 2010. On 7 September 2010, details were released of 56 proposals for local enterprise partnerships (LEP’s), that had been received. On 6 October 2010, during the Conservative Party Conference, it was revealed that 22 had been given the provisional ‘green light’ to proceed and others might later be accepted with amendments. 24 bids were announced as successful on 28 October 2010.

Consequently, Government would claim that the RDA’s were replaced by a new vehicle known as the Local Enterprise Partnerships or ‘LEP’s’. In practice, they were not so much a replacement as a new concept as they differed from RDA’s in one crucial way – they did not receive any funding from central government and local councils to whom responsibility for their success fell, did not receive an equivalent injection of income from central funds, having been called upon to make savings and support similar initiatives.

To this extent, the pioneering LEPs were set up on a volunteer basis without any public funding and struggled to make progress. A much discussed report by Michael Heseltine in October 2012, “No Stone Unturned”, was largely accepted by Government, and proposed delegating funds from central government to LEPs, including:
–    a share of a £1,400m Local Growth Fund to generate growth, allocated through competitive bidding;
–    getting LEPs to draw up plans for local growth as the basis for negotiation on the money in the Fund
–    realigning the management of the EU Structural and Investment Funds in England to follow the plans made by LEPs.
Thus, the Local Enterprise Partnerships as they exist today, were born.  They are described as; “voluntary partnerships between local authorities and businesses set up in 2011 by the Department for Business, Innovation and Skills to help determine local economic priorities and lead economic growth and job creation within the local area.”   To this extent, they provide opportunities for local funding initiatives by companies looking to develop their businesses whether it be through increased recruitment, filling skills gaps or developing new products and services.
The first LEP’s to become established were, Greater Birmingham and Solihull, Greater Manchester, Leeds City Region, North Eastern, Sheffield City Region, and West of England. They were included in the first wave of what were called ‘city deals.’
Four years later, there are now 39 active LEP’s in operation.

Engaging with the LEP network (Growth Hubs)

Since its inception in 2012, the LEP network has evolved extremely fast.  Service delivery is now achieved through what are termed Growth Hubs.  Each LEP has an associated Growth Hub thus there is a Hub-network of 39. Growth hubs are local public/private sector partnerships led by the Local Enterprise Partnerships (LEPs). They join up national and local business support so it is easy for businesses to find the help they need.  They are, if you like, the first port of call for businesses.

The current distribution is mapped out below and reflects the distribution of the LEP’s

screen-shot-2016-10-06-at-10-11-39

 

Each of the Growth Hubs and their associated LEP has a strategic plan for their region all of which can be found along with a great deal of helpful information regarding how to approach them, on the LEP Network website.(www.lepnetwork.net)  The Growth Hub represents the doorway for companies seeking to engage with their LEP.  All contact details for each Growth Hub are also available on the LEP Network website.
Enterprise Zones:-
Any company exploring the LEP network should also be aware of the Governments portfolio of Economic Zones.
Enterprise Zones are designated areas across England that provide tax breaks and Government support.  To this extent they are very attractive places to do business especially for both new and expanding firms.
Also established in 2012, Enterprise Zones are claimed to be at the heart of the Government’s long-term economic plan, helping businesses to grow. Since starting in April 2012 they have laid down the foundations for success for 635 businesses, attracting over £2.4 billion pounds of private sector investment, attracting nearly 24,000 jobs. The success of the programme led to more Enterprise Zones being announced in the Autumn Statement in 2015 and in the March 2016 Budget. Up to 48 Enterprise Zones are currently planned to be in place by the beginning of April 2017.

EZ Benefits for Businesses

Businesses that locate on an Enterprise Zone can access a number of benefits:
•    Up to 100% business rate discount worth up to £275,000 per business over a 5-year period
•    Simplified local authority planning, for example, through Local Development Orders that grant automatic planning permission for certain development (such as new industrial buildings or changing how existing buildings are used) within specified areas
•    Government support to ensure that superfast broadband is rolled out throughout the zone, and, if necessary, public funding
•    100% enhanced capital allowances (tax relief) to businesses making large investments in plant and machinery on 8 Zones in Assisted Areas
Businesses that locate on sites from the first round of Enterprise Zones must have done so before March 2018 to be able to access business rate reliefs. For new Zones starting in April 2016, they will need to have located onto the Zone before March 2021 to qualify.
On EZ sites where enhanced capital allowances are available (assisted areas), businesses now have up to eight years from the launch of the EZ to make their investment. Businesses thinking about locating to an Enterprise Zone can also find more information about investment opportunities at the Local Investment Showcase website.
What benefits do Enterprise Zones offer local communities?
Enterprise Zones are establishing themselves as the driving force of local economies as they unlock key development sites, consolidate infrastructure, attract business and create jobs.

All business rates growth generated by the Enterprise Zone is kept by the relevant local enterprise partnership and local authorities in the areas for 25 years to reinvest in local economic growth. For the Local Enterprise Partnerships with Enterprise Zones, this represents the government’s most significant commitment to long-term economic growth.
In addition, the Government is committed to working actively with Enterprise Zones to help to unblock any barriers to delivery, such as Department for Transport support on transport infrastructure, Defra support on addressing environmental issues and UKTI advice on marketing Zones to international investors.
In April 2016 the Government announced that the Enterprise Zone network was going to be augmented with two further zones meaning that there will be 48 EZ’s by close of play in 2017.
The breakdown of the EZ network is provided in Appendix Two of this document.

Latest Developments:-

On the 11th of August, the new Business and Energy Secretary Greg Clark underlined what he described as the vital role of local growth and the importance of ‘place’ in developing and delivering the government’s comprehensive industrial strategy during a visit to Belfast.
For the first time, all ministers in the Department for Business, Energy and Industrial Strategy (formally BIS), will act as local growth champions across the United Kingdom and will be tasked with building relationships with a number of Local Enterprise Partnerships (LEPs).
Ministers will also engage with businesses and local leaders in the devolved administrations in Wales, Scotland and Northern Ireland, and will act as a first point of contact for respective LEPs in England within the Department for Business, Energy and Industrial Strategy.
This would suggest not only increased Government commitment to the local growth initiatives and the LEP Network but also that MP’s may become an alternative ‘doorway’ into engaging more effectively with the LEP or more specifically, the Growth Hub network.

New Government regulations regarding alternative finance for SME’s

Banks are not known for their generosity but now new regulations will pressure them to refer SME’s in need of financial support to alternative forms of financing.

As British Businesses most of us have a ‘love-hate relationship’ with our banks.  We know that we can’t live without them but most of the time we wish that we could!  The number of case studies that I have heard from BFPA members and other companies who have been refused even the most modest of financial support without virtually ‘sacrificing their first-born’ is legion.
Regular meetings with the British Bankers Association such as BFPA enjoys through its membership of the Engineering & Machinery Alliance (EAMA), has done little to convince me that even the experiences of the 2009 crash have moderated their apparent zeal to either abandon what they consider to be high risk companies or to simply ‘chance their hand’ by trying to derive income from unethical and often surreptitious fees, terms and conditions.  Well, thanks to consolidated and persistent lobbying by many industry bodies, including BFPA, under new Government regulation, events have taken a step in favour of the companies.

On the first of January this year the Small and Medium Sized Business (Finance Platforms) Regulations 2015 found their way onto the UK statute books. The aim of the Regulations is to help small and medium sized enterprises (SMEs) to obtain finance from alternative finance providers if their application for finance to a ‘Designated Bank’ has been unsuccessful.
The, so called ‘Designated Banks’ are officially:
>Royal Bank of Scotland
>Barclays
>Lloyds Banking Group
>HSBC
>Santander
>Clydesdale and Yorkshire Banks
>Bank of Ireland
>Allied Irish Bank
>Danske Bank.

If you are an SME and have made an unsuccessful application for finance to a Designated Bank, the new Regulations require the bank to seek your consent to provide information to ‘Designated Platforms’ i.e. to be referred.
Designated Platforms are online platforms or portals approved by the Government that will seek to match the SMEs financing needs with the most suitable lender(s) for their circumstances.  So as to ensure that competition was maintained, the Government stipulated that there had to be at least three platforms.
Designated Platforms are:
>Bizfitech
>Funding Xchange
>Funding Options

Other similar sites will surely be developed if they haven’t already by the time we go to press with this article.
Having seen demonstrations of these products I would liken them to ‘Zoopla for Finance!’  Applicants are asked to provide a modest amount of data about themselves, including of-course, how much money they are seeking and on what terms, at which point the platforms or ‘websites’ search the market and offer a selection of alternative finance providers in order of suitability or match to the applicants expressed criteria.

Needless to say, as with any Government initiative there are eligibility conditions but again, they are not too onerous.
Applicant companies must:-
–  have a turnover of up to £25 million
–  have an address in the United Kingdom
–  carry out commercial activities as its principal activity
–  not be part of a group which as a whole has an annual turnover which is equal to or greater than £25 million;

Products within the scope of the Regulations include:
> Overdrafts
> Loans
> Invoice Finance
> Asset Finance
> Credit cards
The designated banks are not compelled to offer this alternative funding if certain conditions apply.  They are:-
– the value of the finance facility applied for is less than £1,000;
– the facility applied for is sought for a period of less than 30 days;
– the bank is aware that the business is subject to a statutory demand for payment, enforcement proceedings or other legal proceedings in relation to payment obligations arising under an existing finance facility;
– the bank is aware that the business is subject to a formal demand
– the reason the SME has turned down the bank’s offer due to price considerations

The only ‘exemption’ that caused a little concern was that regarding price considerations.  In theory, one might argue that the less ethical banks could claim that any given offering was appropriate but that their pricing was simply too high for the customer’s appetite and/or resources.  Subsequent discussions with the regulators and the British Bankers Association suggested that this kind of behaviour was highly unlikely and would reflect very badly upon any of the designated brands that might consider taking such an unethical approach to the new regulations.  Let’s examine the process more closely.
>If a lending application for an ‘in scope’ product is unsuccessful, e.g. turned down or the bank offers a facility on a different basis to the one applied which the SME rejects (but not on price grounds) the bank will seek the consent of the SME to make a referral to the Designated Platforms.
> This will occur at the time the decline is communicated or when the SME declines the alternative offer.
> If consent is given, the bank will send specified information regarding the application to all 3 Designated Platforms on the next working day.
> The specified information is:
> the Business Name, postal and e-mail address and telephone number
> the amount and type of finance requested
> the legal structure of the business (limited company, limited partnership, partnership sole trader, or other)
> the period in years and months that the business has been trading for and receiving income
> the date by which the business requires finance or made the application

As with all new regulations there is always a bedding-in period during which all stakeholders will scrutinise the effectiveness of the new rules.  BFPA will report back on any developments in this area.
To conclude, there is no doubt that these new regulations are good for SME’s and will encourage competition amongst funding providers.  Such competition can only apply downward pressure upon prices, availability and associated T&C’s.
BFPA members are encouraged to visit any one or all of the above referenced new sites by ‘googling’ their names directly.  They may also come across other similar sites as they emerge.  They might even wish to visit such sites prior to approaching their banks in order to establish a measure against which their own bank may be compared.