european structural and investment funds hertfordshire...

European Structural and Investment Funds Hertfordshire Investment Strategy

Revised January 2016

Table of Contents

Section 1 – Introduction ....................................................................................................................... 3

Section 2 – EU SIF Context and Background ........................................................................................ 4

Section 3 – Hertfordshire Economic, Social and Environmental Context.......................................... 10

Section 4 – A Strategy for Smart Economic Growth in Hertfordshire (Perfectly Placed for Business) ............................................................................................................................................................ 60

Section 5 – Hertfordshire EU SIF Investment Priorities ..................................................................... 70

Section 6 – Alignment of European Funds ....................................................................................... 143

Section 7 – Delivery Arrangements .................................................................................................. 148

Section 8 – Cross Cutting Themes (CCTs) and Social Innovation ..................................................... 155

Section 9 – Risk Management .......................................................................................................... 159

Section 10 – Eligibility and Compliance ........................................................................................... 160

APPENDICES .......................................................................................................................................... i

Appendix A – Hertfordshire ESIF Financial Profile and Indicator Tables ............................................ ii

Appendix B – Consultation Attendance List........................................................................................ iii

Appendix C – Hertfordshire LEP Draft ESIF Strategy – HMG Feedback and Response Log ................ vi

Document Control

Version Date Content/Circulated to

2.1 22.01.2014 A. Corbett/ESIF Shadow Governance Group

2.2 27.01.2014 ESIF Shadow Governance Group/LEP Board

2.3 29.01.2014 A. Corbett

2.4 30.01.2014 All – Near final

2.5 31.01.2014 Final submission - HMG, ESIF Governance Group, LEP Officers

3.1 23.05.2014 Includes Env Agency suggested changes - A. Corbett

4.1 05.11.2015 Revised final – ESIF Committee for 18th November 2015 meeting

4.2 25.11.2015 Post ESIF Committee revision – Tidy up plus revised section 7

4.3 26.11.2015 Includes MA notified allocations

5.1 28.01.2016 Revised Final Submission – DCLG/Herts LEP Officers/To be published

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Section 1 – Introduction The notional allocation of € 69.5m (revised to € 69,189,641 in October 2015) of European Structural and Investment Funds (EU SIF) for Hertfordshire announced by HM Government in June 2013 plus the additional € 1.889m allocation from the European Agricultural Fund for Rural Development (EAFRD) announced on 19th December 2013 represents a significant part of the funding anticipated to support economic growth in Hertfordshire. This European Structural and Investment Funds Strategy document represents the start of a process to convert that allocated funding into investment priorities and real projects that will bring tangible benefits to the people of Hertfordshire. In preparing this strategy we have carried out an extensive process of consultation involving a wide range of stakeholders across the County. This included a consultation event to inform the first draft of the strategy held on 12th September 2013 and attended by over 90 people. Alongside the event we also ran an on-line consultation process and received a number of letters and papers offering views on the content of the strategy. We published the first draft strategy on our website and have continued to consult widely through to the preparation of this final document. This investment strategy is designed to support the Local Enterprise Partnership (LEP) ‘Strategy for Smart Economic Growth in Hertfordshire’ which was itself the subject of consultation earlier this year. This recognises the importance of growth but not at any cost. We are committed to enhancing the quality of life that Hertfordshire provides. This document sets out our proposed investment priorities for the EU SIF together with funding allocations and the governance structure we propose to introduce to engage stakeholders in delivery. Once the strategy is approved by HMG we will work with our funding partners through the governance structure to develop detailed specifications to enable delivery of the strategy. We invite partners in Hertfordshire to begin to plan to take advantage of these opportunities and to work with us to deliver an investment strategy that will fully support our growth plan becoming a model of excellence in England, and seen as an exemplar for the European Union. John Gourd Chair, Hertfordshire LEP January 2014 (Document revised January 2016)

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Section 2 – EU SIF Context and Background

2.1 Introduction HM Government has decided that Local Enterprise Partnerships (LEPs) will be the ‘building blocks’ of the 2014-20 EU SIF Programmes. The Government have decided that each LEP will receive a ‘notional’ allocation from the European Structural and Investment Fund programmes for the period 2014 to 2020. Hertfordshire LEP received confirmation on 27th June that the allocation for Hertfordshire covering the European Regional Development Fund (ERDF) and European Social Fund (ESF) would be €69.5m (revised to € 69.190m in October 2015). This is roughly £60m at the original exchange rate but has been revised to around £ 49.1m using the revised exchange rate notified in September 2015. On 19th December 2013 Hertfordshire LEP received confirmation of a notional allocation of a further € 1.889m from the European Agricultural Fund for Rural Development (EAFRD). LEPs will not administer the programmes. This will be carried out by the appropriate fund ‘Managing Authority’. For the European Regional Development Fund (ERDF) this will be the Department for Communities and Local Government (DCLG) for the European Social Fund (ESF) the Department for Work and Pensions (DWP) and for European Agricultural Fund for Rural Development (EAFRD) the Department for Environment, Food and Rural Affairs (DEFRA). However, LEPs through local ESIF Committees have set out how the funding is allocated through this strategy document and will advise on the strategic fit of individual proposals and ‘opt-in’ arrangements through the selection process set out by HMG.

2.2 European Policy Context - EU 2020 Strategy Europe 2020 ‘a strategy for smart, sustainable and inclusive growth’ is the European Union’s ten-year growth strategy on which the EU SIF thematic priorities are based. A summary of the three key themes is below: SMART

strengthening research, technological development and innovation;

enhancing access to, and use and quality of, information & communication technologies;

enhancing the competitiveness of SMEs, the agricultural sector (EAFRD) and the fisheries / aquaculture sector (EMFF);

SUSTAINABLE

supporting the shift towards a low-carbon economy in all sectors;

promoting climate change adaptation, risk prevention and management;

protecting the environment and promoting resource efficiency;

promoting sustainable transport and removing bottlenecks in key network infrastructures INCLUSIVE

promoting employment and supporting labour mobility;

promoting social inclusion and combating poverty;

investing in education, skills and lifelong learning;

enhancing institutional capacity and an efficient public administration Working towards delivery of the EU 2020 strategy includes a significant emphasis on the innovation and science agendas with measures anticipated including climate change, digital developments and ‘smart specialisation’.

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As part of the Europe 2020 vision which sets the policy context, a ‘Common Strategic Framework’ will ensure that funds are directed towards investments which support this vision. The CSF will include 4 funding streams all of which, apart from European Maritime and Fisheries Fund, are included in the Hertfordshire notional allocation. The funds are: • European Regional Development Fund (ERDF) • European Social Fund (ESF) • European Agricultural Fund for Rural Development (EAFRD) • European Maritime and Fisheries Fund (not included in LEP allocations). Spanning these funding streams, and aligned with the Europe 2020 priorities for growth the CSF sets out a range of objectives to drive forward economic activity. The European Structural and Investment Funds are, therefore, a key instrument of EU Cohesion policy designed to support delivery of the EU 2020 agenda and targets. This will be reflected in the proposed National England EU Growth Programme currently being designed by HMG under which delivery of the Hertfordshire EU SIF Investment Strategy will sit.

2.3 Structure

HMG have determined the following structure for delivery of the England EU SIF Growth Programme:

Local governance arrangements for Hertfordshire are described in section 7 of this document. The terms of reference for LEP Area ESIF Committees were published in July 2015 and state that The LEP area ESI Funds sub-committees will provide advice to the Managing Authorities throughout the cycle of programme implementation. The LEP area ESI Funds sub-committees will support the Growth Programme Board’s (GPB’s) role in considering overall Operational Programme performance by specifically looking at and advising on the local, on-the-ground implementation of it, via project calls, applications and ongoing implementation.

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2.4 Notional Allocations A notional allocation of € 69.190m (revised) has been announced for the Hertfordshire LEP area for the period 2014-2020 for the European Regional Development Fund (ERDF) and European Social Fund (ESF). This is profiled by year of allocation for the years 2014 to 2020. The allocation is split between a ‘basic allocation’ and a ‘performance reserve’. The performance reserve allocation is conditional on achievement of spend and output targets reviewed in 2019. Potentially funding can be spent up to the end of 2023.

€m 2014 2015 2016 2017 2018 2019 2020 Total

Basic Allocation 0.07 17.671 9.101 9.283 9.469 9.659 9.852 65.038

Performance Reserve 2.034 2.116 4.151

Total Allocation 0.0 17.671 9.101 9.283 9.469 11.694 11.969 69.190

Exchange Rate 0.71 1.404450 E-Mail 1st September 2015

Notional Allocations Using revised (Sept 2015) Notified Exchange Rate

£m 2014 2015 2016 2017 2018 2019 2020 Total

Basic Allocation 00,00 12.516 6.462 6.592 6.723 .6.858 6.995 46.177

Performance Reserve 1.445 1.503 2.947

Total Allocation 0.00 12.516 6.462 6.592 6.723 8.302 8.498 49.125

It is likely that the additional ‘performance reserve’ funds will not be available until late 2019 or 2020. Notice of a notional allocation from the European Agricultural Fund for Rural Development (EAFRD) for the Hertfordshire LEP area was received on 19th December 2013. The allocation is as follows:

Allocation in €m Allocation in £m (provided by DEFRA using 0.71 Forex)

1.899m 1.1.135m

No annual allocation profile or spend targets have been provided by DEFRA. It has not been made clear if a performance reserve element is included in the funds in line with ERDF and ESF allocations.

2.5 Consultation Process

2.5.1 Introduction In accordance with HMG guidance the preparation of this draft strategy has followed extensive consultation with stakeholders across the County of Hertfordshire and with representatives of National or

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Regional organisations with an interest in the delivery of EU SIF in Hertfordshire. Details of the consultation process are recorded below.

2.5.2 Event The LEP hosted a consultation event at Biopark, Welwyn Garden City on the 12 September 2013. The event, held in the main conference centre of Biopark, attracted over 90 delegates from a broad range of backgrounds. Representatives from both the public and private sectors as well as those from academic and non-for-profit organisations attended as the county’s key stakeholders were granted an opportunity to provide feedback on their funding priorities for the next six years. Following a welcome and introduction from LEP board member Cllr Tony Jackson, Andy Luff (ACL European Consultancy) provided an Overview of the European Structural and Investment Funds (EU SIF) and presented the initial proposal for Hertfordshire’s EU SIF Strategy. Andy explained the criteria for funding, gave a breakdown of how organisations could bid and which projects are most likely to fall in line with EU priorities. Following the briefing, delegates broke into workshops centred on five broad themes:

Workshop 1 – Innovation and R&D

Workshop 2 – SME Competiveness and ICT

Workshop 3 – Low Carbon Economy

Workshop 4 - Promoting employment and supporting labour mobility/Social Inclusion/combating poverty

Workshop 5 – Education, skills and lifelong learning

Each workshop contained roughly 15 delegates, all of whom took part in discussions about the priorities for funding in each sector. Feedback from the event has been nothing but positive to date. Notes of each workshop session were taken and the findings of each workshop have fed into the development of this EU Investment Strategy.

2.5.3 On-Line Consultation The online consultation ran from 18 August – 18 September and was produced using Survey Monkey. The survey consisted of eight multiple choice questions (below) with respondents asked to what extent they agreed or disagreed with a series of statements.

1. To what extent do you feel that innovation, research and technological development are important

to Hertfordshire? 2. To what extent is support for small businesses important to Hertfordshire? 3. To what extent is the low carbon economy important to Hertfordshire? 4. To what extent do you feel appropriate skills are important for the Hertfordshire economy? 5. To what extent are the measures to provide employment to the Hertfordshire economy important? 6. To what extent do we need to tackle social exclusion in Hertfordshire? 7. To what extent do you agree that ICT has a significant role to play in developing the Hertfordshire

economy? 8. To what extent do you consider that rural issues need to be addressed for the Hertfordshire

economy?

The consultation received ten online responses; findings below:

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100% of respondents strongly agree that innovation, research and technological development are important to Hertfordshire.

100% strongly agree that support for small business is important to Hertfordshire.

40% of respondents strongly agree that low carbon economy is important to Hertfordshire, whilst the other 60% only agree to some extent.

100% believed that the appropriate skills are important to the economy of Hertfordshire.

80% of respondents believed that the measures to provide employment to the Hertfordshire economy is important and the other 20% only agreed to some extent.

100% of respondents agreed that it is very important to tackle social exclusion in Hertfordshire.

80% of respondents agreed that ICT has a significant role to play in developing Hertfordshire, the other 20% only agree with this to some extent.

80% of respondents believe that rural issues need to be addressed for the Hertfordshire economy and 20% only agree to some extent.

2.5.4 Other Discussions In addition to the online consultation and stakeholder consultation event described above, representations, ideas and economic/social data have also been received from the following organisations:

- Building Research Establishment (BRE) - National Farmers Union (NFU) - Hertfordshire County Council - Jobcentre Plus - Community Action Dacorum - National Council for Voluntary Organisations (NCVO) - Eastern Plateau Local Action Group (LEADER) - National Housing Federation - Eastern Academic Health Science Network

In some cases responses included proposals for projects. These have not been included in the Investment Strategy but can be considered once the Programme is launched.

2.5.5 Feedback on Draft ESIF Strategy In accordance with HMG deadlines the draft strategy was submitted on 7th October 2013. Initial feedback on the draft strategy was received on 30th October followed by a feedback meeting with HMG held on 5th November 2013. Formal written feedback was received on 15th November 2013. Feedback on the draft strategy was very positive. The rationale for intervention was described as a ‘strong response’. Some 29 points of detail were recorded in the HMG written response. These points plus our response is captured in appendix C of this document.

2.5.6 Consultation Through to the Final Strategy Document We have continued the consultation process through to production of this final document. Consultation activities include: Publication of the draft ESIF strategy on the Herts LEP website The draft strategy was published on the Hertfordshire LEP website after submission to HMG in October and comments invited.

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Meetings with Potential Opt-In Agencies

Detailed discussions have been carried out with:

Skills Funding Agency

Jobcentre Plus (DWP)

Big Lottery

UK Trade and Investment (UKTI) We have also engaged with:

Growth Accelerator (GA)

Manufacturing Advisory Service (MAS) Prince’s Trust

Additional Consultation Meetings We have further engaged with stakeholders to refine the draft strategy through a series of meetings including:

Hertfordshire County Council – Deputy Director, Services for Children and Young People

Hertfordshire College Principals

Community and Voluntary Services

Hertfordshire Probation Trust

Hertfordshire Housing Associations

2.5.7 Strategy Approval To ensure local partnership buy in to this strategy we arranged a meeting of the ESIF Governance Group in ‘shadow’ mode to consider and endorse the final strategy document. This meeting will took place on 28th January 2014. It was well attended and was Chaired by LEP Board member Cllr Tony Jackson. The strategy document was endorsed by the ESIF Governance Group. This Hertfordshire ESIF strategy document was discussed and approved for submission to HMG by the Hertfordshire LEP Board at a meeting held on 30th January 2014.

2.5.8 Strategy Approval – Final Version November 2015 Following approval of Operational Programmes by the European Commission a further revision of the ESIF Strategy was requested by HMG. This version has been updated to reflect changes agreed in the final versions of the Operational Programmes plus important changes to the ESIF Strategy following initial implementation planning during 2014 and 2015. A draft of the amended version was discussed by the Hertfordshire ESIF Committee on 18th November 2015.

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Section 3 – Hertfordshire Economic, Social and Environmental Context 3.1 Introduction The following section provides the statistical evidence base for Hertfordshire. Most of this information and narrative is drawn for the document ‘Hertfordshire’s Economic Outlook 2011’ which was completed in October 2011 and provides a detailed analysis of Hertfordshire’s economy. The outlook is currently in the process of being refreshed to support the LEP’s forthcoming Local Growth Deal and Strategic Economic Plan discussions with the Department for Business, Innovation and Skills. In some cases more up to date data is available and this has been included where appropriate. The full published version of Hertfordshire’s Economic Outlook 2011 can be found via: http://mediafiles.thedms.co.uk/Publication/BH-Herts/cms/pdf/Hertfordshire's%20Economic%20Outlook%20Full%20Report%201st%20Edition.pdf.

3.2 Area and Demographics Hertfordshire has a distinctive local economy. It is adjacent to, and strongly influenced by, London. It is also located in the geographical heart of the UK’s knowledge economy – known to many as the Golden Triangle – which is bounded by London, Cambridge and Oxford.

The total population of Hertfordshire in 2011 was estimated at 1,119,800. Total population (2011)

Hertfordshire (numbers)

East (numbers)

Great Britain (numbers)

All people 1,119,800 5,862,400 61,425,700

Males 549,000 2,885,000 30,185,800

Females 570,800 2,977,400 31,239,900

Source: ONS mid-year population estimates

http://mediafiles.thedms.co.uk/Publication/BH-Herts/cms/pdf/Hertfordshire's%20Economic%20Outlook%20Full%20Report%201st%20Edition.pdf

http://mediafiles.thedms.co.uk/Publication/BH-Herts/cms/pdf/Hertfordshire's%20Economic%20Outlook%20Full%20Report%201st%20Edition.pdf

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Population aged 16-64 (2011)


Hertfordshire (%)

East (%)

Great Britain (%)

All people aged 16-64 720,500 64.3 63.4 64.7

Males aged 16-64 357,100 65.0 64.2 65.5

Females aged 16-64 363,400 63.7 62.7 63.9

Source: ONS mid-year population estimates

Notes: % is a proportion of total population

It is estimated that at mid-2009 18.4% of the population of Hertfordshire were of a black or minority ethnic group, this compares to 11.2% in 2001. Of this, 4.9% were White: Other and 2.8% were Asian or Asian British: Indian. Above average proportions of people of black or minority ethnic groups are found in the districts of Watford, Hertsmere, Welwyn Hatfield, Three Rivers and St. Albans. Below average proportions are found in East Hertfordshire, Stevenage, Dacorum, North Hertfordshire and Broxbourne. Hertfordshire’s 1.1 million residents are currently concentrated in the working-age group and within that among the highest earning groups. This is due to a ‘bulge’ in the 35-49 year old groups – those born between 1964 and 1978. Typically these would have been born during the rapid expansion of the New Towns in the County or would have moved to the County more recently to raise their families. Significantly, the two largest groups - the 35-39 and 40-44 year olds - are those in the UK which have tended to command the highest wages. The working age population is set to increase and although its share of the total will decrease and the dependency ratio will increase there is no sign of a local ‘demographic time bomb’ akin to Japan’s. Hertfordshire is officially projected to have 1.29 million residents by 2031 (an increase of more than 223,000/16% from 2011). Of this increase, those of working age number 63,000, those under 16 number 27,500 and those 65+, numbering 90,500, contribute half. This is set to bring the percentage of working age down from 65% to 60% and take the dependency ratio up from 55% to 66%. This means that for every three people of working age there will be two ‘dependants’. The old age dependency ratio will increase from 24% (similar to the UK’s) to 34% (similar to Japan of today). This rate of increase is less than those expected in the UK and those expected in Germany and Japan, despite their current high levels. Rural Population It is estimated that around 12.9% of Hertfordshire’s population lives in rural areas (source ONS).

Source: Office for National Statistics (ONS), Census 2001, Population by Output Areas (OAs)

LEP name LAD name Rural

population % Rural

Hertfordshire

Broxbourne 1,753 2.0

Dacorum 18,645 13.5

East Hertfordshire 41,106 31.9

Hertsmere 17,971 19.0

North Hertfordshire 22,064 18.9

St Albans 12,601 9.8

Stevenage 336 0.4

Three Rivers 6,208 7.5

Watford . .

Welwyn Hatfield 12,527 12.8

Total 133,211 12.9

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Rural areas are defined based on the ‘2011 Rural-Urban Classification’ which is an official statistical designation of settlements, developed by the Office for National Statistics, the Department for Environment, Food and Rural Affairs, Department for Communities and Local Government, and Welsh Assembly Government in collaboration with the Universities of Sheffield and Nottingham. The following map shows areas designated as urban or rural under the classification described above.

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3.3 Employment and Skills 3.3.1 Economic Activity and Employment rates Hertfordshire’s economic activity rate (i.e the total size of the local labour market, expressed as a percentage of the working age population, both employed and unemployed) is currently five percentage points higher than in the rest of Great Britain. The gap between GB and Hertfordshire closed to around 2 percentage points at the start of the recession but has increased in recent times to pre recession levels of performance.

Source: NOMIS In terms of Hertfordshire’s employment rate (i.e the proportion of the workforce in paid or self employment), Hertfordshire remains one of the best performing LEP areas in the country with an economic activity rate more than 7% above the GB rate.

Source: NOMIS However, the total number of jobs in the local economy (estimated at 597,000 in 2011) remains below its 2008 level. This suggests that the impact of slower jobs growth, which had been below trend in the period

72.073.074.075.076.077.078.079.080.081.082.083.0

%

Economic Activity Rate: 2004 to 2012

Hertfordshire Great Britain

64.0

66.0

68.0

70.0

72.0

74.0

76.0

78.0

80.0

%

Employment Rate: 2004 to 2013

Hertfordshire Great Britain

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leading up to the recession, has been mitigated by the impact of out commuting to other areas, such as London, where job opportunities continued to grow. That the employment rate and economic activity rates have held up relative to other parts of the country belies the growth challenge facing Hertfordshire; the loss of private sector jobs over the course of the last decade. The adjacent chart, based on Regional Growth Fund metrics, highlights the performance gap with the rest of the country, with seven of the county’s ten districts (shaded red and yellow) falling behind the rest of England in terms of the number of private sector jobs being created:

3.3.2 Unemployment Following the 2008/09 recession there was a substantial rise in the claimant count, which peaked at 20,392 in February 2010 and has since abated slightly (latest figure, November 2011: 17,994). From 1998–2008 claimant count averaged around 8000. (Source – Hertfordshire County Council) The unemployment rate in July 2013 stood at 6.0% of the working age population, 0.6% lower than the East of England and 1.8% lower than the England rates. The total claimant count in Hertfordshire fell by 728 in June 2013 (a fall of 4.3%), compared to May 2013 and now stands at 16,136 (2.2%) of the working age population (i.e. those aged 16-64). Nine of the districts experienced a decrease in the actual number of claimant count since May 2013. Dacorum had the largest decrease of 117, while East Hertfordshire had the highest percentage decrease of 6.7% during this period. Welwyn Hatfield was the only district to experience a slight increase of 7. The proportion of claimant count in Stevenage stands at 3.6%, a fall of 0.1% since May 2013, and remains the highest in the county. Hertfordshire has relatively few people on out of work benefits – not only is the claimant count, Job Seekers Allowance (JSA), proportion relatively low so also are the proportions of those on other out of work benefits. The table below shows that no district in the County has a higher share of its working-age

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population claiming out of work benefits. This is largely thanks to relatively low percentages claiming disability benefits (such as Employment and Support Allowance).

Benefit GB Herts BBC DBC EHDC HBC NHDC SACD SBC TRDC WBC WHBC

Job seeker’s

3.4 2.3 3.1 2.2 1.7 2.4 2.3 1.6 3.6 1.8 2.7 2.1

Disability 6.6 4.0 4.6 4.1 3.0 4.3 3.7 3.3 5.3 3.5 4.6 4.0

Lone parent

1.7 1.3 2.1 1.3 0.7 1.5 1.2 0.8 2.0 1.0 1.3 1.3

All out-of-work benefits

12.2 7.8 10.2 7.9 5.8 8.5 7.5 5.9 11.3 6.7 9.0 7.6

Source: DWP Benefits Data, NOMIS

Out of Work Benefits Analysis The Jobseeker's Allowance (JSA) is payable to people under pensionable age who are available for, and actively seeking, work of at least 40 hours a week.

Total JSA claimants (June 2013)


Hertfordshire (%)

East (%)

Great Britain (%)

All people 16,136 2.2 2.8 3.5

Males 10,144 2.8 3.6 4.5

Females 5,992 1.6 2.0 2.4

Source: ONS claimant count with rates and proportions Note: % is a proportion of resident population of area aged 16-64 and gender

Claimants by age duration (June 2013)

JSA Hertfordshire

(level) Hertfordshire

(%) East (%)

Great Britain (%)

Aged 16 to 64

Total 16,125 2.2 2.8 3.5

Up to 6 months 8,985 1.2 1.5 1.7

Over 6 and up to 12 months 3,195 0.4 0.6 0.7

over 12 months 3,950 0.5 0.8 1.0

Aged 18 to 24

Total 3,510 3.8 5.4 6.2

Up to 6 months 2,345 2.6 3.3 3.7

Over 6 and up to 12 months 650 0.7 1.1 1.3

over 12 months 510 0.6 0.9 1.2

Aged 25 to 49

Total 9,240 2.3 2.9 3.7

Up to 6 months 4,975 1.2 1.4 1.8

Over 6 and up to 12 months 1,935 0.5 0.6 0.8

over 12 months 2,330 0.6 0.8 1.2

Aged 50 to 64

Total 3,360 1.7 1.8 2.1

Up to 6 months 1,645 0.8 0.8 0.9

Over 6 and up to 12 months 605 0.3 0.3 0.4

over 12 months 1,105 0.6 0.6 0.8

Source: ONS claimant count - age duration with proportions

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Note: % is number of persons claiming JSA as a proportion of resident population of the same age

Working-age client group - key benefit claimants (November 2012)

Hertfordshire

(numbers) Hertfordshire

(%) East (%)

Great Britain (%)

Total claimants 68,240 9.5 11.5 14.1

By statistical group

Job seekers 16,400 2.3 2.9 3.6

ESA and incapacity benefits 28,950 4.0 4.9 6.3

Lone parents 7,180 1.0 1.1 1.3

Carers 6,260 0.9 1.1 1.3

Others on income related benefits 1,800 0.2 0.3 0.4

Disabled 6,160 0.9 1.0 1.1

Bereaved 1,510 0.2 0.2 0.2

Key out-of-work benefits† 54,310 7.5 9.2 11.6

Source: DWP benefit claimants - working age client group

† Key out-of-work benefits includes the groups: job seekers, ESA and incapacity benefits, lone parents and others on income related benefits. See the Definitions and Explanations below for details

Note: % is a proportion of resident population of area aged 16-64

3.3.3 Structure of employment The following table shows the percentage of the employed workforce in Hertfordshire in each of the major Standard Occupational Classification (SOC) groups. Broadly, the County compares well with the percentages for Great Britain particularly in higher level occupations although the Annual Population Survey suggests that Stevenage and Broxbourne fall below the GB average for the major group 1-3 which covers the higher level jobs. HERTFORDSHIRE – OCCUPATIONAL PROFILE OF RESIDENCE-BASED EMPLOYMENT – COMPARING CENSUS RESULTS

HERTFORDSHIRE 2001 2011 Change in total

employees

Percentage change

1. Managers, directors and senior officials 99,585 72,983 -26,602 -26.7%

2. Professional occupations 68,611 113,960 45,349 66.1%

3. Associate professional and technical 76,765 82,539 5,774 7.5%

4. Administrative and secretarial 73,556 68,636 -4,920 -6.7%

5. Skilled trades occupations 51,801 57,459 5,658 10.9%

6. Caring, leisure and other service 31,948 47,581 15,633 48.9%

7. Sales and customer service 35,637 42,143 6,506 18.3%

8. Process, plant and machine operatives 31,058 30,885 -173 -0.6%

9. Elementary 49,812 48,846 -966 -1.9%

Total (all occupations) 518,773 565,032 46,259 8.9%

Source: 2001 and 2001 Census

Any analysis of occupational change is complicated by the fact that the Census results (which can be considered as highly robust) throw up different results from the Annual Population Survey (which is a sample based survey of adults and is far less robust – with confidence intervals of +/- 10,000):

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Overall over a decade or more there has been an apparent decline in Hertfordshire residents in Managerial, directors and senior officials occupations

There has been a significant increase (66%) in employment in professional occupations and associate professional occupations – both in terms of workplace-based and residence-based employment

Many commentators portray a national picture of the ‘hollowing out’ of the labour market over time – where intermediate level skilled jobs have declined, and there has been en expansion in high skill and low/no skill jobs. This seems to be true using APS evidence, but is somewhat contradicted with Census evidence.

Pre-recession levels of unemployment in Hertfordshire do not suggest a major mismatch between the jobs normally on offer and the skills of residents. However, it is evident that there is a considerable mismatch between the locations of knowledge-intensive employment and the residence of highly skilled workers reflected in graphic below showing lower concentrations of employment in knowledge based sectors despite the high concentrations of skilled residents.

At a local level, Watford and Stevenage have the highest proportions of employment in knowledge-intensive sectors (at 63.1% and 60% respectively, compared with the Hertfordshire average of 52.9%) but neither district enjoys high skill levels relative to the Hertfordshire norm, with Stevenage’s falling considerably below this. This suggests consequences, not only in terms of missed opportunities for those living close to knowledge-intensive employment, but also environmental damage due to commuting that could be rendered unnecessary by a better geographical skills-jobs match. An analysis of the Census (which tends to give more accurate and detailed results, compared to the Annual Population Survey) reveals that a significant share and total of Hertfordshire residents are employed as science, research, engineering professionals and associate professionals in comparison with other areas.

Data from the East of England Forecasting Model (EEFM) suggest that over 50% of our employment is concentrated in six sectors. These sectors are also the six largest in neighbouring Cambridgeshire (although relatively, we can claim more retail, professional services and construction employment, but less employment in health and care, and education); and five of the six are amongst the largest sectors nationally. Hence this pattern of employment is not atypical: much of it is straightforwardly population-related (i.e. through the provision of local services) and it provides little insight into what, if anything, sets our economy apart.

HERTFORDSHIRE AND OTHER SELECTED LEP AREAS – ANALYSIS OF KNOWLEDGE ECONOMY AND HIGH AND MEDIUM TECHNOLOGY EMPLOYMENT

Source: Estimated using BRES, 2011

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Hertfordshire % of total Herts employment

Cambridgeshire % of total Cambs employment

UK % of total UK employment

Retail 12.1% Health and care 11.6% Health and care 12.8%

Prof. services 9.5% Education 11.1% Retail 9.8%

Health and care 9.3% Retail 8.2% Education 8.9%

Construction 8.4% Prof. services 8.2% Prof. services 7.1%

Education 8.0% Wholesale 7.4% Construction 6.6%

Wholesale 7.9% Construction 6.0% Hotels/restaurants 6.2%

For a perspective on economic distinctiveness, a different set of metrics is needed. The table below identifies those standard sectors in which, in relative terms, employment in Hertfordshire (and Cambridgeshire) is greatest compared to the UK as a whole1 : specifically, it lists those sectors in which there is at least 40% more employment than would typically be expected in the “average” local economy across the UK. For Hertfordshire, the specialist sectors include three that are broadly high tech (pharma, R&D and electronics) – although it is important to note that together, these account for well under 20,000 jobs (less than 5% of the total). It also includes three that are consistent with a “servicing economy” (where the absolute scale of employment is much greater). In Cambridgeshire, four high tech sectors stand out, together with agriculture.

Hertfordshire Total employment

Location Quotient (relative to UK)

Cambridgeshire Total employment

Location Quotient (relative to UK)

Pharma 3,600 4.8 R&D 11,700 8.5

R&D 7,000 2.8 Pharma 1,100 2.7

Employment activities 28,500 2.1 Electronics 5,900 2.7

Electronics 5,800 1.5 Agriculture 7,100 1.6

Real Estate 11,900 1.5 Computer related activity

8,900 1.5

Wholesale 46,400 1.4

All sectors 586,500 1.0 All sectors 325,800 1.0

1 Note that EEFM, like other sources based on the Standard Industrial Classification system, is poor in relation to activities that cut across conventional boundaries. For

this reason, it does not really flag Hertfordshire’s strengths in bioscience (apart from pharma) and nor does it give any ind ication of the scale and importance of film

19

HERTFORDSHIRE AND OTHER SELECTED COUNTIES – OCCUPATIONAL PROFILE OF RESIDENTS IN 2011


This analysis shows that 13.5 per cent of all employed residents are employed as science, research, engineering professionals and associate professionals – and this is significantly higher than in other peer localities.

The county has also experienced high rates of growth (28.5% or +9,400) in the number of residents working as science, research, engineering professionals and associate professionals. This compares to +59.6 per cent, or +11,400 in Cambridge and London has +40.5 per cent, or +71,99 in London.

On most metrics, our economy has grown on a reasonably consistent basis for some decades, and further growth is anticipated. The figure below charts total employment (jobs), the total workplace population and the number of Hertfordshire residents in employment. It shows, broadly, that the recent recession is expected to be relatively short-lived in Hertfordshire (certainly as compared to elsewhere), with the number of jobs returning quickly to pre-recession levels. It also shows that whereas at the start, the

HERTFORDSHIRE AND OTHER SELECTED COUNTIES – OCCUPATIONAL PROFILE OF RESIDENTS IN 2001 AND 2011


20

number of residents in employment exceeded the workplace population2, by about 2008, the numbers were much more similar – implying that the rate of growth in labour supply has been slower than the growth of demand. Overall, the baseline projections from EEFM indicate that the total number of jobs in Hertfordshire (full time plus part time, and including both employed and self-employed) is expected to increase from about 590,000 in 2012 to around 660,000 in 2020 and 690,000 in 2030.

The projected pace of employment growth is – on the face of it – strong. However, this observation needs to be put in comparative context. The table below provides data on employment growth rates – actual and projected future – for Hertfordshire and various comparators; and for sub-areas within Hertfordshire. Despite the sanguine headlines from the table above, it actually suggests that jobs growth in Hertfordshire has – in the recent past – been sluggish when compared particularly to Cambridgeshire (but also the wider East of England region); looking ahead, rates of growth are projected to be similar. Although some caution is needed in interpreting EEFM at smaller spatial scales, the data appear to be indicating that within Hertfordshire, past employment growth has been concentrated in the A1 Corridor; in the future, prospects across the county are broadly similar (although rather stronger in the London fringe and weaker in the rural area in the east and north). Historic and projected future annual rates of employment growth (percentage per annum)

2000-2005 2005-2010 2010-2015 2015-2020

Hertfordshire 0.09% 0.22% 1.25% 1.09%

Cambridgeshire 0.92% 1.31% 1.82% 1.03%

East of England 0.76% 0.50% 1.35% 0.87%

London fringe (Three Rivers, Watford, Hertsmere, Broxbourne)

-0.81% 0.26% 1.19% 1.28%

West Herts (Dacorum, St Albans) -0.17% 0.65% 1.50% 1.14%

A1 Corridor (Welwyn Hatfield, Stevenage) 2.40% 1.06% 1.32% 0.98%

Rural Herts (North Herts, East Herts) -0.18% -1.16% 0.99% 0.83%

Overall job numbers are not, however, the only metric of significance. Some attention must also be given to sectoral patterns and prospects, and the implications for overall economic output (GVA). From the EEFM baseline scenario, it is possible to glean some insights (noting, though, that these are modelled projections, not calibrated forecasts, and that they need therefore to be treated carefully). From the tables above, the

2 This is a measure of people working in jobs – it is lower than the number of jobs because one person may have more than one job

21

key messages for Hertfordshire ought to be of some concern. Our most distinctive sector – pharma – has seen employment fall and it is projected to decline further; and the picture with regard to electronics is similar. After faltering, employment in R&D is projected to grow, but at a rate that is notably slower than in Cambridgeshire. For Hertfordshire, among the specialist sectors, employment activities seem set to expand at the greatest rate; as a sector this includes a miscellany of activities linked in the main to the supply of contract labour. Past and projected future employment growth in specialist sectors (percentage per annum)

2000-2005 2005-2010 2010-2015 2015-2020

Hertfordshire – All sectors 0.09% 0.22% 1.25% 1.09%

- Pharma -4.11% -8.22% -0.22% -1.77%

- R&D 4.71% -0.57% 1.69% 0.75%

- Employment activities -0.49% -1.80% 4.15% 2.72%

- Electronics -7.68% -2.71% -0.17% -2.40%

- Real Estate 4.35% 10.31% -0.12% 2.45%

- Wholesale -1.58% 0.46% 0.95% 0.78%

Cambridgeshire – All sectors 0.92% 1.31% 1.82% 1.03%

- R&D 2.62% 8.67% 4.84% 3.40%

- Pharma -0.70% -5.87% -0.22% -1.77%

- Electronics -4.74% -0.08% -1.44% -2.41%

- Agriculture 2.50% 0.10% 0.22% -1.67%

- Computer related activity -1.48% 3.81% 4.39% 1.99%

3.3.4 Earnings For comparisons it is common practice to use the median gross full-time weekly earnings of people working in an area. This does not include annual bonuses, and is unaffected by the pay of higher earners. Nor does it take into account the earnings of out-commuters. However, it sometimes serves as a proxy indicator for workplace productivity. The workforce in Hertfordshire is on average well paid but earnings levels vary across the County. In Hertfordshire the 2010 figure of £540.30, while higher than that for Great Britain, is considerably lower than the residence-based one of £597.50, suggesting that out-commuters earn more than residents working in Hertfordshire. The County’s workplace-based figure of £540.30 leads the East of England but trails London (£642.30), Surrey (£564.80) and Buckinghamshire (£547.80) among its neighbours. For residents’ earnings, the average weekly pay in Hertfordshire is again greater than that for Great Britain as a whole. There is a substantial difference of £223.40 between the highest (St Albans) and lowest (Stevenage), which just falls short of the Great Britain average. This correlates with Table 7.1 which shows that St Albans has the highest percentage of its population educated to Level 4 or higher.

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Gross Weekly Pay - All full-time workers by place of residence (2010)

LA District Median

Earnings

Broxbourne £548.5

Dacorum £578.8

East Herts £638.6

Hertsmere £573.4

North Herts £614.6

St Albans £724.4

Stevenage £501.0

Three Rivers £648.2

Watford £586.1

Welwyn Hatfield £566.5

Herts £597.5

Great Britain £501.80

Source: ONS Annual Survey of Hours and Earnings - resident analysis.

3.3.5 Skills The qualification levels of Hertfordshire residents are on average better than those in England with substantially higher percentages for Level 2 upwards. In an assessment of skills and qualifications in Hertfordshire, Local Futures (December 2010) used a composite measure based on four of the National Vocational Qualification (NVQ) Levels, with greater weighting attached to the higher levels. Hertfordshire is ranked 4 out of 53 sub regions on a skills and qualifications score, its score of 106.59 puts it in the top 20% of sub regions in Great Britain for human capital. The proportion of the working age resident population qualified below NVQ Level 2 in Hertfordshire is average, with the area ranking in the middle 20% of sub regions in Great Britain. The proportion of the working age resident population qualified to NVQ Level 2 in Hertfordshire is low, with the area ranking in the bottom 20% of sub regions in Great Britain. The proportion of the working age resident population qualified to NVQ Level 3 in Hertfordshire is high, with the area ranking in the top 40% of GB sub regions in 2010. Qualification levels of the 19-59/64 population – 2009

Highest Qualification Level – 19-59/64 population

No

qualification

Below Level

2

Level 2 or

above

Level 3 or

above

Level 4 or

above

Broxbourne 7.8% 25.2% 74.8% 49.7% 29.3%

Dacorum 5.3% 25.6% 74.4% 56.1% 38.3%

East Hertfordshire 5.6% 25.7% 74.3% 61.4% 37.0%

Hertsmere 6.8% 30.1% 69.9% 53.1% 34.3%

North Hertfordshire 8.1% 28.5% 71.5% 55.4% 34.9%

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Highest Qualification Level – 19-59/64 population

No

qualification

Below Level

2

Level 2 or

above

Level 3 or

above

Level 4 or

above

St Albans 5.7% 15.5% 84.5% 70.0% 55.0%

Stevenage 4.6% 28.2% 71.8% 47.5% 23.4%

Three Rivers 6.8% 29.0% 71.0% 56.9% 39.6%

Watford 5.2% 25.5% 74.5% 55.3% 34.2%

Welwyn Hatfield 6.6% 25.8% 74.2% 55.5% 38.4%

Hertfordshire 6.3% 25.9% 74.1% 56.1% 36.4%

England 10.8% 28.3% 70.9% 50.9% 32.0%

Source: http://www.thedataservice.org.uk/

3.3.6 Apprenticeships Hertfordshire partners in their successful application to Government for a Local Enterprise Partnership (LEP) expressed the desire to build on the County’s key strengths in R&D, life sciences, telecoms and information technology and hi-tech engineering. Sectors such as digital media and low carbon technology were also highlighted as potential clusters. The tables below show the starts for apprenticeships at Intermediate, Advanced and Higher levels over the last three years. Achievement figures are not shown. Due to the nature and duration of apprenticeship programmes a start for one year may result in an achievement in subsequent years. These figures show an increasing number of advanced and higher level apprenticeships moving some way towards meeting LEP priorities as set out in the apprenticeship plan. Apprenticeship starts in Hertfordshire continue to increase; the aspiration though will continue to be around increasing Level 3 apprentices with a progression towards Level 4.

SASE Grouping SSA T1 A15 SFR Programme Group 2010/11

ER ER15

2011/12 SILR SN14

2012/13 SILR SN14

Agriculture, Horticulture and Animal Care (03) Intermediate Level Apprenticeship 70 99 60

Advanced Level Apprenticeship 65 21 43

Agriculture, Horticulture and Animal Care (03) Total 135 120 103

Arts, Media and Publishing (09) Intermediate Level Apprenticeship * * *


Higher Apprenticeship * * *

Arts, Media and Publishing (09) Total 12 28 19

Business, Administration and Law (15) Intermediate Level Apprenticeship 1,153 1,340 1,145


Higher Apprenticeship 13 45 62

Business, Administration and Law (15) Total 1,654 2,131 1,964

Construction, Planning and the Built Environment (05) Intermediate Level Apprenticeship 193 214 187


Construction, Planning and the Built Environment (05) Total 266 249 245

Education and Training (13) Intermediate Level Apprenticeship 21 24 11


24

SASE Grouping SSA T1 A15 SFR Programme Group 2010/11

ER ER15

2011/12 SILR SN14

2012/13 SILR SN14

Education and Training (13) Total 47 97 74

Engineering and Manufacturing Technologies (04) Intermediate Level Apprenticeship 413 514 491



Engineering and Manufacturing Technologies (04) Total 695 774 822

Health, Public Services and Care (01) Intermediate Level Apprenticeship 681 579 758


Higher Apprenticeship * * 41

Health, Public Services and Care (01) Total 1,398 1,279 1,689

Information and Communication Technology (06) Intermediate Level Apprenticeship 86 64 55



Information and Communication Technology (06) Total 514 336 201

Leisure, Travel and Tourism (08) Intermediate Level Apprenticeship 284 341 326


Leisure, Travel and Tourism (08) Total 399 466 435

Retail and Commercial Enterprise (07) Intermediate Level Apprenticeship 1,119 1,171 1,137



Retail and Commercial Enterprise (07) Total 1,322 1,402 1,505

Grand Total 6,442 6,882 7,057

Source: Skills Funding Agency January 2014

Apprenticeships Level Summary

A15 SFR Programme Group 2010/11 ER

ER15 2011/12

SILR SN14 2012/13

SILR SN14

Intermediate Level Apprenticeship 4,021 4,351 4,175

Advanced Level Apprenticeship 2,405 2,476 2,755

Higher Apprenticeship 16 55 127

Grand Total 6,442 6,882 7,057

Source: Skills Funding Agency January 2014

3.3.7 Workforce Summary Hertfordshire hosts a diverse spread of industrial sectors many of which are highly knowledge intensive. The workforce is on average highly skilled and well paid, with a high proportion having higher level qualifications. Earnings are also above the UK average, and are driven even higher by the many residents working in London. Whist the majority of Hertfordshire’s working-age population are well qualified, a quarter do not have a Level 2 qualification, making it difficult for this group to participate in knowledge-intensive activities. If Hertfordshire is to maintain its position as a relatively productive locality, the number of low skill jobs will continue to fall, thereby increasing the risk that many in the poorly-qualified minority will be unable to participate in the labour market.

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3.4 Competition and Enterprise 3.4.1 Business density and business stock

In 2012 there were 55,740 enterprises based in Hertfordshire registered for VAT or PAYE. These represented 629 per 10,000 residents aged 16+. This was well above the UK average of 466. Indeed all but one district (Stevenage with 423) exceeded the UK average. Moreover, Hertfordshire year after year has exceeded the national averages for new registrations (‘births’) per 10,000 residents over 16+ (National Indicator 171).

The employment size band with the highest proportion of local units in Hertfordshire County was the 0-4 band (73.1%). This is greater than the proportion in the East of England region (69.8%) and greater than in England (68.4%). Local units in the employment size bands 5-9,10-19,20-49,50-99, were proportionally less in Hertfordshire County than in the East of England region.

Proportion of Local enterprise units in VAT and/or PAYE based enterprises

Source: ONS UK Business: size and activity 2012

3.4.2 VAT registrations In 2011, there were 6,295 enterprise start-ups in Hertfordshire County.

Start-Ups 2007 2008 2009 2010 2011

Count Count Count Count Count

Hertfordshire County 6520 6690 5745 5820 6295

East 27600 25975 23535 22580 24930

England 246700 236345 209035 207520 232460 Source: ONS

In 2009 the rate of new business registrations decreased in Hertfordshire. It also decreased in nine of ten districts as can be seen from the chart below. This appears to be the result of the recession. It has since shown signs of recovery as can be seen above. Deaths of enterprises

2007 2008 2009 2010 2011

Count Count Count Count Count

Hertfordshire County 5060 6350 7375 5730 5370

East 22065 23515 28475 24070 22640

England 199300 196695 247150 219920 202365 Source: ONS

In 2011, Hertfordshire County had more enterprise start-ups (6,295) than closures (5,370). The figures below show steady growth in Hertfordshire business start up rates since the recession but the number of active enterprises remains below 2009 level.

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Hertfordshire Data Category

United Kingdom 2009 2010 2011 2009 2010 2011

55,135 54,730 54,860 Count of Active Businesses 2,341,900 2,351,425 2,342,595 5,745 5,820 6,295 Count of Enterprise Births 236,030 235,145 261,370

10.40% 10.60% 11.50% Birth Rate 10.10% 10.00% 11.20%

Source: ONS Business Demography Dec 2012

Birth rate calculated using new business starts as a percentage of business stock Hertfordshire business start up rates, although above average in upper tier local authority areas, are just outside the top quartile for new starts in England.

The 54,860 active businesses in the county are not uniformly distributed according to ONS data. In addition to the variability in size, there is similar variability in terms of entrepreneurial activity with four of the county’s ten districts experiencing start up rates below the UK average of 11.2%.

27

IDBR snapshot (ONS: UK Business, size and activity 2012) shows a net reduction of 180 enterprise units since 2009 with significant falls in the construction, production, information & communications industry groups. The biggest gainers through the recession were Professional, Scientific and Technical, Health and accommodation and food services.

Sector 2012 2009 Change % Change Professional, scientific & technical 9,920 9,230 690 7.0% Construction 6,715 7,010 -295 -4.4% Information & communication 5,475 5,690 -215 -3.9% Retail 5,045 5,065 -20 -0.4% Business administration and support services 4,455 5,045 -590 -13.2% Arts, entertainment, recreation and other services 3,710 3,885 -175 -4.7% Wholesale 3,085 3,100 -15 -0.5% Accommodation & food services 3,050 2,785 265 8.7% Production 2,835 3,055 -220 -7.8% Health 2,440 2,125 315 12.9% Property 2,065 2,085 -20 -1.0% Motor trades 1,585 1,555 30 1.9% Transport & storage (inc. postal) 1,555 1,540 15 1.0% Finance & insurance 1,445 1,445 0 0.0% Education 1,325 1,245 80 6.0% Agriculture, forestry & fishing 780 800 -20 -2.6% Public administration and defence 250 255 -5 -2.0% TOTAL 55,735 55,915 -180 -0.3% The number of local enterprise units registered in the county varies across the employment size bands. The county’s profile is one where the county is significantly under-represented in the employment size bands from 5 to 100 but in the smallest size band outperforms the rest of the UK.

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In terms of business survivability, the rate of business churn in the county is broadly on a par with the rest of the UK with the steepest falls in business failures occurring in year 2 and year 3 but this might be explained away by the onset of recession from 2008 to 2009.

However, the county does have a much higher presence in registered enterprises in the age bands below 10 years. After 10 years there is a marked deterioration in the proportion of businesses registered beyond

a 10th

birthday. There may be many and varied reasons for this, but some commentators believe that the county is good at growing lifestyle businesses to the extent that the lack of longevity is not caused by business failure but by individual choice.

Age of Business

Less than 2 Years

2 - 3 Years 4 - 9 Years 10 or more

Years

UK 16% 12% 28% 44% Hertfordshire 18% 14% 29% 40% 3.4.3 Gross Value Added (GVA) GVA is a key indicator of the economy. Broadly the same as Gross Domestic Product, which is only used at national levels, it is the difference between the value of goods and services produced and the inputs used in production. In 2009 GVA was severely affected by the recession. In Hertfordshire estimated GVA shrunk by 2.9%, a slightly better performance than that of the East of England, where the drop was 3.7% and substantially better than that of the UK, where the decrease was 4.9%. Hertfordshire’s GVA in 2008 was £26,011 million according to the Office for National Statistics (ONS). This is 2.1% of the total for UK regions and 2.4% of the total for England. It is the third largest for a county council area and is very similar to that of Surrey which represents 2.2% of the UK total.

Survival rates of newly born enterprises started in Hertfordshire in 2006

Year Numbers registered Herts (% Surviving)

UK (% Surviving)

2006 5,805 100.0 100.0

2007 5,550 95.6 96.5

2008 4,615 79.5 80.7 2009 3,790 65.3 66.2 2010 3,085 53.1 53.2

2011 2,605 44.9 45.0

Source: ONS Business Demography 2011 (published Dec 2012)

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In terms of GVA per head Hertfordshire is traditionally well above the UK regional average. Estimates show it as 16.8% above in 2008. It was 14.0 % above England, 10.7 % above the South East and 23.9% above the East of England on this measure. Moreover it is among the more productive counties in the UK as is demonstrated by Chart 1.2 showing the three former Government Office regions forming the Greater South East and the seven most productive counties in the UK. Looking at Hertfordshire’s most important economic indicators reveals a county that is economically strong but whose growth performance since 2001 has been overshadowed by its neighbours in London and Cambridgeshire. Despite reaping some benefit, through commuting, from proximity to these areas, Hertfordshire households in the run up to the 2008-2009 recession would appear to have lost out relative to those in other areas in the UK, London in particular. The cost in lost output relative to what would have happened had Hertfordshire maintained its 2000 performance relative to the UK has been spectacular – clearly over £5 billion in today’s prices. However, more recent data has shown that Hertfordshire has seen only modest growth of GVA per head since the late 1990s. On this metric, its rate of growth has been similar to that of the Tees Valley and York and North Yorkshire LEP areas; it has been well below that of its near neighbours (London, Greater Cambridge-Greater Peterborough, Buckinghamshire Thames Valley, etc.). The evidence shows that Hertfordshire’s growth performance in terms of economic output since 2001 has been overshadowed by that of its neighbours, particularly London and Cambridgeshire.

Regional share of GVA 2008

Inne

r Lon

don

Wes

t

Inne

r Lon

don

East

Out

er L

ondo

n (W

& N

W)

Gr M

anch

este

r (S)

Surre

y

Han

ts C

C

Berk

s

Her

ts

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

NUTS 3 regions

Shar

e of

UK

(les

s ex

regi

o) G

VA

30

In respect of GDP the European Commission’s UK Position Paper3 records that over the period between 2000 and 2009, 32 out of the 37 NUTS 2 regions experienced a decrease in GDP per capita relative to the EU average. The largest declines were registered in the West Midlands (from 113 % to 94 % of the EU average) and Bedfordshire and Hertfordshire (from 134 % to 116 %). In productivity terms, the best measure of productivity is GVA per hour worked. This is best viewed relative to the UK (as it is a nominal value, where no calculations are made for localised price differentials).

From the tables below, Hertfordshire has a higher level of productivity than the average for the UK and England, but is below that for London and Berkshire, Buckinghamshire and Oxfordshire.

What is perhaps more revealing, is that Hertfordshire’s relative performance has consistently declined since 2004, when its GVA per hour work was 19 per cent above the UK average, and exceeding other areas such as Cambridgeshire and Berkshire, Buckinghamshire, and Oxford. Whilst Cambridgeshire’s GVA per hour worked has also declined, this has not been as steep; and Berkshire, Buckinghamshire and Oxford’s productivity has more or less remained constant at around 15-16 per cent above the UK average.

NOMINAL (SMOOTHED) GVA PER HOUR WORKED INDICES, 2004 - 2011

2004 2005 2006 2007 2008 2009 2010 2011

UK 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

ENGLAND 101.9 101.9 101.9 101.9 101.8 101.7 101.5 101.4

Cheshire 104.0 104.1 104.0 103.5 102.4 101.5 101.2 101.3

Cambridgeshire 105.1 104.4 103.6 103.4 102.4 101.4 100.6 100.7

Hertfordshire 119.2 118.6 116.3 112.9 109.1 106.8 105.5 105.2

London 128.0 128.6 129.6 130.7 131.5 131.7 131.4 130.9

Berks, Bucks and Oxfords 116.5 116.3 115.6 115.0 114.7 115.2 116.0 116.7

Source: ONS sub regional productivity July 2013 revision

3.4.4 International trade The Hertfordshire Business Survey (HBS) provides information on ownership and the extent of markets and a little about skills issues among non-native English speakers.

The HBS revealed the most important export market for Hertfordshire business as the ‘Rest of Europe’, that is Europe other than the UK. 22% of businesses had customers there and 36% of Hertfordshire employment was implicated. The difference in the figures reflects the tendency for bigger businesses to be exporters. Perhaps surprisingly, the USA/Canada was an export market for only 14% of businesses (21% of employment). However, it should be stressed that the HBS gives us no indication of the value of orders – exports from Hertfordshire were likely to have been dominated in the past by GlaxoSmithKline (GSK) Ware’s exports of its key product (Advair/Seretide) to the USA. More businesses export to the ‘Rest of the World’, that is not the UK, the ‘Rest of Europe’ or USA/Canada. Exporters to this vast range of countries account for 15% of Hertfordshire businesses and 28% of employment. Given that the current government’s economic strategy relies on the ‘re-balancing’ of the UK economy towards exports, it is pertinent to ask whether Hertfordshire businesses are showing signs of being up to the challenge. The HBS asked current exporters and others about willingness to consider new export

3 Position of the Commission services on the development of the Partnership Agreement and programmes in the United Kingdom for the period 2014- 2020 - Ref. Ares(2012)1315758 - 08/11/2012

31

markets. 32% of businesses were so willing and these accounted for 44% of employment. In employment terms the new markets concerned were the Rest of the World (40%), the Rest of Europe (36%) and USA/Canada (24%). This pattern reflects the relative optimism with which many regard ‘emerging markets’. This might surprise many, as exporting is so closely associated in many people’s imagination with manufacturing, of which Hertfordshire has relatively little. Not surprisingly Hertfordshire’s manufacturers are foremost among those willing to consider new markets – 62% mentioned the ‘Rest of Europe’ and 63% the ‘Rest of the World’. But wholesalers were not far behind – 52% mentioned the ‘Rest of Europe’ and 48% the’ Rest of the World’ 48%. Also many (42% of) information/communications firms were willing to consider exporting to the USA/Canada.

3.4.5 Voluntary and Community Sector A ‘value and volume study’ conducted in November 2007 estimated that in Hertfordshire there were 5,254 constituted voluntary and community groups, with an estimated turnover of £481m pa. The total turnover in Hertfordshire in 2007 has been estimated at £75.7 billion. This implies that these groups constitute a rather small (0.6%) share. However, this is belied by the figures on employment. Hertfordshire’s voluntary and community sector employs 19,642 individuals, with approximately 46% (9,056) on part-time contracts. This implies that such jobs constitute 3.1% of full-time employee jobs in the county and 6.1% of part-time employee jobs in the County. As at July 2008, 18% of the population reported that they participated in formal volunteering opportunities. The ‘value and volume report’ estimated much higher numbers (333,000) volunteering at least once a year for a voluntary or community group and that the total value of this donated labour was equivalent to at least £50m pa and 10 million labour hours. These hours can be compared with the total hours of paid (employee) work expended by Hertfordshire residents in 2008 as estimated from the ONS Annual Survey of Hours and Earnings (842 million). On this basis, voluntary labour is equivalent to 1.2% of ‘involuntary’ labour. However, its value is considerably less than the financial contributions of Hertfordshire residents to charities outside the County - £139 million. Source: Value and Volume: An Introduction to the Voluntary and Community Sector in Hertfordshire: prepared for the Hertfordshire Infrastructure Consortium 2007

3.4.6 Business Consultation - Our Own Self-Assessment During February/March 2013, in-depth consultations were conducted with business leaders drawn from several different sectors – including financial services, construction, chemicals, film, IT and bioscience. These consultees reflected critically on “our place” in their capacity as business leaders and with reference to their own business activities. Reflecting on the analysis within this chapter, they provide an important set of “on the ground” perspectives and these have been important in shaping our Strategic Economic Plan and feeding into the development of the ESIF strategy document. “Doing business in Hertfordshire” – Observations major business leaders

Observation Implications

Notwithstanding variations in scale/corporate structure, etc., most businesses are working across a territory that extends well beyond Hertfordshire’s boundaries

While the Strategy is for Hertfordshire, it must respect – and positively respond to/embrace – the porosity of administrative boundaries in terms of real economic life: it needs to help equip businesses to succeed on this broader stage

Links with London are absolutely crucial for business life – and at least for some, Hertfordshire essentially provides the benefits of a London location without many of the drawbacks

Hertfordshire is on the edge of (and – particularly in the south – functionally part of) a world city, and in large part, this gives businesses competitive advantage – whether through access to labour, or markets, or early stage finance. The question that follows is whether and how “Hertfordshire – World City” might be harnessed for forms of economic growth that benefit current/future residents in a sustainable way Hertfordshire is a fantastic location for corporates wanting to be “of London but not in it” – in general terms, it ought to have no real difficulty securing

32

Observation Implications

investment of this nature, but has it sorted out its “offer”? Watford appears to have been successful, but what about the other obvious locations?

There is very little sense of a “Hertfordshire economy” in any meaningful sense – there are a few sub-county economies which are tied, more-or-less closely, to London

The Strategy needs to respond to the real economic geography as defined by the business community and to this end, it probably ought to harness the coherence defined around radial arteries. Is there, for example, more scope for defining real synergies between Watford and Hemel Hempstead; and between Hatfield, Welwyn Garden City and Stevenage? These appear to be the “economic spaces” defined and recognised by the business community

Hertfordshire’s transport infrastructure (road, rail) is congested – but the access it provides, particularly to London, remains a substantial asset: the benefits far outweigh the drawbacks

This Strategy is not only about infrastructure. However, it is important that the Strategy looks ahead: will assessments of the transport infrastructure continue to be positive if/when economic growth resumes?

At least for the moment, there appears to be no shortage of commercial property and rents are being negotiated downwards

As with the comment about transport infrastructure, this observation could be short-lived and the picture may look different as economic growth resumes. That said, the relationship between employment provision and economic life is changing substantially and out-of-town business parks are, increasingly, far from the whole answer. From the private sector point of view, the use of commercial property/land close to the main railway interchanges would appear to be a real priority for economic growth

Business networks appear to be either non-existent or highly localised or aspatial – confirming again that there really isn’t a pan-Hertfordshire economic narrative

Local networks do seem to be playing some kind of role for some businesses, but these are very local (e.g. in Watford). Beyond that, some firms rely on sector-specific networks, but typically these are much broader in terms of location. Local networks could usefully be encouraged

Skills issues are a priority – while specialist skills can be found (although often by long distance commuting) there are continuing challenges around the skills of the local resident workforce, including school leavers

The skills strand within the Strategy will need to be developed creatively – aimed, perhaps, at the large numbers of small/medium-sized businesses within the county. To this end there is a need for a far more lively and constructive dialogue between businesses and the FE/HE sector. There are, though, existing examples of broadly good practice: West Herts College was reviewed favourably in terms of its links to the film sector in the south west of the county

Links into research institutions (whether HE or other) appear quite limited

The fragmented nature of Hertfordshire’s economy – and the lack of an obvious “centre” (apart from London) – may be one reason why relationships to the wider knowledge base appear thin. In the medium term, this could be problematic

Within Hertfordshire there are “fragments of knowledge-based excellence” – but they are fragmented: Hertfordshire is less coherent/cohesive (even if only in terms of rhetoric) than Cambridge and London

Is there scope to “do something” to pull the different fragments together, recognising that this may well need to be thought through with respect to the arterial corridors within and beyond the geography of Hertfordshire? Hertfordshire could “do something” around R&D and high end manufacturing, etc.; it is likely however that links to London will remain crucial in relation to supporting services (notably finance)

In terms of actively supporting economic growth, local authorities in Hertfordshire get a very mixed press

There seems to be uncertainty within the business community in terms of the extent to which local government really wants to see business investment and growth – although the picture does vary. It would help if local authorities were perceived to be more consistently pro-business

3.5 Innovation and research 3.5.1 Research base Hertfordshire has a strong research base comprising world class companies engaged in the advancement of science and technology. This research sits comfortably alongside publicly funded research institutes of international renown. In 2010, the East of England Regional Technopole report by St John’s Innovation Centre in Cambridge confirmed the strength of Hertfordshire’s scientific asset base exemplified by the concentration of multinational pharmaceutical/biomedical companies including Eisai, Roche, GlaxoSmithKline and Merck Sharp & Dohme.

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Three of the top twenty five companies in the UK which invest in R&D have substantial research capabilities in the County. In 2010, the department for Business Innovation and Skills (BIS) published the R&D scoreboard which benchmarks UK private sector R&D investment. Table 5.1 shows the position of Hertfordshire based companies in the scoreboard as measured by the size of their investment:

Rank

2010 Company Sector

R&D

(£M)

Growth in R&D

over previous

year

Rank

2009

1 GlaxoSmithKline Pharmaceuticals and Biotechnology £3,629 9.5% 1

19 Roche Products Pharmaceuticals and Biotechnology £208 15.0% 22

25 Eisai Europe Pharmaceuticals and Biotechnology £151 42.0% -

Source: Business Innovation and Skills, 2010

The scoreboard shows that all three companies substantially increased their investment in R&D with Eisai entering the top 25 for the first time and Roche improving its position on the scoreboard by three places. GlaxoSmithKline (GSK) remains the single largest R&D investor by some margin, and is the only UK firm in the top 25 of global investors in R&D. Funding in 2010 for the phase one development of a £36m ‘Open Innovation’ Science Park from the Technology Strategy Board’s and BIS’ Strategic Investment Fund reaffirms GSK ‘s position as a national strategic priority. But global excellence in Research is not just restricted to pharmaceuticals: MBDA and EADS Astrium are among a number of world class companies engaged in cutting-edge R&D in the County and these companies are supported by and help maintain a significant talent pool.

The presence of a strong publicly funded research base around the Royal Veterinary College, the University of Hertfordshire (including the schools of Life Sciences, Pharmacy, Health and Human Sciences, Postgraduate Medicine and the Medical Technology Innovation Centre), the National Institute for Biological Standards & Control, the UK Stem Cell Bank and Rothamsted Research confirms the presence of a world-class cluster in life sciences. The County is also home to a number of well-regarded technology consulting firms of which the Building Research Establishment (BRE) and the Materials Engineering Research Limited (MERL) are nationally and internationally recognised as centres of excellence. BRE is particularly prominent in supporting the Innovation agenda as the lead partner in the consortium that delivers the Modern Build Environment Knowledge Transfer Network. This is funded by the Technology Strategy Board to increase the exploitation of innovation in the built environment in four key areas: • Energy & Carbon Efficiency • Process Efficiency • Climate Change Adaptation • Life Extension and Retrofit

3.5.2 Innovation In addition to this high quality R&D base, the County is fortunate to possess a high concentration of knowledge based businesses within its borders. The 2010 Insight East/ Work Foundation report on the innovation performance of the East of England confirmed Hertfordshire’s strengths in high-value, knowledge- intensive businesses. The density of knowledge-intensive businesses (Table 5.2 below shows it has the highest concentration of such businesses in the East of England) is a major factor in the County’s economic performance reflected by comparatively high levels of output.

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Knowledge intensive business density

Area

Number of businesses in

knowledge intensive industries

All businesses Knowledge intensive business density %

Hertfordshire 21,647 54,038 40.1

Cambridgeshire 10,647 27,495 38.7

Bedford 2,496 6,657 37.5

GREAT BRITAIN 895,077 2,446,015 36.6

Peterborough 2,329 6,514 35.8

East of England 87,149 248,192 35.1

Central Bedfordshire 4,035 11,591 34.8

Southend-on-Sea 2,323 6,689 34.7

Suffolk 10,226 30,490 33.5

Essex 20,113 60,399 33.3

Luton 1,886 5,845 32.3

Norfolk 10,150 33,521 30.3

Thurrock 1,297 4,953 26.2 Source: Annual Business Inquiry (2008); EUROSTAT definition (SIC2007: 50-51,58-63,64-66,69-75,78,80,84-93) This concentration of knowledge-based businesses suggests that the capacity to innovate is strong. Between 2007 and 2008, the number of knowledge intensive businesses increased from 20,365 (38.9%) to 21,647 (40.1%). A density which is 3.5 percentage points above that of Great Britain. We know that the County’s total stock of businesses reduced as a result of the recession but, as yet, we cannot assess the full impact on the County’s knowledge-based businesses. Moreover, there is further evidence of the County’s capacity to innovate as the number of businesses collaborating with the academic base increases year on year. For example, the total number of licenses granted by the University of Hertfordshire continues to rise. Higher Education Funding Council for England (HEFCE) data shows a strong licensing performance by the University which accounts for 14% of all licences granted by academic institutions in the East of England region in 2007/8. Indeed, HEFCE’s Higher Education-Business Community Interaction Survey confirms a significant increase in the total value of collaborative research, research contracts and consultancy contracts formed between business and the University of Hertfordshire. The value of those contracts rose from £14.4m in 2006/7 to £16.8m in 2007/8. As a result, business funding per head of academic staff improved from £8,740 in 2006/7 to £9,868 in the following year, bringing funding per head of academic staff to within 8% of the national average compared to 15% in 2007/8. This improving performance is reflected in the following table (Table 5.3) of HE/business collaborations which positions the University as the most successful of the East of England’s universities after Cranfield and Cambridge.

University

Total value of

collaborative

research, research

contracts and

consultancy

contracts

Total academic staff*

Total funding for

business-university

research and

consultancy (per

academic staff)

Cranfield University 23,063,000 665 34,681

University of Cambridge 82,099,000 4,315 19,026

University of Hertfordshire 16,825,000 1,705 9,868

University of East Anglia 9,742,000 1,625 5,995

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University

Total value of

collaborative

research, research

contracts and

consultancy

contracts

Total academic staff*

Total funding for

business-university

research and

consultancy (per

academic staff)

University of Essex 3,513,000 1,005 3,496

University of Bedfordshire 1,873,000 605 3,096

Anglia Ruskin University 2,837,000 1,050 2,702

Writtle College 255,000 175 1,457

Norwich University College of the Arts 148,000 115 1,287

UNITED KINGDOM 1,866,424,674 174,950 10,668

Source: HEFCE Higher Education-Business Community Interaction Survey (2007/08) HESA HEIDI (2007/08) Total academic staff: All academic staff (full and part-time) excluding atypical Note: Data not available for University Campus Suffolk

This improvement continued in 2008/9 with £19.1 million being earned by collaborative research, research contracts and consultancy contracts (an increase on the previous year of 13.8%). Further evidence of the County’s capacity to innovate is demonstrated in the value of the County’s human capital as emphasised in Chapter 7 of the Strategic Economic Plan: Job market. An earlier calculation, based on the 2008 Annual Population Survey, made in the course of the Insight East/Work Foundation assessment of innovation performance, showed Hertfordshire’s ‘Human Capital Index’ to be substantially higher than that for Great Britain’s and just behind that of the Cambridgeshire County Council are in the East of England. The extent to which Hertfordshire is an innovative place manifests itself through high levels of productivity (workplace GVA per head) which continues to outstrip most UK local authority areas. However, there are signs that growth is slowing and that the County is struggling to keep up with the highest performing parts of the south east. In innovation terms, there are a number of challenges required to deliver a climate for innovation which drives higher levels of growth. For example, it is difficult to identify significant sector based knowledge networks within the County of the scale prevalent in other high performing areas such as Cambridge, London and Oxford. Leaving aside general economic conditions and high levels of inflation, there are also concerns about: access to the highest speed broadband needed by certain knowledge-intensive businesses; the availability and cost of premises for innovative companies looking to expand; and the scarcity of funding for early-stage technology focused businesses arising from a reduction in net lending and a precipitous fall in venture capital and business angel funding throughout the UK. More generally, the fallout from the recession and the restructuring of some key players has had a negative impact locally and will require a focus on supporting the continued development of a climate in which innovation can flourish. Hertfordshire has a long and proud history of private sector R&D embedded in knowledge based industrial clusters such as Pharmaceuticals, High Value Engineering and Information and Communications Technologies. The growth of the University of Hertfordshire and the growing connections made between the University and the business base have also contributed to the delivery of high levels of workplace productivity and created a climate for innovation which supports economic growth. However, there are signs that the conditions which support innovation and productivity are under stress as growth, which was slowing before the recession, continues to decline. The availability of broadband in rural areas and slow connection speeds at the County's key employment sites are seriously impacting on the performance of SMEs at the cutting face of technology. The County also appears to lack the depth of

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business angel and other networking structures prevalent in other high performing areas and premise availability for new and emerging businesses remains a concern. In conclusion, the County has some of the key innovation ingredients for success, but there are areas for investment which require attention if the County is to match the economic performance of some of its faster growing neighbours.

3.5.3 Intellectual and Knowledge Based Assets However, what sets Hertfordshire apart is the breadth, depth and diversity of our intellectual and knowledge-based assets – and these comprise a major opportunity for economic growth. At the heart of the Golden Triangle, these assets are overwhelmingly vested in the private sector and – alongside the high incidence of new and small businesses – they mean that Hertfordshire as a whole might be seen as a county of open innovation. In October 2013, Sir Andrew Witty reported to government on the role of universities in stimulating economic growth. As part of the evidence base, the Witty Report measured the incidence of employment in key sectors identified within UK Industrial Strategy. These showed that – among 39 LEPs areas – Hertfordshire has a particularly high employment Location Quotient in respect to life sciences. We also have a level of specialism (although a less distinct one and one that is much more similar to other LEP areas in the greater south east) in information sciences; professional and business services; and construction. The Witty Report also produced maps highlighting the Top 20 research organisations nationally as defined in relation to their contribution to the sectors set out in UK Industrial Strategy and/or the Eight Great Technologies identified by government. We featured strongly in relation to three of these key areas.

Life sciences First, Sir Andrew Witty’s life sciences map identified GSK as a “top 20” organisation in relation to the field-weight citations index (which was the principal indicator used throughout). The map itself plotted the location of GSK’s Head Office (which is in west London). However increasingly, the principal research locations for GSK are in Stevenage and (on a smaller scale) Ware, both of which are in Hertfordshire; together, they employ several thousands of research scientists and they comprise a scientific hub of international standing. Within the county, there are also a number of other research-based organisations in closely related field: for example, the National Stem Cell Bank is hosted by the National Institute for Biological Standards and Control at Potters Bar. In addition the GSK Biocatalyst at Stevenage is attracting small bioscience firms, as is BioPark at Welwyn Garden City. As well as GSK there are other major bioscience firms which are active in Hertfordshire, such as Eisai at Hatfield (which, attracted by the proximity of both London and Cambridge as well as the implicit strengths of Hertfordshire, has recently expanded its operations within the county); Merck Sharp Dohme at Hoddesdon; Bio Products Laboratory Ltd at Borehamwood; and Roche in Welwyn Garden City. The map which follows shows the incidence of life sciences businesses across Hertfordshire. It demonstrates the breadth and depth of activity in this crucial sector. Although intrinsically difficult to measure, these observations are wholly consistent with the high employment Location Quotients identified by Lord Witty for life sciences in Hertfordshire and also the data from EEFM set out in the table above.

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Agri-science and agri-tech A second – and closely related – Hertfordshire knowledge-based specialism identified through Sir Andrew Witty’s report reflects the enormous potential of Rothamsted. Located in west Hertfordshire, Rothamsted is conducting research to integrate biotechnology with other areas of science such as agronomy and agro-ecology. It is a nationally significant player in respect of both agri-science and agri-tech and is recognised as such through Lord Witty’s analysis.

Robotics and advanced engineering The third key area that Sir Andrew Witty identifies is robotics. Here, the University of Hertfordshire is identified as one of the top 20 organisations nation-wide. This specialism links to the presence in Hertfordshire of some very significant businesses in the fields of applied physical sciences and engineering. For example:

Airbus Defence and Space is an international leader in the techniques and key technologies required for the development and delivery of major space systems. It has a major site at Stevenage where its 1,200 staff are working on the development, management and operation of a wide range of satellites, some of which are intended for science missions

MBDA is major international defence business. It was formed following the restructuring of various major companies (including BAe and GEC Marconi) over a decade ago and it has a substantial, research-based, operation near Stevenage.

All three of these technologies (and their related sectors) are centrally important to Perfectly Placed for Business. We will return to them later. In this context it is important to recognise fully the large – and increasing – role played by the University of Hertfordshire – both in relation to robotics and far more generally. The University is a major employer in

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Hertfordshire – with 2,300 full time equivalent direct jobs and, taking account of indirect and induced impacts, a total of over 11,000 attributable jobs (of which 43% are in the county). It also contributes substantially in terms of GVA; its total impact (taking into account direct, indirect and induced GVA) is estimated to be £388m. However it is not just the scale of the University that is impressive. Also important is its range of specialisms and the extent to which these align with the strengths of the Hertfordshire economy. As well as robotics (which, as noted above, was identified as a national specialism by Sir Andrew Witty), these include, inter alia, digital technologies, particle filter analysis, health simulation, agri-science and media. These specialisms weave their way through Perfectly Placed for Business and the University of Hertfordshire will be a key partner in the delivery of our strategy.

3.5.4 Technological Drivers In 2010, the Foresight Horizon Scanning Centre completed – and published – a major piece of work, Technology and Innovation Futures: UK Opportunities for the 2020s. This was based on interviews and workshops with over 180 representatives from industry, research, international institutions and social enterprises. It identified 53 technologies (grouped into 28 clusters) which “are likely to be important in the UK in the 2020s, because of the UK’s comparative advantage today, its future needs or the size of its market”. From the report, the following opportunities would appear to be especially relevant for Hertfordshire:

Regenerative medicine: One of the most exciting – but complex – areas of science with potential commercial application relates to life science and, particularly, regenerative medicine. Although the lead-in time is substantial, over future decades, significant breakthroughs are expected linked to stem cell research. The report argues that there are translational, regulatory and financial challenges, but that eventually, approaches to healthcare will be transformed. The challenge for the UK – it argues – is to retain the associated researchers and drug discovery companies in the UK.

New materials’ contribution to a low carbon future: The report argues that major advances in materials offer great market opportunities, not least in the context of reducing the use of energy and emissions of CO2. A key focus in this context is the construction industry, which is a major source of emissions currently. Light and strong materials also have widespread applications, not least commercial aircraft.

Smart infrastructure : In essence, the report identifies two elements of “smart infrastructure” which are likely to be transformational in their impact over the next period: the application of new information and communication technologies to improve all

infrastructures (e.g. transport, water, etc.) by “providing data that enables quick and accurate detection of failures, improvements to the efficiency of control systems, and the more intensive use of transmission networks”

the development of a smart electricity grid – the first transformational infrastructure of the

21st Century – which, the report argues, is a prerequisite to meeting the UK’s carbon reduction requirements.

Internet: The report argues that we are on the cusp of a second internet revolution. Central to this will be a “web of data”, adding structure and semantic meaning. The implication is that searching will become less random and instead, genuinely linked – and therefore more robust – data will be sourced. The report argues that this could transform business-to-business and business-to-consumer transactions as internet search processes should become far more intelligent (e.g. it will “know” whether “Casablanca” is a town or a film) and hence the provision of genuinely linked data will become possible

Manufacturing on demand: the report argues that there are real potential opportunities linked to manufacturing – not the mass production which has dominated recent years but “bespoke” manufacturing, or “manufacturing on demand” which is described in terms of a “manufacturing

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revolution”. The report states that “the principal drivers of such a change would be higher shipping costs and customer demand for customised products; the principal enabler would be improved manufacturing equipment and software” . In order to capture this opportunity, it suggests that “the development of small scale manufacturing capability could be considered whenever investment is made in a new research institution” .

In January 2013 – and in the light of commitments set out in the Chancellor’s Autumn Statement 2012 – David Willets (Minister for Universities and Science) delivered a major speech outlining the government’s commitment to invest significantly in “eight great technologies”. The read-across to Technology and Innovation Futures is broadly clear. The “eight great technologies” are: big data (linked to an open data revolution); space; robotics and autonomous systems; synthetic biology; regenerative medicine; agri-science; advanced materials; and energy. A key challenge for Hertfordshire is the extent to which the county will – or could – potentially benefit from these, and indeed, contribute to them.

3.6 Access and Connectivity 3.6.1 Internet access Much of Hertfordshire enjoys good internet connectivity and speeds but there are some areas that are not covered by high speed internet. An internet coverage map for Hertfordshire can be found via: http://www.connectedcounties.org/content/17467108/bbhertsv6.pdf .

3.6.2 Transport Infrastructure Our changing economic geography relates, fundamentally, to the opportunities and constraints presented by our transport infrastructure. We are traversed by strategic road and rail routes. As well as providing a core element of the national strategic transport network, these routes function as key local arteries within the county. Without exception, they are highly congested: it is telling, for example, that Hertfordshire can claim 2% of the national population; 1.3% of the land; and nearly 3% of all national vehicle miles. Congestion is, in turn, stifling the growth of our economy. Patterns of rail use in Hertfordshire are illustrated in the two maps that follow – first in terms of internal connectivity and then in terms of journeys outside the county. Two points are self-evident. First, within Hertfordshire there is significant rail-based commuting along the main rail corridors (e.g. between Stevenage and Hatfield). Second, there is a substantial volume of rail-based net out-commuting from across Hertfordshire to London. This has a fundamental bearing on the nature of our economy – and prospects for it – and it explains why residence-based accounts of Hertfordshire are so different from those premised on a workplace narrative. Within Perfectly Placed for Business, we reflect this strong inter-relationship fully and constructively.

http://www.connectedcounties.org/content/17467108/bbhertsv6.pdf

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Our road network is very congested, as depicted in the map below. There are challenges with all of the trunk roads and congested junctions severely affect many of our significant towns – including Stevenage, Hemel Hempstead, Watford, St Albans and Welwyn Garden City. Within this overall context, the priority for Hertfordshire is the A1(m) – partly because congestion issues are acute; partly because it (literally) bisects the county; and partly because it is, and needs to be, the spatial focus for much of our planned growth. It is imperative that improvements are made to it, and we will continue to lobby national government hard in this respect.

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Principal transport constraints within Hertfordshire

3.6.3 Travel to work Hertfordshire districts fall into four official travel to work areas (TTWAs): Luton & Watford; Stevenage, Harlow & Bishop’s Stortford, and London. These TTWAs, based on commuting patterns as at the 2001 Census, cover in addition to Hertfordshire and London substantial parts or the whole of Luton, Central Bedfordshire, Uttlesford and Harlow. HCC have therefore focused its analysis on Hertfordshire, London and these districts. For Hertfordshire as a whole 70% of resident workers were employed within the County, 20% in London and nearly 4% in the four neighbouring areas above, principally Luton and Harlow. Only just over 2% were employed in other parts of the East of England (Cambridgeshire accounts for less than half of these). While Hertfordshire as a whole can be considered as quite self-contained, with London as the key external market for the County’s labour, the pattern varies across Hertfordshire. In the south of the County, Three Rivers, Broxbourne and Hertsmere, all bordering London had 29.9% to 37.5% commuting there. These districts also display low levels of containment with the majority of residents working outside their boundaries. In the case of Three Rivers only 33.8% worked in the district with 29.9% working in London and 17.1% working in neighbouring Watford. However, even in this well-connected district, 62.0% of Three Rivers’ residents worked in Hertfordshire. The Hertfordshire pattern, outside the southern districts, is for about half of workers (from 49.3% in St. Albans to 60.7% in Dacorum) to work in their district of residence and for around 70% (from 66.1% in East Hertfordshire to 84.8% in Stevenage) to work in Hertfordshire. The district with the lowest proportion working in the County is Hertsmere with 58.5%, still a comfortable majority of course. The relationship to London is complex. Firstly, the propensity to commute there varies considerably from district to district. We have seen that the ‘southern districts’ exhibited high levels of London commuting but it is not just a matter of proximity. St. Albans also exhibited an above average level of commuting to London (at 22.2%). East Hertfordshire, further from London, also had a substantial share (17.1%) of its resident workforce travelling to the metropolis, whereas Stevenage’s share was only 7.8%, bettered by the 9.7% of

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more northerly North Hertfordshire. While there is clearly a north-south division this is moderated by the tendency for the higher skilled to travel further to work (with the higher skilled being present in greater proportion in St Albans and East Hertfordshire than in Hertsmere and Broxbourne, and in greater proportion in North Hertfordshire than in Stevenage. Secondly, commuting destinations vary; while Central London (excluding the City) looms large as a destination across Hertfordshire (from 3.46% in Stevenage to 11.9% in Hertsmere), commuting to ‘close London’ (North West, North and North East) is highly dependent on proximity. 16.1% in Broxbourne commuted to North London (its most common commuting destination), 9.6% in Watford to North West London (again the most common commuting destination), 11.5% in Hertsmere to North London and 8.6% from Hertsmere to North West London (combined these constitute by far the most common commuting destination for Hertsmere residents). In Three Rivers, 14.9% commuted to North West London. In many other districts the closest parts of London do not outweigh the attraction of Central London and or the Financial District (City and Tower Hamlets). In East Hertfordshire 10.6% of workers commute to Central London and the Financial District combined, while only 5.4% commute to the closest parts of London (North London and North East London combined). The comparable figures for North Hertfordshire are 6.9% and 2.2% (North London and North West London combined). Even in Stevenage where, despite good rail and motorway connections, few commute to London, more (4.6%) commute to Central London and the Financial District than do to North London and North West London (3.2%). More generally we can divide Hertfordshire districts according to whether their pattern of commuting to London is dominated by close or distant commuting. Out-commuting directions – Northern and Southern Hertfordshire

District of

residence

% of resident workforce commuting

to:

*Close parts of London Central

London &

Financial

District

Close*

London

Remainder

of London

St. Albans 15.1 6.0 1.1 North and North West

East Hertfordshire 10.6 5.4 1.1 North and North East

Welwyn Hatfield 9.4 7.1 1.4 North and North West

Dacorum 7.4 5.1 0.8 North and North West

North

Hertfordshire 6.9 2.2 0.6 North and North West

Stevenage 4.6 3.2 0.8 North and North West

Hertsmere 15.8 20.1 1.6 North and North West

Broxbourne 13.4 18.9 1.6 North and North East

Three Rivers 12.1 14.9 3.0 North West

Watford 9.4 11.8 1.0 North and North West

Hertfordshire 10.5 9.5 0.5 North, North West and

North East

Source: 2001Census of Population, ONS

Hertfordshire, with 70% of residents working in the County, is largely self-contained Hertfordshire districts are interdependent. Across the districts the percentage of residents working somewhere in the County is largely bunched around the 70% average with 58.5% in Hertsmere and 84.8% in Stevenage constituting the extremes. In all cases a substantial share of residents work outside their district of residence. A significant (20%) minority of residents commuted to London. This is clearly important but the pattern of flows is not straightforward. Commuting destinations within London were split almost equally between a

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wide range of boroughs close to the Hertfordshire boundary and Central London plus the Financial District. In southern districts commuting is largely to close parts of London but in northern districts it is largely to Central London and the Financial District. Hertfordshire residents did not constitute a substantial share of workers in most parts of London, the dependency in that respect was one way. In North London (Barnet, Enfield and Haringey) 8.9% of the workplace population originated in Hertfordshire and their residents provided 3.1% of Hertfordshire’s workplace population. This example of a two-way relationship largely concerned three neighbouring boroughs on the Hertfordshire side of the boundary. Central Bedfordshire was dependent on employment in Hertfordshire but the relationship was not mutual. This one-way traffic is the only major commuting flow concerning Hertfordshire other than that into London. Hertfordshire residents tended not to work there and Central Bedfordshire residents did not constitute a numerically important component of Hertfordshire’s workplace population. Stansted Airport and Harlow in Essex were dependent on Hertfordshire as a source of labour. Hertfordshire residents comprised 15.3% of Harlow’s workplace population. Similarly, Uttlesford drew 10.3% of its workplace population from Hertfordshire and its significant employment centre, Stansted Airport, was 19.3 % dependent on workers resident in Hertfordshire. However, neither Hertfordshire nor East Hertfordshire, the district neighbouring these areas, are particularly dependent on them in numerical terms as a source of employment.

3.7 Environment 3.7.1 Countryside, landscape and settlement character Hertfordshire is adjacent to the northern part of Greater London and stands astride key routes between London and the major cities of the Midlands and North. It covers an area of 634 sq miles (1,634 sq km) and has an estimated population of over 1 million, 87% of whom live in the 45 settlements of over 3,000 people. There is one city (St Albans) and a variety of market towns, industrial towns, new towns, commuter villages and rural villages. There are ten districts/ boroughs, the four southernmost of Broxbourne, Hertsmere, Watford and Three Rivers, and Stevenage towards the north, being the most urban, with East Hertfordshire and North Hertfordshire having large rural, fairly sparsely populated areas. Over half of the County’s land is Green Belt and there are significant amounts of open space between settlements, so despite being the second most densely populated County in the Country, Hertfordshire has for the most part managed to avoid many of the disadvantages of urban life. This makes the County an attractive and desirable place to live and work. Hertfordshire has an agricultural GVA of £30 million per annum.

The total value of agricultural output is £109 million and the total income from farming is £18 million.

There are 880 farms in Hertfordshire.

The total farmed area is 97,315 ha (out of an area of 163,872 ha) i.e. 59% of the surface area is farmland.

2513 individuals are directly employed by farming. 63% of the farmed area is under agri-environment schemes (ELS and HLS).

(Source DEFRA 2010)

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In depicting the spatial backdrop to Perfectly Placed for Business, we must also have regard to a range of environmental and other policy constraints. Much of Hertfordshire – particularly in the south and west – is within the Metropolitan Green Belt and a small part of the county falls within the Chilterns Area of Outstanding Natural Beauty. In addition – along our river valleys – there are areas at flood risk. In addition at other times our rivers suffer from low flows. There are thought to only be 200 chalk streams in the world. Over 150 of these are in England and a good number of these can be found in Hertfordshire. These chalk streams contribute to creating the distinctive and attractive environment in the County, they are an environmental and indeed economic asset much valued by residents, visitors and businesses alike. However, these environments are impacted as a result of high water demand and a high population density in the County. Particularly in the south and west of Hertfordshire, this all means that our options for spatial development are severely constrained. Several of our larger towns are within the Metropolitan Green Belt and they must effect patterns of growth that can be accommodated within the existing urban areas. Environmental and policy constraints across Hertfordshire

3.7.2 Environmental Drivers In planning for Hertfordshire’s medium-long term economic future, we also need to reflect on a range of environmental drivers – all of which are complicated. One relates to the implications of climate change and the need to adapt to higher temperatures, more frequent extreme weather events (such as storms and heatwaves), more frequent flooding (from rivers, following storms, etc.) and rising sea levels. Nationally, the Climate Change Act, 2008, provides a legally-binding long-term framework to cut greenhouse gas emissions and a framework for building the UK’s ability to adapt to the changing climate. The Act requires a UK-wide climate change risk assessment (CCRA) that must take place every five years; a national adaptation programme (NAP) which must be put in place and reviewed every five years, setting out the Government’s objectives, proposals and policies for responding

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to the risks identified in the CCRA; and Adaptation Reporting Powers (not applicable in Northern Ireland) which enable the Secretary of State to direct “reporting authorities” to prepare climate change adaptation reports. The first CCRA was published by Defra in 2012. In relation to the business sector (defined to exclude agriculture), this identified four major risks:

decrease in output for UK businesses due to an increase in supply chain disruption as a result of extreme events

increase in monetary losses as a result of interruption to business from flooding greater variability in the availability of water potential loss of staff hours due to high internal building temperatures (assessed as being of

particular relevance to the health, education and retail sectors, which have large workforces).

Closely related to the drivers deriving ultimately from climate change are those which link explicitly to energy. Shortly after the current government came into power, the first Annual Energy Statement was published. This stated that “the mission of this Government is to support the transition to a secure, safe, low-carbon, affordable energy system in the UK, and mobilise commitment to ambitious action on climate change internationally”. Government acknowledged that this transition was challenging – but also an opportunity. Specifically:

It requires major investment in new technologies to renovate our buildings, electrification of much of our heating, industry and transport, and cleaner power generation. And it requires major changes in the way energy is used by individuals, by industry, and by the public sector. The promise of transformation is a huge economic opportunity as we grow out of recession.

The catalysts for the energy transition are essentially two-fold. First, there is a concern that the production of fossil fuels will peak within the next decade and then available supply will simply diminish (due to due to a combination of resource scarcity and exorbitant development costs). Second, there is an overarching concern with regard to greenhouse gas emissions (and the combustion of fossil fuels are a major source), coupled with legally binding commitments to reduce them. Over the medium term, the consequences, however, are profound.

3.7.3 Water resources Hertfordshire has one of the highest domestic water needs in the country and is classified as suffering from severe water stress, with many rivers and ground water sources over-abstracted leading to impacts on the water environment. Water resource availability in future, will need to be resilient to impacts of climate change and must meet the needs of existing and new businesses and industries, residents and the environment.

3.7.4 Energy Use Overall energy use in the County is decreasing and significant reductions are being made in the domestic sector through implementing energy efficiency measures. However, the overall energy use within the industrial and commercial sector has seen only a slight decrease and in some areas has increased. Despite seeing an overall reduction in energy use, energy supplies in Hertfordshire are reliant on traditional fossil fuels which are particularly vulnerable to price fluctuations. Although it is in the East of England, which is recognised as the leading region in renewable and low carbon energy production, Hertfordshire performs poorly when compared to other counties. In 2009 it produced 143MW less renewable energy than the top ranking County (Cambridgeshire) and 30MW less than the closest County (Suffolk).

3.7.5 CO2 emissions and Ecological Footprint

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Hertfordshire currently has the second highest total emissions in the East of England (Table 9.1) and has a target of a 9.1% reduction in CO2 emissions by 2011. Between 2005 and 2008 per capita carbon emissions in Hertfordshire have decreased by 7.5%, compared to a national decrease of 5.4% and 6.8% regionally.

Carbon emissions in the East of England (DECC, 2010)C

ounty

Yea

r

Indust

rial

an

d

Com

mer

cial

Dom

estic

Road

Tra

nsp

ort

Tota

l E

mis

sions

Per

Cap

ita

Em

issi

ons

% r

educt

ion

since

200

5

Hertfordshire 7.50%

2005 2,560 2,638 1,811 7,008 6.7

2008 2,435 2,597 1,741 6,773 6.2

2005 2,153 1,739 1,608 5,500 7.9

2008 1,940 1,692 1,526 5,158 7.3

2005 2,468 2,117 2,016 6,601 8

2008 2,530 2,057 1,927 6,514 7.7

2005 831 927 743 2,501 6.3

2008 834 912 724 2,470 6

2005 2,056 1,385 1,673 5,115 8.8

2008 1,924 1,381 1,641 4,946 8.2

2005 3,073 3,355 2,831 9,259 6.9

2008 2,868 3,281 2,720 8,869 6.4

2005 15,538 13,726 11,823 41,087 7.4

2008 14,811 13,436 11,373 39,620 6.9

Source: Department of Energy and Climate Change

Norfolk 3.80%

Bedfordshire 4.80%

Hertfordshire 7.50%

Suffolk 7.60%

Cambridgeshire 6.80%

Essex 7.20%

East of England

Total6.80%

When compared to emissions from domestic properties and road transport, commercial and industrial emissions account for the least total emissions in Hertfordshire. However, commercial and industrial emissions are the third highest in the East of England, behind Cambridge and Norfolk. The majority of industrial and commercial emissions in Hertfordshire come from the consumption of electricity and gas, with emissions from electricity use increasing by 3.5% between 2005 and 2008 (2.4% more than the national average) whilst gas emissions have reduced 18.4% (compared to 12.4% nationally). Although there has been positive progress on reducing carbon emissions within Hertfordshire, performance has not been uniform across all areas, with some districts seeing significant reductions compared to others. Dacorum has shown the greatest decrease of 11.9%, followed by Welwyn Hatfield, with a 7.1% decrease. Broxbourne made the smallest reduction at 1.7%, with emissions remaining at 5.7 tonnes CO2 per capita since 2006.

3.7.6 Climate Change Impact – Risk of Flooding Approximately 27,000 properties in Hertfordshire are at risk of flooding from rivers, with just under a quarter having a significant likelihood of flooding. However, the number of properties at risk of flooding significantly increases when taking into account the risk from surface water flooding and groundwater flooding and these pressures are likely to become worse as land take increases.

3.7.7 Recycling The County is performing well in relation to waste with the overall recycling and composting rate at 44% being significantly higher than the national average (37.6%) but slightly lower than the regional average (44.5%).

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3.7.8 Water Services Infrastructure (blue infrastructure) Water services infrastructure is also a potential constraint that needs to be looked at, however, if well planned for it could deliver environmental improvement and benefits in both water quality, water resource availability and ecology/biodiversity. Major settlements in Hertfordshire, potentially suitable for further expansion through new housing developments face water services infrastructure/sewage infrastructure capacity issues. These will need to be examined and planned for in the context of the spatial plan for growth. Both in terms of the capacity of existing sewers and waste water treatment works, and the capacity of the wider environment to absorb any increase in discharges to rivers without detrimental effects.

3.8 Spatial Plan for Growth Taking into account both transport and environmental constraints, and the content of existing Local Plans, we – through the Hertfordshire Infrastructure and Planning Partnership – have pieced together a spatial statement for the county. This is built up from:

major housing, employment, and mixed use development proposals contained in adopted and emerging Local Plans;

the key major transport schemes for the period 2015 to 2019 as agreed by the Local Transport Body;

the key strategic proposals of the Hertfordshire Green Infrastructure Plan;

a spatial representation of the other key economic assets and opportunities in the county as defined through Perfectly Placed for Business (see Chapter 2) of the Strategic Economic Plan.

The current spatial plan for Hertfordshire is summarised in the graphic which follows.

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Key to map above

No Description Type Dwellings Town Category

1 Bishops Stortford North Housing 2500 Bishops Stortford Existing

2 Spencers Park Housing 500 Hemel Hempstead Existing

3 West Hemel Hempstead Housing 900 Hemel Hempstead Existing

4 Elstree Way Housing 800 Borehamwood Existing

5 Watford Junction Mixed Use/Retail 1500 Watford Junction Existing

6 Hatfield Business Park Employment 0 Hatfield Existing

7 Shire Park Employment 0 Welwyn Garden City Existing

8 Centenniel Park Employment 0 Elstree Existing

9 North Hitchin Employment 0 Hitchin Existing

10 Letchworth Employment 0 Letchworth Existing

11 North Royston Employment 0 Royston Existing

12 Elstree Way Employment 0 Borehamwood Existing

13 Maylands Employment 0 Hemel Hempstead Existing

14 Gunnelswood Employment 0 Stevenage Existing

15 Bishops Stortford Goods Yard Mixed Use 0 Bishops Stortford Existing

16 Mead Lane Mixed Use 0 Hertford Existing

17 Hatfield Town Centre Mixed Use/Retail 0 Hatfield Existing

18 Welwyn Garden City Town Centre

Mixed Use/Retail 0 Welwyn Garden City Existing

19 Hemel Hempstead Town Centre Mixed Use/Retail 0 Hemel Hempstead Existing

20 Watford Health Campus Mixed Use 650 Watford Existing

21 Charter Place Mixed Use/Retail 0 Watford Existing

22 Leavesden Mixed Use 0 Watford Existing

23 South Oxhey Mixed Use/Retail 0 South Oxhey Existing

24 West of Hoddesdon area of search

Housing 600 Hoddesdon Emerging

25 Goffs Oak area of search Housing 0 Goffs Oak Emerging

26 Bury Green area of search Housing 0 Cheshunt Emerging

27 Panshanger Housing 700 Welwyn Garden City Emerging

28 North of Hatfield Housing 2000 Hatfield Emerging

29 Broadwater Road West Housing 1000 Welwyn Garden City Emerging

30 Stevenage West Housing 1400 Stevenage Emerging

31 Stevenage North Housing 500 Stevenage Emerging

32 Stevenage Town Centre Housing 800 Stevenage Emerging

33 Park Plaza area of search Employment 0 Waltham Cross Emerging

34 Brookfield Centre Mixed Use/Retail 0 Cheshunt Emerging

35 St Albans Town Centre Mixed Use/Retail 0 St Albans Emerging

36 Stevenage Town Centre Mixed Use/Retail 0 Stevenage Emerging

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No Description Type Dwellings Town Category

37 Hoddesdon Business Park Employment 0 Hoddesdon Existing

38 Rothamsted SEP Priorities 0 Rothamsted SEP

39 Hertfordshire University SEP Priorities 0 Hertfordshire SEP

40 BRE Watford SEP Priorities 0 Watford SEP

41 Elstree Studios SEP Priorities 0 Borehamwood SEP

42 Leavesden SEP Priorities 0 Watford SEP

43 GSK Catalyst - Stevenage SEP Priorities 0 Stevenage SEP

44 Bio Park - WGC SEP Priorities 0 Welwyn Garden City SEP

45 Hemel Hempstead SEP Priorities 0 Hemel Hempstead SEP

46 Watford SEP Priorities 0 Watford SEP

47 Stevenage SEP Priorities 0 Stevenage SEP

At least initially, the spatial framework that has been distilled by the Hertfordshire Infrastructure and Planning Partnership is a “given” for Perfectly Placed for Business. It will define, effectively, the spatial footprint within which development – both employment and housing-related – can take place. As is apparent from Figure 4 6, this footprint might be depicted in terms of two key elements:

the development of key Corridors – of which the most obvious are the A1(m) and M1, and – because of its potential – an east-west link connection (including the A120)

the development of key settlements – of which the most apparent are Stevenage, Watford, Hemel Hempstead, Welwyn Garden City, Hatfield and Broxbourne – and, in terms of immediate housing growth, Bishop’s Stortford.

In time, our Strategic Economic Plan will mould the spatial framework. In the short term, however, that framework is providing the parameters for Hertfordshire’s economic and housing growth.

3.9 Deprivation 3.9.1 Ward Areas - Index of deprivation Hertfordshire has consistently had very few areas among the official lists of the most deprived areas in England. Hertfordshire’s virtual stagnation in the last decade appears to have increased deprivation levels relative to England. The latest indices show improvement but not so much among the worst areas.

HERTS

IMD RANK 2010

AREA NATIONAL IMD PERCENTILE

LSOA NAME WITHIN 2010 2007 2004

1 Three Rivers 012D Northwick Ward 12 13 17

2 Stevenage 008D Bedwell Ward 13 13 16

3 Hertsmere 006C

Borehamwood Cowley Hill Ward 16 14 20

4 North Hertfordshire 012C Hitchin Oughton Ward 18 22 29

5 Welwyn Hatfield 012A Hatfield Central Ward 20 16 17

6 Broxbourne 013C Waltham Cross Ward 20 21 22

7 Watford 003D Meriden Ward 24 23 29

8 Watford 009B Central Ward 24 22 28

9 Broxbourne 005D Wormley & Turnford Ward 24 19 25

10 Broxbourne 011B Bury Green Ward 25 23 27

11 Hertsmere 006E Borehamwood Cowley Hill 25 27 34

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HERTS IMD RANK

2010

AREA NATIONAL IMD PERCENTILE

LSOA NAME WITHIN 2010 2007 2004

Ward

12 Broxbourne 006D Flamstead End Ward 26 21 27

13 St Albans 009A Batchwood Ward 26 25 32

14 North Hertfordshire 007B Letchworth Wilbury Ward 26 29 35

15 Watford 009C Central Ward 26 26 31

16 Three Rivers 012B Northwick Ward 27 27 30

17 Stevenage 010C Shephall Ward 27 39 43

18 Dacorum 013D Adeyfield East Ward 28 35 36

19 Hertsmere 007B

Borehamwood Brookmeadow Ward 28 27 28

20 North Hertfordshire 003C Letchworth Grange Ward 28 31 42

21 Watford 002B Stanborough Ward 28 26 29

22 Broxbourne 013D Waltham Cross Ward 29 21 27

23 Welwyn Hatfield 007E Peartree Ward 29 23 29

24 Hertsmere 006A

Borehamwood Cowley Hill Ward 29 34 35

25 Hertsmere 009D

Borehamwood Kenilworth Ward 29 29 34

26 Broxbourne 010D Cheshunt Central Ward 29 24 33

27 Stevenage 009A Bandley Hill Ward 29 26 29

28 Dacorum 020A Bennetts End Ward 29 35 41

29 Dacorum 005D Woodhall Ward 30 31 37

30 Dacorum 008D Highfield & St Pauls Ward 30 30 34

31 Hertsmere 011E

Borehamwood Hillside Ward 30 33 37

32 Watford 011C Holywell Ward 31 24 31

33 North Hertfordshire 009C

Letchworth South East Ward 31 33 37

34 Watford 012B Oxhey Ward 31 28 32 Source: Index of Multiple Deprivation (IMD) 2004, IMD 2007 & IMD 2010, Department for Communities and Local Government

Examination of the table above reveals that the LSOAs concerned are spread widely across urban Hertfordshire, with nine of the County’s ten districts featuring in the first eighteen on list of the most deprived according to the IMD. The IMD 2010 is based on data from 2008, after Hertfordshire had just enjoyed a pre-recession fillip. By and large the position of Hertfordshire’s LSOAs improved, but did not return to their earlier positions relative to other parts of the country. However, the position of the worst 22% of Hertfordshire LSOAs (falling in the worst 50% in England) closely resembles the IMD 2007 position. Indeed at the very extreme, six LSOAs are now among the worst 20% in the country (as against five in the IMD 2007 and four in the IMD 2004). This lack of response to a tightening labour market highlights the danger of increasing detachment from employment among some groups. Hertfordshire cannot claim to have a large number of areas ranked officially among the worst in the country for multiple deprivation. However, it seems likely, on the basis of the limited analysis relayed above, that not only were the few areas where deprivation is of national significance, along with other areas across Hertfordshire, adversely impacted by the slackening of demand for labour since 2001, they did not benefit as much as other areas did from the pick up in the economy prior to the 2008-2009 recession.

3.10 Housing Across Hertfordshire, house prices are very high indeed – certainly in relation to what those employed locally can afford to pay. In January 2013, the average price of a house in Hertfordshire was over £240,000:

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almost 50% higher than the average for England and Wales and 100% higher than the average price in Hertfordshire at the start of the new millennium. Locally, the figures are more extreme: data from Hometrack, for example, suggest that between 2004 and 2012, the average price of a house in St Albans (district) rose from £288,500 to £421,000, while in neighbouring Watford, the increment was more modest (from £202,000 to £254,000) . Rates of housing delivery across Hertfordshire have been poor, and well below the levels that are needed; these need to be understood partly in terms of Hertfordshire’s demography and economic potential, and they are also influenced by an intricate and complex relationship with London. In part, the reasons for a relatively weak track record in housing delivery reflect the intrinsic constraints which surround housing growth in Hertfordshire (e.g. Green Belt) and are set out in more detail below. But they have also, in part, been political: with under-bounded urban areas in (e.g. Stevenage) – or on the borders of (e.g. Luton, Harlow) – Hertfordshire, significant growth – which has at times been signalled – has been premised on political alliances that have proved fragile and temporary in the context of continual changes to the national planning system. Data sourced from Hertfordshire County Council provide an insight into long term achieved delivery patterns. They show a clear cyclical element, but over 11 years of data, the average figure has been 3,475 dwellings per annum. In the recent past – and in the context of the down-turn – the number of completions has been lower.

Source: Hertfordshire County Council

CLG also provides data in relation to house-building. These data may be less accurate (and they are certainly different) but they do allow some level of benchmarking with other areas. On the CLG dataset, in 2012/13, the total number of dwellings started in Hertfordshire was 1,840 – equivalent to 2.6 new dwellings for every 1,000 residents. This ratio was the 27th highest (or 13th lowest) across 39 LEP areas and it was below the national average. It was less than half that recorded for Greater Cambridge – Greater Peterborough area, and also well below that for both the South East Midlands and Buckinghamshire Thames Valley LEP areas. Hertfordshire fared slightly better in terms of recorded completions, but even so, in relative terms, it was well behind these same three areas4 . Our housing targets for the early years of SEP implementation are detailed below.

District Annual target over the period 2015-2021

Source

Broxbourne 250 Broxbourne Strategic Housing Market Assessment. May 2013

Dacorum 430 Dacorum Core Strategy, adopted September 2013

4 Data for housing starts and completions are sourced from CLG (Table 255: Housebuilding: permanent dwellings started and completed, by tenure

and LEP, 2012-13). Ratios have been calculated by dividing these data by population estimates (ONS mid-year population estimates for 2012)

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District Annual target over the period 2015-2021

Source

East Herts 750 Discussions – Plan is under development

Hertsmere 266 Hertsmere Core Strategy adopted January 2013

North Hertfordshire 556 North Herts LDF- Housing Growth Targets 2013 to 2031 consultation, February 2012

St Albans 360 St Albans Core Strategy Consultation

Stevenage 265 Stevenage Local Plan Consultation, June 2013

Three Rivers 180 Three Rivers Core Strategy 2011-2026, adopted 2011

Watford 260 Watford Core Strategy, adopted January 2013

Welwyn Hatfield 400 Welwyn Hatfield Emerging Core Strategy Consultation

Hertfordshire 3,717

If we are to realise anything like our full economic potential, we need to succeed in delivering more homes, particularly in the south; this area is projected to see the greatest employment growth. Within this context, some of Hertfordshire’s towns must be allowed to grow.

3.11 Community Safety, Crime and Offending The Hertfordshire Probation Trust – ‘Four Year Strategic Business Plan 2012-2016’ records that Hertfordshire remains one of the safest counties in England. It is reported that:

Crime has continued to fall;

Rates of crime in the County have remained low across main crime types with Hertfordshire having 61 recorded offences per 1,000 population compared to a national rate of 76;

In May 2012 the number of crimes had reduced by over 15% on the previous year. Hertfordshire Constabulary detection rate had increased to an all-time high of 39% of crimes compared with a national average of 28%.

House Burglary and Anti-Social Behaviour has fallen significantly.

The strong partnership between the Probation Trust and Hertfordshire Constabulary to deliver Integrated Offender Management was recognised as a key contributor to the reductions achieved in serious acquisitive crime and house burglaries. The Howard League Award for working with Adult offenders was awarded to the Hertfordshire Choices and Consequences Project in 2011, which is delivered in partnership by Hertfordshire Constabulary and Hertfordshire Probation Trust.

In 2012 the Guardian Public Services Award for Digital Innovation was awarded to Hertfordshire Probation Trust in respect of Hertfordshire Horizons – Integrated Offender Management Programme joint initiative with Hertfordshire Constabulary to pilot GPS tracking.

Hertfordshire Probation Trust is represented on all ten Community Safety Partnerships: Broxbourne, Dacorum, East Herts., Hertsmere, North Herts. St Albans, Stevenage, Three Rivers, Watford, Welwyn & Hatfield.

The caseload for Hertfordshire Probation Trust is approximately 3,100, 66% - Community Sentences, 12% supervised on Licence & 22% serving prisoners.

The delivery arrangements for rehabilitation of offenders are changing from April 2014. The Ministry of Justice has published “Transforming Rehabilitation: A Strategy for Reform” – the Government’s response to the consultation document “Transforming Rehabilitation: a revolution in the way we manage offenders”. The strategy sets out the Government’s plans for transform the way in which offenders are managed in the community in order to bring down reoffending rates. The key aspects of the reforms are as follows:

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A new public sector National Probation Service will be created, working to protect the public and building upon the expertise and professionalism which are already in place.

In 2015 when the new contracts have been let every offender released from custody will receive statutory supervision and rehabilitation in the community. The government are legislating to extend this statutory supervision and rehabilitation to all 50,000 of the most prolific group of offenders – those sentenced to less than 12 months in custody.

A nationwide ‘through the prison gate’ resettlement service will be put in place, meaning most offenders are given continuous support by one provider from custody into the community. NOMS will support this by ensuring that most offenders are held in a prison designated to their area for at least three months before release.

The market will be opened up to a diverse range of new rehabilitation providers, to run the 21 Community Rehabilitation Companies which can involve the public, voluntary and private sectors, at the local as well as national level. A competitive bidding process is underway to establish the CRC operator. It is anticipated the new provider will take ownership of the CRC in early 2015.

New payment incentives for market providers to focus relentlessly on reforming offenders will be introduced, giving providers flexibility to do what works and freedom from bureaucracy, but only paying them in full for real reductions in reoffending.

Hertfordshire will form part of the BeNCH Community Rehabilitation Company (CRC) which will cover Bedfordshire, Northamptonshire, Cambridgeshire and Hertfordshire. The current Chief Executive for Hertfordshire Probation Trust has been appointed as the CEO to lead the start-up of BeNCH CRC. Staff from Hertfordshire Probation Trust will transfer to the new National Probation Service and BeNCH CRC 1st June 2014. Currently offenders sentenced to less than 12 months in custody do not receive statutory support in the community. However, the changes taking place will bring this support. In Hertfordshire it is estimated that this will add around 500 to 600 people per year to the caseload. It is anticipated that this new provision will be introduced following completion of the legislation and share sale to the new market providers in 2015. According to statistics published by Hertfordshire Police there were 37,840 reported crimes in Hertfordshire between 1st April 2013 and 31st December 2013. This represents a reduction from the previous year of 6.79%. A detailed breakdown is provided below:

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Source: Offence and Outcomes Year on Year % change, for Hertfordshire Constabulary – published Hertfordshire Police website.

In 2011/12 CPS Hertfordshire prosecuted 13,496 cases in the Magistrates Courts and 1,609 cases in the Crown Courts. Hertfordshire Probation Trust has carried out a ‘Criminogenic Needs Analysis’. This is included below. This analysis seeks to identify the underlying issues faced by offenders that are directly linked to their offending behaviour and therefore if they are not addressed may lead to re-offending. The ‘Tiers’ used in the chart are standard classifications covering the complexities and seriousness of cases. Tier 1 is typically for those who are more straight forward cases where it's generally a single requirement such as Community Payback only. Tier 4 are more complex, resource hungry and for those posing a much higher risk. The majority of offenders in Tiers 2 and 3 will generally have a number of requirements to address a range of criminogenic factors.

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Glossary of Terms:

ETE = Education, Training & Employment

Thinking = is about thinking skills, how to deal with issues in ways that don't lead to offending, making the right choices, seeing things from other people's perspective etc.

OASys = Offender Assessment System = main assessment tool for risk of offending and risk of causing harm

3.12 Health and Wellbeing The Health and Wellbeing Board for Hertfordshire have produced a strategy for the period 2013 to 2016 entitled ‘Healthier People, Healthier Communities for a healthier and happier Hertfordshire’. A copy of the strategy can be found via: http://www.hertsdirect.org/docs/pdf/h/hwbstrategy.pdf . The strategy identified that in Hertfordshire many residents already experience good levels of health and wellbeing. However, some do not, and these health inequalities must be addressed. The strategy states that partners have a duty to work together to make a real difference to people’s lives while improving the health of the general population. However, significant problems persist such as the low level of physical activity in children and young people and the fact that if you live in the most deprived ward of Hertfordshire, on average you will live 7.4 years less than if you lived in the least deprived. While the average life expectancy in Hertfordshire has increased significantly over the past ten years, the gap between the least and most deprived has not changed.

http://www.hertsdirect.org/docs/pdf/h/hwbstrategy.pdf

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The strategy identifies the challenge of tackling health inequalities, which remain a significant issue in Hertfordshire. They are closely linked to the environment in which people live, the community, the services people receive and the way people live their lives. Health and life chances are strongly linked - if you have poor health you will have fewer life chances and equally, if you have less life chances you are more likely to have poorer health. Health is the single biggest factor affecting whether or not you are able to reach your full potential.

In total the strategy identifies nine initial priorities which fall into three broad categories. These are all to be considered equally and the links between them recognised. Physical activity, for example can contribute towards improving mental health and reducing the likelihood of developing a long term condition. The categories are: Healthy Living These are issues where you are able to have the greatest impact on your own health and wellbeing. You should be supported to take control of your life to tackle these issues and improve your health and wellbeing through: • Reducing the harm caused by alcohol • Reducing the harm from tobacco • Promoting healthy weight and increasing physical activity Promoting Independence The Marmot Review argued that poor health is linked to the stress you experience and the level of control you have over your life. Where you have more control and less stress, you are more likely to be healthier for longer. If you are affected by the issues we have prioritised below, you often need additional support to be independent and more control over your life. In this case, we will strive to ensure that you are able to live your life and that you feel safe and in control: • Fulfilling lives for people with learning disabilities • Living well with dementia • Enhancing quality of life for people with long term conditions

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Flourishing Communities These are areas where you, your family and your community can make the biggest difference in improving the health and wellbeing of those around you and of the most vulnerable members of your community. Tackling these issues helps ensure that everyone is able to receive the support they need and contribute to resilient and sustainable communities. • Supporting carers to care • Helping all families to thrive • Improving mental health and emotional wellbeing

3.12 Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

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SWOT Analysis: Innovation

HELPFUL HARMFUL

INTE

RN

AL

Strengths

World Class Centres of research excellence in Plant Sciences (Rothamstead Research) and Buildings (BRE Group),

World Class Private Sector R&D in pharmaceuticals (GSK, Eisai pharma, Merck Sharpe and Dohme) satellite technology (Astrium); and ICT (Imagination Technologies)

Cluster of Independent Research and Technology Organisations offering contract research and testing specialisms in genomics, materials, security equipment, rubber, furniture, tin

Significant presence in key industry clusters: Lifesciences; Advanced Engineering; Creative Digital and Media; Professional Business services and construction

High Quality Business Schools: University of Hertfordshire and Ashridge Business School

Significantly higher than average share of residents working as science, research, engineering professionals and associate professionals

High rates of growth in residents working as science, research, engineering professionals and associate professionals

Proximity to other centres of scientific and technological excellence in Cambridge and London.

Weaknesses Net exporter of talent: Below average employment in Knowledge Intensive sectors in spite of

highly skilled workforce

Average employment share compared to England in high and medium technology manufacturing

Absence of high quality science and technology parks Fragmentation in the coordination of innovation services leading to problems in connecting

smes to services to help company’s innovate and commercialise ideas.

Access2Finance: Flight of venture capital from UK key sectors such as life sciences; few business angel networks and continuing issues for early stage financing of innovative smes including visibility and presence of Technology Strategy Board

Weak linkages between business and academia

Innovation not widely understood and often confused with invention

EXTE

RN

AL

Opportunities Linkages to the National Government’s industrial strategy, its focus on growth sectors and

the eight great technologies where Hertfordshire has the opportunity to complement and support Government and Research Council investments .

Possible phase 2 development at GSK/Wellcome Trust’s joint venture in the UK’s first open innovation science park at Stevenage BioScience Catalyst, including potential for development in Convergent Medical Technologies field

Development potential to create high quality science and innovation campuses at Rothamsted and BRE (i.e St Alban’s Green Triangle; comprising the two research organisations and University of Hertfordshire).

Establishment of a joint venture Growth Hub, between the University of Hertfordshire and Hertfordshire LEP targeting the innovation value chain: idea generation - Supporting scientific and technological Research and Development

and deliver support for innovative clusters and networks idea conversion – Developing appropriate financial instruments for growth businesses

(including leveraging Technology Strategy Board support for R&D, collaboration and promoting functional technology transfer)

idea diffusion - providing access to domestic and international markets by through Small Business Research Initiative,Academic Health Science Networks and UK Trade and Investment

Cross border collaboration with neighbouring leps on the development of financial instruments to leverage increased private funding into key technology sectors

Threats

Under investment by National Government in Hertfordshire arising from perceptions that Hertfordshire is doing well economically. For example, Hertfordshire does not have and will not get assisted area status; it has been overlooked by the Regional Growth Fund, Enterprise Zone and City Deal policies and its university does not get access to the same sources of funding as research intensive universities.

The channelling of scarce resources to areas of need takes resources away from investments in places of opportunity like Hertfordshire.

Continuing market failures in the supply of private equity to nationally important sectors like Lifesciences is impacting on the start up rates of early stage lifescience firms and has long term consequences for the vitality of the sector.

Competition from other science and technology developments in other parts of the UK (Life sciences, Scotland; Hyperpolarised gases, York; Imaging, Leeds; Graphene, Manchester)

SWOT Analysis: SME Competitiveness

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SWOT Analysis: Skills

HELPFUL HARMFUL

IN

TER

NA

L

Strengths 11.5% business birth rate exceeds the English average of 11.2%

Better than average business start-up rates in six of the county’s ten local authority districts

Business birth rate is recovering year on year since start of the recession in 2008

Business survivability on a par with the national average

Numbers of Professional, scientific and technical businesses continue to grow and bucks the trend in other industry sectors

Excellent opportunities for sme growth arising from proximity to largest urban conurbation and consumer/business market in Europe

Strong performance from the county’s business incubators (e.g. WENTA’s My Incubator network)

Strategic location benefitting from good (if sometimes congested) transport networks

Access to strong professional business services sector

Supply chain opportunities for smes to access cluster of world class businesses.

Better than average workplace productivity

Weaknesses Long term survivability (over ten years) is well below UK average.

Variable business start up rates across the lep area leading to an over-reliance on large firms to create employment in certain locations (e.g Stevenage, Watford, Welwyn/Hatfield).

Lower than average rate of enterprise starts in North Herts, East Herts, Stevenage and Broxbourne

Productivity growth falling relative to the rest of the UK

Falling private sector employment pre recession

Over represented in micro sme businesses between 0 to 4 employees but under represented in the middle segment of sme population between 5 and 100 employees

Availability of quality grow on space for fast growth companies

Oversupply of dilapidated industrial and commercial space

Significant broadband “not spots” at key business park locations where high speed broadband is notionally available

Fragmented and uncoordinated business support environment with no clear gateway for smes to access public and private sector forms of support

EXTE

RN

AL

Opportunities Review demand for business incubation and promote entrepreneurship in areas lagging

behind the rest of the UK.

Address gaps in the provision of business incubation in areas of the county (largely the Northern and Eastern sides of Hertfordshire) underserved by centres providing quality business support services.

To connect enterprise centres across the whole of the county to provide access to as broad a network of expertise as possible and to increase the impact of incubators beyond their local boundaries

Address the fragmentation and lack of coordination across the business support landscape through a joint investment with Hertfordshire University in a business growth hub to encourage established business to grow through a portfolio of services based on improving: o Access2Finance. Investor readiness and financial support packages including business

angel funding/crowd funding; o Access2Skills. Helping firms access external expertise in the private, public and

academic sector with a specific focus on strategic leadership and management development; Includes possible opt-ins for Growth Accelerator and MAS.

o Access2Markets. Working with UKTI, through the Opt-in, to increase levels of Export Finance resource available to Hertfordshire and to tailor specific UKTI programmes (e.g Gateway to Global Growth) for deployment in the county

Opportunities for local authorities to co-invest and partner with the lep to address inherent gaps in capacity and bring forward projects with genuine economic impact

Threats



Continuing market failures in the supply of finance to smes is holding back business investment in capacity and people.

Underinvestment by local authorities in economic development giving rise to capacity constraints across the board which affects the ability of places to deliver transformational projects

HELPFUL HARMFUL

IN

TER

NA

L

Strengths Highly skilled workforce

Strong presence in professional and technical occupations

Strong Further Education Sector

University of Hertfordshire

Weaknesses Modest supply of high skilled employment leading to highly skilled residents commuting to

London

Absence of research intensive university

HE & FE engagement with business

Low key presence of Sector Skills councils

Opportunities Development of relationships with business in the design and implementation of training

provision which matches business demand for skills. E.g Employer ownership of skills pilots

Implementation of apprenticeships strategy leading to quantum jump in number of apprenticeships on offer in Hertfordshire

Potential collaborations with Skills Funding Agency, National Apprenticeships Service, Sector Skills Councils (eg Cogent and Science Industry Partnerships)

Development of academies and University Technical Colleges

Threats



Underinvestment by local authorities in economic development giving rise to capacity constraints across the board which affects the ability of places to deliver transformational projects

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Section 4 – A Strategy for Smart Economic Growth in Hertfordshire (Perfectly Placed for Business)

4.1 Introduction The figures tell us that Hertfordshire’s economy is performing well compared to elsewhere – but it is slipping back relatively. For the benefit of this and future generations, we need to address this relative decline. Government has given us a unique opportunity to respond – but exactly how we respond is up to us.

Hertfordshire Local Enterprise Partnership (LEP) wants to pursue a strategy of smart growth. This is not growth at any cost. Instead, it is growth based on knowledge and innovation, and which is concerned with promoting a more resource efficient, greener and competitive economy. We have identified our vision:

Our Vision is that by 2030, Hertfordshire will be among the UK’s leading economies, helping to realise the full economic potential of the assets and opportunities within the Golden Triangle

Our four priorities listed below will ensure we are able to take this vision forward. These represent major opportunities for Hertfordshire:

Maintaining global excellence in science and technology

Harnessing our relationships with London (and elsewhere)

Re-invigorating our places for the 21st Century

Foundations for growth

In addressing these four priorities, we will ensure that Hertfordshire is Perfectly Placed for Business.

A detailed implementation plan is in development in order to advance these Priorities, and to make them happen. Over the next two decades, Hertfordshire will embrace a new agenda for economic growth that is at once smart, sustainable and positive.

“Smart growth” is not growth at any cost. Instead, it is growth which is premised on knowledge and innovation, and which is concerned with promoting a more resource efficient, greener and competitive economy. Through smart growth, people and businesses in Hertfordshire should, genuinely, thrive. The draft Hertfordshire Strategic Economic Plan (SEP) entitled ‘Perfectly Placed for Business’ was submitted to HMG on 16th December 2013. This document can be accessed via the Hertfordshire LEP website: http://www.hertfordshirelep.com/ .

http://www.hertfordshirelep.com/

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Perfectly Placed for Business: Hertfordshire’s Strategic Economic Plan in summary

4.2 Priority 1 - Maintaining global excellence in science and technology By 2030, we want Hertfordshire to be well established as the leading economy at the heart of the UK’s Golden Triangle. We want it to be a catalyst for the production and creative synthesis of ideas and insights across the “great technologies” that are likely to shape the UK’s economic future. Among these, this could mean a particular role for Hertfordshire’s businesses in relation to:

• satellites and commercial applications of space • life sciences, genomics and synthetic biology • regenerative medicine • agri-science • the big data revolution and energy-efficient computing.

Across all these domains, Hertfordshire has significant assets already and enormous further potential. Used smartly, we need to make all this count. Within this overall context, Hertfordshire will be a place where entrepreneurship is encouraged; where new enterprises can form; and where established ones can grow. Moreover it will be a place where inward investment is actively encouraged, particularly when it contributes positively to knowledge-based economic growth. Businesses will be able to recruit the people they need – for R&D, for production, or the management and commercialisation of both.

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The opportunity Hertfordshire’s science-based knowledge economy is extensive and diverse, and it is long established – back in the 1980s, it had an employment location quotient of 3.6 (relative to GB). Today it includes many different strands, all of which are private sector-led. For example:

life sciences, which is dominated by large pharmaceutical operations such as GSK, Eisai and Merck Sharp & Dohme accounts for around 30,000 employee jobs

advanced engineering, including defence and aerospace companies such as Smith Detection and EADS Astrium, and accounting for about 21,600 employee jobs

software, ICT and telecoms services, including equipment producers and communications integrators, such as Imagination Technologies (Watford), which accounts for some 15,000 jobs, principally in the west of Hertfordshire.

Research-based assets within Hertfordshire are also first rate. They include, inter alia, Rothamsted Research (agri-science) and BRE (sustainable construction) The University of Hertfordshire also has important supporting specialisms. The strengths, then, are substantial. In theory at least, Hertfordshire should have the wherewithal to exploit them. It can point to a highly qualified workforce, but also to people who are willing to work in the supporting occupations on which many science-based activities depend. There are also a number of employment sites and premises that are close to the main centres of the knowledge economy and these ought to provide an important physical infrastructure. Most importantly, it has a knowledge economy which is genuinely led by the private sector. These assets are all the more potent in the context of major investments in UK science which are being made currently in both London and Cambridge.

In terms of the former, the Francis Crick Institute is currently under construction. A partnership between the Medical Research Council (MRC), Cancer Research UK, the Wellcome Trust, UCL (University College London), Imperial College London and King’s College London, the Institute will employ over 1,000 scientists at its site near King’s Cross and St Pancras.

Cambridge, meanwhile, has seen substantial recent and on-going investment into the Cambridge Biomedical Campus on the site of Addenbrooke’s Hospital. In addition, the decision of Astra Zeneca to relocate its European R&D operations to Cambridge represents a major investment.

Within Hertfordshire – and across the wider Golden Triangle – there is a world class asset base, which is receiving further investment: this represents a huge opportunity for knowledge-based growth. Hertfordshire has the potential to become the private sector-led core of this process.

The risks The scale of the opportunity is substantial, and the links between Cambridge and London, and between Oxford and London are strong, powerful and productive. However in the process, there is a risk that Hertfordshire could simply be by-passed: Cambridge, in particular, has ambitious growth plans and it has substantial provision in the form of well-located and high quality science and business parks; a strong labour market (particularly for bioscience); and a track record in delivering the infrastructure that is needed to sustain economic growth. By contrast, Hertfordshire’s recent track record in securing inward investment has been mediocre and its current “offer” in relation to the knowledge economy is patchy. Among businesses in the county, there seems to be genuine uncertainty as to whether Hertfordshire as a whole really has the appetite to respond.

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In addition, there is recognition that networks and collaborations within Hertfordshire are quite weak. Linkages are very important, but these are frequently global. Against this backdrop, Hertfordshire – as a brand, a location and an organising device – needs to be positioned judiciously. Finally, across knowledge-based firms in general – and those in bioscience in particular – there are currently major challenges in relation to early stage financing. Promising businesses are struggling to secure the capital they need to invest and grow. This problem is by no means restricted to Hertfordshire – but it is a major challenge looking ahead.

The strategic response

There are tremendous opportunities for Hertfordshire as the private sector core of Golden Triangle. However these are not “easy wins”: realising them will require a concerted – and committed – response. This response is likely to include:

supporting the development of the Rothamsted Enterprise and Research Centre, recognising its potential (which longer term, could form the core of a more ambitious agri-science park) in relation to one of the government’s “eight great technologies”, and also – alongside BRE Group – its role vis-à-vis environmental/green technologies

continuing to develop and support the principal bioscience facilities within Hertfordshire, particularly BioPark (Welwyn Garden City) and the GSK Biosicience Catalyst (Stevenage). In the future Watford Health Campus may also play a role. More generally, it will be crucial that Hertfordshire provides the sites and premises demanded by bioscience (and related) firms; only in this way will the Golden Triangle have traction

engaging in a creative dialogue with the bioscience community across the Golden Triangle involving, One-Nucleus, OBN, UKTI and the LEPs with responsibility for Cambridge, London, and Oxfordshire; this dialogue ought to focus, in particular, on inward investment and the challenges of financing early-stage business growth. With regard to the latter, there is a need to explore the scope to establish investment funds to address the equity gap facing bioscience (and related) businesses across the Golden Triangle

actively fostering the growth of knowledge-based businesses, including through the Growth Hub (set up by the University of Hertfordshire and Hertfordshire County Council) at Biopark

ensuring that Hertfordshire’s wider physical infrastructure is attuned to the opportunities for economic growth at the core of the Golden Triangle. Priorities will include the upgrading of well-located strategic employment sites (e.g. Gunnels Wood); and critical elements of the strategic road infrastructure (e.g. A1(m) from Junction 6 to 8)

working with Hertfordshire’s FE Colleges, key businesses, and the University of Hertfordshire to support workforce development through training provision and knowledge transfer, particularly in advanced manufacturing/engineering and IT; apprenticeship programmes will form a key part of the response.

4.3 Priority 2 - Harnessing our relationships with London (and elsewhere) Whilst distinctive, Hertfordshire will enjoy a confident and synergistic relationship with London: it will recognise and support the functional growth of London as a “world city”, and it will steer its own economic growth aspirations purposely and in response. This will mean that it will pay particular attention to the growth of four sectors:

• film and media • sport, leisure and cultural activities • financial and business services • high-end logistics.

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The opportunity

London has experienced tremendous growth over the last two decades, including throughout the recent recession. London’s share of the UK’s population, employment and output has risen rapidly, and international investment – particularly into property – has been phenomenal. Precipitated in part by the 2012 Olympic/Paralympic Games, London has also seen substantial infrastructure investment and more is planned/underway – not least Crossrail and HS2. Notwithstanding the financial crisis – and the implications for the City of London – the extraordinary growth of London as a first division “world city” seems set to continue. Over recent months, for example, Google has completed a £1bn property deal to move its UK headquarters to a brownfield site in the King’s Cross area: the seven and 11 storey complex is due for completion in 2016. Developments in London are creating major opportunities for adjacent areas, not least Hertfordshire. These include economic activities that are, effectively, priced out of central London; activities that are providing services to London’s burgeoning population; and any activities which – at root – require “space”. Four sectors appear to bring particular opportunities for Hertfordshire within this context: film and media – noting that Hertfordshire has world class assets in the form of Leavesden (home of Warner Bros) and Elstree, and that it can also offer a wide range of filming locations sport, leisure and cultural activities – recognising, in particular, the footprint of the 2012 legacy, and the tremendous upsurge in interest in participative sport that has been seen since 2012

financial and business services – where there are opportunities to accommodate national headquarters and also regional offices serving southern England: Watford, St Albans, Cheshunt, Hemel Hempstead can all claim notable businesses in this context

high-end logistics – which is growing very quickly, particularly in servicing London-based households and businesses, and increasingly generates higher quality jobs. With escalating fuel prices, the comparative advantage of Hertfordshire is growing in relation to this sector.

The risks For Hertfordshire, London’s growth is double-edged – and for many in the county, the pernicious creep of London into Hertfordshire is what they fear most. This strategy recognises and understands these concerns. But it is also fully alert to the tremendous opportunities that London’s growth presents in relation to Hertfordshire’s own economic well-being: a big, growing, and largely affluent market, right on the doorstep. We also need to recognise – and respond to – the fact that London’s infrastructural investments could benefit Hertfordshire: plans for Crossrail 2, for example, include an option that could extend into Hertfordshire. More immediately, the Croxley Rail Link project is extending the Metropolitan Line in the Watford area, and adding two new stations. Through this strategy, we need to channel these opportunities appropriately. In so doing, we must avoid those elements that really are not “smart” and focus instead on the growth dynamic that can add value, interest and opportunity to Hertfordshire’s businesses and workers alike.

The strategic response In responding to the opportunities linked – more or less closely – to London, this strategy will focus on five main strands:

supporting the growth (in scale and profile) of the film and media sector, and doing so in partnership with the LEPs with responsibility for Buckinghamshire and London. This process will

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itself be multi-faceted, but it will need to include an appropriate dialogue in relation to site-related issues. It ought also to include some support for local supply chain development – although here again, it must be recognised that the effective functional geography may substantially extend to the south and west of Hertfordshire

encouraging the growth of sport, leisure and cultural activities as key economic drivers. In this context, we need to really exploit (for example) the investment into white water rafting in Broxbourne, and the excellent location of Hertfordshire in relation to national centres of sport

working with local authorities to prioritise a few key sites that could become high quality business parks (that would appeal to UK or European headquarters) and make provision for some value-added logistics (recognising that jobs within logistics have been upskilled and Hertfordshire’s location is second to none)

ensuring that wider aspects of the strategic transport infrastructure are aligned, as far as possible, with these opportunities and imperatives; in this context, the Watford Junction Interchange Redevelopment and the M1-Maylands Link NE Relief Road (Hemel Hempstead) – two of the five priorities identified by the Hertfordshire shadow Local Transport Body – could be especially important

working with relevant partners – including the LEPs with responsibility for Cambridgeshire, Essex and London – to explore further the scope and potential of the London–Stansted–Cambridge (M11) Corridor. This Corridor is a complete mix – some major regeneration issues, some buoyant economies, and Stansted Airport. The Airport has recently seen a change in ownership which could be a fillip for economic growth in its own right. The opportunities linked to the M11 Corridor need to be explored – and partners in Hertfordshire need to be part of this.

4.4 Priority 3 - Re-invigorating our places for the 21st Century In achieving its Vision – and very much as part of it – we will embrace a new approach to our own spatial development. Our towns will be re-energised as vibrant urban economic hubs (with different solutions in different places). In addition, some of our towns must be allowed to grow. At the same time our high quality rural and urban environments must be conserved. The whole growth process will be smarter than previously – less confrontational, more reflective and galvanised by a genuine and shared commitment to securing the future of Hertfordshire for both current and future generations of residents, workers and businesses.

The opportunity With the transformative potential of high speed broadband and a radical renegotiation of the relationship between home and work, the geography of economic life is changing – in subtle, but important, ways. Hertfordshire’s rural areas ought to benefit from this, and it will be important that appropriate broadband provision is available. But in relation to ambitious economic growth – and the Vision we have defined for ourselves – there is a particular opportunity for Hertfordshire’s towns. In advancing a smart growth agenda, high quality urban environments are an increasing draw. The “coffice” – or perhaps more formal workhubs – are becoming increasingly important as workspaces, and in the provision of both, town centres provide great potential. Hertfordshire’s town centres are, currently, very mixed. Some – such as St Albans and Berkhampsted – are thriving, with invaluable cultural and heritage assets; a strong speciality retail offer; and a vibrant visitor

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economy. Others – notably Watford – have a strong retail offer (based currently around the Harlequin Shopping Centre (now intu), but with potential to be developed through Charter Place) and function as strong economic hubs, attracting shoppers and workers from across a geography that extends well beyond Hertfordshire. Elsewhere, however, and particularly with regard to the Phase 1 New Towns (Hatfield, Hemel Hempstead, and Stevenage), the urban fabric is in urgent need of regeneration; indeed, with surplus commercial and retail space, some of the town centres are quite out of kilter with the character and potential of Hertfordshire more generally. Yet most have mainline railway stations and they ought to be regarded as a substantial opportunity. Their economic roles and functions need to be re-defined – and in the light of the growth of on-line retailing, the mix of town centre uses may need to be re-appraised. More generally, though, there is a need – and an opportunity – for a new spatial framework for growth in Hertfordshire. Not everywhere can or should grow in terms of its spatial footprint, but some towns must do so. Hertfordshire has a serious housing shortage and the number of dwellings in the planning pipeline is much reduced since the demise of the East of England Plan: analysis completed through the refresh of the Hertfordshire Infrastructure Investment Strategy (2012) concluded that there could be 22,000 fewer dwellings coming forward over the period 2001-2031 than previously planned.

The risks Issues relating to Hertfordshire’s spatial development are likely to be among the most contentious – and we do understand why. The redevelopment of the town centres – including, potentially, some changes of use – should make a useful contribution in relation to the housing deficit; but it is unlikely to be enough. Ignoring the issues will not make them go away; they will just become progressively more challenging. The risk is that the only people who can afford to live in Hertfordshire are those that work in central London; and this is an outcome that we need to avoid.

The strategic response

Our strategic response to this third Priority involves: working with relevant local authorities to advance a new urban vision, focusing on both the whole town economy and the evolving roles/potentials of town centres. In many cases, this will include a strong live/work offer (through ’coffices’, work hubs and incubator space, and including first-rate wi-fi connectivity) consistent with 21st century life; and a greater recognition of the role of towns as hubs for enterprise. It is quite clear that the old models are broken and that capacity is severely stretched. As a first step to developing a new approach, we will work to ensure that employment land allocations are realistic and – where appropriate – we will support the conversion of redundant retail and commercial buildings to residential uses. Beyond this, we will support the preparation and implementation of town centre (and related) masterplans as part of a whole town economic vision.. Although they differ from each other, our initial priorities are likely to be:

Hemel Hempstead – which is one of Hertfordshire’s New Towns and today has a population of around 89,000. A Town Centre masterplan is in place (2012) encompassing strategies for land use, access and movement and quality environment. Whilst the Old Town has an historic character, the town centre has struggled and changes are needed

Stevenage – which is another New Town and also has a clear masterplan in place (prepared in 2010). This sums up the challenges facing Stevenage as “a town centre that has a poor image,

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cannot provide modern retailers with the flexibility they need, does not contain a thriving evening economy, offers only a limited range of uses and seems detached from its community and a significant employment area on its doorstep”

Watford – which is Hertfordshire’s largest town. Watford has seen substantial investment and growth over recent years but more needs to be done, not least through proposed developments at Charter Place and the west Watford regeneration plans (with commercial, residential and health-related components) linked to Watford Health Campus;

working with a range of providers to ensure that Hertfordshire’s towns (large and small) have

appropriate provision for enterprise. We need a network of managed incubator facilities – both general purpose and more specialised, all with superfast broadband – to encourage enterprise;

working with private sector providers and local authorities to ensure that Hertfordshire leads the way as a “smart county” in terms of its infrastructure for virtual and physical communications. We want to see, for example, smart ticketing at railway stations; and mobile apps underpinning real-time traffic and parking management. All of this must be underpinned by the highest quality broadband and we will take steps to ensure that Hertfordshire’s towns – and its rural areas – are prioritised in the roll-out process;

working with the local authorities to advance our collective thinking in respect of a spatial plan for Hertfordshire. This must be consistent with our aspirations and assets – and indeed our responsibilities – with regard to smart economic growth over the period to 2030. Elements of this will be challenging, but some of our towns must be allowed to grow. The political geography of Hertfordshire (in terms of boundaries) means that this cannot be achieved by individual local authority districts in isolation. In many areas, we are struggling to make progress in relation to Local Plans which are now very out-of-date. We need a reasoned and constructive dialogue to agree the best way forward.

4.5 Priority 4: Foundations for Growth Finally, in striving towards our Vision, we will ensure that the opportunities for – and benefits of – economic growth are appropriately shared. We will ensure that our 50,000+ small and medium-sized enterprises are able to secure the support they need, irrespective of the sector in which they operate or the place they are located. We will also ensure that skills provision is improved county-wide. It simply must become more reflective of, and responsive to, the changing requirements of our wider business community.

4.6 What will success look like? Our Vision for the future is one of smart growth. This is challenging in terms of metrics and targets. However, in headline terms, we want to see jobs that are more productive and a business population that is increasingly ambitious. The targets we have defined for ourselves follow – recognising that to become more productive (as individuals) and ambitious (as businesses), we will also need better and smarter skills, infrastructure, access to capital, etc. GVA per job (and overall GVA) One of our headline metrics is a key measure of productivity: GVA per job. By improving productivity, we will grow our economy overall.

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Currently, GVA per job in Hertfordshire is around £44k (based on data from EEFM, 2012, at constant 2008 prices). It is projected to increase to £62k by 2030. Within Hertfordshire, district level data suggest that East Hertfordshire and Stevenage will see the slowest productivity growth (1.9% per annum) while Broxbourne (2.3% per annum) will see the fastest.

Compared to this baseline statement, our target is to grow Hertfordshire’s productivity performance at a rate of 2.5% per annum over the period to 2030. This is ambitious: it means achieving an overall rate of growth in excess of that projected for the best performing district.

If we achieve our productivity target, by 2030, output per job across Hertfordshire will have risen to £68k (compared to a projected £62k). Assuming the number of jobs grows as per the baseline projection8 (an increase in total employment from 588,000 to 687,000 jobs between 2012 and 2030), Hertfordshire’s overall GVA will have increased to £47bn (compared to the currently projected £43bn).

Skills Hertfordshire performs well on conventional qualification-based skills measures, but we need to continue to improve. Our target is that by 2030, 85% of our working age population will be qualified to NVQ2 or above and 53% will be qualified to NVQ 4 (degree level) or above. If we achieve this, the whole county will be performing at the level of St Albans district currently.

Business demography Currently, there are around 50,000 businesses in Hertfordshire. The county’s business demography is unusual insofar as both micro-enterprises and large firms are (relatively) over-represented while “mid-size” firms (employing between 10 and 249 people) are under-represented. To achieve smart growth:

rates of new business formation will continue to be high: the rate of new business formation (per resident aged 16+) should continue to be at least 25% higher than the national average

more firms will grow to become larger SMEs (as these tend to be the “engines of growth”): the stock of mid-size enterprises should have grown to at least 20% of the total by 2030 (currently it is less than 10%)

Hertfordshire will secure more inward investment: the number of inward investment projects will increase to 30 per annum (compared to the 15-20 secured over the last three years (according to UKTI data).

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Section 5 – Hertfordshire EU SIF Investment Priorities 5.1 Introduction and Approach 5.1.1 Introduction and Content This section sets out the proposed Investment Priorities for the Hertfordshire allocation of the European Structural and Investment Funds (EU SIF). We have refined and added further detail to the approach set out in the draft strategy. The figures provided for outputs and results are based on HMG benchmarking guidance and should be considered as estimates based on this information. We have enjoyed positive discussions with ‘opt-in’ agencies. However, it has not been possible to agree the detail required to fully commit funds to any of the ‘opt-in’ offers contained in the guidance published in July 2013 or those that have arisen as this strategy document was under preparation. We note that HMG guidance recognises that this is the case across the Country and that ‘opt-ins’ are included in the strategy documents as in principle commitments subject to satisfactory conclusion of detailed ‘opt-in’ agreements. We look forward to finalising these agreements in the coming months. This section has been structured to align with the published EU SIF themes and is accompanied by the spreadsheet required by HMG. This is attached as Appendix A.

5.1.2 Rationale for Intervention Article 27 and Article 96 of the EC Common Provisions Regulation (covering programme preparation) places sound intervention logic as the cornerstone of the 2014-20 programming period. Intervention logic is further defined in the Commission’s guidance note “Guidance Document on Monitoring and Evaluation” published in January 2014. Intervention logic (see diagram below) seeks to ensure that funds are deployed efficiently and intelligently to interventions that make the greatest contribution to smart, sustainable and inclusive growth.

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Hertfordshire LEP has sought to use intervention logic to arrive at a rationale-driven set of indicative interventions, based on evidence and development needs, to maximise the use of resource. This avoids duplication and helps to ensure additionality and tangible impact delivery. Each part of this section of the strategy contains the ESIF Thematic Objective selected, the proposed allocation of ESIF and estimated associated match funding sources; the rationale for intervention (including reference to the National evidence base, Hertfordshire evidence base and links to the Hertfordshire growth strategy); the investment priorities within the thematic objective plus an indicative list of possible activities and estimated outputs and results. Recognising that some funds can be used to complement themes where appropriate a narrative is included in the ERDF section which sets out support from ESF and EAFRD. We believe that the format of the strategy provides a clear rationale for the targeting of funds. We have sought to ensure the document remains strategic in nature. Whilst there is reference to some specific interventions we have not detailed likely project proposals. A summary of the process that we have undertaken to develop our Intervention Logic is as follows: Stage 1 – identification of development needs The evidence base set out in section 3 of this document has been used to understand the social and economic context of the area, to identify the issues and identify what change we want to affect. Until the underlying problem is identified and understood improvements cannot be made. The analysis was not started from scratch. Much of this information was drawn from the Hertfordshire Economic Outlook of 2011. The analysis has been updated where possible and appropriate. Furthermore, consideration of our approach to local challenges has been made in the context of national and Europe 2020 objectives. Stage 2 – selection of thematic objectives and programme priority axis The economic and social analysis helps to provide an understanding of the issues and development needs of the area. This information has been key to informing the selection of thematic objectives which provide the framework under which Hertfordshire can utilise ESIF resources to help meet our challenges. We believe that our selection of thematic objectives is consistent with the EC requirements in respect of thematic concentration. We have allocated sufficient resource to the areas of low carbon and social inclusion, but have avoided diluting the impact of the funding by spreading the investment too thinly across objectives. Stage 3 – establishment of investment priorities Within each thematic objective we have further defined our investment priorities and allocated funding accordingly. This approach provides more detail of our intended approach and seeks to ensure the focus of investments on identified priorities. It is recognised that the allocation of funds is insufficient to address every identified issue. Stage 4 – identification of (indicative) types of actions /activities to be supported We have included indicative activities within the strategy. These are not intended to be a list of actions or projects but will act as a guide to illustrate the types of interventions that might be used to deliver the investment priorities. The list is mainly drawn from National guidance but has been amended or re-worded where appropriate. The list is not exhaustive and it is anticipated that some interventions may not fit into the descriptions included. However, providing that the funded activities fit under the definition of the Thematic Objective and meet eligibility rules these could be eligible. Stage 5 – definition of Output Indicators

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The funded interventions will produce measureable Outputs – the direct products of supported operations. These in turn contribute to results in meeting defined objectives. Outputs measure project activity and are prescribed by the EC and measured in physical or monetary units. Unlike previous programmes (for ERDF), output targets will be national, and LEP strategies will contribute through local or collaborative delivery to national targets. As with Results, national guidance has been limited, so we have estimated our output contribution as effectively as we can. Our output indicators are logically linked to, and reflect, the types of actions planned. Outputs along with results will be used to assess the value for money of specific interventions. Stage 6 – definition of Result Indicators Using the ‘intervention logic’ model the outputs will produce results. These seek to measure the gross economic benefits or outcomes from the funded intervention. We have not included estimates of likely results from our planned investments at this stage since we are not required to do so on the HMG spreadsheet. Broadly the structure of each section setting out the chosen Thematic Objectives is as follows:

5.1.3 Approach to Additionality The demonstration of additionality is a key requirement for the use of ESIF. Assessment of additionality has been built into the development of this strategy and will be assessed for each individual intervention. The requirement for additionality is contained in the ESIF Common Provisions Regulation (Article 95 refers). In summary in the regulatory context this means:

Initial Funding Allocation

Rationale for Investment

Opt-In Arrangements (Where appropriate)

Investment Priorities

Indicative Activities

Outputs

Results

EU 2020 UK National Local

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‘Support from the Funds for the Investment for growth and jobs goal shall not replace public or equivalent structural expenditure by a Member State’.

Hertfordshire LEP is keen to ensure that additionality is demonstrated through provision secured via ‘opt-in’ arrangements and by directly funded project proposals. Underpinning an assessment of additionality across all thematic objectives will be the following approach: Scale Either the proposed intervention would not go ahead without ESIF support or such support would increase the size and scope of the intervention. Timing Additionality may also be demonstrated if the timing of the intervention is crucial and there are benefits that could missed if it does not proceed without substantial delay. Specific Group or Location Additionality can be demonstrated if the investment is targeted at addressing issues faced by particular groups or at particular locations. Quality Additionality could be demonstrated if the investment seeks to enhance the quality of a particular activity providing measurable benefits. A combination of the above alongside evidence that interventions would not simply displace other public expenditure will be used to assess additionality for any interventions funded under this ESIF strategy.

5.1.5 Market Failure In developing this strategy and the Hertfordshire Strategic Economic Plan we have carried out an overarching assessment of market failure. This analysis appears, in summary, in section 5 of the SEP document submitted to HMG on 16th December 2013. The table below is an extract from that analysis containing the sections relevant to investment priorities we have selected for support from ESIF. Growth in Hertfordshire: Opportunities, constraints and key market failures

Opportunities for and/or barriers to growth

Key market failures

Access to finance: Our small, technology-based, firms cannot secure the finance they need to grow their businesses

Imperfect information: Lenders/investors (business angels and Venture Capitalists) have less information than they think they need; and firms fail to make their case appropriately

Institutional failures: Investors are not really geared up to the realities of investing in high risk, knowledge-based, enterprises

We have fragments of knowledge-based excellence: There are world class knowledge-based assets within Hertfordshire – particularly in the domain of bioscience – and we are also adjacent to key hubs in both Cambridge and London, but we need to make this “count”

Agglomeration and growth externalities and clustering: There is not a strong network of inter-relationships across Hertfordshire, despite the calibre of the assets. In part this reflects the fact that Hertfordshire does not have a clear “economic centre” (i.e. there is no one dominant urban area). But in part it also reflects the fact that key relationships exist – and need to exist – with both London and Cambridge, and indeed internationally

Our science and technology is “ahead of the market”: Hertfordshire is a national

Imperfect information: Some of the science that Hertfordshire’s firms are seeking to develop is so leading edge that the market does not yet exist and would-be

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Opportunities for and/or barriers to growth

Key market failures

focus for R&D and it has real science-based excellence, but that takes time to translate into economic growth

customers (e.g. NHS, downstream pharmaceuticals firms) are unwilling to take the risks

Our businesses cannot recruit staff with STEM skills: There is a shortage of supply of workers with skills and expertise in science, technology, engineering and mathematics. This is constraining the growth of knowledge-based enterprises in Hertfordshire and it means that Hertfordshire’s growth potential is not being realised to the full

Co-ordination failures: Public sector provision in relation to STEM skills is very fragmented and responsibilities are split between DfE and BIS and their various agencies

Imperfect information: Young people entering the workforce have no real idea of the opportunities that exist in relation to science-based activity in Hertfordshire; retention of those with STEM-related qualifications is therefore challenging

Public goods: Firms are reluctant to invest as much as they might in training in relation to STEM disciplines because the costs are high and they fear they won’t capture the gains (because workers might move on to the next job)

In general, firms’ attitudes to recruitment are strongly influence by the scale of the labour market in which they are operating: The labour market available to Hertfordshire’s businesses extends well beyond the boundaries of the county. This creates opportunities for Hertfordshire’s businesses (because of its size) but also some real challenges

Public goods: Hertfordshire’s firms are reluctant to invest as much as they might in training because as soon as workers are qualified and experienced, they can command much higher salaries in London. This issue has been flagged explicitly by firms, including in the financial and business services sector

Agglomeration and growth externalities and clustering; and environmental externalities: Hertfordshire’s businesses are able to recruit from a labour market pool that certainly includes north London, Luton and Central Bedfordshire. This means that the incentive to develop local solutions is not high and significant “leakage” is linked to any attempt so do to. This labour market geography also brings with it significant environmental down-sides

We have a large number of Mark 1 New Towns and other settlements that saw accelerated growth in the 1950s/60s: Many of our towns have a crumbling infrastructure and weak local economies in the midst of the greater south east. Moreover given the spatial constraints which define Hertfordshire, these towns have got to be the principal hubs for future economic growth

Co-ordination and institutional failures 1: The planning system has not served Hertfordshire’s towns well. Several are significantly under-bounded and growth needs to occur in adjacent local authority areas. This in turn requires a political consensus for growth that has proved impossible to sustain

Co-ordination and institutional failures 2: Our New Towns were substantially developed in a short, concentrated period which means their infrastructure was all put in place at the same time and it now all needs upgrading at the same time. This constitutes a major co-ordination/institutional failure as there is no concerted delivery mechanism to invest and prioritise at the scale which is needed (beyond standard development/planning processes)

Scale economies and diseconomies: In part because of planning issues, many of our towns are below critical mass in terms of their scale. Watford aside, our towns struggle to function as genuine regional centres with the scale and quality of amenity/retail/leisure that our residents seek. Hence rather than shopping locally, residents will travel to Milton Keynes or Cambridge or possibly Brent Cross. This constitutes lost economic impact for Hertfordshire and does nothing for our urban economies in general or our town centres in particular. These are weak and new approaches are needed

Social inclusion, equity and distributional issues: Within our towns, there is real deprivation and disadvantage which is masked within overall data for Hertfordshire. It is telling, for example, that the people who work in Stevenage’s high profile employers (like GSK) largely commute in from outside while the residents of Stevenage are poorly qualified and work in low paid jobs

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5.2 Investment Priorities - European Regional Development Fund (ERDF) 5.2.1 Overview ERDF Related Themes 5.2.1.1 Financial Allocations The HMG Supplementary Guidance to Local Enterprise Partnerships (July 2013) on the Development and Delivery of European Structural and Investment Funds Strategies listed the following themes under the European Regional Development Fund (ERDF) allocation:

Core EU SIF Themes ERDF More developed regions TO1 - Strengthening Research, Technological Development & Innovation

At least 80% ERDF must be spent on these 4 themes of which at least 20% must be spent on ‘low carbon’.

TO2 - Enhancing Access to, and use and quality of, Information and Communication Technologies

TO3 - Enhancing the Competitiveness of SMEs

TO4 - Supporting the Shift towards a Low Carbon Economy in All Sectors

TO5 - Climate change adaptation Lower priority

TO6 - Environmental protection Lower priority

TO7 - Sustainable transport Lower priority

The table below represents the revised allocation for ERDF notified to Hertfordshire LEP by the Managing Authority. It includes changes made since approval of the Operational Programme but does not incorporate the virement agreed by the Hertfordshire ESIF Committee in March 2015. The Thematic Objectives (TOs) originally used for notional allocations were incorporated into Operational Programme (OP) Priority Axis. The table below reflects this change. Managing Authority Notified Allocations – December 2015

ERDF Priority Axis (PA) and Thematic Objectives (TOs) (Core themes shaded green) Percentage ERDF € Match € Total Value PA1 (TO1) - Strengthening Research, Technological Development & Innovation 38.91% 13,829,321.00 13,829,321.00 27,658,642.00

PA2 (TO2) - Enhancing Access to, and use and quality of, Information and Communication Technologies 0.00% 0.00 0.00 0.00

PA3 (TO3) - Enhancing the Competitiveness of SMEs 38.14% 13,555,934.00 13,555,934.00 27,111,868.00

PA4 (TO4) - Supporting the Shift towards a Low Carbon Economy in All Sectors 22.94% 8,154,004.00 8,154,004.00 16,308,008.00

PA5 (TO5) - Climate change adaptation 0.00% 0.00 0.00 0.00

PA6 (TO6) - Environmental protection 0.00% 0.00 0.00 0.00

PA7 (TO7) - Sustainable transport 0.00% 0.00 0.00 0.00

Total Check 100.00% 35,539,259.00 35,539,259.00 71,078,518.00

The Hertfordshire LEP Area ESIF Committee proposed the following changes (see table below) to the allocation of funds between Priority Axis. The proposal met the requirement for at least 20% of the funding to be spent on PA4 (TO4) ‘Supporting the Shift towards a Low Carbon Economy in All Sectors’ and had the primary objective of moving funds from PA1 to PA3. The rationale for this change was the likely lack of available match funding for local PA1 projects given that Government funding for innovation primarily flows through from national level via agencies such as Innovate UK. Whilst not impossible it is difficult to access this funding to use as match for local projects.

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These figures include the performance reserve allocation. The table below represents the revised allocation profile for Hertfordshire including changes to the percentage distribution of funding across the Priorities approved by the Hertfordshire ESIF Committee in March 2015. The table also reflects changes notified by the Managing Authority to the percentage allocation for PA4 which has increased from 20% to 23.04%. The allocation for PA1 has been amended to accommodate this change.

Proposed Changes to allocation (October 2015 – including changes to ERDF allocation March 2015)

ERDF Priority Axis (PA) and Thematic Objectives (TOs) (Core themes shaded green) Percentage ERDF € Match € Total Value PA1 (TO1) - Strengthening Research, Technological Development & Innovation 26.96% 9,581,030.50 9,581,030.50 19,162,061.00

PA2 (TO2) - Enhancing Access to, and use and quality of, Information and Communication Technologies 0.00% 0.00 0.00 0.00

PA3 (TO3) - Enhancing the Competitiveness of SMEs 50.00% 17,769,629.50 17,769,629.50 35,539,259.00

PA4 (TO4) - Supporting the Shift towards a Low Carbon Economy in All Sectors 23.04% 8,188,599.00 8,188,599.00 16,377,198.00

PA5 (TO5) - Climate change adaptation 0.00% 0.00 0.00 0.00

PA6 (TO6) - Environmental protection 0.00% 0.00 0.00 0.00

PA7 (TO7) - Sustainable transport 0.00% 0.00 0.00 0.00

Total Check 100.00% 35,539,259.00 35,539,259.00 71,078,518.00

The Managing Authority confirmed in late November 2015 that the proposed changes could not be accommodated at that time due to restraints arising from negotiations with the Commission. However, it is understood that the allocations will be reviewed at a future date. The virement proposal remains lodged with the Managing Authority and is accordingly recorded in this ESIF Strategy document.

5.2.1.2 Match Funding Overview Identification of match funding for ERDF related themes will be challenging. We have sought to make clear links with the Growth Plan and Strategic Economic Plan (SEP) and associated funding sources. It is anticipated that Single Local Growth Fund and Growing Places funding could be used plus locally identified funding sources potentially including university sources, local authorities, and leverage of some private sector funding. More information on match funding appears under each of the Priority Axis sections below.

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5.2.2 Priority Axis 1 (TO1) - Strengthening Research, Technological Development & Innovation 5.2.2.1 Funding Allocation The table below represents the allocation notified by the Managing Authority in December 2015 following approval of the Operational Programme. PA1 – Allocation and Funding Summary (MA December 2015)

Source €m

ESIF 13.829

Local Match including SLGF 13.829

Total 27.659

The allocation to Priority Axis 1 represents 38.91% of the Hertfordshire ERDF notional allocation (covering the theme TO1 - Strengthening Research, Technological Development & Innovation). This represents an allocation of €13.829m of EU SIF (ERDF) making the total allocation around €27.659m based on an average ERDF intervention rate of 50%. It is anticipated Single Local Growth Fund and Growing Places will provide some match funding plus locally identified funding potentially including university sources, local authorities, and leveraging some private sector funding. Where it is possible to do so funding delivered via the Technology Strategy Board (TSB) (now called Innovate UK) will be explored as a potential source of match. The current sterling value of the notional allocation to Priority Axis 1 for Hertfordshire can be found in the funding spreadsheets associated with this document. 5.2.2.3 Rationale for Investment Europe 2020 and National Government Priorities5 Clear and specific performance measures were set out in the UK Government’s Innovation & Research Strategy for Growth. The ambition is to improve the framework conditions for research and innovation to facilitate greater private sector investment over the period. HMG is basing proposals for use of the European Structural and Investment Funds on that strategy and the more detailed proposals for proposed actions also take into full account the Government’s Industrial Strategy and the proposals in Innovation in Health & Wellbeing. Meanwhile, the Europe 2020 ambition is to improve the conditions for research and development, in particular with the aim of raising combined public and private investment levels in innovation in the EU to 3 per cent of GDP. The European Commission will expect the use of European Structural and Investment Funds for innovation in England to align with this policy.

The National Policy Context6

Innovation & Research Strategy for Growth The UK Government’s Innovation & Research Strategy for Growth was published in December 2011. It is supported by an authoritative economics paper. It provides a robust and detailed evidence for national innovation and research priorities and how European Structural and Investment Funds and other EU funds could support research, development and innovation.

5 Taken from Framework of European Growth Priorities – Background Analysis, HM Government, July 2013 6 Taken from Framework of European Growth Priorities – Background Analysis, HM Government, July 2013

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The national strategy notes that the UK has the potential to be a world leader in innovation. The strength of UK universities and the wider knowledge base is seen as a strong national asset. The UK knowledge base is the most productive in the G8, with a depth and breadth of expertise across over 400 areas of distinctive research strength. UK Higher Education Institutions generate over £3 billion in external income each year. The strategy confirmed that it is committed to invest in maintaining and strengthening the research base, and to continue to fund a balance of blue skies and applied research projects.

The Innovation & Research Strategy for Growth also recognises that the challenges we face in innovation are as big as those elsewhere. Some of these are long-standing, such as ensuring we make the most of the UK’s inventions and discoveries. It notes that other countries are spending more on research and working to develop clusters of knowledge and innovation hotspots. It recognises that the costs of cutting-edge research and the latest high-tech processes are greater than ever before, and are often too large for any one company. It notes that we need to do more to support the development of technician-level skills and higher level skills. Importantly, the national strategy emphasises that we must strengthen our ability to accelerate the commercialisation of emerging technologies, and to capture the value chains linked to these. The private sector will always be central to innovation but government and its agencies can play a key role in ensuring entrepreneurs, financiers and innovators have the best possible environment in which to operate through improving the interface between Higher Education Institutions (HEIs) and business, and delivering a better environment for the commercialisation of research. The national strategy recognises that competition is important in driving the quality of research and business innovation. However, it stresses also that there is overwhelming evidence to show that multi-partner collaborations can add more than the sum of their parts.

The Industrial Strategy The Government set out in September 2012 its approach towards a new industrial strategy. Technologies and the broader research which underpins their development is a fundamental part the approach of government to the industrial strategy. The Government is working in partnership with business to develop 10 sector strategies. The update to the Life Science strategy was published in December 2012 and new strategies for the sectors of Aerospace, Nuclear, Oil & Gas, Information Economy, Construction, Automotive and Professional Business Services have also been published. Sector strategies are also due to be published for Offshore Wind, Agri-tech and Education. The Government has set out the ‘eight great technologies’ that are key to the Industrial Strategy and growth, with real potential for economic and societal benefits, in which the UK can gain a competitive advantage. They are:

The Data Revolution and energy-efficient computing;

Synthetic Biology;

Regenerative Medicine;

Agri-Science;

Energy Storage and the stockpiling of electricity;

Advanced Materials and Nano-technology;

Robotics and Autonomous Systems; and

Satellites and commercial applications of Space technology.

Innovation in Health & Wellbeing The report Innovation, Health and Wealth, published by the NHS Chief Executive in December 2011, outlined the contribution the service can make to the Government’s Plan for Growth, setting out the strategic approach to innovation in the reformed NHS. Part of the Prime Minister's UK strategy for Health

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Innovation and Life Sciences, it focuses on the NHS as a major investor and wealth creator in the UK, whose success in adopting innovation enables industries to invest in developing the technology and other products the NHS needs for its development. The aim of Innovation, Health and Wealth is to support the NHS in achieving systemic change in the way it operates; in pursuing innovations that add value for the service but not cost and in enabling the consistent and widespread adoption and diffusion across the NHS. This involves both the supply of, but also critically the demand for, new and existing ideas, services and products. Central to this agenda is the relationship between the NHS, academia and industry. Innovation, Health and Wealth outlined several actions necessary to position industry as a strategic service partner to the NHS, rather than a transactional supplier of goods and services.

National Context - Progress7 The economic downturn continues to highlight challenges to the UK’s long run growth prospects. Business investment in R&D is low compared to leading countries and we still have work to do to catch up with leading competitors such as Germany and the US in terms of UK’s overall investment in R&D. Levels of investment in R & D differs significantly across the various parts of England.

The 2012 Annual Innovation Report shows:

in terms of traditional forms of innovation metrics, such as Gross Expenditure on Research & Development as a proportion of GDP, the UK does still trail behind most of our main competitors;

on the other hand, much of the gap between the UK’s R&D intensity relative to comparator countries can be explained by the UK’s sectoral mix, which includes a relatively high proportion of industries which are, by nature, of a lower R&D intensity;

the UK stands among the top performing countries when all intangible investment is taken into account. Nesta’s 2012 Innovation Index calculated total investment in intangible assets as £124 billion in 2009, down £4.2 billion (3.3%) in nominal terms from the year before, but up 1.5% in terms of share of private sector gross value added (GVA);

the 2011 UK Innovation Survey (UKIS) show that a total of 37% per cent of firms were active in innovation12 in the three year period from 2008 to 2010;

innovative firms in the UK are far more likely to be active in foreign markets than their counterparts in France, Italy or Sweden;

the UK is well behind the leaders in Finland and Canada in terms of higher education R&D intensity, but reasonably well positioned in terms of the main group of comparator countries, in line with Germany and France;

the proportion of the UK labour force that is trained in science and technology has increased over time, and the UK has a high proportion of engineering and doctoral graduates in comparison to other countries; and

the UK performs well on international collaboration and international investment measures, with the highest proportion amongst the OECD of R&D funded from abroad countries at 16% of total R&D.

Local Evidence Base The evidence base relevant to this theme can be found in section 3.5 of this document.

Local Context Whilst it is not possible to provide data on which to make a full assessment of the county’s innovation capacity, we know from existing metrics, such as patents, that Hertfordshire outperforms the national average (13.0 EPO patent registrations per 100,000 residents) with 15.5 EPO registrations/100,000 residents. Other indicators including high levels of economic output per head; higher than average

7 Taken from Framework of European Growth Priorities – Background Analysis, HM Government, July 2013

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proportions of residents working in science, research and engineering; and a highly skilled labour force suggests a propensity towards innovation. However, in spite of possessing some key components typical of highly innovative places, the county’s average employment in high and medium technology manufacturing and slowing long term growth rates suggest that innovation performance is at best average.

However, measuring Innovation at a local level is an imprecise science. Traditionally, Innovation is measured by a narrow set of metrics related to a linear model of innovation founded on the measurement of scientific and technological research linked to the performance of manufacturing sectors. Established metrics such as business expenditure on research and development (R&D), counts of patent filings, and numbers of science and technology graduates are useful metrics, if somewhat limited, for gauging regional innovation performance and may give rise to perceptions that innovation is largely about invention. This linear model involving scientific discovery and basic research, passed through applied research, engineering and manufacturing activities and eventually leading to the introduction of new products is clearly important to counties like Hertfordshire. But there is a growing need to look at the whole Innovation value chain and support innovation in services and the creative industries and to reflect emerging trends in open and user led innovation. This rationale for promoting innovation in its widest sense is supported by a series of research findings published by NESTA. In its 2009 report, “The Innovation Index: Measuring the UK’s investment in innovation and its effects”, NESTA found that over three quarters of investment in innovation was hidden in areas other than traditional research and development. The NESTA report went on to conclude that investment in innovation made a significant contribution to the UK’s economy, accounting for two-thirds of the UK’s private-sector labour productivity growth between 2000 and 2007 and delivering a productivity gain by an average of 1.8 percentage points per year. In NESTA’s view much of this productivity increase came not from traditional research and development but from other types of investments in innovation, such as design, the development of innovative skills, brand equity and organisational innovation. Follow up work by NESTA, (2009: Vital 6%) suggests that the best way of generating employment and growth will best be achieved through policies focused on promoting innovation on the small number of companies with high growth potential, rather than through broadly based business support programmes for new start-ups and SMEs. We know from research carried out by Hansen and Birkinshaw and published in the Harvard Business review in 2007 that much of the economic benefit from innovation comes from incremental innovations arising from the wide diffusion of knowledge and technology rather than from the creation of that knowledge in the first place. Our approach based on the work of NESTA and Hansen and Birkinshaw is focus on innovation, both scientific and hidden, through a value chain approach by developing initiatives in the components of the value chain:

idea generation - Supporting scientific and technological Research and Development and delivering support for innovative clusters and networks

idea conversion – Developing appropriate financial instruments for growth businesses and promoting functional technology transfer

idea diffusion - Providing access to domestic and international markets by promoting opportunities through government procurement contracts (e.g. Small Business Research Initiative and Academic Health Science Networks) and UK Trade and Investment

Our approach to supporting innovation will be delivered through the development of a business Growth Hub for Hertfordshire in partnership with the University of Hertfordshire. There is a clear rationale for a targeted intervention to support an undersized segment of Hertfordshire’s business stock (i.e businesses in the employment size bands 5 to 100) in order to address below average growth rates in the last decade. It involves the LEP co-investing with the University in the establishment of a central resource to support small and medium firms and would provide coordination and facilitation services to support SMEs based on

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an in depth analysis and understanding of individual business needs. The model would build on existing organisational structures where possible and focus on the following main areas of activity.

Increasing the uptake of national and local schemes: facilitate a ‘single conversation’ with local businesses, raising awareness and uptake of both public and private sector support by improving coordination, marketing and signposting

Maximising the reach of national schemes: including ‘amplification’ – where local funding could be used to expand the provision of agreed national schemes (e.g. Technology Strategy Board, MAS, Growth Accelerator and UKTI) – and ‘franchised delivery’ – where agreed national schemes or assets could be delivered/provided from the Growth Hub.

Tailored business and innovation support: offer tailored support to business with a strong focus on areas of higher added value, including leadership and management training, investment readiness e.g. early stage seed finance, growth capital, bank lending etc

Tailored trade and investment support: close links to export support, as a major growth driver

Stimulate the demand for innovation: establish an innovation champion to promote the benefits of innovation and provide support to companies looking to develop innovative products and processes including the availability of an Innovation Voucher scheme to encourage business engagement with the universities and specialist research and technology organisations.

Increase the take up of technology: provide access to technology developments through a range of advice and financial support mechanisms to encourage early adoption.

Local Context – Strategic Economic Plan (SEP) The draft Hertfordshire Strategic Economic Plan (SEP) ‘Perfectly Placed for Business’ submitted to HMG in December 2013 highlights the importance of supporting innovation and knowledge transfer in the area. In particular the Implementation Plan Package A ‘Maintaining global excellence in science and technology’ sets out key actions to deliver this priority. It is envisaged that funds allocated to TO1 in this ESIF strategy will contribute towards the delivery of that agenda particularly the following actions: A1: Equity/funding gap Hertfordshire needs to provide the conditions to support high technology businesses with global sales potential. Recent evidence confirms that the availability of venture capital for new and expanding companies has been deteriorating for some time as many investors have been put off by a combination of technological uncertainty and market risk. This retrenchment into “safer” investment havens has created a gap in the financing of developing SMEs. Indeed, the onset of the credit crunch in 2008 has widened the gap in funding for expanding SMEs and innovative new businesses. The Centre for Economic and Enterprise Development Research (CEEDR) reports that the equity gap for early stage high technology businesses now extends above the £2m investment ceiling as a result of the high R&D set-up costs and long lead times to market. As a result there are discontinuities across the supply side between business angels and venture capitalists. A recent survey of Business Angels by Deloittes and the British Business Angels Association ,“Taking the Pulse of the Angel Market”, found that 40% of angel investors saw the funding gap deepen as VCs retreated up the value chain. The intention is to build an investment climate by establishing a business angel and venture capital fund manager support scheme for Hertfordshire’s high technology growth sectors: life sciences, advanced engineering, sustainable construction, industrial plant crop technology, and film and media. This will support growth in a variety of businesses, primarily where sales revenue has already been established. It is intended that the following activities may be supported by ESIF: 1: Investor readiness programme – conditioning the pipeline of investment opportunities 2: Due diligence service to support private investors

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Further details can found in section 8 of the SEP. Growth Hub The key element of Package D – Foundations for Growth contained in the SEP is the creation and expansion of a growth hub. The detail of this proposal is explained in section 11 of the SEP document. Growth Hub Overview – and the overall case for intervention In explaining the performance of Hertfordshire’s economy, evidence points to a systemic problem which is very difficult to explain. While rates of business start-up and survival are high across the county, many businesses appear unable to grow. The upshot is that there are relatively few firms in the 10-250 employment size band. Yet elsewhere, it is this group of firms that are most likely to drive the economy forward as some of them function as “high growth” gazelles. To achieve the vision set out in Perfectly Placed for Business, Hertfordshire needs more firms that do more than survive: they need, in short, to grow. Against this overall backdrop we believe that: • significant employment and GVA growth could be achieved through the “missing middle” • the LEP should direct business support specifically to this group of enterprises. Activities In order to grow, the “missing middle”, advice might be needed in one, two or all three of the following:

access to markets – particularly those that are non-local or even international

access to finance – as bank-led lending continues to be cautious while the assets of friends and families might be diminished in the context of recession

access to skills – noting that for many firms, people are the only serious resource. In practice, each of these domains is complex to navigate. Support is available, but it can be difficult to identify and labyrinthine to negotiate. Centrally provided services abut privately provided provision and business support schemes funded locally within Hertfordshire. For would-be beneficiaries, the consequence is chaos, and the need for some kind of informed local signposting service is absolutely clear. The intention, therefore, is to provide a web-based resource together with five FTE advisers (roughly one adviser for every two district council areas) through which businesses can be given intelligent advice regarding relevant key services (whatever their source). Where relevant, businesses will be referred to national provision (e.g. Growth Accelerator, MAS), and/or local private sector providers, and/or local publicly-funded schemes. The advice will be tailored to – and focused on – businesses with the potential to grow. More broadly, though, our contention is that businesses that seek out advice and support are far more likely to succeed that those that don’t. These proactive businesses will be the principal beneficiaries of our Growth Hub programme. We will work hard to nurture and sustain a strong and interactive (if light touch) relationship with them throughout the delivery of this scheme. It is envisaged that the Growth Hub will be partly supported with ESIF. ESIF will provide an opportunity to further develop the growth hub concept beyond the initial plans. Match funding is likely to come from University sources and Single Local Growth Fund (SLGF).

5.2.2.4 Opt-In

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No opt-in is available under this theme. However, Hertfordshire LEP is keen to consider the use of Innovate UK funding as match where this is possible.

5.2.2.5 Investment Priorities

Two investment priorities have been adopted under this theme for Hertfordshire. These are:

INVESTMENT PRIORITY 1a : enhancing research and innovation (R&I) infrastructure and capacities to develop R&I excellence, and promoting centres of competence, in particular those of European interest

INVESTMENT PRIORITY 1b : - promoting business investment in R&I;- developing links and synergies between enterprises, research and development centres and the Higher Education sector, in particular promoting investment in product and service development, technology transfer, social innovation, eco-innovation, public service applications, demand stimulation, networking, clusters and open innovation through smart specialisation; -and supporting technological and applied research, pilot lines, early product validation actions, advance manufacturing capabilities and first production, in particular in key enabling technologies and diffusion of general purpose technologies.

Fit with the Strategy for Smart Economic Growth in Hertfordshire

The chosen investment priorities and activities listed below link to the following Hertfordshire Growth Strategy priorities:

Priority 1 - Maintaining global excellence in science and technology Priority 3 - Re-invigorating our places for the 21st Century

Investment Priority 1(a) SPECIFIC OBJECTIVE 1.1: increase investment in research and innovation infrastructure that catalyses collaboration with the research community especially in sectors identified through smart specialisation

Potential or Indicative Activities Fund Specialist infrastructure/facilities/centres linked to smart specialisation including

enhancements to science parks and to improve access to these facilities through digital and physical links;

ERDF

Investment in the development and upgrading of innovation space, with capability to serve as a platform or host for innovation and innovative relationships;

ERDF

Improved incubation space to enable research and development and innovation; ERDF

Shared use research laboratories and facilities, particularly targeted at the Eight Great technologies as set out in “Smart Specialisation in England”;

ERDF

Development of enterprise, innovation and technology hubs and centres of excellence, in line with the approach set out in “Smart Specialisation in England”;

ERDF

Development and upgrading of appropriate test facilities and deployment infrastructure.

ERDF

Investment Priority 1(b) SPECIFIC OBJECTIVE 1.2: Increase investment in research and innovation by small and medium enterprises in sectors and technologies identified through smart specialisation. SPECIFIC OBJECTIVE 1.3: Increase the number of small and medium sized enterprises engaged in knowledge exchange, collaborative and contract research and innovation with research

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institutions, public institutions or large enterprises in order to help them bring new products and processes to market.

Potential or Indicative Activities Fund Support for smart specialisation collaborative and contract research and

development including initiatives stimulating and facilitating productive innovation partnerships;

ERDF

Support for the commercialisation of new products and business processes and initiatives, particularly targeted to aid innovation in the Eight Great technologies as set out in “Smart Specialisation in England”;

ERDF

Collaborative and contract research and development programmes; ERDF

Applied research programmes, particularly targeted at sectors and technologies set out in smart specialisation in England;

ERDF

Innovation vouchers for small and medium sized enterprises; ERDF

Innovation support programmes for product design and development and systems integration;

ERDF

Initiatives simulating the demand for new or improved services, processes and products including business-led and public procurement programmes;

ERDF

Schemes providing practical, financial and material support for the innovation process within businesses;

ERDF

Schemes stimulating and enabling graduate start-up and spin out from universities, colleges and research institutions;

ERDF

Technology support programmes and demonstrator projects and programmes for current and future technologies;

ERDF

5.2.2.5 Estimated Outputs and Results Outputs

Outputs and results for this Priority Axis and the Investment Priorities are supplied by HMG as an apportionment of those agreed in the National England Programme. The actual targets are listed on a separate spreadsheet appended to this document. Targets – Investment Priority 1(a)

ID Description Measurement Unit

CO25 Research, Innovation: Number of researchers working in improved research infrastructure facilities

Full time equivalents

P1 Number of researchers working in improved research or innovation facilities

Full-time equivalents

P2 Public or commercial buildings built or renovated Square metres

Targets – Investment Priority 1(b)


CO01 Productive investment: Number of enterprises receiving support

Enterprises

CO02 Productive investment: Number of enterprises receiving grants

Enterprises

CO03 Productive investment: Number of enterprises receiving financial support other than grants

Enterprises

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CO04 Productive investment: Number of enterprises receiving non- financial support

Enterprises

CO05 Productive investment: Number of new enterprises supported

Enterprises

CO06 Productive investment: Private investment matching public support to enterprises (grants)

EUR

CO07 Productive investment: Private investment matching public support to enterprises (non- grants)

EUR

CO08 Productive investment: Employment increase in supported enterprises


CO26 Research, Innovation: Number of enterprises cooperating with research institutions

Enterprises

CO28 Research, Innovation: Number of enterprises supported to introduce new to the market products

Enterprises

CO29 Research, Innovation: Number of enterprises supported to introduce new to the firm products

Enterprises


5.2.2.6 Support from ESF and EAFRD

Sub-Theme 2 Potential Activities Fund Intermediate, technical and higher level workforce and management skills in

support of the priorities for this thematic objective

ESF TO10

Provide support, advice and funding to businesses and entrepreneurs to support the creation and development of SMEs and Micro Businesses

ESF TO10/EAFRD

Development of general and, potentially, industry specific business skills ESF TO10/EAFRD

Provide funding to businesses and entrepreneurs to support the creation and development of SMEs and Micro Businesses, including the uptake of new/improved business processes and technology

ESF TO10/EAFRD

Note: The allocation for these supporting activities appears under TO10 and Rural Sections of this document.

5.2.3 Priority Axis 2 (TO2) - Enhancing Access to, and use and quality of, Information and Communication Technologies 5.2.3.1 Funding Allocation No funding allocation is proposed for this theme.

5.2.3.2 Rationale for Investment Given the restrictions on the potential to invest in the roll-out of high-speed communications networks the scope of other activities eligible under this theme appear too narrow to justify investment. Whilst there is some potential need to support SMEs in Hertfordshire in their development of ICT products and services and improve their ability to exploit e-commerce opportunities it is envisaged that support can be provided under PA3 (TO3) - Enhancing the Competitiveness of SMEs.

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5.2.3 Priority Axis 3 (TO3) - Enhancing the Competitiveness of SMEs 5.2.3.1 Funding Allocation The table below reflects the revised allocation notified by the Managing Authority in December 2015 encompassing changes agreed in the Operational Programme. The allocation to PA 3 is 38.14% of the Hertfordshire notional ERDF allocation.

PA3 (TO3) – Allocation and Funding Summary

Source €m

ESIF 13.556

Local Match including SLGF 13.556

Total 27.112

This represents an allocation of €13.532m of EU SIF (ERDF) making the total allocation around €27.065m based on an average ERDF intervention rate of 50%. It was originally intended that match funding would include BIS National Products such as Manufacturing Advisory Service (MAS) and Growth Accelerator. Following Government announcements in late 2015 this will not now be possible. It is also intended that there may be use of funds derived from Growing Places and Single Local Growth Fund (SLGF). It is also expected That use will be made of local match funding identified through sources such as the University. Enterprise Agencies and Local Authorities. The current sterling value of the notional allocation to Priority Axis 2 for Hertfordshire can be found in the funding spreadsheets associated with this document.

5.2.3.2 Rationale for Investment Europe 2020 and National Government Priorities8 The ‘Plan for Growth’ aims to make the UK the best place in Europe to start, finance and grow a business. The Rural Statement set out the Government’s ambition that rural business should make a sustainable contribution to national growth. In 2011 the Government launched the National Export Challenge which aims to double UK exports to £1 trillion by 2020 and create 100,000 new exporters. SMEs account for approximately half the value of UK exports of goods. The parallel challenge is to double the stock of Foreign Direct Investment (FDI) by 2020, 40% of UK exports of manufactured goods come from UK based foreign owned companies. This is in line with the wider Europe 2020 priorities to: update worker skills, take advantage of the digital society, support entrepreneurship, encourage exports and get access to finance to return to normal lending to the economy. In addition the European Council has recommended that the UK improves the availability of bank and non-bank financing to SMEs and explore with the market ways to improve access to nonbank financing such as venture and risk capital.

The National Policy Context9 The Government is seeking to grow a dynamic entrepreneurial nation where more people have the ambition, confidence, opportunity and skills to start and grow a business, driving social and economic growth.

8 Taken from Framework of European Growth Priorities – Background Analysis, HM Government, July 2013 9 Taken from Framework of European Growth Priorities – Background Analysis, HM Government, July 2013

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Key objectives for Government are:

I. Where Government investment is justified, focusing it on the smaller number of SMEs with greatest potential to contribute disproportionately to economic growth;

II. To build growth capability among SMEs more generally, focusing on the market failures that can hold SMEs back; and

III. To foster a more entrepreneurial society in the UK, by reducing barriers to entrepreneurship and supporting entrepreneurs.

Local Evidence

Section 3.4 of this document sets out the evidence base relevant to this theme. Section 3.4.2 of the Economic, Social and Environmental part of this document provides evidence of the decrease in business registrations since 2009. Although there have been some signs of improvement there remains a need for support to maintain the gains made.

Local Context The Hertfordshire Economic Development Strategy 2009-2021 reported that Hertfordshire is operating in a global marketplace, facing increasing competition from other parts of the world that can undercut it in terms of cost and which are growing their knowledge-based skills. The county remains an expensive place to live, and an expensive place to locate or run a business. This means that it needs to demonstrate significant added value to overcome the extra cost hurdle and maintain its competitive edge. To do this Hertfordshire needs to encourage and support appropriate knowledge-based high growth, high value businesses that will generate long term, sustainable prosperity for the county.

Like many places, the vast majority of businesses in Hertfordshire are SMEs accounting for around half of all employment. Moreover, the vast majority of SMEs are sole traders and partnerships employing fewer than 4 people (i.e they represent 73% of the business base). In fact, Hertfordshire’s business base has higher concentrations of businesses in the 0 to 4 employment size band compared to other areas, but is undersized in terms of businesses in employment size bands between 5 and 249 employees. In spite of this, non-micro SMEs and large firms are still the main drivers of employment growth accounting for more than ¾ of all employment but representing less than 30% of the business base. The recent publication Firm Dynamics and Job Creation in the UK: Taking Stock and Developing New Perspectives published in April 2013 by the Enterprise Research Centre establishes some key facts about SMEs. The majority of jobs are created by small firms including micro-enterprises; but these new small firms also exhibit the greatest rates of churn. The research established five “brutal facts” about SMEs:

1. Every year a large number of private sector firms are born in the UK ~ typically between 200,000 and 250,000

2. Most new born firms are very small ~ around 90% have less than 5 employees 3. A decade later between 70% and 80% of those new born firms will be dead 4. A cohort is born with about 1 million jobs ~ a decade later the survivors employ just half a million 5. Of those which have survived to age 10 ~ around 75% of those born with less than 5 employees will

still have less than five employees This means that a relatively small proportion of firms are responsible for a disproportionate share of job creation. The ERC identifies High Growth firms as being the most prolific creators of jobs but their closest comparators – the larger non-high growth SMEs are quite prolific too.

This has important implications for the LEP’s policy towards SMEs and suggests that a targeted programme of support to aid SMEs should be put in place. There will still be a need to support and encourage new business formation, particularly in places lacking an enterprise culture or where business support is non

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existent for prospective entrepreneurs. However, there is a pressing need to target support for business on SMEs with the maturity, capacity and capability to grow. Hertfordshire LEP is currently working with the University of Hertfordshire on the development of a Growth Hub to service the business support needs of a segment of the sme business population above 5 employees (see also Section 5.2.2). The emerging operating model for the Growth Hub is set out below.

In conclusion not every business in Hertfordshire wants to be, or has the capability of being, high growth, high value. Many businesses in the county provide good quality local employment to those people in the community with fewer or no skills. While we aspire to raise skill levels in the county within the workforce, we also need to recognise that employment also needs to be available for all communities in the county. This means that Hertfordshire cannot, or should not, rely solely on knowledge-based employment but should develop a balanced economy with knowledge-based businesses at its heart while offering a range of employment and business development opportunities, including social enterprises across the whole community. The growth hub offers the opportunity to support business growth by coordinating and facilitating access to the tools necessary to help those businesses that want to move to the next stage.

Key Sectors

Hertfordshire LEP has identified the following key sectors:

Life Sciences/advanced manufacturing/engineering and IT – including life sciences, defence and aerospace companies, software, ICT and telecoms services, equipment producers and communications integrators;

film and media – noting that Hertfordshire has world class assets in the form of Leavesden (home of Warner Bros) and Elstree;

sport, leisure and cultural activities – recognising, in particular, the footprint of the 2012 legacy, and the tremendous upsurge in interest in participative sport;

financial and business services – where there are opportunities to accommodate national headquarters and also regional offices serving southern England: Watford, St Albans, Cheshunt, Hemel Hempstead can all claim notable businesses in this context;

high-end logistics – which is growing very quickly, particularly in servicing London-based households and businesses, and increasingly generates higher quality jobs.

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Department for Business Innovation and Skills (BIS) National Products It Had been intended, in principle, to take up the ‘opt-in’ offers on BIS National Products:

UK Trade and Investment (UKTI)

Manufacturing Advisory Service (MAS)

Growth Accelerator However, during 2015 HMG notified LEPs that these ‘opt-ins’ would not be offered. Instead specific open calls have been to cover BIS National Products. UK Trade and Investment (UKTI) UKTI is the Government Department that helps UK-based companies succeed in the global economy and assists overseas companies to bring their high-quality investment to the UK. UKTI leads for Government on all trade promotion activity. The offer to LEPs is for an enhanced service, with bespoking and targeting to be agreed locally. Match funding comes directly from the Government allocation to UKTI. There is an in principle intention to invest in this activity providing a proposal developed through the open call process can be tailored to meet the needs of Hertfordshire and ensure additionality requirements are met over and above a level of core service consistent with other areas. A budget for an open call for UKTI services will be agreed with DCLG as part of the call preparation process. Manufacturing Advisory Service (MAS) MAS is the Government’s flagship business improvement programme for manufacturers, providing specialist strategic and technical advice to help improve the competitiveness of manufacturing in England. The current national budget for MAS is £59.3m and has targets to help deliver £1.2bn additional GVA to the national economy. The offer to LEPs is for an enhanced service, with bespoking and targeting to be agreed locally. Match funding comes directly from the Department of Business, Innovation and Skills (BIS). There is an in principle intention to invest in this activity through the BIS National Products Open Call process providing that a proposal can be tailored to meet the needs of Hertfordshire and ensure additionality requirements are met over and above a level of core service consistent with other areas. The table below provides a breakdown of the employees and employment (including those that are self-employed) in the manufacturing sector across top tier local authority areas in the East of England. This information relates to 2012 and was extracted from NOMIS on 27th January 2014. It is taken from the business register and employment survey. local authority: county / unitary

Employees

Employment

number % of business

base number

% of business base

Bedford 4,931 7.3 5,018 7.2

Cambridgeshire 30,516 11.0 30,902 10.8

Central Bedfordshire 10,509 12.2 10,669 11.9

Essex 49,374 9.3 50,158 9.1

Hertfordshire 35,589 6.8 36,130 6.7

Luton 8,982 11.2 9,258 11.3

Norfolk 33,770 10.3 34,566 10.1

Peterborough 9,741 10.1 9,828 9.9

Southend-on-Sea 4,352 7.0 4,404 6.8

Suffolk 33,303 11.5 33,810 11.2

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Thurrock 3,201 5.6 3,282 5.6

Total 224,269 9.4 228,026 9.2 Source: NOMIS business register and employment survey. Estimates are subject to sampling errors which increase as geographic areas become smaller and industry more detailed. Please see http://www.nomisweb.co.uk/articles/774.aspx to gauge the magnitude of these errors.

A budget for an open call for MAS activity will be agreed with DCLG as part of the call preparation process. Growth Accelerator Growth Accelerator is an existing Government-backed programme of support for businesses exhibiting strong potential and ambition for growth. It is not suitable for all businesses and has minimum access criteria. The current national budget for Growth Accelerator is £190m and has targets to support around 26,000 businesses. The offer to LEPs is for an enhanced service, with bespoking and targeting to be agreed locally. Match funding comes directly from BIS as well as client match. There is an in principle intention to invest in this activity through the BIS National Products Open Call process providing that a proposal can be tailored to meet the needs of Hertfordshire and ensure additionality requirements are met over and above a level of core service consistent with other areas. We will be seeking to push for more emphasis on our priority areas of innovation and access to finance support. A budget for an open call for Growth Accelerator activity will be agreed with DCLG as part of the call preparation process.

Access to Finance As listed in Investment Priority 2 below and mentioned in the description of the proposed Growth Hub, access to finance is seen as key activity to support business growth in Hertfordshire.

Hertfordshire LEP is keen to participate in an appropriate ERDF supported Financial Instrument (FI). Low Carbon Innovation Fund (see section below PA4 (TO4))

All discussions on potential FIs are at an early stage. It is not possible at this stage to provide detail on potential investment into such funds.


It is proposed that three investment priorities are adopted under this theme for Hertfordshire. These are:

Investment priority 3a -Promoting entrepreneurship, in particular by facilitating the economic exploitation of new ideas and fostering the creation of new firms, including through business incubators.

Investment priority 3c - Supporting the creation and the extension of advanced capacities for products, services and development

Investment priority 3d - Supporting the capacity of small and medium sized enterprises to grow in regional, national and international markets and to engage in innovation processes

Note that there is no Investment Priority 3(b) in the England Operational Programme.

Fit with Strategy for Smart Economic Growth in Hertfordshire


Priority 1 - Maintaining global excellence in science and technology

Priority 2 - Harnessing our relationships with London (and elsewhere)

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Priority 3 - Re-invigorating our places for the 21st Century

Priority 4 – Foundations for growth

Investment Priority 3(a)

Promoting entrepreneurship, in particular by facilitating the economic exploitation of new ideas and fostering the creation of new firms, including through business incubators. Specific objective: 3.1 Increase entrepreneurship, particularly in areas with low levels of enterprise activity and amongst under-represented groups.

Potential or Indicative Activities Fund

Targeted engagement, outreach and mentoring to strengthen entrepreneurial and enterprise culture;.

ERDF

Provision of advice and support for entrepreneurship and self-employment in particular amongst under-represented groups by developing entrepreneurial skills and attitudes with a focus on increasing the number of business start-ups;

ERDF

Provision of advice and support for new business start-ups to survive and grow; ERDF

Support to address market failures in the provision of start-up finance, e.g. seed finance, start-up loans;

ERDF

Outreach, coaching, mentoring, networking and consultancy support to promote business start-up, survival and growth;

ERDF

Grants to support productive investment; ERDF

Provision of land and premises for employment sites including incubator space, managed workspace, or grow-on space.

ERDF

Investment Priority 3(c) Supporting the creation and the extension of advanced capacities for products, services and development Specific objective: 3.2 Increase growth capacity of SMEs


Provision of advice to develop new business models or higher quality products, processes or services;

ERDF

Advice to improve business processes and workforce development; ERDF

Advice and support for supply chain interventions to strengthen and grow the domestic supplier base;

ERDF

Attracting new foreign direct investment into England through, for example, promotion of business collaborations (SME to Prime/Original Equipment Manufacturers, SME to SME), supply chain initiatives, sectoral and research and innovation propositions linked to smart specialisation and “soft landings”;

ERDF

Ensuring SMEs have access to sufficient levels of finance to implement their growth plans, including appropriate capital investment for premises and equipment to help build capacity;

ERDF

Provision of advice, consultancy support, mentoring, peer to peer support, and support for collaborative projects;

ERDF

Grant finance for business to invest for product, process and service improvements; ERDF

Provision of independent access to finance advice; ERDF

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Provision of land and premises for employment sites, including incubation space, managed workspace, or grow-on space.

ERDF

Potential Supporting Activities Fund

Leadership and management training to help management identify and resolve problems in setting direction and strategy, including internationalisation.

ESF

Support for collaborative projects, placements, internships or other activities with SMEs that enable students and graduates to gain industry relevant experience and skills.

ERDF/ESF

Building capacity in SMEs to provide project/ placement/ internships/ apprenticeships opportunities and enhance the contribution of higher level skills to SME growth. This could include programmes to specifically engage the most disadvantaged groups or those who face particular local disadvantages in higher level skills.

ESF

Support for apprenticeships (but not direct funding of training or wage costs) including improvements to the recruitment, assessment and facilities for training.

ESF

Promotion of the use of Higher Level Apprenticeships (HLA) (especially in manufacturing and industrial strategy priority sectors) by developing a supportive environment for new HLAs.

ESF

Development of general and, potentially, industry specific business skills. ESF/EAFRD

Provide support, advice and funding to businesses and entrepreneurs to support the development of SMEs and Micro Businesses, including the uptake of new/improved business processes and technology.

ESF/EAFRD

Investment priority 3d - Supporting the capacity of small and medium sized enterprises to grow in regional, national and international markets and to engage in innovation processes Specific objective: 3.3 Increase growth capability of SMEs


Provision of efficient local referral routes to ensure that SMEs are able to identify and access the most appropriate and tailored support for their specific growth needs;.

ERDF

Support SMEs to develop focused growth strategies and update or introduce new business models which will drive business performance;

ERDF

Attracting new business investments to England, including through, for example, cluster and sector initiatives, collaborations with trade associations and inward missions;

ERDF

Advice and support for SMEs to enter, establish and expand in new domestic and international markets;

ERDF

Advice and support for businesses to become investment ready; ERDF

Provision of advice, consultancy, mentoring and peer-to-peer support to indigenous businesses and inward investors (SMEs from outside the EU who will move to England);

ERDF

Leadership and management coaching where connected to the development and implementation of a business growth plan;

ERDF

Support events, trade fairs and missions to enable SMEs to enter, establish and expand in new domestic and international markets;

ERDF

Targeted grant schemes to support productive investment; ERDF

Provision of advice and consultancy on access to finance. ERDF

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Potential Supporting Activities Fund

Developing better links between business and educators, Further Education providers and other education partners to equip students with the skills to start and grow businesses to meet local needs and to compete in UK and international markets.

ESF

Leadership and management training to help management identify and resolve problems in setting direction and strategy, including internationalisation.

ESF

Provide support, advice and funding to businesses and entrepreneurs to support the creation and development of SMEs and Micro Businesses, including the uptake of new/improved business processes and technology.

ESF/EAFRD

5.2.3.4 Estimated Outputs and Results Outputs and results for this Priority Axis and the Investment Priorities are supplied by HMG as an apportionment of those agreed in the National England Programme. The actual targets are listed on a separate spreadsheet appended to this document Targets – Investment Priority 3(a)



Enterprises


Enterprises


Enterprises


Enterprises


Enterprises


EUR


EUR



CO28 Research, Innovation: Number of enterprises supported to introduce new to the market products

Enterprises

P11 Number of potential entrepreneurs assisted to be enterprise ready

Persons


Targets – Investment Priority 3(c) ID Description Measurement Unit


Enterprises


Enterprises


Enterprises


Enterprises

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Enterprises


EUR


EUR




Enterprises

P13 Number of enterprises receiving information, diagnostic and brokerage

Enterprises


Targets – Investment Priority 3(d) ID Description Measurement Unit


Enterprises


Enterprises


Enterprises


Enterprises


Enterprises


EUR


EUR




Enterprises

P13 Number of enterprises receiving information, diagnostic and brokerage

Enterprises


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5.2.4 Priority Axis 4 (TO4) - Supporting the Shift towards a Low Carbon Economy in All Sectors 5.2.4.1 Funding Allocation The notional allocation for Hertfordshire Priority Axis is 22.94% (revised from 20% by the Managing Authority) of the total ERDF notional allocation. This covers the theme (TO4) of Supporting the Shift towards a Low Carbon Economy in All Sectors. This represents an allocation of €8.154m of EU SIF (ERDF) making the total allocation around €16.308m based on an average ERDF intervention rate of 50%. We anticipate match funding from the private sector leveraged in via the proposed equity investment fund (see section 5.2.4.4 below) and via other grant schemes (such as those delivered under the 2007-13 Operational Programme. Additional public match will potentially be sourced locally or from Growing Places and/or Single Local Growth Fund (SLGF). Priority Axis 4 (TO4) – Allocation and Funding Summary

Source €m

ESIF 8.154

LCIF FEI 2.8

Local Match 5.354

Total 16.308

The current sterling value of the notional allocation to Priority Axis 4 for Hertfordshire can be found in the funding spreadsheets associated with this document.

5.2.4.2 Rationale

Europe 2020 and National Government Priorities10 Driving jobs and growth is vital within the economy. Decarbonising the economy plays a key part in the Government's aim to achieve sustainable and balanced growth, with a focus on maximising the opportunities and minimising the costs of the green economy transition. This approach complements the Europe 2020 strategy for smart, sustainable and inclusive growth specifically the priority to promote a more resource efficient, greener and more competitive economy. In the area of Low Carbon relevant EU goals by 2020 are:

reducing Green House Gas (GHG) emissions by 20% compared to 1990 levels;

increasing the share of renewables in final energy consumption to 20%; and

moving towards a 20% increase in energy efficiency. The UK has targets in each of these three areas by 2020, relevant to the EU Programmes in the period 2014-2020 as follows:

reducing GHG emissions by 34% compared to 1990 levels;

increasing the share of renewable energy to 15%; and

enhancing the energy efficiency of homes, business and transport. These sit within the wider context of achieving an 80% reduction of GHG emissions compared to 1990 levels by 2050 via a series of five year statutory carbon budgets. In this context the Government also has objectives to:

reduce emissions from buildings (predominantly in form of heating) to near zero by 2050;

reduce industrial emissions (predominantly in form of heat for industrial processes) by up to 70% by 2050 compared to 1990 levels; and


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reduce emissions from the agriculture and waste sectors by 16% between 2008 and 2027.

The National Policy Context11 To support the achievement of the targets above, the Government has set out a comprehensive suite of policies and legislative measures. These include:

in relation to the GHG emissions target key policies are: the Climate Change Act 2008; the UK

Carbon Plan; the Carbon Price Floor, the Heat Strategy; the Forestry & Woodlands Policy Statement; and the Greenhouse Gas Action Plan for Agriculture;

in relation to the Renewable Energy target key policies are: Renewables obligation and feed-in tariff for electricity, Renewable Heat Incentive, Renewable Transport Fuel Obligation; Electricity Market Reform (EMR) via the Energy Bill; and the Gas Generation Strategy;

in relation to the Energy Efficiency target key policies are: Enabling the Transition to a Green Economy and the accompanying Policy Timeline; the establishment of the UK Green Investment Bank; Green Deal; The Energy Efficiency Strategy (including Electricity Demand Reduction); the Plan for Growth; the Climate Change Levy & Climate Change Agreements, and the CRC energy efficiency Scheme; and

in relation to heating for buildings and industrial decarbonisation key areas of policy development are detailed within: The Future of Heating: A strategic framework for low carbon heat in the UK, and The Future of Heating: Meeting the Challenge.

All these policies are based on a comprehensive and sound evidence base, particularly the UK 2050 Pathways analysis, which provides an excellent tool to support the delivery of the UK’s goals and measures, and the Technology & Innovation Needs Assessments for the key technologies in the Renewables Roadmap. Government estimates that through socially cost-effective investment in energy efficiency we could be saving 196TWh in 2020, equivalent to 22 power stations. Were all this potential to be realised, final energy consumption in 2020 could be 11% lower than the business as usual baseline. Promoting sustainable transport - The Government believes that a modern transport infrastructure is central to improving wellbeing and quality of life. The vision is for an inclusive, integrated and innovative transport system that works for everyone, and where making door-to-door journeys by sustainable means is an attractive and convenient option. The aim is to make the transport sector greener and more sustainable, to promote growth and reduce carbon emissions. Central to this is encouraging and enabling more people to make more of their door-to-door journeys by sustainable means: public transport, supported by walking and cycling. The Government is taking forward a number of initiatives to make these modes of transport more attractive to encourage people to leave the car at home. These initiatives reduce people’s carbon footprint and contributes to attaining climate change goals.

Progress against EU and National Priorities The UK is currently performing against these headline targets as follows:

the UK GHG emissions are currently 23% lower than 1990 levels (3 percentage points higher than the EU goal for 2020 but 11 percentage points below the UK target for 2020);

the UK is currently only producing 3.8% of all energy from renewables (well short of both the UK target and EU goal). However, renewables now generates just under 10% of the UKs electricity requirements in terms of terawatt hours (TWhrs) of electricity, and wind has become the sole largest contributor to the renewables mix;


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the UK currently has 10.6m homes with cavity wall insulation and 12.9m homes with loft insulation of at least 125mm, out of about 25m homes; and

UK industry reduced total emissions by 111 MtCO2e since 1990 – a reduction of around 46% over 20 years as well as reducing total energy consumption by 44% since 1970 and by 9% since 1990.

In 2011, the UK had an installed Combined Heat and Power (CHP) capacity of 6,111 MWe. The electricity produced from good quality CHP sites was just over 27 TWh in 2011. This corresponds to about 7.4 per cent of all electricity produced in the UK. In 2012 there was recorded operationally installed onshore wind capacity of 4.5GW in the UK; there was a further 1.4GW under construction, 4.0GW that had been approved but not yet built and connected, and a further 7.7GW of onshore projects in the planning process. In addition, the proportion of heat that is renewable is less than 5% (compared to the EU27 average of about 14%). This shows the vast opportunity in both large scale and small scale renewable developments. The Low Carbon Environmental Goods and Services sector is large – the global market is worth £3.3trillion of which the UK share is £122bn. From 2009-10 to 2010-11 it grew at 4.7% in the UK and employs nearly 1million people in 51,000 companies and by 2014-15 it is expected to halve the UK’s trade deficit.

Local Context - Hertfordshire Section 3.7 of this document provides an evidence base in respect of the environment and CO2 emissions in Hertfordshire. The Hertfordshire Economic Impact Report 2011 recognised that there will be a need to ensure that Hertfordshire’s businesses are resilient to the impacts of climate change by facilitating a shift to a low carbon economy which is recognised in the Hertfordshire Economic Development Strategy. A low carbon economy would result in a competitive and resilient economy in Hertfordshire which;

‘prospers with minimal use of carbon, having successfully adapted to the challenges of a changing climate and taken full advantage of the economic opportunities generated by the transition to a low carbon society’

Alongside climate change and the associated environmental impacts, there is a need for all business sectors to actively try to become more energy efficient and reduce carbon emissions. Businesses will need to balance future energy demands alongside energy price increases, the predicted reduction in availability of current energy sources and increasing ‘taxes’ on carbon. The supply and affordability of energy was identified as either very important or somewhat important by 78% and 80% of respondents in the Hertfordshire Business Survey respectively. Moving to a low carbon economy will profoundly impact the way Hertfordshire functions, the way its public sector bodies invest, and the way its businesses operate. These changes present a number of opportunities for Hertfordshire’s economy to capitalise on new investment opportunities by developing new sectors, securing new jobs and boosting education and skills within the green sector. To support the transition to a low carbon future, there will be a need to bring forward renewable, low carbon and adaptive technologies. The County already has an emerging cluster of Green sector industries and has a base of nationally and internationally recognised low carbon and green sector companies (Building Research Establishment, Renewable Energy Systems, Centre for Business and Sustainability and Green Energy Ltd.). Hertfordshire is in a strong position to take advantage of existing expertise within the County and take a lead in the research and development of renewable, low carbon and adaptive technologies, particularly those associated with the built environment. In light of climate change impacts, it is likely that new economic opportunities could come forward (such as tourism and agriculture) that could support the diversification of Hertfordshire’s economy in a new low carbon landscape.

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Moving towards a low carbon economy will require investment and incentives, as well as business and organisational innovation in terms of carbon reduction and resilience. It will also involve greater knowledge and information, and new attitudes, lifestyle choices and behaviours by consumers and citizens. Therefore, to achieve an effective transformation to a low carbon economy and maximise the economic opportunities that this offers, there is a need for a collective and co-ordinated approach between the public and private sector that brings together local businesses, local authorities, higher education institutions and communities.

Local Context – Strategic Economic Plan A5: Green Technology Section A5 of the SEP covers the approach to green technology. Overview – and the overall case for intervention Perfectly Placed for Business is premised on smart growth which is more resource efficient and means, essentially, “doing more with less”. We are not interested in growth at any cost; we value the quality of our natural environment; and we are determined that the intrinsic qualities of Hertfordshire should be enhanced through the delivery of our Strategic Economic Plan, not destroyed by it. For this reason, we have an intrinsic interest in the role and potential of green technology writ large. Although less in vogue nationally than it once was, we are committed to resource efficiency; to mitigating the impacts of climate change; and to ensuring that economic activity and economic development (including house building) is pursued both vigorously and responsibly. Activities Within this overall context, we are committed to advancing two inter-related projects. Sustainable construction, retrofit and the role of Buildings Research Establishment (BRE) Across Hertfordshire – particularly our New Towns – there is a legacy of buildings constructed in the 1960s and 1970s which are extremely inefficient in terms of their carbon footprint. We have the problem in Hertfordshire “writ large”. But we also have a potential solution in the form of the Buildings Research Establishment (BRE) which is based near Watford. It has expertise in the technologies and potential linked to sustainable construction and we need to make this count. Green Triangle Linking to BRE is the wider concept of the “Green Triangle”. This initiative has emerged from St Albans and the vision locally is to develop a world renowned centre of excellence for green technology. Underpinning it is a recognition of the role and potential of Rothamsted (discussed above), BRE and the University of Hertfordshire. The aim is to create a cluster of excellence in the Green Technology arena, built around the expertise of major green technology businesses and research institutions in Hertfordshire, and aimed at building green growth and attracting inward investment in the county and beyond. The overall vision is supported by six objectives: to make a major contribution to the nation’s economic growth; to develop green technology enterprise in the area; to attract and retain skills and talent in environmental research and its application; to attract international private sector inward investment; to provide infrastructure linking green research, science, engineering and technology enterprises; and to assist the growth of new businesses associated with green enterprise. It is envisaged that ESIF can contribute towards these objectives as set out in the SEP.

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It is proposed that four investment priorities are adopted under this theme for Hertfordshire. These are:

Investment priority 4a : Promoting the production and distribution of energy derived from renewable sources

Investment priority 4b: Promoting energy efficiency and renewable energy use in enterprises

Investment priority 4e : Promoting low-carbon strategies for all types of territories, in particular for urban areas, including the promotion of sustainable multimodal urban mobility and mitigation-relevant adaptation measures

Investment priority 4f : Promoting research and innovation in, and adoption of, low-carbon technologies



Priority 1 – Maintaining our global excellence in science and technology Priority 3 - Re-invigorating our places for the 21st Century

Investment priority 4a : Promoting the production and distribution of energy derived from renewable sources Specific objective: 4.1 - to increase the number of small scale renewable energy schemes in England


Measures to support increased production of renewable fuels and energy, in particular wind energy, solar and biomass;

ERDF

Measures to support increased production of renewable fuels and energy, in particular wind energy, solar and biomass;

ERDF

Demonstration and deployment of renewable energy technologies; ERDF

Measures to support the wider deployment of renewable heat, including micro-generation, geothermal, renewable heat networks or district heating, ground source and air source heat pumps, and biomass systems with associated heat off-take and heat distribution networks along with recycling processing reprocessing and remanufacturing facilities; and

ERDF

Anaerobic digestion plants and other biomass or landfill gas schemes. ERDF

Investment Priority 1 ESF and EAFRD Potential Supporting Activities ESF/EAFRD

Skills/employment development for low carbon including via Higher Apprenticeships, University Technical Colleges and placements/ working with industry.

TO10

Help those without jobs and labour market entrants gain accredited low carbon skills/employment.

TO8

Sustainable Land management and forestry skills. EAFRD

Skills/ employment for retrofitting and low carbon heating. TO10

Skills to enable knowledge transfer. TO10

Specific objective: 4.2 Increase energy efficiency in particular in SMEs, including through the implementation of low carbon technologies

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Potential or Indicative Activities ERDF

Enhanced advice, support, information and action to promote innovation in businesses and how they operate, in order to deliver best practice in energy management. This will include innovation in energy efficiency and energy cost reduction to improve businesses’ competitiveness and resilience;

ERDF

Support to businesses to undertake ‘green’ diagnostics or audits of energy efficiency and potential for renewable generation and energy use, which will be followed by provision of energy efficiency information and guidance, tailored energy action plans and of support to implement them;

ERDF

Investing in energy efficiency measures, processes and renewable generation capacity to improve a business’ or building’s environmental performance or its resilience to the impacts of climate change;

ERDF

Investing in measures to stimulate cost-effective deep renovations of buildings, including staged deep renovations;

ERDF

Supporting an increase in energy efficiency in enterprises including an emphasis on “whole place” especially through improving industrial processes, designing out waste, recovery of “waste” heat energy and CHP;

Supporting increased SME access to national and local government procured contracts for energy efficient goods and services;

Developing low carbon innovation in relation to energy efficiency within enterprises, including through technologies and engagement practices;

Building retrofit and energy efficiency measures, especially whole building solutions to exemplify, and support the commercialisation of, next phase technologies which are near to market and low carbon construction techniques to improve the energy efficiency of buildings.

ESF and EAFRD Potential Supporting Activities ESF/EAFRD Adaptation skills for all sectors to support low carbon transition including eco-

innovation and skills to drive change. TO10

Provide support or access to finance for local projects to support renewable energy initiatives.

EAFRD

Investment priority 4e : Promoting low-carbon strategies for all types of territories, in particular for urban areas, including the promotion of sustainable multimodal urban mobility and mitigation-relevant adaptation measures Specific objective: 4.4 Increase implementation of whole place low carbon solutions and decentralised energy measures.

Investment Priority 4(e) Potential Activities Fund

investments in local/regional smart grid demonstration projects, including validation and solving system integration issues;

ERDF

sustainable energy action plans for urban areas, including public lighting systems, smart metering and distribution through smart grids;

ERDF

Investments in combined heat and power from renewable sources; ERDF

Investments to encourage the adoption of renewable technologies ERDF

investments in actions aimed at improving the capacity at local level to develop and implement integrated and sustainable transport strategies and plans (including for example actions related to modelling data collection, integrated transport management, operations and services, public consultation etc) to reduce transport related air pollution, in particular retrofit or replacement programmes for bus fleets, incentive schemes for cleaner transport, improved public transport

ERDF

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infrastructure and alternative forms of transport;

investments in actions aimed at introducing innovative environmentally-friendly and low-carbon technologies (for example, alternative fuel stations or charging points);

ERDF

investments in actions aimed at developing innovative and multi-modal transport services (for example, intelligent transport systems for travel information and planning, traffic and demand management, smart ticketing, multimodal integrated datasets or cooperative systems);

ERDF

innovative transport pricing and user charging systems; ERDF cycle paths, walkways and waterways only where part of an integrated approach to

GHG reductions. ERDF

ESF and EAFRD Potential Supporting Activities ESF/EAFRD

Low carbon power and heat skills. TO10

Low carbon transport and network management skills. TO10

Urban design/construction/planning skills. TO10

Low carbon land use skills. EAFRD

Investment priority 4f : Promoting research and innovation in, and adoption of, low-carbon technologies

Investment Priority 4 Potential Activities ERDF

R&D, innovation and supply chain work for low carbon technologies and materials, including, wave and wind energy, smart grids, distributed generation, solar and photovoltaics, heat networks, heat pumps and low carbon heat for energy intensive industries;

ERDF

Research underpinning carbon capture and storage, taking account of the restrictions laid down in Article 3.3.b of the ERDF Regulation;

ERDF

Technology centres of excellence and test facilities, including relevant Catapult centres;

ERDF

Renewable technologies in the UK renewable energy roadmap; ERDF

Research, development, demonstration and adoption of technologies and systems that support low-energy transport and accelerate the establishment of new technologies such as low emissions vehicles (electric, hybrid and hydrogen);

ERDF

Knowledge transfer with Higher Education/Further Education institutions and Businesses;

ERDF

Supporting low carbon tech start-ups and greater commercialisation of low carbon products and processes;

ERDF

Developing financing methods that encourage the adoption of proven low carbon technologies and generate long-term financial savings;

ERDF

Demonstration and deployment of decentralised renewable energy technologies; ERDF Research, development and innovation and supply chain development for low

carbon and resource efficient technologies and materials (including small scale pilot programmes that test the market with new low carbon solutions and the use of secondary materials).

ERDF


Skills for low carbon new build and alternative construction methods. TO10

Offshore engineering skills. TO10

Skills centres for renewable energy training. TO10

Innovation skills in low carbon transport technologies. TO10

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Skills to enable knowledge transfer. TO10

5.2.4.4 Potential Delivery Options

Financial Engineering Instruments - Low Carbon Innovation Fund (LCIF)

The University of East Anglia ADAPT Group currently operates a ‘Low Carbon Innovation Fund’ (LCIF) in the East of England ERDF Programme Area. There is a proposal to extend the fund to operate on an England wide basis for the 2014-2020 Programme period. This is set out in a letter to LEP Chairs from UEA ADAPT Group dated 25th July 2013. The Low Carbon Innovation Fund (LCIF) is a venture capital fund which makes early-stage investments as equity or convertible loan between £25K and £750K alongside co-investors. The investee companies must be small or medium enterprises (SMEs) based within the East of England that are developing new and innovative products or processes in a low carbon, environmentally sensitive manner. We have set aside the following funds for investment in LCIF 2014-20:

Source 2015 2016 2017 2018 2019 2020 2021 Total

ERDF 0.00 1,000,000 1,000,000 0.00 0.00 0.00 0.00 2,000,000

This initial investment is dependent on reaching a satisfactory agreement with LCIF to ensure that delivery would meet the needs and priorities of Hertfordshire. We will require that the fund is responsive to the needs of Hertfordshire. In addition our investment is subject to the findings of the ex-ante assessment that we understand the fund manager needs to commission on behalf of the LEP to provide a robust evidence base to justify the investment. The second proposed investment in 2017/18 is dependent on satisfactory performance of the fund in respect of investments undertaken and also on developing an understanding of the use and priorities for the LCIF legacy fund from the 2007-13 period in Hertfordshire. Depending on the progress of the fund we reserve the right to review the position and make further investments if there proves to be a need. We would envisage a minimum of 50% co-investment based on private sector co-investor contributions as match funding for the ESIF allocation. Hertfordshire LEP will require regular performance updates and representation on any partnership board set up to oversee the funds activity. Grants4Growth The Low Carbon Goods and Services Sector is important to Hertfordshire. The Grants4Growth project delivered by Breckland Council during the 2007-13 Programme period provided an innovative and successful model to deliver a low carbon focussed grant scheme to enable business growth and expansion whilst achieving resource efficiencies. We would welcome continuation of such a programme for the period 2014-20 building on the knowledge gained from previous experience. Such grants could be part of a wider approach to enable access to finance under PA1, PA3 and PA4. We would envisage an ESIF allocation of around £150,000 pa for the Programme period.

5.2.4.5 Estimated Outputs and Results Outputs and results for this Priority Axis and the Investment Priorities are supplied by HMG as an apportionment of those agreed in the National England Programme. The actual targets are listed on a separate spreadsheet appended to this document

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Targets – Investment Priority 4(a) ID Description Measurement Unit


Enterprises


Enterprises

CO30 Renewables: Additional capacity of renewable energy production

MW

CO34 GHG reduction: Estimated annual decrease of GHG Tonnes of CO2eq

Targets – Investment Priority 4(b) ID Description Measurement Unit


Enterprises


Targets – Investment Priority 4(e) ID Description Measurement Unit


Enterprises


Targets – Investment Priority 4(f) ID Description Measurement Unit


Enterprises


Enterprises

CO26 Research, Innovation: Number of enterprises cooperating with research institutions

Enterprises


Enterprises


5.2.5 Other Priorities It is proposed that the following ERDF themes are not included in Hertfordshire EU Structural and Investment Funds strategy:

Priority Axis 5 (Theme 5 (TO5)) - Promoting Climate Change Adaptation, Risk Prevention and Management

Priority Axis 6 (Theme 6 (TO6)) - Protecting the Environment and Promoting Resource Efficiency

Priority Axis 7 (Theme 7 (TO7)) - Promoting Sustainable Transport and Removing Bottlenecks in Key Network Infrastructures [Guidance implies transition and less developed areas only]

Theme PA5 and PA6 require substantial capital investment which would not be possible given the size of the Hertfordshire EU SIF allocation. Our understanding is that Priority Axis 7 (theme TO7) is not appropriate to ‘more developed’ areas such as Hertfordshire. Accordingly we propose no allocation to any of these three themes.

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5.3 Priority Axis and Themes - European Social Fund (ESF) 5.3.1 European Social Fund Priority Axis and Thematic Objective Overview 5.3.1.1 Financial Allocations The final approved England ESF Operational Programme document includes three Priority Axis incorporating the Thematic Objectives on which the ESIF Strategy was based plus Investment Priorities. The Programme Priority Axis are as follows:

Priority Axis 1 – Inclusive Labour Markets

Priority Axis 2 – Enhancing Equal Access to Lifelong Learning

Priority Axis 3 – Technical Assistance

Core EU SIF Themes ESF More developed regions Priority Axis 1 (TO8)- Promoting Employment and Supporting Labour Mobility

At least 80% ESF must be spent on up to 4 sub-

priorities within these themes. Priority Axis 1 (TO9) -Promoting Social Inclusion and Combating Poverty

Priority Axis 2 (TO10) - Investing in Education, Skills and Lifelong Learning

Allocation ESF core themes (including performance reserve) (€m) (Revised October 2015)

European Social Fund (ESF) Allocations Modeller Themes Percentage ESF

Match @ 50%

Total Value

Priority Axis 1 (TO8- Promoting Employment and Supporting Labour Mobility) 30.31% 10.200 10.200 20.401

Priority Axis 1 (TO9 -Promoting Social Inclusion and Combating Poverty) 16.81% 5.657 5.657 11.314

Priority Axis 2 (TO10 - Investing in Education, Skills and Lifelong Learning) 52.88% 17.793 17.793 35.585

Total Check 100.00% 33.650 33.650 67.301

A detailed breakdown of each allocation and associated match funding is provided in Annex 1 and further information provided under each Thematic Objective heading. Note that the co-financing provided by SFA and DWP will not match fund specific activities but is incorporated into the co-financing plan. Where ESF is being used to support ERDF Thematic Priorities we have included the funding under the appropriate ESF Thematic Priority.

5.3.1.2 Match Funding Overview The majority of match funding (in the form of co-financing) for ESF Thematic Objectives will be sourced from opt-ins to:

Skills Funding Agency (Priority Axis 1 (TO8), and Priority Axis 2 (TO10)

Department for Work and Pensions Priority Axis 1 (TO8)

Big Lottery Priority Axis 1 (T09) An allocation of 10% of the value of Priority Axis 1 Thematic Objectives 8 and Priority Axis 2 (TO10) jas been retained for local projects with local match funding which could potentially come from Local Authorities, University of Hertfordshire and Hertfordshire FE Colleges. More information on match funding is included under each thematic objective section below.

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5.3.2 Priority Axis 1 (TO8)- Promoting Employment and Supporting Labour Mobility 5.3.2.1 Funding Allocation An allocation of representing 30.81% of the total Hertfordshire ESF notional allocation is for Priority Axis 1 (theme TO8) - Promoting Employment and Supporting Labour Mobility. This represents an allocation of €10.200m of EU SIF (ESF) making the total allocation around €20.401m based on an average ESF intervention rate of 50% but this includes co-financing not available as match funding locally. It is intended that co-financing would come from the Department for Work and Pensions Jobcentre Plus ‘opt-in’ and the Skills Funding Agency (SFA) ‘opt-in’ plus a further 10% of match funding from local sources. Both the DWP Jobcentre Plus and SFA match funding is subject to reaching a satisfactory agreement that meets local needs and LEP identified priorities. Priority Axis 1 (TO8) – Allocation and Funding Summary based on Co-Financing (FOREX 0.71 Sept 2015)

Source £m Match inc Co-Financing

Actual Available for Herts ESF Projects £

ESIF 7.242 7.242

Jobcentre Plus DWP Co-Financing (Opt-In) 3.289 0.00

SFA Co-Financing (Opt-in) 3.230 0.00

Local Match 0.724 0.724

Total 14.485 7.966

Rationale: Based on the originally notified exchange rate and taking into account the existing SFA commitment to ESF and applying this budget to TO10 initially left around £4m SFA match for use in PA1 (TO8). Taking into account the proposal to allow for 10% locally identified match this left a gap of £4.046m which we proposed to cover using the Department for Work and Pensions Jobcentre Plus opt-in offer. These figures have subsequently been adjusted in accordance with exchange rate fluctuations as shownb in the table above.

5.3.2.2 Rationale for Investment EU Policy Context

The Europe 2020 goal is to raise to 75% the employment rate for women and men aged 20-64, including through the greater participation of young people, older workers and low-skilled workers and the better integration of legal migrants. UK Policy Context12 The UK Government is committed to increasing employment opportunities for all by providing support mechanisms and benefits systems that incentivise work and reduce worklessness, to ensure that individuals can fulfil their potential within the labour market. The overarching objective is to maintain the effective functioning of the labour market by maximising labour market attachment and active participation. National Programmes include: The Work Programme which was launched in June 2011 and is a national programme to support people at risk of long-term unemployment. Work Programme providers are free to design support, based on individual and local need. They are paid primarily for supporting claimants into sustained employment and helping them stay there for longer than ever before, with higher payments for supporting the hardest to help. The Work Programme is expected to provide personalised support to 3.3 million claimants over the


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life of the contract. Since its launch in June 2011, the programme (data shows up to July 2012) is supporting around 840,000 people. Get Britain Working measures can include Work Clubs to encourage people who are out of work to share experiences; Work Experience to help young unemployed people get work experience through local businesses to help them build their experience and make them more marketable; and the New Enterprise Allowance, to support those looking to start their own business by providing access to finance and support from local business mentors. In response to the challenge of youth employment, and the CSR on youth unemployment, extra help is being provided to young unemployed people to get a job. The Youth Contract, launched in April 2012, provides extra help to young unemployed people and will support up to half a million young people into education and employment opportunities, including:

160,000 Wage Incentives of up to £2,275 for employers to recruit 18-24 year olds from the Work Programme;

250,000 extra Voluntary Work Experience or sector-based work academies; and

up to 40,000 new Apprenticeship Grants to encourage new employers to take on 16 – 24 apprentices.

A new programme, Traineeships, started in August 2013 and is designed to help young people who are focused on getting an Apprenticeship or sustainable job but who do not yet have the skills or experience to compete successfully for vacancies. The core target group for Traineeships is young people who:

are not currently in a job and have little work experience, but who are focused on work or the prospect of it

are 16–19 and qualified below Level 3, or 19 to 23 years of age and have not yet achieved a Level 2

employers and training organisations believe have a reasonable chance of being ready for employment or an Apprenticeship within six months of engaging in a Traineeship programme

Traineeships are available for young people aged 16 to 23 and for young people with Learning Difficulty Assessments up to an academic age of 25.

This initiative has three elements: a focused period of work preparation training; high quality work placement with an employer; and English and maths for those without a Level 2 in the subjects.

The 2007-2013 ESF programme is adding value to these policies by supporting additional activities to extend employment opportunities and tackle barriers to work faced by unemployed and inactive people, with a particular focus on people at a disadvantage in the labour market . The final stage of the 2007-2013 England ESF programme, ESF is focusing on:

employment related support for families with multiple problems (aligned with the cross-government Troubled Families initiative);

voluntary places on the Work Programme for people on incapacity benefit and income support;

a pilot of Day One Support for Young People aged between 18-24 years old who need additional support to make the transition from benefits in to sustained employment;

support for young people not in education, employment or training;

skills support for the unemployed; and

support for very long term unemployed people.

Local Context and Links with Growth Plan

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Section 3.3 of this document provides the evidence base and analysis relevant to this theme including activity rates and unemployment levels. Whilst unemployment levels in Hertfordshire are relatively low there continue to be similar issues to other parts of the County and the need to target interventions to address specific local issues. Hertfordshire has a high rate of 18-24 year old unemployment. Hertfordshire has a resilient economy (ranked in the top 5 of 39 LEPs for economic resilience). Business start-ups and vacancy data suggest economic activity in the area is returning to pre-recession levels with relatively low unemployment, (2.4%)13. However, in Hertfordshire the key issue is the unemployment rate amongst 18-24 year olds. Whilst 4.4% of 18-24 year olds in Hertfordshire are on Jobseekers Allowance (JSA) compared to 7% nationally, the group constitutes nearly a quarter of all Hertfordshire residents on Jobseekers Allowance (JSA)14, and when the numbers on Employment Support Allowance (available to those with an illness or disability) are added, there are as many as 6095 young people under 24 out of work and in receipt of either benefit15. Those Not in Education Employment or Training (NEETs) need to be re-engaged. Apprenticeships provide an opportunity to help reduce youth unemployment but the longer the young person is unemployed the harder it is to make the transition into an apprenticeship or work. Work experience and employability skills training are important to retain the engagement of this group and ensure they do not become too far removed from the labour market. Hertfordshire has a low number of 16 to 18 year old NEETs (see table below):

Hertfordshire NEET numbers up to age 18:

NEET Cohort

size NEET %

28/1/2014 NEET %

31/1/2013 NEET %

31/01/2012

Broxbourne 187 3402 5.72 5.43 5.72

Dacorum 164 4828 3.48 3.22 3.70

East Hertfordshire 157 4952 3.24 3.00 3.05

Hertsmere 132 3265 4.22 4.14 4.77

North Herts 178 4279 4.32 4.14 4.22

St Albans 105 4700 2.31 2.20 2.15

Stevenage 177 3237 5.71 6.12 6.52

Three Rivers 104 2902 3.71 3.71 4.01

Watford 148 3136 4.89 4.81 4.39

Welwyn Hatfield 152 3428 4.65 5.34 5.03

No fixed or not known 2 118 13.33 15.00 1.3

Hertfordshire 1506 38247 4.09 4.05 4.19 Source: Hertfordshire County Council

On 31 January 2013, there were 1477 young people in the NEET group (unadjusted 4.05% - 1197 available and 280 unavailable), 1658 lost contact (4.35%), in learning rate 81.8%, 34949 EETs and a cohort of 38084

On 31 January 2012, there were 1558 young people in the NEET group (unadjusted 4.19% - 1276 available and 282 not available), 1593 lost contact (4.11%), 35652 EETs, in learning rate of 82.47% and a cohort of 38803

13 NOMIS 14 Herts LEP economic update Jan 2013, December 2012 figures. 15 NOMIS, data for May 2012 & Herts LEP economic update Jan 2013

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On 31 January 2011, there were 1454 young people in the NEET group (unadjusted 4.08% - 1236 available and 218 not available), 1429 lost contact (3.9%), and in-learning rate of 84.48%, 34052 EETs and a cohort of 36935

However, for the 18-24 year old group this is significantly higher. The highest concentrations of NEETs are in Watford (18% of Hertfordshire’s total) and Stevenage (15% of Hertfordshire’s total)16. Work needs to be undertaken to investigate barriers to learning/employment in areas where take up is lower, e.g. Broxbourne, Watford and Stevenage. Traineeships, will be able to increase young people’s employability and re-engage individuals. Traineeships became available to 16-23 year olds in 2013/14 and will include work placements of up to six months and flexible training to build character and to help young people get ready for work, such as job search and interview skills, time-keeping and team working and will develop learners’ English and maths. Unemployed Over 50 – Analysis by Jobcentre Plus shows that Hertfordshire has a marginally lower percentage of those over 50 who are unemployed. Nonetheless there are skills related issues that can be addressed to remove barriers to return to the labour market. There is a potential untapped workforce of around 3,000 people (source NOMIS Labour Market report).

Lone Parents – Analysis by Jobcentre Plus shows that lone parents also face barriers in returning to the labour market. This is an issue particularly in a number of deprived wards.


We will focus on activities that will align with the following investment priorities:

Investment priority: 1.1 - Access to employment for job seekers and inactive people, including the long term unemployed and people far from the labour market, also through local employment initiatives and support for labour mobility

Investment priority: 1.2 - Sustainable integration into the labour market of young people (ESF), in particular those not in employment, education or training, including young people at risk of social exclusion and young people from marginalised communities, including through the implementation of the Youth Guarantee



Priority 1 – Maintaining global excellence in science and technology Priority 3 - Re-invigorating our places for the 21st Century Priority 4 – Foundations for growth

Investment Priority 1.1 contains the following ‘specific objectives (page 37 of the ESF National OP refers):

1. To improve the employability of long-term unemployed people, so that they can compete effectively in the labour market.

2. To provide individuals from groups which face particular labour market disadvantage with additional support so that they can compete effectively in the labour market.

3. To encourage inactive people to participate in the labour market and to improve their employability.

16 Final report – Strand 2 Engage and support 16-24 year olds who are currently not in Education or Employment or Training (NEET) to take up Apprenticeship opportunities, ACER

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4. To address the basic skills needs of unemployed and inactive people so that they can compete effectively in the labour market.

5. To provide support for women at a disadvantage in the labour market, and particularly those who are currently inactive, to contribute to our efforts to reduce the gender employment gap.

Investment Priority 1.2 (Sustainable Integration of Young People) includes the following specific objectives (page 48 of the ESF National OP refers);

1. To support the rise in the participation age by providing additional traineeship and apprenticeship opportunities.

2. To engage marginalised 15-18 year olds and support them to re-engage with education or training.

3. To address the basic skills needs of young NEETS so that they can compete effectively in the labour market.

4. To provide additional work experience and pre-employment training opportunities to unemployed 18-24 year olds

5. To support young lone parents to overcome the barriers they face in participating in the labour market (including childcare).

Investment Priorities 1.1 and 1.2 Indicative Activities Fund Additional and innovative approaches to pre-employment training. ESF Additional support for long-term unemployed people, including those who have left

the Work Programme, and including new approaches to work experience and training.

ESF

Providing additional support to specific target groups such as people with disabilities or health barriers (including mental health issues), people with caring responsibilities, lone parents, ethnic minorities, ex-service personnel, ex-offenders and those from households with inter-generational worklessness.

ESF

Helping older workers to re-train, re-enter or stay engaged in the labour market. ESF Training workless people and those facing redundancy who need to upgrade their

skills or learn new skills (including basic skills and English for speakers of other languages) to compete in the local labour market and adapt to changes in the economy.

ESF

Responding flexibly to employer demand in local labour markets where Local Enterprise Partnership and their partners identify specific needs. This may include demands highlighted by Universal Credit Local Support Service partnerships and health and wellbeing boards to help Universal Credit claimants progress into the labour market, support their career progression (better pay/ work/ hours), and move from the hidden economy to legitimate work.

ESF

Using self -employment as a route out of worklessness. ESF Reducing the number of young people not in employment, education, or training,

and those at risk of disengaging (including through engagement and preparation activities, access to apprenticeships, and personal coaching).

ESF

Additional literacy and numeracy provision for young people. ESF Additional and innovative approaches to support and motivate young people with

no or few qualifications into training and the workplace such as additional support that harder to reach young people will require to successfully complete a traineeship or apprenticeship.

ESF

Innovative programmes for marginalised groups to help bring them to and support them in learning, such as new training programmes and support for young lone parents, carers, ex-offenders and people with disabilities or health barriers.

ESF

Providing support to embed programmes for young people not in employment, education or training, such as traineeships and apprenticeships.

ESF

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Investment Priorities 1.1 and 1.2 Indicative Activities Fund Brokering opportunities for young people and supporting local employers to take on

young people who are not in employment, education, or training (including those with complex barriers), including through traineeships, apprenticeships, work experience and graduate placements.

ESF

Overcoming the challenges brought about by the limited range of employment in some rural areas.

ESF/EAFRD

To create opportunities for jobs through funding to businesses and entrepreneurs to support the creation and development of SMEs and Micro Businesses, including the uptake of new/improved business processes and technology.

ESF/EAFRD

To create opportunities for jobs through supporting funding for strategically important tourist projects and through supporting and promoting tourism, recreation and leisure.

EAFRD

Specific targeted action to promote equality between men and women including to: increase the sustainable participation and progress of women in employment, including women at risk of poverty to reduce gender-based segregation in the labour market; combat gender stereotypes; and promote reconciliation of work and personal life for all and equal sharing of care responsibilities between men and women.

ESF

Additional, tailored support through the National Careers Service for those requiring help with entering or re-entering the job market (potentially included in the SFA opt-in but subject to agreement).

ESF

5.3.2.5 Opt-Ins Priority Axis 1 (TO8) Our intention is that 90% of co-financing under this thematic objective will come from two ‘opt-ins’ as follows:

Skills Funding Agency (SFA)

Department for Work and Pensions (DWP) Opt in Skills Funding Agency (SFA) Hertfordshire LEP is keen to negotiate an ‘opt-in’ to the Skills Funding Agency (SFA) in order to secure match funding for 45% of the actions envisaged under thematic objective 8. An opt-in would be subject to negotiations and conclusion of a satisfactory agreement with SFA. This document confirms our ‘in principle’ agreement to opt-in. Discussions that have taken place between submission of the draft ESIF strategy in October 2013 and completion of this document have been very positive. There is potential to ensure that an agreement can be reached to ensure LEP identified priorities as set out in this document can be taken forward. SFA have provided a draft template as the basis for such an agreement. We look forward to concluding agreement in the near future. SFA opt-in proposed is as follows: SFA Opt-in Summary Table (Based on FOREX 0.71 September 2015)

ESIF £m SFA £m

3.230 3.230

The Skills Funding Agency wrote to all Local Enterprise Partnerships in November 2015 concerning the opt-ins and devolution deals. The letter stated “In light of these changes in government policy, the SFA has sought agreement from ministers on how to proceed with the SFA opt-in service. Ministers have agreed

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that we cannot put in place contractual or match-funding arrangements beyond the point at which the SFA might cease to be accountable for the non-apprenticeship adult skills budget. As a consequence, all ESF contracts will have to come to a close in March 2018. By closing the contracts at this time, the SFA will have enough time to accrue the necessary match-funding and gather the necessary data from providers to submit our claims to the European Social Fund Division (ESFD) by the summer of 2018. This will then give ESFD enough time to make claims to the European Commission before the end of 2018, triggering final audits in 2019”. It is not known at this time what arrangements will exist for the delivery of adult skills post 2018. This ESIF Strategy will need to be revised accordingly once the arrangements are known.

Opt in DWP Hertfordshire LEP has negotiated an ‘opt-in’ to the Department for Work and Pensions (DWP) Jobcentre Plus provision in order to secure match funding for around 45% of the actions envisaged under PA1 (thematic objective 8). The arrangements have been agreed and the process for contracting this provision is underway. DWP opt-in proposed is as follows: DWP Opt-in Summary Table (Based on FOREX 0.71 September 2015)

ESIF £m DWP £m

3.289 3.289

5.3.2.6 Outputs and Results The tables below represent the outputs and results appropriate to the selection of Priority Axis and Investment Priorities. The actual targets appear on the spreadsheet appended to this document and have been allocated by the Managing Authority based on an apportionment of targets agreed in the England ESF Operational Programme. Outputs Investment Priority 1.1 Outputs

ID Indicator

O1 Participants

ESF - CO01 Unemployed, including long-term unemployed

ESF - CO03 Inactive

O4 Participants over 50 years of age

O5 Participants from ethnic minorities

ESF - CO16 Participants with disabilities

O6 Participants without basic skills

ESF - CO14 Participants who live in a single adult household with dependent children

Investment Priority 1.1 Results

ID Indicator

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R1 Unemployed participants into employment (including self-employment) on leaving

R2 Inactive participants into employment, or job search on leaving

R3 Participants gaining basic skills

ESF- CR06 Participants in employment, including self-employment, 6 months after leaving

Investment Priority 1.2 Outputs

ID Indicator

O2 Participants (below 25 years of age) who are unemployed or inactive


ESF - CO03 Inactive



O6 Participants without Basic Skills



ID Indicator


R5 Participants (below 25 years of age) in employment, including self-employment, or education/ training upon leaving

ESF- CR06 Participants in employment, including self-employment, 6 months after leaving

5.3.2.7 Value for Money The Outputs and Results included in the appended spreadsheet have been calculated by the Managing Authority and are an apportionment of targets contained in the England ESF Operational Programme. Value for money calculations are, therefore, assessed against national indicator benchmarks. Where proposals vary from national benchmarks an explanation will be required for the purposes of assessment.

5.3.2.8 Additionality Activities funded under this thematic objective will meet the additionality principles set out in section 5.1.3 of this document. Hertfordshire LEP is keen to ensure all ‘opt-in’ providers respect the need to demonstrate additionality for any ESF funded activity. This will form a key part of any agreements signed between Hertfordshire LEP and ‘opt-in’ providers.

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5.3.3 Priority Axis 1 (TO9) -Promoting Social Inclusion and Combating Poverty 5.3.3.1 Funding Allocation In accordance with HMG guidance 16.81% (revised from 20%) of the ESF notional allocation is now allocated to Priority Axis 1 (theme TO9) - Promoting Social Inclusion and Combating Poverty. This is now covered in the England ESF Operational Programme by Investment Priority 1.4 ‘active inclusion’. This represents an allocation of €5.657m of EU SIF (ESF) making the total allocation around €11.314m based on an average ERDF intervention rate of 50%. This theme will complement funding allocated to Priority Axis 1 (TO8) - Promoting Employment and Supporting Labour Mobility. It is anticipated that match funding will come from the Big Lottery ‘opt-in’. Priority Axis 1 (TO9) IP 1.4 – Allocation and Funding Summary

Source €m

ESIF 5.657

Big Lottery Match (Opt-In) 5.657

Local Match 0.00

Total 11.314

5.3.3.2 Rationale for Intervention EU Policy Context The Europe 2020 strategy has a goal of promoting social inclusion, in particular through the reduction of poverty, by aiming to lift at least 20 million people across the EU out of the risk of poverty and social exclusion (see section 2.2 of this document).

England Policy Context17 The Government is seeking to create a new welfare system for the 21st Century, recognising work as the primary route out of poverty, and eradicating child poverty. Government states that the welfare system is being reformed to make it fairer, more affordable, and better able to tackle the causes of poverty, worklessness, and welfare dependency. Moreover, in tackling poverty, the Government’s strategy takes an ambitious approach, aspiring to deliver Social Justice. Poverty, as measured by a household’s income relative to the national average, is often a symptom of deeper, more complex problems. Many of these problems are passed on from one generation to the next. The Government is aiming to help people change the course of their lives and make a real and lasting difference. To do this, there is a need to deal with the problems that cause people to end up living in poverty, rather than dealing with people’s incomes in isolation. This will include actions to:

help troubled families turn their lives around;

improve mental health;

reduce child poverty and make sure that children are properly supported so that they complete their education;

make work pay, and help people to find and stay in work;

help people recover and become independent if things have gone wrong; and

work with the voluntary, public and private sectors to deal more effectively with complex problems.


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The Government’s strategy for social justice ‘ Social Justice: Transforming Lives’ sets out the Government’s commitment to giving individuals and families facing multiple disadvantages the support and tools they need to turn their lives around. A new set of principles inform this approach:

a focus on prevention and early intervention;

where problems arise, concentrating interventions on recovery and independence, not maintenance;

promoting work for those who can as the most sustainable route out of poverty, while offering unconditional support to those who are severely disabled and cannot work;

recognising that the most effective solutions will often be designed and delivered at a local level; and

ensuring that interventions provide a fair deal for the taxpayer. The 2007-2013 England European Social Fund (ESF) programme is adding value to these policies by supporting additional activities to extend employment opportunities and tackle barriers to work faced by unemployed and inactive people, with a particular focus on people at a disadvantage in the labour market (including disabled people, lone parents, older workers, people from ethnic minorities, the low skilled, offenders and ex-offenders ,including those battling addiction, and young people not in education, employment, or training). The final stage of the 2007-2013 England ESF programme, ESF is focusing on:

employment related support for families with multiple problems;

voluntary places on the Work Programme for people on incapacity benefit and income support; and

employment and skills support for offenders and ex-offenders in extremely hard to help groups. The draft 2013 EU Country Specific Recommendations to the UK include: ‘Step up measures to facilitate the labour market integration of people from jobless households. Ensure that planned welfare reforms do not translate into increased child poverty. Fully implement measures aiming to facilitate access to childcare services.’

Hertfordshire - Local Context Section 3.8 of this document provides the evidence base for this theme including data on areas of deprivation, housing issues, rehabilitation of offenders plus health and wellbeing. Not all residents of the County share in the relative prosperity of the area. There are pockets of deprivation and social inclusion issues across a variety of communities. This can be seen from the evidence base data contained in section 3 especially those sub sections dealing with unemployment, index of deprivation, housing and health which highlight areas of inequality. Specific social inclusion issues identified in Hertfordshire relate to:

Young people

Ethnic minorities/migrant workers

Ex-offenders

Troubled families

Health inequalities

People not active in the labour market including people with disabilities

Housing

Deprived wards

Rural deprivation

Child Poverty

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Hertfordshire has an active and vibrant Community and Voluntary sector keen to engage in addressing these problems. Rehabilitation of Ex-Offenders Hertfordshire Probation Trust provides a number of interventions to address criminogenic need such as programmes to address thinking skills, violence and substance misuse. However many of the needs are met by agencies outside the criminal justice system, such as housing, employment and being part of a local community. Working in partnership with other agencies and the local communities is therefore essential to reduce reoffending. Changes to the structure of support for the rehabilitation of offenders (see section 3.11) mean that, in Hertfordshire, an additional 500 to 600 people per year will come under the scope of support provided by the new Community Rehabilitation Companies (CRCs). However, it is likely that the scope of that support may be limited due to financial constraints. There is clear evidence that addressing the issues faced by offenders leads to a reduction in re-offending. The Hertfordshire Probation Trust has carried out a ‘Criminogenic Analysis’ of offenders (see table section 3.11). This shows that issues such as access to employment and up skilling are critical to reduce re-offending. It is likely that offenders have multiple issues and require an inclusive holistic approach to resolving barriers to progress. There is scope for looking at the needs of specific offender groups. For example, although women represent only around 12 to 13% of the current Hertfordshire Probation Trust caseload, they often come from abusive backgrounds and have higher emotional and personal needs but as they do not tend to present a serious risk of harm to the public they may not receive intensive intervention. Likewise the numbers of offenders aged 50 and over is small, in comparison to overall offending rates, but this group has specific issues and needs which are particularly evident in the ageing prison population and the difficulties this can present with resettlement on release. There are, of course, substantial barriers facing all offenders in seeking to return to the labour market including a reluctance from employers to provide opportunities to ex-offenders. Homelessness is also a substantial issue in respect of rehabilitation. During the consultation on this strategy it has emerged that there is potential to address some of these issues through use of ESIF within this thematic objective. Alongside the Community Rehabilitation Company we anticipate involvement of the Community and Voluntary Sector and Housing Associations to take this work forward.

5.3.3.3 Investment Priorities We propose a focus on tackling high inactivity rates by providing additional and/or more intensive and flexible support tailored to the multiple needs of people at most disadvantage in the labour market on their journey to work – either within or alongside Government programmes. These people are furthest from the labour market and are likely to need more focussed and targeted help, perhaps over a longer period to help them into work. We will seek to do this by delivering integrated and continued investments to support the journey to work for those at most disadvantage in the labour market by:

providing local programmes to reach and motivate those at risk of becoming socially excluded, that aim to help those people reconnect with work through learning and skills;

where appropriate, extending eligibility for Big Lottery and Government programmes;

providing ‘top-up’ support within Big Lottery/Government programmes or complementary additional support alongside Big Lottery/Government programmes;

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piloting innovative approaches that bring those with multiple disadvantage closer to the labour market; and

providing additional incentives for providers to help move those at most disadvantage into work

Exploring the potential of social innovation initiatives It is anticipated that the delivery of all projects will recognise the importance of pathways for progression and the value Information, Advice and Guidance can provide to enable individuals to make informed choices.

Activity will focus on the following overarching investment priorities:

Investment priority: 1.4 - Active inclusion, including with a view to promoting equal opportunities and active participation, and improving employability


The chosen investment priority links to the following Hertfordshire Growth Strategy priorities:

Priority 3 - Re-invigorating our places for the 21st Century

The following specific objectives will be incorporated into delivery:

1. To support people with multiple and complex barriers to participation to address these underlying issues and to move closer to or into the labour market.

2. To engage marginalised individuals and support them to re-engage with education, training, or in employment.

Delivery will encompass a range of potential activities such as:

Indicative Activities Fund

Tackling barriers to work in troubled families. ESF

Complementing and adding value to other services and funds locally, especially helping those with more complex barriers (and in greatest need of a more consistent service offer and who may require extra support to transfer to Universal Credit) closer to employment.

ESF

Tackling barriers to work in a holistic and integrated way, including through supporting early action before problems become entrenched, outreach activities and access to locally provided services. This may include addressing issues such as: caring responsibilities; debt and money management; digital inclusion; reducing drug and alcohol dependency; educational attainment (particularly lack of basic literacy and numeracy and English for speakers of other languages skills); family, parenting and relationship intervention; access to flexible and affordable childcare, health problems (including mental health); homelessness; learning difficulties and disabilities; life skills; offending; and access to transport.

ESF

Targeting specific communities or ethnic minorities with high levels of poverty and social exclusion (for example, spatial targeting in key neighbourhoods where worklessness is persistent, high and inter-generational to raise aspirations and tackle core economic barriers).

ESF

Helping grow the social investment market to support social enterprises and the social economy.

ESF

Developing the capacity of social entrepreneurs to address the needs of their local ESF

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Indicative Activities Fund communities.

Providing additional and/ or more intensive and flexible support identified by Universal Credit Local Support Service partnerships and health and wellbeing boards. This may include actions to help Universal Credit claimants progress into the labour market, support their career progression (better pay/work/ hours), and move from the hidden economy to legitimate work.

ESF

Providing additional support to offenders and ex-offenders without work, especially from very hard to help groups.

ESF

Supporting early interventions for young people, especially those with multiple barriers to their participation, for example care leavers, ex-offenders, lone parents and those with special needs.

ESF

Supporting specific activities to combat discrimination of groups with protected characteristics in the labour market. and promote equal opportunities, which may include actions to: improve accessibility for persons with disabilities, with a view to improve their integration into employment, education and training, thereby enhancing their social inclusion; and reduce inequalities in terms of educational attainment and health status and facilitating the transition from institutional to community-based care in particular for those who face multiple discrimination.

ESF

Promote a dynamic and inclusive rural economy with fair access to services and basic amenities.

ESF/EAFRD

Providing additional and/or more intensive and flexible support identified by Universal Credit Local Support Service partnerships and health and wellbeing boards. This may include actions to help Universal Credit claimants progress into the labour market, support their career progression (better pay/work/ hours), and move from the hidden economy to legitimate work.

ESF

Providing additional support to offenders and ex-offenders without work, especially from very hard to help groups.

ESF

Supporting early interventions for young people, especially those with multiple barriers to their participation, for example care leavers, ex-offenders, lone parents and those with special needs.

ESF

Supporting specific activities to combat discrimination of groups with protected characteristics in the labour market. and promote equal opportunities, which may include actions to: improve accessibility for persons with disabilities, with a view to improve their integration into employment, education and training, thereby enhancing their social inclusion; and reduce inequalities in terms of educational attainment and health status and facilitating the transition from institutional to community-based care in particular for those who face multiple discrimination.

ESF

Developing the capacity of community groups to participate in the delivery of services to those furthest from the labour market.

ESF

Encouraging Social Investment models by providing (matched) outcome funding that enables payment by results programmes to be established in support the Government’s agenda on Social Justice and encourage innovative delivery models within local communities. The focus would be on disadvantaged individuals and families, in areas such as NEETs, employment and training, drug addiction and other issues which are usually part of the cycle of deprivation.

ESF

Capacity-building for non-governmental organisations (i.e. Civil Society), to encourage adequate participation of and access by non-governmental organisations to actions supported by the European Social Fund, notably in the fields of social inclusion, gender equality and equal opportunities.

ESF

Encourage closer collaboration between businesses and civil society as a ESF

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Indicative Activities Fund mechanism of addressing social inclusion (add to capacity building heading). This can provide the framework for tackling social inclusion issues through initiatives such as work experience and training.

Encourage a culture of active and meaningful cross sector working. ESF

5.3.3.5 Opt-In – Big Lottery/Department for Work and Pensions (DWP) Opt-In – The Big Lottery Hertfordshire Local Enterprise Partnership has explored further the potential of the Big Lottery ‘opt-in’ detailed in the prospectus published in July 2013. Initial discussions took place in August 2013, were followed up in November 2013 and agreement in principle reached in January 2014. Subsequently outline project specifications for the first three year period have been agreed and the following activities have been set out in a call for projects:

Young people

Barriers to employment

Financial confidence These projects will seek to address the issues identified during development of this strategy and will incorporate the anticipated activities with a focus on the identified client groups. Big Lottery Opt-in Summary Table

ESIF €m Big Lottery €m

5.657 5.657

The opt-in is subject to conclusion of a satisfactory agreement with the Big Lottery that meets the needs of Hertfordshire as identified by Hertfordshire LEP.

5.3.3.6 Estimated Outputs and Results Investment Priority 1.4 - Outputs

ID Indicator

O1 Participants


ESF - CO03 Inactive





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ID Indicator

ESF - CR02 Participants in education or training on leaving

R1 Unemployed participants into employment, including self-employment on leaving

R2 Inactive participants into employment, or jobsearch on leaving

R4 Participants with childcare needs receiving childcare support

5.3.3.7 Value for Money The Outputs and Results included in the appended spreadsheet recorded above have been calculated by the Managing Authority and are an apportionment of targets contained in the England ESF Operational Programme. Value for money calculations are, therefore, assessed against national indicator benchmarks. Where proposals vary from national benchmarks an explanation will be required for the purposes of assessment. Social inclusion as a heading covers a range of issues which can have an adverse impact on the life and wellbeing of individuals. Just as there are many issues (as outlined in the plan) there are equally many measures which can be enacted to measure outcomes. The projects supported will be instructed to capture quantifiable outcomes in areas such as the number of people supported, the number accessing training and the numbers passing assessments /tests (being non-accredited or accredited). Especially in the area of social inclusion it is important to recognise the role and value of soft outcomes, for example the steps achieved in terms of interpersonal skills, the confidence to travel independently, organisational and analytical skills. These are small and very important steps in building levels of confidence and positively contributing to quality of life of the individual. The beneficiaries supported in this strand of the European Structural Fund in Hertfordshire will be a distance from the labour market. Small steps such as arriving at training on time and being part of a group are important to the individual and are important to record. There is no one method for measuring soft outcomes and we recognise the need to have a consistent approach across the projects funded, whilst recognising that projects will be working with different target groups and the need for any reporting to be proportionate to the size of the project. We recognise at a national level good studies have been conducted by Government, the Lottery and by voluntary community sector organisations and the appointed managing agent for the Social Inclusion will work with the Managing Authority and LEP Area ESIF Committee to prepare and enact a consistent method of outcome reporting.


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5.3.4 Priority Axis 2 (TO10) - Investing in Education, Skills and Lifelong Learning 5.3.4.1 Funding Allocation We have allocated 52.88% (revised from 50%) of the ESF notional allocation to Priority Axis 2 ‘skills for growth’ which encompasses the theme TO10 - Investing in Education, Skills and Lifelong Learning. This represents an allocation of €17.793m of EU SIF (ESF) making the total allocation around €35.586m based on an average ESF intervention rate of 50%. It is intended that the majority of match funding (90%) will come from the Skills Funding Agency (SFA) ‘opt-in’ subject to reaching an agreement that meets local needs and LEP identified priorities for skills. Given that this funding is in the form of ‘co-financing’ the SFA contribution is not available at local level as match funding.

Priority Axis 2 (TO10) – Allocation and Funding Summary £ (based on FOREX 0.71 Sept 2015)

Source Match Funding inc Co-Financing £m

Actual funds available for ESIF in Hertfordshire £m

ESIF 12.632 12.632

SFA Co-financing (Opt-in) 11.370 0.00

Local Match 1.263 1.263

Total 25.266 13.895

5.3.4.2 Rationale for Investment EU Context The Europe 2020 strategy has a goal to improve education levels, in particular, by aiming to reduce school drop-out rates to less than 10 per cent and by increasing the share of 30-34 years old having completed tertiary or equivalent education to at least 40 per cent.

National Context18

The UK education system has important strengths but is being improved still to make opportunity more equal and to contribute more to growth, including by making up ground lost in global comparisons of workforce skills. Developing human capital in the UK is integral also to the performance of the UK labour market so as to increase and sustain employment opportunities. The Government is, therefore, continuing its reforms to improve attainment and raising the level of youth participation in continued education or training. Changes to the system should allow students to achieve their full potential, while enabling high quality assessment of attainment at all levels with qualifications that are the ones best recognised by employers and universities. The Government wants learners at all ages to be informed and empowered. The Government’s strategy to maximise the participation of 16-24 year olds in education, training, and work: Building Engagement, Building Futures, sets out the range of policies that the Government is implementing to raise educational attainment and ensure that young people are prepared to progress successfully into higher education and sustainable employment. Compulsory participation in education and training up to the age of 17 comes into force this year. By 2015, this will be extended to 18 year olds. £7.5 billion in funding is available for 16-19 education and training places including apprenticeships. Vocational training is recognised as the route to enable people to progress into skilled, higher-paid employment. A new Further Education (FE) and skills system was launched in autumn 2010 and full implementation began in 2011. Reform of the system has included the removal of government targets and


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freed providers to work with local employers and communities to determine the appropriate training. In addition funding now follows the learner. The Government has also consulted on the future of apprenticeships following the Richards Review which set out a compelling vision for the future of the programme, putting the relationship between the individual and the employer at the heart of the Apprenticeship. The Skills Funding Statement published in December 2012 confirmed the priorities for funding: apprenticeships, young people, those with English and maths skills below level 2 and the unemployed. Currently funding is available for adults to gain:

English and maths skills up to level 2;

skills training up to level 2 to help them into work, if in receipt of agreed benefits;

a first full level 2 qualification (aged 19 – 24), and Foundation Learning if needed;

a first full level 3 qualification (aged 19 -24);

apprenticeships; and

retraining at level 2, and/ or classroom training at level 3 or 4. Since the new skills system was launched further reforms have built on the approach:

the launch of the Employer Ownership Pilot (EOP) promotes the development of bespoke training courses and bids for government support (37 bids were accepted last year worth £95m government funding and leveraging £115m employer investment); and

giving older learners (24+) the ability to purchase the skills they need, supported through a loan scheme, mirroring the High Education market.

The reform programme is now moving to the next stage. This means driving up both rigour and responsiveness in the system. In April 2013 the Government announced in its Paper ‘Rigour and Responsiveness in Skills’ its aims to create a rigorous Skills system ensures that provision responds to the individual and the employer. The areas where changes will be made to achieve this objective are:

raising standards: improving the quality and professionalism of teaching, dealing with poor quality teaching and giving learners and employers greater power to choose training and better information about the quality of provision and routes to employment;

reforming Apprenticeships: to give employers greater flexibility in deciding what training individuals need to reach the required standard;

pathways into work: to include a framework for skills and unemployed learners to ensure better interaction of skills and benefits and to develop a traineeships programme to respond to the concerns of employers about the readiness for work of young unemployed people;

meaningful qualifications: introducing a new New Technical Baccalaureate Standard and ensuring the number of qualifications we continue to fund meet employer needs and are developed with strong employer input; and

underpinned by funding reform and greater access to Government data: to provide sharper incentives for colleges and training providers to respond to what learners want to study and what employers need. By 2014 the full range of Government data on FE and skills will be available on data.gov.uk for dissemination via apps.

In terms of Higher Education (HE) the UK system has an excellent reputation for overall quality, and attracts large numbers of international students and researchers, who bring revenue and expertise. Our strongest universities are among the best in the world, and retaining and building on that strength is a Government priority. The highly skilled graduates that the HE system delivers are crucial to the UK's economic growth. The Government’s strategy for HE has student choice and provider opportunity at its core. A sustainable funding system has been introduced which means that the costs of Higher Education are shared between Government and graduates who gain a range of benefits from a university education – most notably the higher salaries they earn. The funding system means that no student is prevented from gaining the high level skills and opportunities associated with an HE qualification because of cost. Eligible students can

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access tuition fee loans and loans to help with living costs. They do not need to repay their loans until they are in well-paid jobs. Because more HE teaching funding is now in the hands of students via student loans, their choices will shape higher education. Universities and colleges will have to persuade prospective students that their teaching, facilities and support are worth their investment. This will help drive quality improvement. The Government recognises the importance of promoting opportunities for successful participation in higher education and the development of higher level skills to everyone who can benefit from it. The Government is establishing a new framework, with increased responsibility placed on universities to widen participation. We have also asked HEFCE and OFFA to develop a national strategy for access and student success which will include advice to ensure we achieve the maximum impact from spending by Government, HEFCE and institutions. The Government wants more students to be able to go to the university of their choice, and a more dynamic system which will enable popular institutions to grow. The central controls placed on the number of students each university through unconstrained recruitment of high performing A level (or equivalent) students. Better information to support student choice is a key strand of the current HE strategy. The Key Information Set (KIS) enables students to compare data for each course. Information provided includes student satisfaction, graduate outcomes, learning and teaching activities, assessment methods, tuition fees and accommodation. Skilled graduates are central to the UK's economic growth, and the Government has encouraged universities and business to work in partnership to ensure that supply meets demand. The 2012 Wilson Review of Business-University collaboration highlighted the importance of universities working closely with the business community in their local area, and in April 2013 the Government launched the National Centre for Universities and Business. HEFCE will ask the new Centre to provide strategic advice periodically on industry’s needs and perceptions of graduates and postgraduates (drawing on established evidence from bodies such as CBI and UKCES) across all disciplines including STEM. Working with Universities UK, the Research Councils and HEFCE have written jointly to funded universities, encouraging them to engage with LEPs to identify opportunities to co-invest in projects of mutual interest.

Local Context – Hertfordshire - The Skills Environment

Section 3.3.5 and 3.3.6 of this document sets out the evidence base in respect of skills and apprenticeships

relevant to this theme.

Recent research commissioned by the Hertfordshire LEP Employment & Skills Board identifies a number of

critical issues that an Employment & Skills Strategy will need to address:

Skills gaps affect business competitiveness.

Employers in Hertfordshire view the overall proficiency of their workforce as key to their performance. Over half of employers19 identified skills gaps in their existing workforce and the majority (55%) of local businesses20 considered that skills gaps were important factors affecting their competitiveness. Gaps cited most often were: technical, practical or job specific (65% of these); sales/marketing/promotional/ PR (63%); advanced IT (57%); managerial (53%); customer handling (51%).

19 Herts Chamber Survey 2011 20 Herts Chamber 2011

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Vacancies are hard to fill.

The corollary of low unemployment levels is relatively high vacancy levels, 18% of establishments in Hertfordshire report having a vacancy21, compared to 15% nationally and 9% of employers reported a hard-to-fill vacancy. Where there are hard to fill vacancies, the vast majority (91%) are skills shortage vacancies. These skills shortages are concentrated in professional/associate professional roles and specifically in the Caring and Leisure sectors. Vacancies in the ICT industry are equivalent to 5% of total employment, the highest proportion across all sectors22. IBM’s Chief Executive Stephen Leonard believes that "Our combined ability [as an industry] to identify, recruit and retain skilled candidates is weaker today than it has probably ever been". They anticipate a shortfall of 20% over the next two or three years and see skills as “the biggest challenge we will face in the next five years".23 Out-migration of talent.

With its close proximity and transport links to London, Hertfordshire has the potential to find it even more difficult to fill hard to fill vacancies as skilled workers can migrate to higher paid roles in London. The cluster research around Film/TV and Software found that employers are often looking for fresh new talent, suggesting that the weaknesses within this cluster may be caused by younger, talented employees being drawn to London in search of work.

Shortage of advanced level skills.

The high percentage of the labour market educated to graduate level makes recruitment at this level an advantage in Hertfordshire but there are business concerns about the availability of suitable individuals educated below level 4, with a consequent impact on competitiveness24. This suggests opportunities available for up-skilling to below the graduate level - i.e. up to level 3/advanced apprenticeship. The underlying theme is that there is still a significant gap between the skills being produced by education and training providers across Hertfordshire – including schools, FE colleges and the University – and the skills being sought by local employers in many of the key growth sectors. Skills contribute significantly to the economic output of an area and are a dynamic driver of enterprise, investment, and new industries. Apprenticeships are one part of the skills offer that can significantly contribute to improving business performance and supporting a thriving economy.

Hertfordshire Skills and Employment Action Plan and Apprenticeship Strategy Hertfordshire has a strong partnership group which has already developed the LEP Skills and Employment Action Plan and the Apprenticeship Strategy for Young People (16-25) 2011-2016 which sets out a vision for apprenticeships. This Apprenticeship Plan has been developed to sit within a suite of plans including the Employment and Skills Action plan and the EU Investment Prospectus and Single Growth Strategy to provide a clear account of the challenges faced within Hertfordshire and guidance on how these can be addressed by working collaboratively with all partners with an interest in apprenticeships and skills development. The actions detailed in the Implementation Plan at the end of the document build on the previous work undertaken and will be delivered by a range of partners and aim to:

Ensure all young people under 19, who are capable and ready and wish to take up an apprenticeship, can do so by 2014.

21 UKCES (2012) UK Employer Skills Survey 2011. This obtained information from 1,599 employers in Hertfordshire. 22 E-skills UK overview 2013 23 Daily Telegraph. 8th May 2013 24 Herts Chamber 2011

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Ensure that all young people in Hertfordshire under the age of 25, who are capable and ready and wish to, can take up an apprenticeship by 2016.

We will work towards achieving this by:

Increasing apprenticeship opportunities – working with employers to understand the business benefits of the apprenticeship offer.

Supporting potential apprentices – to ensure they are of the required calibre for business and to support young people into work.

Ensuring quality provision – ensuring provision meets business needs. The Hertfordshire Local Economic Partnership (LEP) area follows the county boundaries and therefore comprises just one county local authority area, but its boundaries overlap in North Hertfordshire with the Greater Cambridgeshire Greater Peterborough LEP. Both plans have been created in close association to ensure join up between the two areas and avoid duplication of activity. Community Grants Community grants have been an important tool for providing support to those disengaged from learning and the labour market. Hertfordshire organisations funded through ESF Community Grants 2011-2013 include 20 grants which have been awarded to 18 organisations in the county with a total of £231,760 in grants. Hertfordshire has therefore been awarded nearly 20% of the total number of grants awarded to the six counties in the East of England, where a total of £1.2 million has been awarded in grants. Many of the learners that have received support through The Consultancy Home Counties (TCHC) Community Grants programme are disengaged from classroom based learning, and are not able or willing to enrol into a college, but have now received invaluable support in their own community, improving their chances of employment. The projects have a real impact on communities as demonstrated with the number of projects that have an environmental focus in the community. Community Grants has proven to have a real impact on communities that mainstream colleges and providers have often not been able to engage successfully with, especially in other employment programmes to move learners closer to employment or with sustained job outcomes. Successful projects have been delivered especially those in deprived areas supporting people with disabilities and health conditions, lone parents, returners to work, people aged 50 or over, people from ethnic minorities, and ex-offenders. The organisations that have received funding from TCHC are now much closer to being able to deliver mainstream support in employability skills training. The organisations have also had capacity building funding to support their organisation. TCHC has supported organisations with funding for training for their own staff and volunteers and the development of delivery and accreditation arrangements in-house. Some of these organisations are now supporting large organisations such as Amazon with their recruitment drives by working closely with Jobcentre Plus. The community venues are also now being used as training centres on TCHC’s mainstream support programme for the Unemployed, and other mainstream programmes. We have included provision for a Community Grants Programme in Hertfordshire under this strategy for the 2014-20 period. Big Lottery has indicated that delegated grant schemes cannot be funded under their rules. We have, therefore, agreed that the match funding for Community Grants will come from the Skills Funding Agency who have indicated that the scheme will continue. Accordingly provision will enable activity to promote, co-ordinate and administer a grant scheme for the capacity development of the Voluntary, Community and Social Enterprise sector in Hertfordshire


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It is proposed that the following investment priorities are adopted:

Investment priority: 2.1- Enhancing equal access to lifelong learning for all age groups in formal, non formal and informal settings, upgrading the knowledge, skills and competences of the workforce, and promoting flexible learning pathways including through career guidance and validation of acquired competences

Investment priority 2.2: Improving the labour market relevance of education and training systems, facilitating the transition from education to work, and strengthening vocational education and training systems and their quality, including through mechanisms for skills anticipation, adaptation of curricula and the establishment and development of work based learning systems, including dual learning systems and apprenticeship schemes



Priority 1 – Maintaining or global excellence in science and technology Priority 2 – Harnessing our relationships with London (and elsewhere) Priority 3 - Re-invigorating our places for the 21st Century Priority 4 – Foundations for growth

Under each Investment Priority the ESF Operational Programme contains the following ‘specific objectives’:

Investment Priority 2.1 – Specific Objectives

To address the basic skills needs of employed people, particularly in SMEs and Micro businesses.

To increase the skills levels of employed people from the existing level to the next level up, to encourage progression in employment.

To increase the number of people with technical and job specific skills, particularly at level 3 and above and into higher and advanced level apprenticeships, to support business growth.

To increase the skills levels of employed women to encourage progression in employment help address the gender employment and wage gap.

Investment Priority 2.2 – Specific Objective

To promote improvements in the labour market relevance of skills provision through active engagement with relevant institutions and employers, particularly SMEs and Micro businesses.

Investing in Education, Skills and Lifelong Learning – Indicative Activities


Support for activities to start and grow a business from promoting entrepreneurship (including social enterprises), self-employment to providing leadership and management training/advice within Small and Medium Sized Enterprises to develop internal capabilities and growth potential.

ESF

Support for collaborative projects, placements, internships or other activities with SMEs that enable students and graduates to gain industry relevant experience and skills.

ESF

Building capacity in SMEs to provide project/placement/internships/apprenticeships opportunities and enhance the contribution of higher level skills to SME growth. In particular this could include programmes to specifically engage the most disadvantaged groups or those who face particular local disadvantages in higher level skills.

ESF

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Skills support for apprenticeships and traineeships (but not direct funding of training or wage costs) including improvements to the recruitment, assessment and facilities for training.

ESF

Promotion of the use of Higher Level Apprenticeships (especially in manufacturing and industrial strategy priority sectors) by developing a supportive environment for new HLAs.

ESF

Additional and innovative approaches to training for the unemployed, including marginalised groups, to help bring them to and support them in learning and developing employability skills.

ESF

Additional or innovative approaches to training in a vocational context for those with low level skills in Maths, English and ICT, to support them in finding work or progressing in work; and to enable them to achieve vocational qualifications and continue to upskill.

ESF

Support for intermediate, technical and high level vocational provision for the unemployed and for career progression.

ESF

Supporting low skilled people in low paid work to help them progress. ESF

Support for intermediate, technical and higher level skills for specific industries for industries and sectors identified as driving growth in local economies in support of other relevant thematic objectives.

ESF

Skills and training packages in response to redundancies. ESF

Development of general and, potentially, industry specific business skills in rural areas.

ESF/EAFRD

Support for change in the local economy to meet skills gaps at all levels, including for Small and Medium Sized Enterprises and the social economy.

ESF

Support for informal learning and community based learning. ESF

Support specific activities to promote equality and diversity, retention, progression and employability in further and higher education; particularly related to the raising of aspirations towards improved economic and social outcomes.

ESF

Developing better links between business and educators, Further Education providers and other education partners to equip students with the skills to start and grow a business to meet local business needs.

ESF

Capacity-building activities, in the form of training, networking measures and to activities jointly undertaken by the social partners (i.e. employers and trade unions).

ESF

5.3.4.5 Opt-In – Skills Funding Agency Hertfordshire LEP is keen to negotiate an ‘opt-in’ to the Skills Funding Agency (SFA) in order to secure co-financing for 90% of the actions envisaged under Priority Axis 2 IPs covering thematic objective 10. The opt-in will be subject to negotiations and conclusion of a satisfactory agreement with SFA. This document confirms our ‘in principle’ agreement to opt-in. Discussions that have taken place between submission of the draft ESIF strategy in October 2013 and completion of this document have been very positive. There is potential to ensure that an agreement can be reached to ensure LEP identified priorities as set out in this document can be taken forward. SFA have provided a draft template as the basis for such an agreement. We look forward to concluding agreement in the near future. SFA opt-in proposed is as follows: SFA Opt-in Summary Table

ESIF £m SFA £m

11.370 11.370

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The Skills Funding Agency wrote to all Local Enterprise Partnerships in November 2015 concerning the opt-ins and devolution deals. The letter stated “In light of these changes in government policy, the SFA has sought agreement from ministers on how to proceed with the SFA opt-in service. Ministers have agreed that we cannot put in place contractual or match-funding arrangements beyond the point at which the SFA might cease to be accountable for the non-apprenticeship adult skills budget. As a consequence, all ESF contracts will have to come to a close in March 2018. By closing the contracts at this time, the SFA will have enough time to accrue the necessary match-funding and gather the necessary data from providers to submit our claims to the European Social Fund Division (ESFD) by the summer of 2018. This will then give ESFD enough time to make claims to the European Commission before the end of 2018, triggering final audits in 2019”. It is not known at this time what arrangements will exist for the delivery of adult skills post 2018. This ESIF Strategy will need to be revised accordingly once the arrangements are known.

5.3.4.6 Estimated Outputs and Results

The Outputs and Results included in the appended spreadsheet recorded above have been calculated by the Managing Authority and are an apportionment of targets contained in the England ESF Operational Programme. Value for money calculations are, therefore, assessed against national indicator benchmarks. Where proposals vary from national benchmarks an explanation will be required for the purposes of assessment. Investment Priority 2.1 - Outputs

ID Indicator

O1 Participants




O6 Participants without basic skills


Investment Priority 2.1 - Results

ID Indicator


R6 Participants gaining level 2 or below or a unit of a level 2 or below qualification (excluding basic skills)

R7 Participants gaining level 3 or above or a unit of a level 3 or above qualification

R8 Employed females gaining improved labour market status

Investment Priority 2.2 – Outputs

ID Indicator

CO23 number of supported micro, small and medium-sized enterprises (including cooperative enterprises, enterprises of the social economy)

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Investment Priority 2.2 – Results

ID Indicator

R9 Small and Medium Enterprises successfully completing projects (which increase employer engagement; and/or the number of people progressing into or within skills provision)


129

5.4 Investment Priorities - European Agricultural Fund for Rural Development (EAFRD) 5.4.1 Allocation The Department for the Environment, Food and Rural Affairs (DEFRA) have transferred 12% from Common Agricultural Payments (CAP) direct payments to rural development in England. This will give an overall Rural Development Programme budget of about £3.5bn. Of this DEFRA are allocating 5% to the Growth Programme. This gives a total of £177m to be allocated between LEP areas. Notice of a notional allocation from the European Agricultural Fund for Rural Development (EAFRD) for the Hertfordshire LEP area was received on 19th December 2013. The allocation is as follows:

European Agricultural Fund for Rural Development Allocation in € Allocation in £ (provided by DEFRA using 0.71

Forex)

1,899,304 1,348,506

No annual allocation profile or spend targets have been provided by DEFRA. It has not been made clear if a performance reserve element is included in the funds in line with ERDF and ESF allocations.

5.4.2 National Context DEFRA point out that ERDF, ESF and EAFRD funding can all be used in rural areas. So they do not expect LEPs to use only EAFRD funding to support projects in rural areas. However, the guidance explains that EAFRD funding cannot be spent anywhere except in rural areas.

DEFRA guidance sets out that EAFRD funding in the Growth Programme will contribute to delivering the Government’s top priority of economic growth through a selection of the following options:

Building knowledge and skills in rural areas;

Funding new, and developing non-agricultural, micro, small and medium sized rural business;

Funding small scale renewable and broadband investments in rural areas;

Supporting tourism activities in rural areas. The guidance records that businesses in rural areas, including farming businesses, will be able to apply for EAFRD funding for activities that support the LEP’s ESI Fund Strategy. The listed activities are not sector specific so, for example, where the LEPs have identified a need to invest in knowledge and skills in their areas this can be targeted at general business skills rather than land-based skills. It is noted that a separate EAFRD-funded Rural Development Programme will operate across rural England. This Programme will fund national schemes offering farming and environmental grants and also directly support rural LEADER groups (such as the Eastern Plateau Group) operating at the local level. We anticipate further engagement in the development of the Rural Development Programme and LEADER proposals for the period 2014-2020.

5.4.3 Restrictions and Eligibility The LEP allocated funding can only be spent in designated rural areas. The definition of a rural area is based on the ‘2011 Rural-Urban Classification’ which is an official statistical designation of settlements, developed by the Office for National Statistics, the Department for Environment, Food and Rural Affairs, Department for Communities and Local Government, and Welsh Assembly Government in collaboration with the Universities of Sheffield and Nottingham. Rural areas are settlements below 10,000 people.

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A map setting out the designated rural areas according to the DEFRA definition can be found in section 3.2 of this document. This will be used to determine the eligible areas for investment of the EAFRD allocation.

5.4.4 Rationale for Investment - Local Context and Links with Hertfordshire Strategic Economic Plan The landscape of Hertfordshire is 70% rural and 30% urban. The County has a characteristic of no single dominant urban centre within its boundaries. Instead there is a high incidence of market towns. Many of these have populations of over 10,000 and will not be eligible for support from EAFRD. In all, 87% of the population of Hertfordshire lives in 45 settlements of over 3,000 population. Whilst focusing on Hertfordshire’s distinctive assets and opportunities, the Strategic Economic Plan for Hertfordshire recognises the crucial role which is played by smaller enterprises in urban and rural areas alike. Some of these have the potential to grow and many report that recruitment is especially challenging. Whilst often “under the radar”, these businesses – and the people within them – are the real foundation for future economic growth. The ESIF strategy and Strategic Economic Plan seeks to support them Within Hertfordshire, past employment growth has been concentrated in the A1 Corridor; in the future, prospects across the county are broadly similar (although rather stronger in the London fringe and weaker in the rural area in the east and north). The following table sets out historic and projected future annual rates of employment growth (percentage per annum)

Overall population growth In rural Hertfordshire 2011-2021 is anticipated to be around 1%. However, the most striking observation is the very rapid growth in the population aged over 70. This is a particular issue in rural areas where it is anticipated to reach 3% as compared with 2.4% across the County. The following table taken from DEFRA’s rural statistics dataset provides a comparison of economic activity and employment between urban and rural areas in Hertfordshire. Unemployment is lower in rural areas and economic activity rates higher. However, employment as a percentage of working age is lower.

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Economic Activity by Local Enterprise Partnership (LEP) and rural - urban definition (Jan to Dec 2011)

Local Enterprise Partnership (LEP) Area

Unemployment (as a % of economically

active working age)

Economically Inactive (as a %

of all working age)

Employment (as a % of all working

age)

Hertfordshire

Rural areas 3.7% 24% 73%

Urban areas 6.8% 19% 75%

Overall 6.5% 20% 75%

The following table provides a breakdown of business by industry based in Hertfordshire’s rural areas. Although 12.9% of Hertfordshire’s population lives in ‘rural areas’ as designated by the DEFRA definition 16.73% of businesses are located in these areas. The breakdown of businesses by industry is provided below: Business count by Local Enterprise Partnership (LEP), Local Authority District (LAD), number of employees, industry and rural - urban definition 2011/12

Source: Office for National Statistics (ONS), Inter-Departmental Business Register (IDBR) 2011/12, Local Unit level dataset supplied at Output Area (OA) level

RURAL HERTFORDSHIRE ECONOMIC ISSUES AND CHARACTERISTICS In order to better inform the use of EAFRD within Hertfordshire the LEP commissioned an analysis of rural issues and characteristics. This was prepared by Athey Consulting and published in April 2015. RURAL HERTFORDSHIRE The rural population of Hertfordshire (according to the DEFRA/ONS classification) totalled 128,584 in 2011, out of a total population for Hertfordshire of 1,116,062. The most rural districts in terms of population share include East Hertfordshire (29.5 per cent of population considered rural); North Hertfordshire (18.1 per cent); Hertsmere (15.0 per cent) and Dacorum (13.0 per cent).

The main features of rural Hertfordshire

Lower rates of economic participation

Much lower rates of employment growth in recent years compared to average

A griculture

, fo restry &

f ishing

Who lesale

& retail

t rade,

repair o f

mo to r

vehicles

P ro fessio n

al,

scient if ic &

technical

services

C o nstruct i

o n

T o urism

and

recreat io n

P ublic

A dministra

t io n,

Educat io n

and H ealth

A dministra

t ive &

suppo rt

service

act ivit ies

M anufactur

ingOther

T o tal

B usiness

Units

Broxbourne ** ** ** 25 ** ** ** ** 25 110

Dacorum 105 190 220 170 115 85 100 80 230 1,305

East Hertfordshire 200 390 440 410 250 145 225 145 435 2,635

Hertsmere 30 245 280 145 135 95 130 55 340 1,450

North Hertfordshire 145 245 345 200 155 100 120 100 280 1,685

St Albans 35 100 215 90 70 50 70 30 175 835

Stevenage ** ** ** 5 ** ** ** ** 5 20

Three Rivers 30 65 65 85 40 25 25 30 95 450

Watford ** ** ** ** ** ** ** ** ** **

Welwyn Hatfield 25 115 170 130 70 45 45 35 200 840

T o tal 565 1,365 1,745 1,260 850 550 725 480 1,785 9,330

LA district

name

N umber o f Lo cal B usiness Units 1 by Industry

132

A higher share of part-time employment

Higher level of dependence on public sector jobs, and on public administration for jobs growth

The visitor economy is over twice as important for in Rural Hertfordshire compared to the County as a

whole

Slow growth in Professional, scientific and technical employment and higher growth in ICT employment

compared to the rest of the County

A higher share of very small businesses (employing under 10 employees)

Higher rates of self-employment

Slower growth in business population

Better qualified residents

Challenges facing the rural economy in Hertfordshire

Despite more reliance on small businesses, slow growth in the business population. The economy of Rural

Hertfordshire is more reliant on very small businesses, but the overall rate of growth in the business

population has been much slower than the rest of the County.

The economy of Rural Hertfordshire less able to generate private sector jobs. There is more reliance on

public sector employment, including for jobs growth.

The visitor economy is over twice as important for in Rural Hertfordshire compared to the County as a

whole, and there is a high level of dependence on in-commuters to work in these jobs.

Rates of economic participation are lower in Rural Hertfordshire.

Despite high qualifications attainments, the economy of Rural Hertfordshire is unlikely to generate

sufficient opportunities to use these. It is more likely that highly skilled residents will commute to work

outside of the rural area, thus decreasing the economic and environmental sustainability of the rural area.

Overall the risk if one of long-term decline in providing sufficient businesses and jobs to sustain the

economy of Rural Hertfordshire in the long-term.

Employment From Mid-layer super output area data, it is estimated that there are 35,740 employees in Rural Hertfordshire, comprising 6.7 per cent of Hertfordshire’s total employment. lower rate of employment growth in rural Hertfordshire Significantly, at 1.6 per cent over the 4 years from 2009 to 2013, employment growth has been much weaker in Rural Hertfordshire than for Hertfordshire as a whole (3.6 per cent). FIGURE 1: EMPLOYMENT CHANGE 2009 TO 2013

Source: Business Register and Employment Survey, analysis of rural classification of Mid-layer Super Output Areas, Office for National Statistics.

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HIGHER SHARE OF PART-TIME EMPLOYMENT IN RURAL HERTFORDSHIRE Analysis of employment statistics suggests that there is a slightly higher propensity of employment to be part-time, with 36.1 per cent of employment part-time in 2013 in Rural Hertfordshire compared to 34.6 per cent for Hertfordshire as a whole. FIGURE 2: FULL AND PART-TIME EMPLOYMENT, 2013


RURAL HERTFORDSHIRE IS MORE DEPENDENT ON PUBLIC SECTOR EMPLOYMENT, AND THIS DEPENDENCY

HAS INCREASED OVER RECENT YEARS

As can be seen in Figure 3 below, Rural Hertfordshire is more reliant on the public sector for jobs. In Rural

Hertfordshire in 2013, 15.2 per cent of employment was in Public Administration and Defence, and Compulsory

Social Security; and Education compared to 11.3 per cent for Hertfordshire in total.

Employment in public administration has growth in Rural Hertfordshire (by 47.8 per cent between 2009 and 2013)

compared to contraction in Urban Hertfordshire. This means that the rural areas of Hertfordshire have been

increasingly reliant on public jobs in an environment of cuts to public sector employment.

FIGURE 3: SHARE OF TOTAL EMPLOYMENT IN PUBLIC ADMINISTRATION AND DEFENCE, AND COMPULSORY SOCIAL SECURITY; AND EDUCATION IN 2013


Visitor economy-related jobs are more significant in Rural Hertfordshire As can be seen in Figure 4, 12.3 per cent of Rural Hertfordshire’s employees worked in Accommodation and food service activities in 2013 – compared to 5.0 per cent for Urban Hertfordshire and 5.5 per cent for

63.9% 65.5% 65.4%

36.1% 34.5% 34.6%

0%

20%

40%

60%

80%

100%

RuralHertfordshire

UrbanHertfordshire

TotalHertfordshire

full-time part-time

134

Hertfordshire County in total. Conversely, the share of Rural Hertfordshire residents working in this industry was lower than the average for the whole county, indicating that a significant proportion of the workforce in-commutes from outside of Rural Hertfordshire. professional, scientific and technical jobs are important in rural hertfordshire but are not growing at the high rate enjoyed in urban areas Professional, scientific and technical employment is significant in Rural Hertfordshire, accounting for 10.4 per cent of all employment in 2013 – similar to the Hertfordshire average. However, the increase in employment, at 9.3 per cent over the four years to 2013 is much lower than the 30.2 per cent increase enjoyed in Urban Hertfordshire. By contrast, employment in ICT increased at a higher rate in Rural Hertfordshire than in the rest of the County. figure 4: shares of employment by industry for employees (Workplace) and residents (per cent) Industry Industry which employees work in

(workplace-based) (2013) Percentage of total workplace – based employees

Industry which residents work in (2011) Percentage of residents in work

Rural % Urban % Hertford-

shire % Rural % Urban % Hertford-shire %

A : Agriculture, forestry and fishing 0.7 0.0 0.1 1.4 0.3 0.2

B : Mining and quarrying 0.1 0.0 0.0 0.1 0.1 0.1

C : Manufacturing 6.0 6.6 6.5 7.1 6.8 6.8

D : Electricity, gas, steam and air conditioning supply 0.0 0.2 0.2 0.2 0.3 0.3

E : Water supply; sewerage, waste management and remediation activities

0.7 0.4 0.4 0.5 0.6 0.6

F : Construction 9.0 5.3 5.6 9.1 8.3 8.2

G : Wholesale and retail trade; repair of motor vehicles and motorcycles

12.3 20.0 19.4 14.9 16.9 17.2

H : Transportation and storage 3.0 3.2 3.2 3.6 4.9 5.0

I : Accommodation and food service activities 12.6 5.0 5.5 4.0 4.3 4.3

J : Information and communication 4.2 4.9 4.9 5.5 5.8 5.8

K : Financial and insurance activities 0.8 2.4 2.3 5.2 5.1 5.1

L : Real estate activities 2.8 1.8 1.9 2.2 1.7 1.6

M : Professional, scientific and technical activities 10.4 10.8 10.8 11.1 8.9 8.6

N : Administrative and support service activities 7.8 14.5 14.0 5.1 5.2 5.2

O : Public administration and defence; compulsory social security

2.0 2.8 2.7 4.8 5.1 5.2

P : Education 13.2 8.2 8.6 10.7 10.0 10.0

Q : Human health and social work activities 8.2 9.7 9.6 8.9 10.5 10.7

R : Arts, entertainment and recreation 4.4 2.0 2.1 5.2 5.1 5.1

S : Other service activities 1.8 2.2 2.2

Source: Business Register and Employment Survey, analysis of rural classification of Mid-layer Super Output Areas; and 2011 Census, Office for National Statistics.

FIGURE 5: PERCENTAGE CHANGE IN EMPLOYMENT BY INDUSTRY 2009 TO 2013

Industry Rural Hertfordshire

% Urban Hertfordshire

% Hertfordshire Total

%

A : Agriculture, forestry and fishing -0.4 -7.4 -3.8

B : Mining and quarrying -61.3 29.2 -30.5

C : Manufacturing -2.5 -0.5 -0.6

D : Electricity, gas, steam and air conditioning supply 100.0 41.2 41.3

E : Water supply; sewerage, waste management and remediation activities

43.6 -25.5 -21.2

F : Construction -11.1 -10.1 -10.2

G : Wholesale and retail trade; repair of motor vehicles and motorcycles -1.5 -1.0 -1.0

135

H : Transportation and storage -5.4 -15.2 -14.6

I : Accommodation and food service activities 11.5 9.5 9.8

J : Information and communication 10.8 2.7 3.1

K : Financial and insurance activities -8.6 -11.1 -11.0

L : Real estate activities 10.5 0.8 1.7

M : Professional, scientific and technical activities 9.3 30.2 28.7

N : Administrative and support service activities 3.0 14.2 13.7

O : Public administration and defence; compulsory social security 47.8 -21.9 -20.1

P : Education 4.4 1.6 1.9

Q : Human health and social work activities -0.6 15.0 14.0

R : Arts, entertainment and recreation -6.7 2.8 1.4

S : Other service activities -27.0 -6.1 -7.5

Source: Business Register and Employment Survey, Office for National Statistics.

POPULATION RURAL POPULATION OF 128,600

The rural population (according to the DEFRA/ONS classification) totalled 128,584 in 2011, out of a total

population for Hertfordshire of 1,116,062.

The most rural districts in terms of population share include East Hertfordshire (29.5 per cent of population

considered rural); North Hertfordshire (18.1 per cent); Hertsmere (15.0 per cent) and Dacorum (13.0 per cent).

LOWER RATES OF ECONOMIC PARTICIPATION IN RURAL HERTFORDSHIRE

Hertfordshire has lower rates of economic participation, with an economic activity rate of 72.1 per cent in 2011

compared to 74.5 for Urban Hertfordshire and 74.2 per cent for Hertfordshire as a whole (Figure 7). This contrasts

the national situation where there is no diversion from the national average in either rural or urban England.

FIGURE 6: POPULATION IN 2011

Area / district Rural population % Rural Urban population % Urban Total population

Broxbourne 154 0.2 93,455 99.8 93,609

Dacorum 18,875 13.0 125,972 87.0 144,847

East Hertfordshire 40,588 29.5 97,099 70.5 137,687

Hertsmere 15,024 15.0 85,007 85.0 100,031

North Hertfordshire 22,949 18.1 104,165 81.9 127,114

St Albans 13,264 9.4 127,400 90.6 140,664

Stevenage . . 83,957 100.0 83,957

Three Rivers 4,644 5.3 82,673 94.7 87,317

Watford . . 90,301 100.0 90,301

Welwyn Hatfield 13,086 11.8 97,449 88.2 110,535

Total Hertfordshire 128,584 11.5 987,478 88.5 1,116,062 Source: 2011 Census, Office for National Statistics.

FIGURE 7: ECONOMIC ACTIVITY RATES

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Source: 2011 Census, Office for National Statistics.

ENTERPRISE

As made evident from Figure 8, Rural Hertfordshire has a much higher share of enterprises with no employees

(17.3 per cent) compared to Urban Hertfordshire (12.4 per cent). There are also a larger share of enterprises with

between 1 and 9 employees. As a result there are fewer large employers in Rural Hertfordshire.

Total enterprises

with no employees

1 - 9 employees

10 - 49 employees

50 - 249 employees

250 and more employees

Rural Hertfordshire 8,035 17.3% 75.4% 6.1% 1.0% 0.2%

Urban Hertfordshire 40,705 12.4% 77.2% 8.2% 1.6% 0.5% Source: UK Business Counts, analysis of rural classification of Mid-layer Super Output Areas, Office for National Statistics.

HIGHER RATES OF SELF-EMPLOYMENT IN RURAL AREAS

Like the national situation, the share of adults in self-employment is higher Rural Hertfordshire (at 16.2 per cent)

compared to the county average of 11.6 per cent – as demonstrated by Figure 9.

FIGURE 9: SELF-EMPLOYMENT RATES

Source: 2011 Census, Office for National Statistics.

RURAL HERTFORDSHIRE EXPERIENCED MUCH LOWER RATES OF GROWTH IN THE BUSINESS POPULATION

Figure 10 outlines the total business population in Rural Hertfordshire in 2010 and 2014. As can be see, the

business population only grew by 2.7 per cent during this period compared to 10.4 per cent growth in

Hertfordshire as a whole.

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figure 10: analysis of growth in total enterprises

Area

No. enterprises

2010

No. enterprises

2014

Change 2010 to 2014

Rural Hertfordshire 7,320 7,515 2.7%

Urban Hertfordshire 39,455 44,115 11.8%

Hertfordshire 46,780 51,625 10.4%

England 1,797,910 1,950,030 8.5%

SKILLS RURAL RESIDENTS ARE MORE HIGHLY QUALIFIED The residents of Rural Hertfordshire are better qualified than the rest of the County and the average for England, and are employed in more highly skilled jobs than average. In 2011, 35.6 per cent of residents were qualified to degree level or above, compared to the Hertfordshire average of 32.1 per cent and the national average of 27.3 per cent. figure 11: highest level of qualification held by residents (aged 16 - 74)

Hertfordshire England

Occupation Total Urban Rural Total Urban Rural

No qualifications 18.2% 18.4% 16.8% 22.5% 22.8% 21.0%

Level 1 qualifications 13.8% 14.0% 12.8% 13.3% 13.4% 12.9%


Apprenticeship 3.2% 3.2% 3.3% 3.6% 3.4% 4.2%


Level 4 qualifications and above 32.1% 31.7% 35.6% 27.4% 26.9% 29.7%

Other qualifications 5.0% 5.1% 3.8% 5.7% 6.1% 4.1% Source: 2011 Census, Office for National Statistics.

FIGURE 12: SHARE OF RESIDENTS IN WORK BY OCCUPATIONAL CATEGORY (AGED 16 - 74)

Hertfordshire England

Occupation Total Urban Rural Total Urban Rural

1. Managers, directors and senior officials 12.9% 12.3% 17.5% 10.9% 10.2% 14.0%

2. Professional occupations 20.2% 20.0% 21.3% 17.5% 17.5% 17.5%

3. Associate professional and technical occupations 14.6% 14.6% 15.0% 12.8% 12.8% 12.7%

4. Administrative and secretarial occupations 12.1% 12.2% 11.6% 11.5% 11.6% 10.7%

5. Skilled trades occupations 10.2% 10.1% 11.1% 11.4% 10.8% 14.1%

6. Caring, leisure and other service occupations 8.4% 8.5% 7.4% 9.3% 9.4% 8.9%

7. Sales and customer service occupations 7.5% 7.8% 5.0% 8.4% 8.9% 6.3%

8. Process, plant and machine operatives 5.5% 5.6% 4.4% 7.2% 7.4% 6.4%

9. Elementary occupations 8.6% 8.9% 6.7% 11.1% 11.5% 9.4%

Links with the Strategic Economic Plan In developing this strategy and the Hertfordshire Growth Strategy/Strategic Economic Plan it has not been our intention to distinguish between urban and rural areas. Our approach is in line with the Commission for Rural Communities Report into LEP focus on rural interests (2011) which recommended that rural issues are mainstreamed into LEP thinking.

138

Use of the EAFRD allocation will, therefore, be complementary to actions planned under Priority 3 of the Strategic Economic Plan – Re-invigorating our places for the 21st Century. This priority will embrace a new approach to spatial development. Our towns will be re-energised as vibrant – but distinctive – urban economic hubs. In addition, some of our towns must be allowed to grow – consistent with the need for housing provision that enables our economic potential to be realised. At the same time, the quality of our high quality rural and urban environments will be conserved. The potential for digital solutions will be recognised and encouraged throughout, particularly in relation to enterprise. It is critical that all of Hertfordshire’s places – both urban and rural – are locations where enterprise is welcomed, encouraged and supported; and appropriate provision needs to be made to bring this about. The EAFRD allocation will contribute to this agenda by providing additional support for skills development in rural areas and through specific support for rural based businesses in the County. Investment priorities will complement the Urban Futures Roll Out proposals in the Strategic Economic Plan.

5.4.5 Themes Allocations have been made to the EAFRD themes as recorded below:

EAFRD Themes % EAFRD Match Total Value

Art 15 - Knowledge transfer and information sharing

0.00% 0 0 0

Art 16 - Provision of advice 0.00% 0 0 0

Art 20 - Business development - business start up for non-agricultural activities in rural areas: investment in creation and development of non agricultural activities

80.00% 1,078,805 1,078,805 2,157,609

Art 21 - Basic services in rural areas: investments in the creation, improvement or expansion of all types of small scale infrastructure

0.00% 0 0 0

Art 21 - Broadband infrastructure 0.00% 0 0 0

Art 21 - Investments for public use in recreational infrastructure; tourist information and signposting of touristic sites and small scale tourism infrastructure

0.00% 0 0 0

Art 36 - Development and/or marketing of tourism services relating to rural tourism

20.00% 269,701 269,701 539,402

Total 100.00% 1,348,506 1,348,506 2,697,012

Check 1,348,506 1,348,506 2,697,012

5.4.5 Investment Priority - Development and/or marketing of tourism services relating to rural tourism (Measure 16.3) Indicative activities for this investment priority are:

Type of Support Available Co-operation grants are available to support the following types of activity:

Developing a new Destination Organisation;

Supporting Destination Organisations or other

139

partnerships in developing a Destination Plan;

Developing the supply chain through co-operative

activity e.g. local speciality food tourism.

Eligible Applicants Rural businesses (including social enterprises), charities, trusts, community groups, public/private partnerships and public bodies who want to work together to develop or promote tourism.

Eligible Costs Costs covering the co-ordination and organisation of the co-operation activity.

Ineligible Costs Operational costs of the bodies involved in the application are not eligible for support.

Minimum Requirements The project must demonstrate how it proposes to develop a better co-ordinated local visitor economy. Projects will need to provide a sustainable business plan and contractual agreements between members of the co-operative or, in the case of Destination Organisations and Destination Plans, evidence of the establishment of the organisation and a planned publication date for an agreed Destination Plan which meets the guiding principles given by Visit England as far as possible.

Amounts Grants will be available at or above £35,000. Higher minimum and maximum levels of grant can be set with the advice of local ESIF sub-committees. Grant amounts will generally be limited to the sterling equivalent of the EU de minimis state aid level (€200,000) in any three year period.

Support Rates Support rates of 100% of the costs covering the co-ordination and organisation of the co-operation activity for non-profit making organisations. For commercial operations, the support rate shall be 50%.

Outputs

Co-operation among small operators, including for development and marketing tourism (measure 16.3)

Output Indicator Description

Development of a Destination Organisation

The development of a Destination Organisation as a result of the intervention

Development of a Destination Plan

The development of a Destination Plan as a result of the intervention

New partnerships Development of a new partnership as a result of the intervention

Additionality Any provision supported under this measure will demonstrate additionality over and above existing or fully funded provision.

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5.4.6 Investment Priority - Support for investments in the creation and development of non-agricultural activities (measure 6.4). Indicative activities for this investment priority are:

Type of Support Available The kinds of projects that are likely to attract funding will be those relating to existing or new micro and small businesses located in rural areas demonstrating growth potential leading to increase economic activity and job creation.

Eligible Applicants New or existing small or micro businesses in rural areas looking to develop and grow – check the size of a business. Farmers or members of the farm household diversifying into non-agricultural activities. Businesses that are wholly or partly supported by Government funding will be required to show that the funding used to match the grant is from private sources.

Ineligible Applicants non-departmental public bodies or Crown bodies

members of Producer Organisations under the Fresh Fruit and Vegetables Aid Scheme who have had (or can get) a grant for the same project under that scheme.

Businesses with more than 50 employees / turnover of more than 10m euros.

Eligible Costs The costs of construction, acquisition (including leasing)

or improvement to immovable property;

The purchase or lease purchase of new machinery and equipment;

General costs linked to facilitating investments such as architect, engineer, consultation fees and technical support limited to a maximum of 15% of the total eligible project costs;

Intangible investments, including acquisition or development of computer software;

Acquisition of patents, licences, copyrights, trademarks;

Energy-saving and resource efficiency equipment where it forms part of the project.

Ineligible Costs In addition to the general list of ineligible costs, the following items are not eligible for funding under this measure:

The costs of refurbishment and simple like-for-like replacement of buildings, machinery or equipment;

Leasing contract costs – like lessor’s margin, interest refinancing costs, overheads and insurance charges;

The costs of computers, software and printers used in the general running of the business, like processing orders or accounts;

Salaries or running costs;

Developing or setting up agricultural businesses;

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Costs of marketing and promotion;

Contributions in kind. Minimum Requirements Investments must be linked to a complete and well-

evidenced business plan

Amounts Grants will be available at or above £35,000. Higher minimum and maximum levels of grant can be set with the advice of local ESIF sub-committees. Payment is conditional on agreed outputs being monitored and reported by the grant recipient. Grant amounts will generally be limited to the sterling equivalent of the EU de minimis state aid level (€200,000) in any three year period.

Support Rates Grants of up to 40% of the total project costs are available for commercial investments in profit-generating operations.

Outputs

Sub-Measure 6.4 – Support for investments on creation and development of non-agricultural activities – for projects from micro and small businesses excluding tourism business.

Output Indicator Description

Jobs Created The total number of permanent new jobs created by a project. 1 full time equivalent job (FTE) equals 30 hours or more a week and must be in place for 1 year (part time jobs will be pro rata, e.g. a part time job of 15 hours a week equals 0.5 FTE). A Seasonal job must be in place for 4 weeks of the year, 1 seasonal job in place for 4 weeks would equate to 0.08 FTE. New = should not have existed with that employer in the UK before the intervention. Permanent = should have a life expectancy of at least 1 year from the point at which it is created.

Increase in wage bill

The wage bill of a business receiving grant funding. This should have a direct relation to jobs created.

Gross Value Added (GVA)

GVA is a measure of the contribution to overall economic output of a firm or sector.

Additionality Any provision supported under this measure will demonstrate additionality over and above existing or fully funded provision. It will be specifically targeted at rural areas offering SMEs support to overcome barriers associated with running or developing a rural business.

5.4.7 Match Funding for EAFRD Projects Annex D section A4.3 of the HMG Supplementary Guidance for LEPs states:

‘The rules for match funding are different for the European Agricultural Fund for Rural Development. In developing their European Structural and Investment Funds Strategies Local Enterprise Partnerships should assume that they will not need to provide public co-financing for European Agricultural Fund for Rural Development. The activities that Local Enterprise Partnerships

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may support using the European Agricultural Fund for Rural Development do not require private match-funding according to the Rural Development Regulation however it may be necessary for state aid reasons. However, Government would encourage the maximum use of private match funding at project level to ensure sufficient ‘buy-in’ to the projects and to ensure that maximum leverage from the European funds is achieved. Government would therefore expect projects to bring forward at least 50% private finance to match the funding. Government would expect the contribution from the European Agricultural Fund for Rural Development to be as low as possible for the project to take place, to ensure maximum value for taxpayer’s money. This may be as low as 20%. Where private finance is harder to secure, such as for social enterprises, the percentage contribution of the European Agricultural Fund for Rural Development may be higher. At this time, Local Enterprise Partnerships do not need to record match funding for European Agricultural Fund for Rural Development in the spreadsheet, as it will take place at a project level; Government will assume a minimum of 50% private match’.

5.4.8 Overlapping Areas The North Hertfordshire area is also covered by the Greater Cambridgeshire Greater Peterborough LEP (GCGP) area. This is primarily a rural area. Initial discussions have been held with GCGP LEP to ensure synergy between investment priorities. We will ensure a delivery mechanism is put in place to avoid duplication once the programme has started.

5.4.9 State Aid and EAFRD The measures selected in this strategy are taken from the Rural Development Regulation and the types of interventions envisaged are based on DEFRA guidance. However, we recognise that this does not guarantee compliance with state aid regulations.

We will seek to ensure that support to rural areas provided under this strategy will be compliant with state aid regulations. For investments funded under EAFRD that involve support to businesses this is particularly important. It is likely that support can be given under De Minimis rules in most cases. Where this is not the case advice will be sought from the Managing Authority.

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Section 6 – Alignment of European Funds 6.1 Alignment of European Funds In addition to the ERDF, ESF and EAFRD Structural Funds Programmes, there are a number of other European funds available which could support Hertfordshire LEP to deliver smart, sustainable and inclusive growth and local need through the EU SIF. It would seem prudent to encourage applicants to the Structural Funds Programmes to consider the diverse range of programmes available when bidding for funding. In many instances, one single funding programme may not address the whole range of activities that an applicant would wish to deal with in a project, whereas through utilising a combination of programmes (in separate but linked projects), an applicant may well achieve a more comprehensive set of actions for the intended beneficiaries. For illustration, although it is not possible to combine different European funds in a single project (due to match funding issues), it could be possible to utilise ERDF, Horizon 2020 and the Competitiveness of Enterprises and SMEs (COSME) Programmes for different phases of a research project. Whereas the focus of the Horizon 2020 programme in a given project might be on pure R & D, ERDF could address the competitiveness and innovation elements, whilst COSME could facilitate access to finance for Small and Medium-sized Enterprises (SMEs), create an environment favourable to business creation and growth, encourage an entrepreneurial culture in Europe, increase the sustainable competitiveness of EU companies, help small businesses operate outside their home countries and improve their access to markets. Similarly, ESF projects could benefit from alignment with Erasmus + in terms of work experience abroad for vocational studies students and apprentices; for staff development, sharing of and learning from best practice; development of new training materials; development of the recognition of common European qualifications; addressing policy developments and influencing emerging EU policy proposals. In terms of ESF social inclusion projects, strong complementarity/synergy can be found with the Rights, Equality and Citizenship and the Employment and Social Innovation programmes as they can help address issues that are outside the scope of the ESF programme. For example, the Rights, Equality and Citizenship programme (incorporating the former Daphne Programme) can support activities to help make people's rights and freedoms effective in practice, by making them better known and more consistently applied across the EU. The programme will also promote the rights of the child, the principles of non-discrimination (racial or ethnic origin, religion or belief, disability, age or sexual orientation) and gender equality (including projects to combat violence against women and children). The Programme for Employment and Social Innovation (incorporating the former PROGRESS, EURES and Microfinance programmes) will support the development of EU policy in the areas of employment, social integration and working conditions. The programme aims to extend coverage further towards social innovation; EURES activities will offer modernised tools for jobseekers and employers, and be used to create and develop new targeted mobility schemes; whilst the Microfinance and Social Entrepreneurship axis, subject to ratification, will finance loans of less than €25,000, working through microcredit intermediaries at national, regional or local level. The new programme will be extended to include investments for developing and expanding social enterprises. The Asylum and Migration Fund can also complement Structural Funds measures by tackling people flows and integrated management of migration: including asylum, legal migration, integration, and return of irregularly staying non-EU nationals with a focus on strategies to promote integration of non-EU nationals at regional/local level. Particular attention will be paid to the most vulnerable groups of migrants, e.g. unaccompanied minors, victims of trafficking, pre-admission measures in countries of origin.

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The Health for Growth Programme also offers complementary interventions through two main strategic goals, namely - Innovation: technological and organisational, for improving the quality and sustainability of health systems and increasing access to better and safer healthcare and; Prevention: promoting good health and preventing diseases at EU level by helping and complementing Member States' efforts to increase their citizens' number of healthy life years. The Active and Assisted Living Programme will foster the emergence of innovative ICT based products, services and systems for ageing well at home, in the community, and at work. Projects may create a critical mass of research, development and innovation at EU level in technologies and services for ageing well in the information society and seek to improve conditions for industrial exploitation by providing a coherent European framework for developing common approaches and adaptation of common solutions. Given that Hertfordshire LEP does not propose to invest in activities under themes TO5 Climate Change Adaptation and TO6 Environmental Protection, organisations with an interest in these fields may usefully consider the LIFE Programme which will have a sub-programme for the environment with priority areas including environment and resource efficiency, biodiversity and environmental governance and information; additionally there will be a sub-programme for climate action with the following priority areas: climate change mitigation, climate change adaptation and climate governance and information. Similarly, as we do not propose to invest in activities under TO7 Sustainable Transport, organisations with an interest in this field may wish to consider a range of alternative programme options - Horizon 2020, covering transport through Societal Challenge 4, in which all modes of transport are addressed (i.e. road, rail, aviation) as well as themes (i.e. urban mobility, logistics, intelligent transport systems, green vehicles). The Trans-European Transport Network Programme (Ten-T) may support projects in core networks, energy and digital infrastructure, whilst other programmes will fund road safety and shifting freight from road to rail, inland water and the sea. The CIVITAS Initiative seeks to drive the innovative policies and technologies needed for the transformation towards cleaner and better urban mobility and transport and is like to support projects in the areas of clean fuels and vehicles; collective passenger transport; demand management strategies; mobility management; safety and security; car-independent lifestyles; urban freight logistics; transport telematics. Hertfordshire LEP has particular ambitions in the broad field of innovation (ERDF TO1 and TO2). A further demonstration of linkages between the Structural Funds and transnational programmes can be drawn from the Horizon 2020 Programme through its support for ICT research and innovation with the purpose of delivering new business breakthroughs, often on the basis of emerging technologies. ICT in Horizon 2020 will support the development of ICT in Science, ICT in industrial leadership and ICT in societal challenges. It will support the riskier ICT research and innovation, in particular, through a new generation of components and systems including micro/nano-electronics and photonics technologies, components and embedded systems engineering. In terms of Territorial Co-operation, the Interreg North West Europe Programme will be of particular interest to Hertfordshire in complementing the ERDF, ESF and EAFRD Programmes, through the key themes of: Strengthening Research, Technological Development and Innovation (investments in enhancing the capacity of the NWE territory to generate innovation, seeking to reduce the innovation capacity gaps between regions and contributing to the implementation of the smart specialisation strategies of participating regions); Supporting the Shift Towards a Low-Carbon Economy in all sectors (investing in the area’s climate change mitigation potential, reduction of GHG emissions, energy efficiency and the share of renewable energy sources in the consumption and production mix); Protecting the Environment and Promoting Energy Efficiency (investing in eco-innovation and resource efficiency in order to reduce the environmental footprint of human activity on the environment).

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6.2 Draft Support Structure

In order to exploit synergies between the European Structural and Investment Funds and other European funds, Hertfordshire LEP will develop an External Funding Service to support applicants in making informed choices about which funds to prioritise for a set of given activities. The comprehensiveness of the service will depend on the resources available to set up and operate it e.g. Technical Assistance funding to support ERDF, ESF and EAFRD activity which will be negotiated following final sign off of the EU SIF, together with the availability of existing Hertfordshire LEP personnel to promote the wider range of transnational funding programmes. 1. Awareness Raising

Anecdotal evidence suggests that Hertfordshire stakeholders are perhaps less familiar with European funding programmes that require transnational working. Applicants will be encouraged via the LEP’s website, Hertfordshire networking groups and personal contact to, for example, search the LEP’s website for alternative funding options; to attend awareness raising seminars (including case studies of best practice) organised by the LEP (generic or in response to specific calls for proposals) or EU Connects (should the service receive continuity funding post April 2014); to attend events organised by the European programmes themselves. 2. Advice and bidding support

The LEP will utilise existing and evolving support structures to ensure that applicants make the best possible choices on the most appropriate funding programme(s) for their proposed activity. Support could take the form of, for example, local surgeries with LEP external funding staff, experienced bidders, DCLG Growth Development Teams, opt-in providers, EU programme specific support officers/facilitators, Enterprise Europe East of England, EU Connects. Timely information is key. Through the East of England Partnership Brussels Office and its own research activities, the LEP will receive and disseminate early notification of calls for proposals. Information published on the individual EU programme websites will also be disseminated accordingly by the LEP. Hertfordshire LEP has a Service Level Agreement with the East of England Partnership Brussels Office and can call on the Brussels Office to support project development. 3. Identification of transnational partners

Applicants new to bidding to EU transnational programmes are often concerned about their ability to find European partners for joint project activity. The LEP and some key partners already have established partnerships across Europe which can be called on, as appropriate. The LEP will promote the Partnersearch facilities that many EU programmes operate, and, through the network of Brussels Offices across Europe, the East of England Brussels Office opens up a wide range of possibilities, as does Enterprise Europe East of England through its extensive network.

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Examples of Potential Synergies Structural Funds Programme

Activity Potential synergies

ERDF Innovation and R & D

intellectual property and commercialising opportunities

overcoming supply chain constraints

linkages between enterprises, research and public institutions – life sciences, agri sciences, advanced engineering, sustainable construction, software, ICT and telecoms

SME Competitiveness and ICT

more support for existing businesses over start ups

access to finance

access to markets

strategic employment sites

Low Carbon Economy

district heating and energy from waste

low carbon street lighting

retrofit/refurbishment of historic buildings

Horizon 2020

support the most talented and creative individuals and their teams to carry out frontier research of the highest quality

collaborative research to open up new and promising fields of research and innovation through support for Future and Emerging Technologies

provide researchers with excellent training and career development opportunities

ensure Europe has world-class research infrastructures (including e-infrastructures) accessible to all researchers in Europe and beyond

Interreg North West Europe Programme

strengthening research, technological development

and innovation

COSME

easier access to finance for entrepreneurs and small businesses

more prominent role for self-employment and business development as important sources of growth and job creation

in individual EU countries: a more competitive industry, more entrepreneurs and higher employment rates

Connecting Europe Facility

stimulate investment in super fast broadband Interreg North West Europe

supporting the shift towards a low carbon economy in all sectors (reduction of GHG emissions, energy efficiency, renewable energy, climate change mitigation

protecting the environment LIFE

environment and resource efficiency

biodiversity

climate change mitigation and adaptation

http://ec.europa.eu/research/infrastructures/index_en.cfm

http://ec.europa.eu/research/infrastructures/index_en.cfm

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ESF Promoting employment and supporting labour market mobility/social inclusion, combating poverty

VCS working with other sectors

improving incomes, reducing deprivation

early intervention

developing social enterprises

health

social housing

migrants

pre employment skills Education, skills and lifelong learning

work readiness

mentoring in the workplace

IAG

apprenticeships

leadership and management

generic IT skills

logistics

care

higher level skills

Programme for Social Change and Innovation

deployment of EU policies in employment, social integration, working conditions

migrants Erasmus +

support for policy reform

learning mobility of individuals

cooperation for innovation and good practices

development of training materials Health for Growth

healthy Living Erasmus +

learning from best practice in other European countries - IAG, mentoring

staff development, training the trainers

work placements abroad for learners

development of training materials

policy development

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Section 7 – Delivery Arrangements 7.1 Section Overview This section sets out, in brief, initial thoughts in respect of delivery of the EU Structural and Investment Funds in Hertfordshire. Further guidance is awaited from HMG on the process for application, approval and delivery of specific operations and the role and resources available to deliver.

7.2 Methods of Grant Distribution We anticipate distribution of grant via the following methods:

- Open calls for projects - Specific calls for projects (e.g. under a specific theme or for a specific type of project e.g financial

instruments) - Opt-in via direct delivery or procurement process

7.3 Use of ‘Opt in’ Opt-in offers have been considered from the early stage development of this strategy. It was not possible to conclude ‘op-in’ agreements by the end of January 2014 when the original ESIF Strategy was submitted. Work is still underway on the opt-in arrangement but co-financing and match funding is envisaged as follows:

Theme Opt-in Status EU SIF Allocation £m (based on 0.71 Sept 2015)

PA1 None available

PA3 None available

PA3 None available

PA3 None available

PA4 No Opt ins but see FEIs below

Allocation set aside subject to ex ante evaluation and negotiation of successful agreement

2.00

PA1(TO8) Department for Work and Pensions

Initial discussions with local JCP but prospectus published late

3.289

PA1(TO8) Skills Funding Agency In principle opt-in agreed and allocation made

3.230

PA1(TO9) Big Lottery In principle opt-in agreed and allocation made

5.657

PA2(TO10) Skills Funding Agency In principle opt-in agreed and allocation made

11.370

7.4 Collaboration Hertfordshire LEP is keen to collaborate with other LEP areas, both neighbouring and further afield on project level development where there is a clear and logical business case and mutual benefit for doing so. We have held some discussions with neighbouring LEPs – Greater Cambridgeshire Greater Peterborough (GCGP) the GTV6 consortium and London LEP. We have started to identify some areas of potential join up, around shared sector interests, cluster development, spatial or common growth objectives.

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We are particularly conscious that we share territory with GCGP and it will be in the interests of businesses and communities in the ‘Golden Triangle’ area that provision is co-ordinated where this is sensible. Hertfordshire LEP is a member of a consortium of six Local Enterprise Partnerships (GTV6) in the South East of England that have come together to develop a common approach to delivering EU Structural Fund Investment Priorities. The LEPs represented in the Consortium are Buckinghamshire Thames Valley LEP; Coast to Capital LEP; Enterprise M3 LEP; Hertfordshire LEP; Oxfordshire LEP; and Thames Valley Berkshire LEP. The six local LEPs in the GTV6 Consortium have worked together to explore possible areas for collaboration both with regard to industrial and growth strategy, and in relation to operational and delivery methods. Research has confirmed potential for joint or linked actions, and for efficient programme oversight and monitoring. Through this consortium, we have identified a number of potential opportunities to collaborate on alignment, lobbying and joint commissioning including higher level skills, broadband and access to finance. However, given the number of LEPs involved and the evolving nature of key priorities and strategic goals, we need to first identify what our respective priorities are, before being able to identify areas for possible collaboration. Given this scenario, our expectation is that the exact areas and initiatives where we will collaborate will become much clearer during the implementation phase of delivery. The ESIF Governance Group will play a key role in endorsing proposals to collaborate. We will seek to further develop these relationships leading up to the start of the programme and during programme delivery.

7.5 Financial Engineering Instruments (FEIs) At this early stage of developing the draft plan Hertfordshire LEP records interest in using EU SIF across at least two themes by way of Financial Engineering Instruments (FEIs). More detail is given under the specific theme headings but a summary of proposals is recorded below:

Priority Axis Potential FEI Status EU SIF Allocation £m

PA4 Low Carbon Innovation Fund (LCIF)

Allocation set aside subject to ex ante evaluation and negotiation of successful agreement

2.00

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7.6 Management and Governance Governance Structure

Hertfordshire LEP recognised early in the process the value of engaging stakeholders through an ESIF governance structure. We were one of the first LEP Areas (if not the first) to set up such a structure in ‘shadow mode’ for the purposes of consultation during the development phase of this strategy. Our structure was intended to provide a clear link between the LEP Programme Boards and ESIF Investment Committee. The Chair of the one of the Programme Boards will Chair the EU SIF Investment Committee providing a clear link to the board. Hertfordshire LEP is keen to ensure partner engagement in the delivery of E SIF in the area in line with National Terms of Reference. Therefore, membership of the shadow EU SIF Investment Committee was drawn from a range of stakeholders including:

Local Authorities;

Civil Society (Voluntary, community and social enterprise sector);

Recognised Business associations such as the British Chamber of Commerce – local chamber and the Federation of Small Businesses;

Locally specific business consortia/ groups;

Higher & Further Education Institutes;

Rural representatives and environmental representatives, such as Local Nature Partnership and Rural and Farming Networks;

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Community Led Local Development representatives – including Leader and Fisheries Local Action Groups;

Opt-in partners;

Skills Funding Agency;

Jobcentre Plus;

Trade Unions (a European Social Fund requirement); and

Equalities organisations.

It has subsequently been agreed that LEP Area ESIF Committees will be sub-committees of the England National Growth Programme Board (GPB). The terms of reference for the Growth Programme Board’s 2014-2020 Local Enterprise Partnership (LEP) Area European Structural and Investment (ESI) Funds Sub-Committees was published by HMG on 16th July 2015 and can be found on the GOV website. Section B of the ToR sets out the revised functions of the ESIF Committee which can be summarised as:

Provide advice to the Managing Authorities on local development needs and opportunities to inform any changes to Operational Programmes and ESI Funds Strategies.

Work with sectors and organisations they represent so that they engage with and understand the opportunities provided by the ESI Funds to support Operational Programme objectives and local economic growth.

Promote active participation amongst local economic, environmental and social partners to help bring forward activities which meet local needs in line with the Operational Programmes and local ESI Funds Strategies.

Provide practical advice and information to the Managing Authorities to assist in the preparation of local planning that contributes towards Operational Programmes priorities and targets.

Similarly, provide local intelligence to the Managing Authorities in the development of project calls decided by the Managing Authorities that reflect Operational Programmes and local development needs as well as public and private sector match funding opportunities.

Provide advice on local economic growth conditions and opportunities within the context of Operational Programmes and the local ESI Funds Strategy, as well as complementarity with interventions funded through other public and private sector funding, to aid the Managing Authorities’ assessment of applications at outline and full application stage, as set out in Section C.

Contribute advice, local knowledge and understanding to the Managing Authorities to aid good delivery against spend, milestones, cross-cutting themes, outputs and results set out in the Operational Programmes and local ESI Funds strategies.

Having regard to the Managing Authority’s statutory duties under the Equalities Act 2010, provide information advice and local knowledge regarding the likely and actual impact of ESI Funds strategies and plans on persons with the protected characteristics and advice on mitigating measures where adverse impacts are identified.

The Herts LEP ESIF Committee will meet on a quarterly basis and be Chaired by a local partner. Membership will broadly reflect the list above. Further information on the operating practice and procedure for the committees is st out in the terms of reference paper.

Governance Structure – ESIF Conflict of Interest It is recognised that Members of the ESIF Investment Committee may, from time to time, have an interest in projects or other types of investment under consideration. The ESIF Committee terms of reference set out the process and rules for managing conflicts of interest under paras 55 to 60:

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The Managing Authorities will be responsible for ensuring that partner roles and responsibilities are clearly set out at all levels and that conflicts of interest are avoided.

To ensure that this is compliantly managed and that appropriate standards are maintained, LEP area ESI Funds sub-committee members will be required to sign an undertaking to abide by ‘Seven Principles of Public Life’, known as the ‘Nolan Principles’ 1 (see Annex C).

The Managing Authorities will establish a “declarations of interest” register which will be updated at each meeting (See Annex D).

The Managing Authority will be responsible for maintaining and monitoring the register and its application at each meeting.

Members must declare an interest in any agenda items at the start of each meeting and must not participate in discussions about either the development of project call specifications that are limited in scope/relate to a project in which they have an interest; or outline and full project applications that have been submitted by them or organisations for which they work/ by whom they are employed/that they represent.

Similar conditions relating to confidentiality, data protection and compliance with freedom of information requirements will apply to the proceedings of the Committee as to the members of the PMC.

Supporting Delivery of the Programmes It is anticipated there will be a need to put in place management information process agreed with the Local representatives of Managing Authorities to provide data on delivery of EU SIF in Hertfordshire. This information will inform the preparation of calls for projects, design of opt-ins and development and revision of a Local Implementation Planas well as inform the consideration of applications/proposals. Capacity to to support delivery of the programmes will depend on the resource made available to Hertfordshire LEP. It is understood that 4% of the total ESF/ERDF value was set aside for Technical Assistance before notional allocations were made to LEPs. Therefore Technical Assistance will not come from the notional allocations issued to LEPs. Half of the Technical Assistance allocation will be retained by Government as Technical Assistance, to support the administration of the programme by government. A further 2% will be available to LEPs and key local delivery partners. The Hertfordshire ESF Committee held in March 2015 agreed a ‘TA Ambition’ statement setting out the ESIF Committee view of key activities that needed to be funded by Technical Assistance to support delivery of the ERDF and ESF Programmes. These are listed below: ERDF

FUNCTION DESCRIPTION

PUBLICITY Publicising and promoting the programmes locally or on a cross-LEP basis within the context of national publicity requirements, through conferences, seminars, newsletters etc. Promoting funding calls as they are released by the MA. Developing and sharing case studies and good practice examples and supporting the promotion of local ERDF-funded projects.

PIPELINE DEVELOPMENT Identifying potential projects to form the pipeline for investment and supporting them through the application process to the ‘Outline Application’ stage initially and then the ‘full business case stage’ where appropriate in the absence of such facilitation being offered by the MA Growth Delivery Teams.

PROJECT DEVELOPMENT

Provision of advisory support and information to potential projects up to and including the point at which the full application is approved into the Programme. This could include support to projects on the mature integration of the cross-cutting themes into their projects, as well as

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helping projects to prepare for running an ERDF project.

KNOWLEDGE Support for partners to allow them to participate in the programme, including attending or running dedicated workshops and events which are tailored to specific projects/sector types to share knowledge and good practice.

PARTNERSHIP Working with partners to ensure match funding is available to support applications for funding.

LOCAL IMPLEMENTATION PLANS

To assist the Managing Authority, LEP ESIF Sub-Committee and all partners in the provision of local information to support development of Local Implementation Plans and supporting the design of local calls content into the ERDF programme.

PROJECT MANAGEMENT AND ADMINISTRATION

For the explicit purpose of managing and co-ordinating delivery, and administering the requirements, of the TA project.

ESF FUNCTION DESCRIPTION

PUBLICITY Publicising and promoting the programmes locally or on a cross-LEP basis within the context of national publicity requirements. Promoting funding calls as they are released by the MA. Developing and sharing case studies and good practice examples and supporting the promotion of local ESF-funded projects.

PIPELINE DEVELOPMENT For non-opt in activity: Identifying potential projects which can form the pipeline for investment and supporting them to the ‘Outline Application’ stage initially and then the ‘full business case stage’ where appropriate. For opt-in activity: local development of ‘feeder’ information to ensure SFA, DWP and BIG Lottery opt-ins are delivering relevant and locally determined activities.

PROJECT DEVELOPMENT

Provision of advisory support and information to potential projects up to and including the point at which the full application is approved into the Programme. Including support to projects on the mature integration of the cross-cutting themes into their projects.

KNOWLEDGE Support for partners to allow them to participate in the programme, including attending or running dedicated workshops and events which are tailored to specific projects/sector types to share knowledge and good practice.

PARTNERSHIP Working with partners to ensure match funding is available to support applications for funding. Creating opportunities for the voluntary sector to be fully integrated into the design and delivery of ESF activities.

LOCAL IMPLEMENTATION PLANS

To assist the Managing Authority, LEP ESIF Sub-Committee and all partners in the provision of local information to support development of Local Implementation Plans and supporting the design of local calls content into the ESF programme.

PROJECT MANAGEMENT AND ADMINISTRATION

For the explicit purpose of managing and co-ordinating delivery, and administering the requirements, of the TA project.

Outline applications for ERDF and ESF TA to support Hertfordshire implementation were submitted in April 2015 in response to calls issued by Managing Authorities. Both projects will commence delivery in August 2015 prior to project approval. Projects will run for three years at which point TA support will be reviewed.

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7.7 Consideration of Community Led Local Development (CLLD) and links with LEADER The question of potential use of delivery models such as Community Led Local Development (CLLD) and other models was raised during the consultation process. No representations were received proposing such delivery models. Given the County based structure of Hertfordshire LEP it is proposed that delivery is not sub-divided into any sort of action plan or other approach but is managed through a LEP based governance structure as proposed under section 7.6 above. Hertfordshire has an existing LEADER Programme ‘Eastern Plateau’ which covers part of rural Hertfordshire and part of Essex. It is not known at this stage if the Programme will continue into the 2014-20 period. If it does then important links will be made to ensure complementarity between the Eastern Plateau LEADER Group and the delivery of the Hertfordshire EU SIF strategy. This will be particularly important for funding directed towards addressing rural issues. The LEP’s Enterprise and Innovation Manager is a member of the current Eastern Plateau Local Action Group and will continue in this role if a new Eastern Plateau programme is approved, thereby providing an additional safeguard that duplication and competition do not occur. Advice from DEFRA made available in January 2014 suggests that funding made available for LEADER Groups and that allocated to the Growth Programme and covered by this strategy may have similar objectives and target beneficiaries. If this transpires to be the case then it is clear careful management and cooperation is required between the LEP and LEADER Group to avoid duplication and even competition. Hertfordshire LEP intends to work closely with any local LEADER group to avoid any problems arising from the DEFRA approach to these funds.

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Section 8 – Cross Cutting Themes (CCTs) and Social Innovation 8.1 Introduction In common with previous programme periods Article 7 and Article 8 of the ‘Common Provisions Regulation’ set out two ‘cross cutting themes’ which must be incorporated into the development and delivery of EU Structural and Investment Funds.

8.2 Equality of Opportunity Article 7 of the ‘Common Provisions Regulation’ requires ‘Promotion of equality between men and women and non-discrimination The Member States and the Commission shall ensure that equality between men and women and the integration of gender perspective is promoted in the preparation and implementation of programmes’. UK policy goes further than that required by the cross cutting theme above. The equality duty covers the following nine groups with protected characteristics: age, disability, gender reassignment, marriage and civil partnership, pregnancy and maternity, race, religion or belief, sex and sexual orientation. In implementation and delivery of this investment strategy we will take into account:

gaps in provision;

differences in employment status and educational/skills attainment for different groups in the Local Enterprise Partnership area, including the common barriers to participation; and

under-representation of the different protected groups in ownership and management of local businesses

Working alongside our delivery partners and stakeholders we will ensure:

a commitment to promoting equality and combating discrimination in line with domestic legislation and European Regulations;

proportionate evidence around equalities issues in the Local Enterprise Partnership area and how the Local Enterprise Partnerships’ investment decisions will impact on those issues; and

evidence that partners with expertise in equality have helped prepare the investment strategy and will continue to assist throughout the implementation and monitoring of programmes.

Key to mainstreaming equality into the selection of operations during the delivery phase will be requirements set out in the selection criteria (not yet available). In anticipation and to back up this approach we have included in the section 3 (economic, social and environmental context) data which will help inform the selection of operations including:

Population analysis male/female

Breakdown of ethnic minority population

Rural population

Index of deprivation by ward

Crime and offending

Health and wellbeing This information, alongside other data will help to inform the approach to equality in any consideration of the selection of operations.

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8.3 Sustainable Development Article 8 of the ‘Common Provisions Regulation’ addresses the cross cutting theme of Sustainable development. It states that ‘The objectives of the CSF Funds shall be pursued in the framework of sustainable development and the Union's promotion of the aim of protecting and improving the environment, as set out in Article 11 of the Treaty, taking into account the polluter pays principle. The Member States and the Commission shall ensure that environmental protection requirements, resource efficiency, climate change mitigation and adaptation, disaster resilience and risk prevention and management are promoted in the preparation and implementation of Partnership Contracts and programmes. Member States shall provide information on the support for climate change objectives using the methodology adopted by the Commission. The Commission shall adopt this methodology by means of an implementing act. The implementing act shall be adopted in accordance with the examination procedure referred to in Article 143(3).’ In accordance with this requirement Hertfordshire LEP will promote sustainable development through the use of EU SIF in line with UK and European policy. We will seek to engage partners with expertise in sustainable development through the process of developing and delivering this European Structural and Investment Funds Strategy and will seek to ensure that those partners continue to assist throughout the implementation and monitoring of programmes. Sustainable development is set out as a key driver for Hertfordshire in this ESIF strategy document and in the Hertfordshire Growth Plan, Strategic Economic Plan ‘Perfectly Placed for Business’. Perfectly Placed for Business is premised on smart growth which is more resource efficient and means, essentially, “doing more with less”. We are not interested in growth at any cost; we value the quality of our natural environment; and we are determined that the intrinsic qualities of Hertfordshire should be enhanced through the delivery of our Strategic Economic Plan, not destroyed by it. Although less in vogue nationally than it once was, we are committed to resource efficiency; to mitigating the impacts of climate change; and to ensuring that economic activity and economic development (including house building) is pursued both vigorously and responsibly. These principles will be embedded in delivery of this ESIF strategy. To support the process in practical terms we have included in this document in section 3:

Analysis of the Hertfordshire environment

Environmental drivers

Water resources

Energy use

CO2 emissions and ecological footprint

Climate change impact

Recycling

Spatial plan for growth Key to mainstreaming sustainability into the selection of operations during the delivery phase will be requirements set out in the selection criteria (not yet available). This information, alongside other data will help to inform the approach to sustainability in any consideration of the selection of operations. Working closely with the Managing Authorities, we will, therefore, encourage all projects to integrate sustainable development into the design and implementation of their activities in accordance with requirements set out by the Managing Authorities in the project selection criteria. Where it is helpful to do

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so we will encourage project developers to adopt the outputs of existing or bespoke tools (such as the LEED – Local Environment and Economic Development Toolkit). We recognise that minimising a project’s environmental impact and, where possible, enhancing environmental benefits will be achieved both directly by funding specific activities under each of the Thematic Objectives set out in this strategy and indirectly by raising awareness of, promoting and developing environmental sustainability approaches in project design, delivery, monitoring and evaluation. The capacity of Hertfordshire LEP to assist in this process is largely dependent on the Technical Assistance funding made available. In accordance with Hertfordshire’s sustainable development aspirations all funded activities will be encouraged in their design to promote mitigation and adaptation approaches to climate change and contribute to a more resource efficient local economy by (for example):

Minimising the need to travel, and where necessary, taking steps to minimise the environmental impact of travel & transport (including procurement measures where possible which allow locally produced/sustainably sourced goods and services to compete on equivalent terms);

Wherever practicable, programmes/projects should, through the consumables they buy and use, seek to minimise environmental impact(s) and maximise cost savings through the efficient use of resources;

Undertake to reduce, reuse, recycle or reclaim wastes and surplus materials wherever possible;

Require subcontractors, and encourage clients and collaborators, to do the same.

The Hertfordshire ESIF Programme will be mainly revenue focussed. However, programme activities that involve capital investments in land and/or buildings should:

Prioritise existing buildings and brownfield land as development sites (where local conditions permit);

Achieve BREEAM “Excellent rating” for new build projects (unless site constraints or project objectives mean that this requirement conflicts with the obligation to achieve value for money) or BREEAM “Very Good rating” for refurbishment projects. Where alternative environmental assessment methods are used an equivalence rating should be achieved;

Have regard to the conservation of biodiversity; and

Incorporate climate change adaptation measures at design stage. The above is subject to arrangements put in place by the Managing Authorities in respect of project selection criteria and monitoring arrangements. It will apply to both Programme/project design and delivery (operational) stages. Whilst the requirements above will help to ensure low-carbon Products and Programmes of Activity, additional resource use and carbon monitoring requirements may be required to support monitoring, impact assessment and evaluation purposes.

8.4 Social Innovation HM Government Supplementary Guidance25 for LEPs recorded that ‘Social innovation’ is the process of finding and implementing new ways to tackle major problems that affect society as a whole or specific groups. It draws on the determination and knowledge of local communities, of ‘not-for-profits’, or of social entrepreneurs, alongside businesses, individuals and researchers. It seeks to deliver better social outcomes by drawing on their collective resources of time, skills, networks and relationships, often using new technologies, to build scale and spread change. Whilst Social innovation is not a ‘cross-cutting’ theme, European Regulations require that social innovation is promoted across the European Social Fund. Social innovation can also be supported on an optional basis

25 The Development and Delivery of European Structural and Investment Funds Strategies, Supplementary Guidance to Local Enterprise Partnerships, HMG July 2013

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with the European Regional Development Fund under the Thematic Objectives of Research, Development & Innovation and SME Competitiveness. Social innovation has 3 potential component elements:

The active leadership and involvement of groups of local people at all stages of the life cycle of a project. This is a key component of social innovation.

And at least one of the following:

The development of innovative ways of working which are more socially aware, leading to delivery of greater commercial or non-commercial value that is capable of greater scale and/or wider use. This is a desirable component of social innovation; and

The exchange of knowledge between research centres, businesses and other organisations to develop and bring new/different products and services to the market or to wider use. This element is also desirable.

There are no specific proposals for Social Innovation contained in this draft plan but Hertfordshire LEP and partners are keen to explore opportunities to adopt these measures during delivery of the Programme.

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Section 9 – Risk Management 9.1 Section Overview Whilst LEPs are not a formally recognised (by the EC) part of the delivery of the ESIF programmes, insofar as they are not Managing Authorities or Intermediary Bodies, there is some limited levels of risk that LEPs need to be aware of in protecting themselves and local partners, as well as attempting to reduce the risk to Government of non-delivery or non-compliance. In feeding back on the draft strategies, Government asked LEPs to consider the appropriate identification and management of risks in relation to likelihood of delivery and the potential for non-compliance with the EC programme regulations.

9.2 Assessment of Delivery Risk We believe the risk of under-performing is LOW, on the basis that:

We have been careful to ensure that our EU Investment Strategy reflects strong links with our Strategic Economic Plan ‘Perfectly Placed for Business’ ensuring we have developed a Strategy that has every chance of a strong start;

We have profiled spend according to what we consider to be a realistic profile based on information from HMG at the time of ESIF development;

We have consulted widely and involved many partners and stakeholders in the development of this Strategy, ensuring commitment and engagement into delivery;

Partners in Hertfordshire have a strong track record in delivery, and understanding, of EU and other public sector funded programmes;

Where we have selected to ‘Opt-In’ delivery partners have capacity, knowledge and experience of programme delivery;

We have established a set of Outputs and Results that we believe reflect a challenging but realistic set of targets for local delivery;

Assuming availability of resource through technical assistance, we will be able to support projects to deliver their project as effectively and efficiently as possible;

We will work closely with the Managing Authorities and local Growth Teams to ensure a smooth framework in project selection and delivery;

We will establish a governance structure that is robust, but proportionate in the interests of efficient project support and selection;

Where possible and practical, we will use ESIF monies towards key strategic interventions and activities to reduce the risk of being unable to source match funding;

Government have built in safeguards through the retention of the ‘performance reserve’ for LEP areas struggling to deliver in later years of the programme.

9.3 Assessment of Compliance Risk We recognise that achieving compliance with complex EU rules is not an easy task. We have assessed compliance risk as MEDIUM, on the basis that:

LEPs and local partners are not an official part of the ESIF delivery landscape, therefore technical compliance is not something that we will be qualified or able to support projects on;

However, we will build effective and productive relationships with the local Growth Teams to ensure that projects benefit at an early stage from advice and guidance on all aspects of eligibility and compliance;

Where the LEP commissions activity, we will ensure that the commissioning framework is fit for purpose and agreed by the Managing Authorities;

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Where activity is procured through ‘opt-in’ agencies we will work on the basis that those agencies have the capacity, knowledge and experience to ensure compliant procurement process;

We will work with projects and local Growth Teams to ensure all projects provide genuine additionality and do not duplicate or displace other EU, national or local activity;

We have on-going concerns that local Growth Teams will be inadequately resourced (as is currently the case in the East of England) and that this could place undue risk on successful local project delivery.

Section 10 – Eligibility and Compliance 10.1 Section Overview It is understood that primary responsibility for technical compliance issues will remain with the appropriate Managing Authorities for the funds. However, Hertfordshire LEP will put in place procedures and signpost to the appropriate guidance made available by the Managing Authorities to ensure potential project beneficiaries deliver in way which is compliant with EU SIF regulations, EU Directives (such as those relating to Procurement), State Aid Regulations and Framework and National Rules (such as fund eligibility rules).

10.2 Delivery Routes and Project Selection In consideration of proposals submitted for funding within the Hertfordshire LEP area, advice will be taken from the Managing Authorities on technical compliance issues.

10.3 Alignment with Thematic Objectives Once a final EU SIF Investment Strategy has been agreed with HMG project consideration and approval will be based on alignment of proposals with the investment priorities set out in this plan alongside consideration of issues such as strategic fit and value for money. No applicant shall have the right to receive grant under this programme or investment strategy.

10.4 State Aid State aid compliance will form part of the assessment of project proposals. Where possible proposals will need to be:

- No aid - Fit under one of the provisions of the General Block Exemption Regulation (GBER) - Fit within a UK notified scheme - Be funded under the De Minimis level of support

Where a proposal does not meet these conditions advice will be taken from the appropriate Managing Authority on potential notification but, given the likely length of time required for a notification, such a proposal is unlikely to be approved.

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APPENDICES

European Structural and Investment Funds

Hertfordshire Investment Strategy

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Appendix A – Hertfordshire ESIF Financial Profile and Indicator Tables

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Appendix B – Consultation Attendance List Venue: BioPark Date: 12 September 2013

Name Organisation

Adam Wood Exemplas

Alan Corbett Hertfordshire LEP

Aled Williams Manufacturing Advisory Service

Alissa Ede Hertfordshire County Council

Andrew Figgis Andrew Figgis Consulting

Andrew Liversidge DENS

Andy Luff ACL European Consultancy

Angela Connor The Creative Sanctury

Bob Mackenzie Hertfordshire County Council

Catherine Wyatt East Herts District Council

Charles Lartey Hertfordshire LEP

Chris Pearson West Herts College

Chris Taylor Dacorum Borough Council

Cllr John Gardner Stevenage Borough Council

Daniel Bicknell Environment Agency

David Forman Harlow Trades Council

David Hill North Herts District Council

David Moule Exemplas

David Stevens Aggregate

Diane Armitage National Farmers Union

Doug Hook Hertfordshire Probation Trust

Ed Blackwell Hertfordshire LEP

Elaine McConnell Hertfordshire Probation Trust

Elaine McCorriston Social Enterprise East of England

Elizabeth Dand Stevenage Borough Council

Graham Fitzgerald Hertfordshire County Council

Graham Lane Cheeky Munkey

Greg MacDonald Broxbourne Borough Council

Heather Allen Volunteer Dacorum

Ian Feekins Skills Funding Agency

Jane Rouse Hertfordshire County Council

Jessie Edwards Hertfordshire LEP

Jim McManus Hertfordshire County Council

Jim Sims Buckinghamshire Thames Valley LEP

Jo Lawrence Exemplas

Jo Ransom Business Improvement & Development

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Services

John Christopher Enterprise Europe

John Pryor Hertfordshire LEP

Julian Greenway GrowthAccelerator

Julie Nunn Environment Agency

Juliet Whitehead Hertfordshire County Council

Karen Kelly Skills Funding Agency

Karen Livingstone NHS

Keith Hughes UKTI

Kristy Thakur Hertfordshire County Council

Lauren Keeler Princes Trust

Lee Byrne Dacorum Borough Council

Margaret Wilson Hertfordshire County Council

Maria Cutler St Albans City & District Council

Mark Emmerson Hertford Regional College

Mark Mitchell Community Action Dacorum

Martin Haindl DCLG Growth Development Team

Mathilde Murphy Enterprise Europe

Michael Schneider TCHC

Michal Siewniak CVSBEH

Mick Hadgraft TUC

Mohua Bhattacharya DEFRA

Morag Saunders Hertfordshire County Council

Moreen Pascal Pascal Davies Ltd

Neil Hayes Hertfordshire LEP

Norman Jennings Exemplas

Paul Howes St Albans City & District Council

Paul Pullin East Herts District Council

Paul Witcombe Hertfordshire LEP

Peter Cabon Wenta

Peter Northover BIS

Peter Orban Sustrans

Rebecca Morgan Welwyn Hatfield Borough Council

Renato Messere Three Rivers District Council

Robin Healey DEFRA

Rupert Thacker Hertfordshire County Council

Russell Fenner Evalu-8

Sally Stanley Hertfordshire LEP

Sambit Sen Oaklands College

Sarah Elliott Herts Training and Development Consortium

Sarah Murray East of England Brussels Office

Shirley Udueni MMIT Global Limited

Simon Aries Hertfordshire County Council

Singe Sutherland North Herts College

Steve Harvey Groundwork

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Stuart Campbell Hertfordshire County Council

Stuart Martin Hertfordshire County Council

Suzanne Lowe Cabinet Office

Thinley Topden UKTI

Tim Davies Pascal Davies Ltd

Tim Edwards Hertfordshire County Council

Timothy Udueni MMIT Global Limited

Trevor Clarke Exemplas

Trevor Mason Hertfordshire County Council Transport

Una O'Brien University and College Union (UCU)

Vicki Brown Exemplas

Vicky Wing Job Centre Plus

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Appendix C – Hertfordshire LEP Draft ESIF Strategy – HMG Feedback and Response Log No. Category HMG Comment Response Status and ESIF Reference

1 Rationale for intervention and selection of activities

This is a strong response, and a great deal of groundwork has been carried out, as reflected in the detailed SWOT analyses and proposed strategic activities, though the issue of additionality needs to be addressed in more detail. The strategy acknowledges that it will need to account for the needs of rural areas better, and plans to develop this further once the forthcoming EAFRD allocations are known. The strategy is deemed to have considered European, national and local context well, and has made a compelling case for the need for funding.

Noted. We will add text on additionality to the final version. Accepted further work on rural is needed but further information from DEFRA is needed to inform this work. Noted.

New additionality section added under 5.1 Rural section 5 now completed

2 Partnership, delivery and risk

It is clear that thought has been given to potential partnership working, but nothing has been firmed up at this stage. These discussions need to be held as soon as possible if the deadlines for drawing up the strategy are to be met. The readiness of partners to invest resources and capacity is not evident at this stage, although the strategy demonstrates evidence of good engagement. The same applies with regards to potential sources of match funding and delivery routes. The LEP has clearly considered possible use of national opt-ins, although further guidance is required. The LEP needs to consider in more detail the role of the civil society – this area within the strategy is considered relatively weak and needs further development. The strategy also considers various financial instruments, and participation in CLLD, however this is not seen as a likely mechanism. No risk assessment has been undertaken.

We have had extensive partnership engagement throughout the process and will develop and implement a governance structure to aid the development of a further draft strategy. We will firm up match funding available through ‘op-ins’ and seek to identify potential sources of other match but it is not feasible to firm up match for a 7 year programme. We do not accept the engagement of civil society has been weak. This is not backed up by any evidence from Herts based stakeholders. No risk assessment was required in HMG guidance.

Further meetings held and shadow governance group now in place. Opt-in match funding now added but this is subject to successful agreement with agencies. New section on match funding under each fund added plus narrative for each TO. Further meetings held with VCS and Housing Association representatives. New risk section added as section 9

3 Eligibility and compliance with

The Herts ESIF would seem to be eligible and compliant with European Regulations and priorities. Providing a

Noted. We will enhance detail in the final version.

No response required.

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No. Category HMG Comment Response Status and ESIF Reference

European Regulations and priorities

little more detail about the activities would provide a clearer indication of compliance with regulations, but there is no reason to doubt that compliance issues will be problematic

4 Distribution of ESIF across thematic objectives

This aspect of the strategy (distribution of ESIF across thematic objectives) represents a good response. It appears that funding has been correctly allocated, though n.b. the comments below from the CSF National Group

Noted. No response required.


The strategy offers a good narrative on the county’s economic needs and clearly sets out the rationale for each of the thematic objectives and investment priorities. The strategy does not explicitly have sections on needs, nor market failure although these issues are referred to elsewhere in the strategy.

Noted. No response required.


Value for money considerations are not fully developed yet, though the proposed expenditure and indicative outputs in section 5 will provide a sound basis for developing this further.

We await HMG guidance on benchmarking to be able to assess VFM in any meaningful way.

We have assessed estimated outputs and results based on revised HMG guidance.


There is a coherent link between the evidence base, SWOT analyses and proposed activities, though this will inevitably need to be further developed as the draft is progressed.

Noted. We have added a section on intervention logic. Each thematic section has been enhanced.


There is evidence that national priorities and policies/programmes have been considered in selection of the vast majority of Hertfordshire’s strategic level activities, though more detail could be included on how the proposed activities complement other national programmes more explicit

Noted. We will consider further narrative to explain the links.

Each thematic section has been reviewed and enhanced.


There had been good consideration of collaboration with other LEPs via GTV6, though it remains to be seen how this will impact on the LEP’s plans going forward

Noted. We can further develop narrative on intentions to collaborate.

Additional narrative added although it is not possible to firm up specific collaboration activity at this stage.

10 Rationale for intervention and

The issue of additionality has not been considered in detail in the strategy. There is an awareness of the issue

The major cause for concern on additionality relates to ‘opt-in’

New section on additionality added plus each Thematic

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selection of activities

and how their approach will complement and add value to local and national and European policies in the ‘justification’ sections for the spending activities in section 5, but this is an area which requires more development

provision. We are discussing ‘additionality’ with ‘opt-in’ organisations. Projects funded via locally identified match will not substitute for existing spend.

section makes reference to additionality.


Above point re development of vfm considerations We await HMG guidance on benchmarking to be able to assess VFM in any meaningful way.

We have now included outputs based on late arriving HMG guidance and discussions with ‘opt-ins’.


The LEP should progress its thinking of potential opt-ins as soon as possible

Discussions underway with SFA, JCP (DWP), Big Lottery, UKTI and Prince’s Trust.

In principle ‘opt-ins’ confirmed in the revised strategy.


Develop a stronger focus on sustainability – there is a lack reference to the natural environment (green infrastructure, natural capital/eco-system services, bio-diversity or access, etc; the only reference is to water stress (over-abstraction).

This will be a cross cutting theme. Practical implementation will be through development and delivery of individual interventions.

We attended the sustainability workshop held on 10th December. This provided little by way of practical advice. We have re-iterated commitment to sustainable principles throughout the document and improved the narrative. We have added section 3.7.2 covering environmental drivers and 3,8 on spatial plan for growth.

14 Partnership, partnership capacity and risks to delivery

The draft strategy gave a clear explanation of possible governance arrangements which are both appropriate and proportionate

Noted. We will further develop these proposals.

Governance structure refined and shadow group will meet to consider the final ESIF strategy document.


There was good evidence of engagement with local partners across the whole LEP area via online means and a dedicated consultation event

Noted. Comment – no action.

16 Partnership, The strategy does not mention if it will have any We did not consider that the detail of Reference now added under

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partnership capacity and risks to delivery

mechanisms to eliminate potential conflicts of interest around strategic or project level investment decisions

the terms of reference or operational rules of the governance structure needed to be in the ESIF strategy document. However, we will include reference!

Governance arrangements in section 7.6.


There is a sense of a good start in developing a relationship and collaboration with civil society partners / VCSE, though this still remains quite underdeveloped and will require more detail

We do not consider the relationship ‘underdeveloped’. However, we will embed participation of VCSE through the proposed governance structure and continue to consult as appropriate.

We have further consulted the VCS. There is general agreement and approval from VCS of the approach we are taking.


The strategy does not really provide strong evidence of commitment from businesses, public sector bodies and civil society to the delivery of the strategy – the readiness of these partners to invest resources and capacity is not evident at this stage

We have engaged all these groups in the consultative process and are in the process of identifying potential match funding sources. We are not looking at individual projects at this stage.

We have in principle agreement from SFA, JCP, Big Lottery, UKTI on match funding plus we propose to consider MAS and GA. Other match will be identified from the Growth Plan and locally during delivery. Section on business consultation (on SEP) added.


Related to this, more work needs to be done on match funding and, as above, use of potential opt-ins

Noted and underway. See above.


The strategy details a number of delivery routes and also mentions the possibility of financial engineering instruments and considers a Community Led Local Development (CLLD). These are credible delivery routes but require more development

FEIs? We do not propose to set up a CLLD.

We have set out our position on FEIs under Theme 3 and 4. No CLLD is proposed.


There is currently no assessment of how to mitigate risk to delivery

Was not required in the HMG guidance.

We have added in a new risk section at 9.

22 Partnership, partnership

More information was required on results indicators for ERDF and ESF

Noted – will add selected results in final version.

Now added under each Thematic Objective.

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capacity and risks to delivery

23 Eligibility and compliance with European Regulations and priorities

The proposed activities in chapter 5 would all seem eligible for investment under the European Regulations governing use of ESIF (although more detailed information about the precise nature of these would obviously enable a better assessment)

Noted. Comment – no action required.


Consideration has been given to alignment with other European Funds in section 5 where ESF and potential EAFRD supporting activities are set out



The draft has taken account of state aid requirements (with the exception of EAFRD – see below)

Noted. Advice from DEFRA on rural related state aid would be welcome.

We have added reference to EAFRD and state aid. Given the proposed activities are taken from the regulation they are likely to be state aid compliant.


There is limited consideration in the strategy of delivery routes which might be used to deliver EAFRD money (though the strategy does state that this will be considered further once allocations are confirmed) and more work needs to be done to establish compliance with the Rural Development Regulation

Noted but it is difficult to make progress on this aspect of the strategy in the absence of the allocation and detailed advice from DEFRA.

New rural section 5.4 added.


The distribution of LEP total allocation across thematic objectives matches requirements at national level to meet European requirements



The LEP might consider slightly increasing spending on TO4 or whether any activities currently classified under TOs 5, 6, 7 could be moved to TO4. Low Carbon is a key priority for the Growth Programme. There is also a regulatory requirement for minimum spend on this TO

We have no plans to change the initial proposals on allocations by themes.

No changes have been made to the initial proposed allocations to thematic objectives.

29 Distribution of ESIF across thematic

The LEP’s proposed level of spending on TO9 should be at least maintained through to its final Strategy. Social

We have no plans to change the initial proposals on allocations by themes.

TO9 spend proposal has been maintained in the final draft.

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objectives Inclusion is a key priority for the Growth Programme and there is also a regulatory requirement for minimum spend on this TO

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