Response to Cabinet Question from Cllr Vint

How much funding does Devon and its small and medium-sized enterprises receive from the EU via the European Regional Development Fund (ERDF), European Social Fund (ESF), European Agricultural Fund for Rural Development (EAFRD) and other funding sources - and how (and by whom) is the likely impact on Devon of any changes to funding following the EU referendum being evaluated? How could this affect the HOTSW Devolution Bid?

INTRODUCTION

The majority of EU funding received in Devon to support businesses is through the European Structural and Investment Funds (ESIF): European Regional Development Fund (ERDF), European Social Fund (ESF) and European Agricultural Fund for Rural Development (EAFRD). The Heart of the South West Local Enterprise Partnership (LEP) has an ESIF Strategy for determining how the €137m allocation of ESIF funding for Devon, Plymouth, Torbay and Somerset will be invested for the current budget period 2014-2020. The programme has started and calls for applications have been issued and bids submitted but so far there have not been any funding agreements.

Previous regional funding programmes have operated on a different geographic footprint and with different priorities: the funds for 2007-2013 were distributed through the South West of England Competitiveness Programme which focused on large-scale projects benefitting the whole of the South West region (excluding Cornwall which had a separate ‘Convergence’ programme).

While some EU funding can be accessed directly by businesses, on the whole, funding is allocated to public-sector infrastructure projects, business support agencies, training initiatives and other economic projects which provide benefits to many businesses rather than direct funding.

In addition to the ESIF funds, which form the bulk of the EU funding available to support businesses, there are several centrally-administered EU programmes which can benefit businesses and economic activity. These include the Horizon 2020 research programme, COSME (Competitiveness of Small and Medium Enterprises) and EaSI (Employment and Social Innovation) programme. Information about activities funded in Devon through these programmes is not readily available.

For these reasons, it is not easy to determine the precise levels of funding which have gone to businesses in Devon, however it is possible to give an indication of how businesses have benefitted from the previous Competitiveness programme and to set out the priorities of the current ESIF programme.

This response therefore provides:

an overview of the regional funding available in the previous cycle (2007-2013) examples of EU-funded projects which have benefitted businesses in Devon commentary on progress with the current cycle (2014-2020)

EU REGIONAL FUNDING 2007-2013

Devon had access to regional funding from the 2007-2013 budget through the following:

South West of England Competitiveness Programme – to provide opportunities for business support through the themes of innovation & knowledge and enterprise & growth as well as addressing skills needs in these areas. The programme provided £104.7m ERDF and £119m ESF for the South West of England region (excluding Cornwall).

Significant ERDF projects included:

The Centre for Additive Layer Manufacturing at the University of Exeter which has so far provided over 180 businesses with the opportunity to discover how this innovative technology can facilitate the manufacture of complex components, reduce waste and accelerate product development.

The new South West Energy Centre at South Devon college – stimulating the green economy by demonstrating some of the latest domestic and commercial renewable and low carbon technology solutions, providing training for businesses and installers and offering impartial business advice.

In Devon and Somerset, 193 established businesses and 46 start-ups have benefitted from a high-growth coaching programme run by Business West. An example is award-winning Little Pod, based in East Devon, which specialises in creating natural vanilla products. The company found the mentoring support was pitched exactly to their stage of development, helping them create new jobs and a solid platform for continued growth.

£9m ERDF boosted the international trade advisory service offered by UK Trade and Investment (UKTI) in conjunction with Business West, to help businesses to identify export opportunities, develop their overseas marketing strategies and attend overseas trade fairs and events. Devon-based Dartington Crystal expanded its operations following a successful export drive in China and South Korea. UKTI provided the company with introductions and invaluable advice on how to do business in both countries, as well as ERDF-funded support towards the cost of visits.

£10m ERDF investment in ‘Superfast Business’ helped businesses exploit opportunities offered by superfast broadband. This project combined an online resource with specialised support for eligible businesses, including access to expert advisers and events offering insights and practical solutions.

The full list of ERDF projects can be viewed at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/403957/SW_Competitiveness_beneficiary_data_Jan_2015.pdf

The ESF allocation was distributed through co-financing organisations: DWP (Jobcentre Plus); Skills Funding Agency; and the National Offender Management Service. The ESF projects can be viewed at:

https://www.gov.uk/government/publications/esf-funding-allocated-to-the-south-west

Rural Development Programme for England (RDPE) (Axes 1, 3 & Local Action) – £156m (all South West) [This figure is about 20% of the RDPE in the South West with the remainder (Axis 2) being allocated at a national level to Environmental Stewardship and forestry measures.]

RDPE-funded initiatives in Devon included:

Unlocking Our Coastal Heritage - £2.1m for route improvements and upgrading of facilities on the South West Coast Path in Cornwall, Devon and Dorset.

Explore the North Devon Coast - £37,500 to support sustainable access and information 30 rural businesses in Devon and Somerset received capital grants totalling £800,000 through

the Rural Enterprise Grant (REG) scheme.

The RDPE also included the allocations for Devon’s ‘Local Action Groups’:

Greater Dartmoor (£1.8m) Torridge & North Devon (£3.8m) South Devon Coastal (£1.8m) Blackdown Hills & East Devon ‘Making it Local’ (£2.4m)

The LAGs were set up to encourage sustainable rural development through business productivity, access to services in rural areas, low carbon economy, community enterprise and skills development.

EU Co-operation (Interreg) Programmes – there was a UK allocation of €177m for cross-border projects and €145m for transnational projects; the budget for interregional projects was €321m for the whole of the EU. Devon County Council was particularly successful in securing Interreg funding during 2007-2013, including acting as lead applicant and accountable body in:

CORDIALE £1,247,500 to look at strategic planning issues in AONBs and protected areas SEACS £1,200,000 – Sustainable Energy Across a Common Space

(NB. the EU investment is shared with the other partners in these projects)

Devon was also a partner in several Interreg projects, including:

AtlantKIS £185,109 for the development of knowledge-intensive services for SMEs CAMIS £148,072 to address common strategic issues in the English Channel area LICCO £200,000 to develop solutions to climate change impact on coastal communities CYCLE £1m to develop a network of cycle routes and greenways

EU REGIONAL FUNDING 2014-2020

ERDF, ESF and part of the EAFRD have been combined into the European Structural & Investment Funds Growth Programme for England for 2014-2020.

The Heart of the South West LEP ESIF strategy will invest the funding through five integrated activities:

A. Maximising Innovation through Transformational Opportunities and Smart SpecialisationInvestment will focus on the priority sectors for the HotSW - Aerospace, Agri-tech, Big Data, Environmental Futures, Healthy Aging, Marine, Nuclear, and Photonics.

B. Enterprise and SME CompetitivenessThis covers business support activity, including support for start-ups, as well as workforce skills

C. Reaching new marketsIncluding export assistance, developing supply chains. Also support for the low carbon sector.

D. DigitalInvesting in digital infrastructure and skills activity to ensure that people are able to benefit

E. Social and Economic InclusionIncluding tackling in-work poverty, employability skills and support for young people

The Heart of the South West LEP area is divided into two ‘categories of region’: Somerset is classed as a ‘More Developed Area’ (GDP per capita more than 90% of EU average) while Devon (including Plymouth and Torbay) is a ‘Transition Area’ (GDP per capita between 75% and 90% of EU average). The ‘Transition’ funding allocations for ERDF and ESF - for Devon, Plymouth and Torbay - are as follows:

ERDF: €50,533,356 ESF: €33,709,965 The EAFRD allocation of €19,408,588 is for the whole Heart of the South West LEP area.

It should be noted that since the allocations are in Euros they are subject to exchange rate fluctuations.

The first calls for project applications in the Heart of the South West were published in March 2015 and there have been further opportunities to submit applications in response to specific calls published at regular intervals on the GOV.UK website.

Devon County Council has submitted, or is in the process of submitting, applications for ERDF funding for the following projects:

Growth Hub – £1m to administer the Growth Hub brokerage (business support) service for Devon and Somerset

Woodheat – around £1m to support the development of biomass district heat networks Social Enterprise - £1,335,000 to provide business support to social enterprises across Devon and

Somerset Healthy Ageing – a proposal to bring together academics, students, businesses, social

enterprises, commissioners and end users to move towards an aspirational health & social care landscape in Devon by encouraging innovation.

The County Council is also a partner in the bid for £4.6m ERDF funding for the Superfast Extension Programme submitted by Somerset County Council on behalf of Connecting Devon and Somerset.

It is not possible to give any clear indication of how the programme will be taken forward in the light of the EU referendum decision. It is not known at this stage whether DCC’s funding applications will be successful and, if they are, how the funding agreements will be drawn up: the ESIF programme runs until 2020 but project expenditure had been expected to continue until the end of 2023.

The Chief Executive of the LEP has said that it is too early to say what impact ‘Brexit’ will have on the work of the LEP and the HotSW economy and advises partners that it is ‘business as usual’, and to continue with planned activity related to the programme, until we hear otherwise.

In the event that the ESIF programme runs its course irrespective of Brexit, there will be further opportunities for funding to support businesses in Devon, including:

demand stimulation to complement the investment in broadband infrastructure scope to build on the former REG scheme and provide rural business support services, rural

grant programme for small and micro businesses enterprise & incubation space – potentially linking to innovation activity further support for community enterprise (building on the success of the Community Impact

Support Scheme) support for employability and in-work poverty initiatives enterprise education activities