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England ERDF Programme 2014-20: Output Unit Costs

and Definitions

A Final Report by Regeneris Consulting

DCLG

England ERDF Programme 2014-20: Output Unit Costs and Definitions

18 December 2013 Regeneris Consulting Ltd www.regeneris.co.uk


Contents Page

1. Introduction 1

2. Key Points 2

3. Enterprises Supported 5

4. Number of new enterprises supported 7

5. Jobs created 9

6. Number of enterprises cooperating with research institutions 11

7. Number of enterprises supported to introduce products new to the market 13

8. Number of enterprises supported to introduce "new to the firm" products 15

9. Additional enterprises accessing ICT products and services including Broadband 17

10. Private investment matching public support to enterprises 18

11. Estimated annual decrease of GHG 19

12. Number of companies supported with business resource efficiency 20

13. Infrastructure site development including green infrastructure 21


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1. Introduction

1.1 DCLG issued guidance to Local Enterprise Partnerships (LEPs) in July 2013 on the completion of their European Structural and Investment Fund Strategies (SIFs). This guidance set out a menu of thematic activities and outputs that could be funded by ERDF. Subsequent to the development of their draft SIFs, LEPs have requested further guidance from DCLG on output definitions and benchmarks. This was in part because the initial analysis by DCLG of the LEP proposals on funding and outputs showed that there was a very wide range of implied unit costs for a particular output from LEP to LEP.

1.2 DCLG requested that Regeneris, as ex-ante evaluators, provide some assistance with this task of further indicative guidance. This note sets out our advice which is there as a starting point for LEPs to use and adjust as they see fit in the light of their own local analysis and past evidence. It should be noted that this advice does not constitute any endorsement of the output menu previously chosen by DCLG for LEPs. It is also critical that any users of this note read carefully the health warnings that are included in it.

The Proposed ERDF Outputs

1.3 The “menu” of suggested ERDF outputs provided by DCLG to LEPs was as follows.

Table 1.1: Proposed ERDF Output Indicators

Proposed ERDF Output Indicator Link to EC List of Common Indicators

Enterprises supported EC Common Indicator 1

Number of new enterprises supported EC Common Indicator 5

Jobs created EC Common Indicator 8: FTE Employment increase in supported enterprises

Number of enterprises co-operating with research institutions

EC Common Indicator 26

Number of enterprises supported to introduce products new to the market


Number of enterprises supported to introduce “new to the firm” products


Additional enterprises accessing ICT products and services including Broadband

There is no EC common indicator for this output. It would however be a sub-set of Common Indicator 1 (Number of enterprises receiving support) and Common Indicator 4 (Number of enterprises receiving non-financial support).

Private investment matching public support to enterprises

EC Common Indicators 6 & 7: Matching Private Investment (£s)

Estimated annual decrease of GHG EC Common Indicator 34

Number of companies supported with business resource efficiency

There is no EC common indicator for this output. It would however be a sub-set of Common Indicator 1 (Number of enterprises receiving support) and Common Indicator 4 (Number of enterprises receiving non-financial support

Infrastructure site development including green infrastructure

EC Common Indicator 22: Total surface area of rehabilitated land

Note: definitions of EC Common Indicators set out in “Guidance Document On Monitoring And Evaluation - European Regional Development Fund and Cohesion Fund”, October 2013.

See http://ec.europa.eu/regional_policy/sources/docoffic/2014/working/wd_2014_en.pdf

http://ec.europa.eu/regional_policy/sources/docoffic/2014/working/wd_2014_en.pdf


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2. Key Points

2.1 This note sets out some suggested guidance on definitions and on the potential range of unit costs that could be used.

Definitions

2.2 Most of the menu of indicators (9 out of the 11) are drawn from the list of EC Common Indicators for Structural and Cohesions Funds. All of these already have definitions in place (which are summarised below indicator by indicator). However, in addition to these new EU Common Indicators there are existing ERDF output indicators from the 2007-13 programmes. These output indicators were given quite detailed definitions in a document called the Combined Indicators Technical Note (CTN), finalised in 20091. This document was produced to ensure consistency between the output definitions used for ERDF programmes and the then RDA Single Programme.

2.3 For each output indicator we have set out:

The current EC definition where this exists.

Provided some commentary to help the interpretation of this guidance.

Drawn on the definitions developed for the Combined Technical Note where that helps.

Unit Cost Benchmarks

2.4 There is a dearth of available information on unit costs, or at least officially sanctioned unit cost information. To aid DCLG we have drawn on information from a database of around 1,000 projects funded under the current English Regional ERDF programmes. This information was provided to Regeneris in early 2013 as part of a national evaluation of the current ERDF programmes undertaken by us for DCLG.

2.5 This note provides an analysis of the total public sector cost per unit for those indicators outlined above where this is available or at least a best fit unit cost. The work involved in estimating unit costs consists of:

1) Calculating the contracted total public sector cost (i.e. ERDF and other reported public sector investment) for each project and that based on spend to date. These costs include all ERDF and all other public sector contributions to the projects and exclude all private sector match funding. The project costs include both capital and revenue. The information on public sector costs is that reported for each project in the DCLG ERDF project database. In most cases these costs recorded are in effect the ERDF and the public sector match funding for the project. Where LEPs propose that much of the match funding for ERDF will come from private sector sources this will of course reduce the appropriate public sector unit cost per output to use2.

1 Technical Note of Combined Indicators for RDA Single Budget and ERDF Programme 2007-13, July 2009 (Chapter 11 of the ERDF Users’ Manual)

2 So for instance if the historic information was that the funding was ERDF 50%, other public 25% and private 25% and total project costs was £1m to create 20 jobs the public sector cost per job created would be (£1m X 75%)/20 = £37,500. However, if the balance of project funding changed to 50% private match but nothing else changed the appropriate unit cost would be (£1m X 50%)/20 = £25,000


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2) Matching outputs reported by projects to the framework of outputs included in the analysis.

3) Calculating unit costs per contracted / achieved output based on ERDF data.

4) Generating distribution charts and descriptive statistics.

5) Excluding significant project outliers.

2.6 The data is a useful starting point to understand potential unit costs, however it does need to be treated very cautiously as:

There are time delays between expenditure on activity in a project and the delivery of outputs. Many projects in the database are ongoing and not yet completed. We have drawn most heavily on data on contracted outputs rather than achieved outputs to deal with this issue. Contracted outputs are generally adjusted during a project to take account of key changes in the project and so are likely to be reasonably aligned to what is finally delivered. However, we have carried out a check on achieved vs. contracted unit costs in assessing unit costs.

Approximately 43% of projects were complete at the time that the data was exported from MCIS (Jan 2013), although there is significant variation by region.

Table 2.1: Number of Projects Completed and in Delivery, February 2013

Region/Current ERDF Programme All Projects

In Delivery Complete

Number % Number %

East Midlands 193 99 51% 94 49%

East of England 53 31 58% 22 42%

London 94 22 23% 72 77%

North East 143 89 62% 54 38%

North West 199 101 51% 98 49%

South East 25 11 44% 14 56%

South West 72 58 81% 14 19%

South West - Cornwall 133 82 62% 51 38%

West Midlands 166 103 62% 63 38%

Yorkshire and Humberside 107 78 73% 29 27%

Grand Total 1,185 674 57% 511 43%

Source: MCIS data provided by DCLG to Regeneris Consulting

Many projects have joint outputs, so they are delivering several activities and hence outputs. This presents a problem in that the methodology used is that the whole public sector cost of the project is applied to a set of outputs that might only account for 50% or even just 10% of project activity. In the time available to us in preparing this note, it is hard to adjust for these factors. LEPs need to be aware of these issues and recognise that the same project may deliver multiple types of outputs and hence the reported unit costs may be overstated for this reason

Furthermore, there are some projects whose activity and core outputs are not at all well captured by the list of outputs we have examined. So again the unit costs may not be a realistic indication of the economic development outputs achieved (many property based capital projects fall into this category).

2.7 For all these reasons, the results need to be treated very cautiously. Generally the mean unit costs are high to reflect these issues and considerably higher than the median unit costs. We have therefore focussed on the median unit cost and the lower quartile unit costs in this note.


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2.8 These above factors are reasons for being cautious about the analysis. However, it is also important to stress that there are many good reasons why unit costs should and do vary due to the intensity, nature or quality of support that LEPs may have decided is best for their local areas. Until the nature of planned interventions is known with more certainty it is very difficult to determine what should be sensible unit costs to use.


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3. Enterprises Supported

Definition

Table 3.1: EC Common Indicator 1: Number of Enterprises Receiving Support

Definition provided by EC: Number of enterprises receiving support in any form from ERDF (whether the support represents state aid or not). Enterprise: is defined as an organisation producing products or services to satisfy market needs in order to reach profit. The legal form of enterprise may be various (self-employed persons, partnerships, etc.).

Comment: This is a very brief definition. The key points are that all enterprises can be counted

(not just SMEs) and that an enterprise is essentially a “for profit” organisation that is selling goods

and services. The EC definition does not define “support” at all so in principle that level of support

could be £1 or £100,000. It is also important to emphasise that this output is about the number of

businesses receiving assistance not the effectiveness or impact of that assistance.

3.1 The current England ERDF programmes use a similar definition3. However, crucially this defines “support” as consisting as a minimum of either:

2 days active consultancy advice or other non-financial assistance (1 day = minimum of 6 hours activity i.e. it excludes lunch and other breaks), or

Grant, or the equivalent, of at least £1,000.

3.2 This minimum assistance level was introduced to deal with past situations where projects had provided support such as helplines or sent out advice leaflets to large number of businesses at a very low unit costs but where the impact was likely to be negligible. We recommend that DCLG and LEPs adopt a similar minimum threshold assistance for purposes of defining and measuring outputs. However, it does not mean that LEPs should default to using £1,000 per business assist (as the unit cost information shows this is in fact much lower than the typical historic unit cost).

3.3 It is also important to point out that this is very much a catch-all output indicator and other outputs indicators are sub-sets of this indicator (for instance different types of SMEs assisted or different types of assistance offered).

3.4 In using this output indicator, LEPs need to be wary about double counting:

It is possible for a business to be assisted more than once within a project (although we would argue this is not good practice and could be misleading) in one LEP area

However, LEPs should certainly try and avoid double counting of businesses assisted across projects in their area.

At a national level, programmes which may well assist the same company at different sites in different LEPs. We consider it would be appropriate to count each assist in each LEP area even if it is the same firm.

3 See O3: Business support – Number of businesses assisted to improve their performance


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Unit Costs

3.5 This output is one that is particularly prone to variability. A business assist can range from a few days consultancy to a £100,000 investment in a firm. In many respects this output is a meaningless measure and the large variations in unit costs reflects this fact. Across the 623 projects which report on this output measure the mean contracted unit costs is £34,000 and the mean based on defrayed costs and reported outputs is £68,000. However, for both measures the median is the same at £10,000 per assist. The lower quartile unit cost is £4,700 (i.e. the 25% lowest unit cost is this level and the average project unit cost for all projects in the lower quartile is £2,500.

3.6 We therefore recommend for a relatively low intensity business assist that a unit cost in the range £2,500 to £4,700 public sector cost per business assisted is used as a starting point. For a more intensive business assist the median of £10,000 public sector cost per business assist could be used as a starting point. However, much higher unit costs can be used if the intention is for a smaller number of higher rates of support (for instance via investment Financial Instruments (FIs)).

Table 3.2: Unit Cost Information on Businesses Assisted

Unit cost, £000s public sector costs per output

Mean Median Lower Quartile

£34 £10.2 £4.7

Note: based on information from 623 projects; based on contracted spend and outputs

3.7 There is a very wide variation in unit costs across projects for a variety of reasons: some to do with measurement and some to do with the different nature of business assist being measured. This is demonstrated in the chart below.

Figure 3.1: Variation in Unit cost of Business Assisted Output

Source: Regeneris analysis of 623 ERDF projects from the 2007-14 English ERDF programmes


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4. Number of New Enterprises Supported

Definition

Table 4.1: EC Common Indicator 5: Number of New Enterprises Supported

Definition provided by EC: Number of enterprises created receiving financial aid or support (consultancy, guidance, etc.) from ERDF or ERDF financed facility. The created enterprise did not exist three years before the project started but the Managing Authority or national legislation may set a lower the time criterion. An enterprise will not become new if only its legal form changes. This indicator should be used for both enterprise development and innovation measures if the goal is to create or support new enterprises (e.g. spin-offs, technology start-ups). The indicator is a subset of 'Number of enterprises receiving support' (Common Indicator 1)

Comment: there is only a brief definition from the EC. This output is fairly similar to one of the outputs used in the current England ERDF programmes4. The key difference is that the current England ERDF programmes output used includes businesses “attracted to the region” (i.e. inward investment), whereas it is clear that the EC Common Indicator would exclude a business that relocated from one location to another. The way the EC definition works means that the enterprise might have already started before it received assistance, but the time period is for the Member State to decide. The output is about young enterprises supported rather than necessarily the creation of new enterprises.

4.1 The Combined Technical Note definition is that the output can be counted “when a new business starts trading in the region and is sustained for at least 12 months as a direct result of the project intervention”. So it differs from the EC definition in that the new business needs to have been started in part as a result of the project and it must trade for at least 12 months. The CTN defines started trading as “the date when the business registers for VAT or registers for National Insurance (Class 2) contributions”.

4.2 We recommend that the England ERDF programme adopts this current England definition so that the output is about assistance to help create new businesses, but that it excludes businesses that simply relocate. The suggested maximum time period for which businesses may have been in existence prior to the assist is 12 months (so shorter than the EC’s maximum of 36 months).

Unit Costs

4.3 We were not able to find many projects which reported on this output in the database of projects. The mean costs across the 24 projects was well over £200,000 although the median was £24,000 and the lower quartile mush lower at £3,500 public sector cost per business start-up supported. Even these figures is high relative to many business start-up schemes. We suspect this is due to the projects providing substantial financial start-up support (via Venture Capital and Loan Schemes). Unless a financial grant or loan scheme is proposed we suggest that the lower quartile figure of £3,500 per business start-up is used.

4 O2: Business creation - Businesses created and/or attracted to the region


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Table 4.2: Unit Cost Information on New Businesses Created

Unit cost, £000s public sector costs per output Mean Median Lower Quartile

£116 £17.6 £3.5

Note: based on 24 observations; based on contracted outputs and expenditure


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5. Jobs Created

Definition

Table 5.1: EC Common Indicator 8: FTE Employment increase in supported enterprises

Definition provided by EC

Essentially a 'before-after' indicator which captures the part of the employment increase that is a direct consequence of project completion (workers employed to implement the project are not counted). The positions need to be filled (vacant posts are not counted) and increase the total number of jobs in the enterprise. If total employment in the enterprise does not increase, the value is zero - it is regarded as realignment, not increase. Safeguarded etc. jobs are not included.

Gross: Not counting the origin of the jobholder as long as it directly contributes to the increase of total jobs in the organisation. The indicator should be used if the employment increase can plausibly be attributed to the support.

Full time equivalent: Jobs can be full time, part time or seasonal. Seasonal and part time jobs are to be converted to FTE using ILO/statistical/other standards.

Durability: Jobs are expected to be permanent, i.e. last for a reasonably long period depending on industrial-technological characteristics; seasonal jobs should be recurring.

Timing: Data is collected before the project starts and after it finishes; Managing Authorities are free to specify the exact timing. Using average employment, based on 6 months or a year, is preferred to employment figures on certain dates.

Outputs from enterprises that went bankrupt are registered as a zero employment increase.

Comment: there are several key points about this more detailed definition. First, it excludes jobs

safeguarded. Second, the jobs must be attributable in some way to the support. Third, jobs must

be expressed in full-term equivalent terms. This output is almost identical to the jobs created

output definition in the current England ERDF programmes (O1 (a) Jobs created). The CTN provides

some useful further clarification and definition as follows:

FTE jobs: an FTE = paid work of 30 hours or more per week. Convert part time jobs to FTE either on a pro rata basis based on hours worked; or 2 part time jobs = 1 FTE, where no other information available.

Seasonal jobs: may be counted where they are integral to the project (for example, in the tourism sector), provided there is a contract of employment that will last for a minimum of 4 weeks per annum. They are calculated on a pro-rata basis e.g. a 3 month job = 0.25 FTE.

The jobs are a direct consequence of project completion. This means that jobs that might be filled in a new property development are generally not to be included (this was also the case under the current ERDF programmes in England).

5.1 Temporary (and so by inference construction jobs) are excluded.


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Unit Costs

5.2 As with all other unit costs there is considerably variability in this unit cost. There are many reasons why variability would be expected:

The quality of jobs created may vary greatly.

As this is gross cost per job it does not take into account additionality and displacement which, to some extent, tend to equalise the net cost per job (so for instance lighter touch interventions with lower unit costs are likely to demonstrate higher deadweight and displacement).

Capital intensive projects will have higher cost per gross job and indeed some of these projects may report few if any jobs during the programme period. Given the wide variation in the size and scope of capital intensive projects we do not consider it sensible to include benchmarks for these projects. A flood defence, a transport or a new incubator centre will all have very project specific unit costs.

5.3 As the table below shows there is considerable variation. The mean unit cost per gross job created is pushed upwards by capital intensive projects. The median unit cost at £25,700 is a reasonable average gross cost per job created broadly in line with other research (mixed revenues and capital schemes and intensive assists). The median based on defrayed expenditure and reported outputs, is £30,000. The lower quartile figure of £11,500 would be relevant for a lower intensity business support scheme. The average (mean) unit cost per job in the lower quartile is £6,500 public sector cost per job. This would be very much at the lower end of most ranges. We suggest that the median figure of £26,000 gross cost per job is used as the starting point for any quantification.

5.4 However, the unit costs would typically be considerably above these figures for capital intensive projects (linked to transport or property development for instance).

Table 5.2: Unit cost information on gross cost per job created


£71 £25.7 £11.5

Note: based on 758 projects; unit cost based on contracted outputs and spend


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6. Number of Enterprises Cooperating with Research Institutions

Definition

Table 6.1: EC Common Indicator 26: Number of enterprises cooperating with research institutions

Definition provided by EC Number of enterprises that cooperate with research institutions in R&D projects. At least one enterprise and one research institution participates in the project. One or more of the cooperating parties (research institution or enterprise) may receive the support but it must be conditional to the cooperation. The cooperation may be new or existing. The cooperation should last at least for the duration of the project. Enterprise: Organisation producing products or services to satisfy market needs in order to reach profit. The origin of the enterprise (inside or outside of the EU) does not matter. In case one enterprise takes the formal lead and others are subcontractors but still interacting with the research institution, all enterprises should be counted. Enterprises cooperating in different projects should be added up (provided that all projects receive support); this is not regarded as multiple counting. Research institution: an organisation of which R&D is a primary activity. Cooperation can be counted based on either the operations or the participants. This indicator focuses on the enterprises as participants.

Comment: the EC provides a fairly full definition of this output. The definition is very similar to the current ERDF programme indicator O3(b) “Business support – Businesses engaged in new collaborations with the knowledge base”. The EC use the term co-operation which is in essence the same meaning as collaboration. As with other business assistance outputs the EC has no minimum level of support or degree of collaboration. The current ERDF output definition requires a minimum level of support to the business as with “businesses assisted (i.e. £1,000 or 2 days consultancy support”. As with business assisted, we recommend that this minimum level is applied.

6.1 The CTN provides some helpful clarification which can be applied to this new output:

Definition of the “knowledge base” which it is reasonable to see as similar to the EC’s

“research institution”. This is defined as including UK Public Sector Research

Establishments or equivalents, Research and Development Organisations, Research and

Technology Organisations, Higher Education and Further Education Institutions.

The CTN defines knowledge transfer (i.e. the activity expected to relate to this output) as

“about transferring good ideas, research results and skills between the knowledge base

and business to enable innovative new products and services to be developed” and

includes: research collaborations and free dissemination of research; contract research on

behalf of industry; licensing of technology to business users; the sale of services, data and

software; and formation of joint ventures and spin-out companies.

Unit Costs

6.2 There is a great deal of variability around the unit costs information from the c. 200 projects where this output is reported. We know that many projects in this area included capital and revenue elements (for instance new centres of excellence at universities) and so this will tend to skew the unit costs). The mean unit cost is very high at £100k per business engaged in new collaboration


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with the research base. The mean is skewed by some major outliers. The median unit costs is £42,000 and the lower quartile unit cost is £17,000. The average unit cost for the lower quartile of projects is £10,900.

6.3 In this instance we would recommend the use of the median of £38,000 for a more intensive project involving a few firms in the collaboration and the average of the lower quartile (around £11,000) for an intervention with larger number of SMEs involved. The higher mean figure may be more appropriate for projects also including a capital element or substantial repayable finance.

Table 6.2: Unit cost information on businesses engaged in new collaborations with the knowledge base



£93 £38 £16.9



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7. Number of Enterprises Supported to Introduce Products New to the Market

Definition

Table 7.1: EC Common Indicator 28: Number of enterprises supported to introduce new to the market products

Definition provided by EC The indicator measures if an enterprise receives support to develop a 'new to the market' product in any of its markets. Includes process innovation as long as the process contributes to the development of the product. Projects without the aim of actually developing a product are excluded. If an enterprise introduces several products or receives support for several projects, it is still counted as one enterprise. In case of cooperation projects, the indicator measures all participating enterprises. A product is new to the market if there is no other product available on a market that offers the same functionality, or the technology that the new product uses is fundamentally different from the technology of already existing products. Products can be tangible or intangible (including services). Supported projects that aimed to introduce new to the markets products but did not succeed are still counted. If a product is new both to the market and to the firm, the enterprise should be counted in both relevant indicators (see indicator 29 number of enterprises supported to introduce new to the firm products'). The boundaries of the market (either geographical or other) are defined by the Managing Authority based on the business activity of the enterprise receiving support. Indicator 1 should also be used where this indicator is used. Please note the relationship with indicator 29 'Number of enterprises that introduced new to the firm product'. While most classic innovations lead to products new both to the market and to the firm, it is possible that the product is new to the market but not new to the firm, e.g. adapting an existing product to a new market without changing functionality

Comment: this is a complex definition. The key points are that the product (physical or service) must be new to the defined market area, but this market area needs to be defined for each enterprise (or programme). It is also the case that the output measures the number of businesses supported but not whether they are actually successful in introducing the new the market product. For purposes of this output we suggest that “the market” is defined as England (rather than just the LEP area). This would be a strict definition and still difficult to measure, but the alternative of trying to define a market area for each enterprise (unless self-definition is used) could be even more complex.

7.1 There is no existing ERDF output indictor in England that corresponds to this. The closest is the results indicator “R3(a) Business with new or improved products, processes or services”. It is important to note that this covers new and improved products, processes or services which are defined as:

Product - when it is either at pre-launch or launched to the market

Process - when it has been introduced into the business

Service - when it has been introduced to the market.


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Unit Costs

7.2 We have examined data from 78 ERDF supported projects which had “new or improved products or processes”. It is important to note that this unit cost is based on a results indicator from the current ERDF programmes. The unit cost is therefore not for businesses successfully assisted. The unit cost for all businesses assisted successfully or unsuccessfully will be lower (probably by at least 25%).

7.3 There is a wide range in calculated unit costs from a mean of £94,000, a median of £28,000 to a lower quartile of £15,600. Within the lower quartile the average (mean) is £10,300). The median unit cost based on defrayed spend and reported outputs is somewhat higher at £34,000.

7.4 In this instance a unit cost based on the median (i.e. £28,000) total public sector cost per business assisted would reflect an intensive assist to support innovation, the average of the lower quartile (£10,000) would reflect a less intensive lower level support.

Table 7.2: Unit Cost information on businesses with new or improved products or processes


£94 £28 £15.6

Note: based on 78 observations; this definition is new or improved and also it is only for businesses successfully assisted; based on contracted spend and outputs


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8. Number of Enterprises Supported to Introduce "New to the Firm" Products

Definition

Table 8.1: EC Common Indicator 29: Number of enterprises supported to introduce new to the firm products

Definition provided by EC The indicator measure if an enterprise is supported to develop a 'new to the firm' product. Includes process innovation as long as the process contributes to the development of the product. Projects without the aim of actually developing a product are excluded. If an enterprise introduces several products or receives support for several projects, it is still counted as one enterprise. In case of cooperation projects, the indicator measures all participating enterprises to which the product is new. A product is new to the firm if the enterprise did not produce a product with the same functionality or the production technology is fundamentally different from the technology of already produced products. Products can be tangible or intangible (including services). Supported projects that aimed to introduce new to the firm products but did not succeed are still counted. If a product is new both to the market and to the firm, the enterprise should be counted in both relevant indicators (see indicator 28 'Number of enterprises supported to introduce new to the market products'). Indicator 1 should also be used where this indicator is used. Please note the relation with indicator 28 'Number of enterprises that introduced new to the market product'. While most classic innovations lead to products new both to the market and to the firm, it is possible that the product is new to the firm but not new to the market, e.g. certain technology transfers.

Comment: this is also quite a complex definition. The key points are that the product (physical or service) must be new to the firm. It is also the case that the output measures the number of businesses supported but not whether they are actually successful in introducing the new products.

8.1 There is no existing ERDF output indicator in England that corresponds to this. The closest is the results indicator “R3(a) Business with new or improved products, processes or services”. It is important to note that this covers new and improved products, processes or services which are defined as:

Product - when it is either at pre-launch or launched to the market

Process - when it has been introduced into the business

Service - when it has been introduced to the market.


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Unit Costs

8.2 We have examined data from 78 ERDF supported projects which had “new or improved products or processes”. This is the same set of projects used to work out the unit costs for the output indicator “number of enterprises supported to introduce products new to the market”. It is important to note that this unit cost is based on a results indicator from the current ERDF programmes. The unit cost is therefore not for businesses successfully assisted. The unit cost for all businesses assisted successfully or unsuccessfully will be lower (probably by at least 25%).

Table 8.2: Unit Cost information on businesses with new or improved products or processes



£94 £28 £15.6

Note: based on 78 observations; this definition is new or improved and also it is only for businesses successfully assisted; unit costs based on contracted expenditure and outputs


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9. Additional Enterprises Accessing ICT Products and Services Including Broadband

Definitions

9.1 There is no EC common indicator for this output. It would however be a sub-set of Common Indicator 1 (Number of enterprises receiving support) and Common Indicator 4 (Number of enterprises receiving non-financial support).

9.2 Note Common Indicator 10 "Additional households with broadband access of at least 30 Mbps" defines improved access as "number of households with internet access with a download speed of at least 30 Mb/sec and who before only had more limited access or did not have access at all. The capacity to access must be a direct consequence of the support. The indicator measures households with the possibility to access, not whether the people living in the households actually choose to be connected or not".

9.3 The definition of this output needs careful consideration. There may need to be two separate outputs: one associated with the provision of super-fast broadband, and the other with improved use of ICT.

Unit Costs

9.4 There are different unit costs for different type of intervention. In terms of providing improved broadband the following unit costs may be of some assistance:

To provide fibre to the premises (FTTP) there is an industry benchmark of around £1,000 per property for FTTP roll-out but there are larger scale rollouts where there are efficiencies available5.

The recently launch Super Connected Cities Voucher scheme is offering grants of up to £3,000 per premise to cover connection costs (NB this excludes ongoing monthly costs) and requires a minimum line speed of 30M/bps.

9.5 The above costs are associated with improving connectivity for businesses. An alternative approach is to consider the unit cost of the provision of business support to increase uptake and effective usage of broadband and so associated business applications). This takes us into the territory of business support. Here as indicated in SMEs Assisted section above, there are range of potential unit costs.

5 FTTP can provide for connection speeds of 100M/bps


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10. Private Investment Matching Public Support to Enterprises

Definition

Table 10.1: EC Common Indicator 6 & 7: Matching Private Investment

Definition provided by EC Total value of private contribution in supported project that qualifies as state aid where the form of support is either grant or other form (see Common Indicator 3 'Number of enterprises receiving financial support other than grants'), including non-eligible parts of the project.

Comment: this output is an amalgam of two EC Common Indicators, where Common Indicator 6 is private sector match to grant support and Common Indicator 7 is private sector match to non-grant support (i.e. equity or loan investment in a business). It is important to note that all private sector investment that takes place in the project can be included whether this is on eligible or non-eligible parts of the project. For instance a mixed use development that included housing or retail the value of the investment associated with this could be included. This indicator is therefore not the same as the eligible private sector match for a project. The private sector eligible match will be measured anyway so this indicator needs to be seen as a broader definition to pick up wider regenerative impacts or project spillovers.

10.1 This indicator is similar in many respects to the current output indicator from the CTN of “O7 Financial: Public and Private Sector Investment Levered”. Private sector match investment in the CTN definition states that this includes the: “sum of the all the private sector investment (£m) in the project, including monetarised in-kind contributions”. To be consistent we suggest that this new output includes financial and in-kind contributions as match investment.

Unit Costs

10.2 The information on private sector match is not collected consistently in the current programme. We do not have any unit costs as such. The degree of private sector match very much depends on the parameters of any project and so could range from £0 per £1 of ERDF/public sector investment (in some grant schemes) to leverage rates of £1 for every £5 for some forms of levered financial investments where the public sector is the lender of the last resort.


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11. Estimated Annual Decrease of GHG

Definition

Table 11.1: EC Common Indicator 34: Estimated annual decrease of Green House Gases (GHG) (tonnes of CO2eq)

Definition provided by EC This indicator is calculated for interventions directly aiming to increase renewable energy production (see indicator 30) or to decrease energy consumption through energy saving measures (see indicators 31 and 32), thus its use is mandatory only where these indicators are relevant. Uses for other interventions with possible GHG impact are optional with methodology developed by the Managing Authority. The indicator will show the total estimated annual decrease by the end of the period, not the total decrease throughout the period. In the case of renewable energy production, the estimate is based on the amount of primary energy produced by supported facilities in a given year (either one year following project completion or the calendar year after project completion). Renewable energy is supposed to be GHG neutral and replacing non-renewable energy production. The GHG impact of non-renewable energy is estimated through the MS total GHG emission per unit of non-renewable energy production. In the case of energy saving measures, the estimate is based on the amount of primary energy saved through in a given year of supported operations (either one year following project completion or the calendar year after project completion). Saved energy is supposed to be replacing non-renewable energy production. GHG impact of non-renewable energy is estimated through the MS total GHG emission per unit of non-renewable energy production.

Comment: there are several key points in the definition of what is a very complex output:

The annual saving is defined as CO2 equivalent (whereby the global warming effect of

different greenhouse gases is converted to their CO2 equivalent (tonnes)

The measure is the total annual decrease arising by the end of the period (presumably the

programme period) for new renewable energy production

For energy saving measures (likely to be the main area of ERDF support) the saving is based

on the first (or typical) year of savings.

11.1 There is no current defined ERDF output measure in the England ERDF programmes. Different regions have adopted different approaches and there have been some carbon calculators produced such as in the North West. However these tend to assess CO2 impacts ex-ante and are not followed up with subsequent measurement.

Unit Costs

11.2 These are not available from an analysis of the current ERDF programmes. However DECC may have some costs per unit of renewable energy or unit costs of CO2 reductions per £1 of investment in business efficiency programmes.


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12. Number of Companies Supported with Business Resource Efficiency

Definition

12.1 This output is not covered by the EC’s Common Indicators. There is Common Indicator 31 Energy efficiency with number of households with improved energy consumption classification. The CTN has output indicator O3(e): Business Support, No. of Businesses Assisted to Reduce Industrial & Commercial Waste and results indicator R3(b) Businesses with industrial and commercial waste reduced, reused or recycled. As with O3 generally on business assistance this has a minimum assistance level of £1,000 or two days consultancy support.

12.2 We suggest that the definition is as O3, but that this output refers to business support that leads directly to improved business resource efficiency. There is no current definition of business resource efficiency for ERDF purposes, but any support aimed at “reduction in energy consumption, use of water or production of waste” would be consistent with business resource efficiency.

Unit Costs

12.3 Of the over 700 projects with SMEs assisted around 80 were classified as being about business resource efficiency. The mean public sector cost per assist was £13,000.

Table 12.1: Unit Cost information on companies supported with business resource efficiency


£13



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13. Infrastructure Site Development Including Green Infrastructure

Definition

Table 13.1: EC Common Indicator 22: Total surface area of rehabilitated land

Definition provided by EC Surface of remediated or regenerated contaminated or derelict land made available for economic (except non-eligible, e.g. agriculture or forestry) or community activities. The unit of measurement is hectares.

Comment: This is a brief definition. The output is very similar to the current ERDF output: “O4 brownfield land reclaimed and/or redeveloped”. The CTN provides some useful further clarification on what categories of land can be included: “contaminated, derelict or previously developed land which is or was occupied by a permanent structure (excluding agricultural or forestry buildings), and associated fixed surface infrastructure within the curtilage of the development”. Categories covered may include:

previously developed vacant land

vacant buildings unoccupied for a year or more

derelict land and buildings

land or buildings, currently in use, allocated for development in the adopted plan or having planning permission

land or buildings currently in use where it is known there is potential for redevelopment but sites do not have any plan allocation or planning permission

defence buildings

land used for mineral extraction and waste disposal.

13.1 The CTN also defines what reclaimed or remediated means:

Reclaimed: making the land fit for use by: removing physical constraints to development or improving the land for soft or hard end use; or providing services to open it up for development e.g. provision of utilities and service roads.

Redeveloped: developing a site and putting up a new building or refurbishing an existing building e.g. construction of premises (commercial, housing, industrial, retail), new plant and equipment, fitting out of premises etc.

13.2 We consider the definition used in the CTN for the current ERDF programmes is therefore similar in all main respects to that implied by EC Common Indicator 22.


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Unit Costs

13.3 Establishing unit costs for such activities is difficult for many of the generic reasons given earlier. However, in addition, the unit costs of reclaiming derelict or contaminated land will have very site specific issues that affect costs. Furthermore, some projects will also include activity such as access roads and buildings in total project costs. The figures suggest that the median cost is £3.3m per hectare (the median based on defrayed costs and reported outputs is £3.8m per hectare).

13.4 These unit costs are very site and project specific. However the figures suggest a working assumption of around £3m per hectare is a reasonable starting point. The lower figures are associated with projects where there is a soft-end use or for some public realm projects.

Table 13.2: Unit Cost information on land reclaimed and re-used

Unit cost, £s public sector costs per output


£9.2m £3.3m £1.0m

Note: based on 115 observations; based on contracted outputs and spend

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