Daily Coronavirus Webinar: Beyond Westminster: regional and local approach to the COVID-19 recovery

Overview:

This morning's webinar took the form of a conversation between the CBI’s own Chief UK Policy Director, Matthew Fell; the Chief Executive of the Cumbria LEP, Jo Lappin; the North East LEP Chair, Andrew Hodgson; and the Director of Strategy for the West Midlands Combined Authority, Julia Goldsworthy. Here’s what they discussed:

• The latest developments
• The importance of local collaboration
• Regional problems…
• …and opportunities
• What structures work?

The latest developments

Matthew began the webinar by updating us on the latest policy developments. “Some of the issues stay a little bit constant,” he said. “But, beneath the surface, we are starting to get more detail.”

One of the areas where we have received more detail is the Job Retention Scheme (JRS), with further announcements last week on how it will continue until October. There are new restrictions, explained Matthew: businesses will have to make increasing contributions to furloughed employees’ pay packets; there is a cap on the number of employees who can be furloughed at any one time; and people need to have completed a three-week furlough before 30 June if they are also to be furloughed beyond that date. But there are also new benefits, including increased flexibility to allow part-time furloughs.

Happily, it seems as though businesses are clear about what the government’s new JRS guidance means. Matthew revealed that the CBI’s mailbags have not been flooded with questions.

Matthew also talked about the detail that’s coming in other areas, much of it about “getting a risk-based approach to make sure that health and the economy are looked at hand-in-hand”. He said that the government seems to be “keen” on applying this risk-based approach to the current 14-day quarantine rules and the test-and-trace system, in both cases potentially making it easier for businesses to operate.

The importance of local collaboration

When it came to the main subject of the webinar – how regions and localities are faring throughout the crisis – Matthew said that “the critical word is engagement”. Engagement between legislators, businesses, unions and others has been “so strong” during the past few months, “both at a national level and at a local and regional level”.

This engagement is important because there are so many challenges to overcome. “Even as we headed into this crisis,” explained Matthew, “we had a major task: geographically, the UK is one of the most unequal countries in Europe”. There are huge disparities in everything from productivity to research spending: “London, the South East and the East account for about half of all R&D.”

Matthew went on to highlight specific examples of collaboration. Some of this has occurred between different areas, such as across the Oxford-Cambridge corridor. Some has been within areas, such as the North Yorkshire Local Enterprise Partnership (LEP) helping to set up a “ShopAppy” app through which local retailers can trade online.

There are various political levers that can be pulled to help business through the pandemic – but “local tailoring” is essential, suggested Matthew, for ensuring that the effects of those levers are maximised.

Regional problems...

“Cumbria is particularly vulnerable because of the structure of its economy,” said Jo. About 52% of the working population is employed in the visitor economy – and, throughout the lockdown, that economy has effectively been “closed”.

The North East also has a “significant” visitor economy, said Andrew – as well as various long-standing issues related to its industrial past. “We have relatively high unemployment. We had large, traditional industries – most of which have fallen away.” He added: “I do worry about our small towns, our coastal towns and our rural communities.”

As for the West Midlands, Julia said that “going into this crisis, our economy was going gangbusters”. The region’s output has risen by about 25% over the past five years, in part because of new opportunities in sectors such as automation and green tech.

Even so, Julia admitted that “all of that came to a halt” with the lockdown – and she’s especially concerned about the effect on younger people. The 2008 crisis caused “generational impacts” that the region’s young people have “never fully recovered from”.

...and opportunities

Despite the immense challenges, all of our guests described the current crisis as a moment of opportunity. As Jo put it, “It’s not what we would have chosen, but it is going to be a catalyst for change.”

Cumbria, Jo continued, has a number of pre-existing strengths that can been developed further in the years ahead. One of these is clean energy: “We’ve got the world’s largest, operational off-shore windfarm.” Another is the currently embattled visitor economy: “People will be travelling out of the country less…. That’s a big market opportunity.”

But she also highlighted some general changes that could benefit Cumbria and other regions alike: “It’s obvious that people have recognised that you don’t need to live where you work. Interest has moved from larger cities to towns and rural areas.”

In the North East, Andrew added, a lot has already been done to improve the area’s economic resilience: “There were 75,000 net new jobs in the three or four years leading into Covid. Technically, 124% of them were better jobs – we more than replaced our old jobs with high-value jobs.”

And the North East also has its own particular strengths, many of which are perfect for the post-Covid years – from “pharmaceutical manufacturing” to “back-office digital work”.

The West Midlands was “hit harder than another other region” by the 2008 crisis, said Julia – “but we bounced back quicker”. She is hoping for a similar bounce-back this time around and believes that there is “plenty of cause for optimism”. The region is already going to be the beneficiary of a lot of new infrastructure spending, from HS2 to 5G, as well as a number of high-profile events, including the Commonwealth Games in 2022.

What structures work?

A number of audience members raised the issue of Metro-Mayors: are they good for an area or not? Julia – who works alongside the Mayor of the West Midlands, Andy Street – said that these figures have huge “convening power”. They can “provide that interface between central government, local institutions and the business base,” and, indeed, have been doing so throughout the lockdown.

Andrew – whose region includes the North of Tyne, where Jamie Driscoll is the Mayor – agreed that “Mayors are very important for gaining a voice”. But he emphasised that “irrespective of what structures you’ve got, you can come together and collaborate”.

Jo’s position was firmer: “When we talk about devolution, there’s too much focus on structures rather than powers…. More financial devolution, less obsession with structures would be my request.”

Key questions we answered:

1. Matthew, how have local and regional governments been engaging in recovery planning?

• Regions are eager to play a strong role in the recovery. The PM has met with 9 regional mayors, but they’ve sought a bigger role.
• Mayoral Combined Authorities (MCAs) have been active in the response and have begun asking for additional powers.
• Over last few months both MCAs and Local Enterprise Partnerships (LEPs) have sprung into action, assisting businesses in making sense of government support and accessing funds.
• We’ve had regular engagement with mayors, and we’ve been welcomed by LEPs across England as they undertake work in this area.
• Most MCAs/LEPs are developing their plans for recovery using the work that was already underway in developing their local industrial strategies.
• It’s becoming increasingly clear that close collaboration will be required to rebuild the economy.

2. Matthew, how do local leaders go about ‘building back better’ in their regions?

• There’s stubborn regional disparity in the UK, and we’re geographically one of the most unequal countries in Europe – with much of this down to differences in productivity.
• We need to take this opportunity to outline a vision for our economic future based on fairness, equality and sustainability.
• Firstly, we should look immediately at our infrastructure pipeline – and look to ensure built-in sustainability, alongside a focus on renewables and insulating homes
• Secondly, the government and business need to help retrain and reskill people, taking regional needs into account
• Thirdly, we need to build on connectivity and digital innovation.
• The CBI is looking at policy solutions – e.g. scaling up grants or R&D tax credit support. We’re also calling on the government to explore options for incentives/support for companies that are looking to boost productivity.
• The business community supported devolution for one, simple reason – we know that decisions are best taken by those closest to the impact of those decisions.
• There has been positive progress on devolution deals progressing in places such as West Yorkshire and Sheffield City Region, and we hope more will continue to be negotiated.

3. Jo, what are Cumbria’s vulnerabilities and strengths as a region when dealing with Covid-19?

• We have higher levels of furloughed people and people on the self-employed income support scheme. So we need to focus on preserving jobs. But we also need to focus on how we get our tourist economy up and running. We’ve gone through a period of glorious weather, but all our tourist establishments were closed.
• We have the world’s largest operational wind farm and we have significant opportunities in nuclear energy.
• People have recognised you don’t need to live where you work, and so the interest has moved from larger cities to towns and rural areas. So, we want to promote Cumbria as a place as a location to live, work and invest in.

4. Andrew, how about the North East?

• Historically, the North East has had systemic high unemployment. Traditional industries have fallen away. Our local strategic plan has been based around building higher value jobs.
• We were doing that to build resilience in our economy, because we knew that when there is a national or international downturn, then the North East suffers.
• We are anticipating job losses after the crisis. We have a large tourist economy.
• We’ve seen significant growth in the offshore wind sector. Pharmaceutical manufacturing is also very strong in the North East. And digital has been one of our strengths.
• Pre-Covid we still had the highest level of unemployment in the UK. As we go to a high value economy, our vulnerable communities were not feeling that benefit.

5. Julia, how about the West Midlands?

• We are the fastest growing region outside of London. Prior to this crisis, our economy was growing. We had world leading automotive, green technology, health and life sciences sectors, and our economic output had gone up 25% over the last 5 years.
• We saw increasing skills and house building.
• So, our economic picture was very positive.
• All of that came to a sudden halt with Covid.
• There were underlying issues, we were committed to tackling through our local industrial strategy. E.g. not everyone having equal access to contribute to our growth so inclusive growth is key
• Productivity of our business base was another issue.
• We had some vulnerabilities following Brexit due to our automotive sectors.
• And Covid brings huge challenges to our leisure and hospitality sectors.
• We have a young and diverse population. The 2008 economic crash showed us there were life impacts on young people, so we have to learn the lessons form that, so we don’t blight another generation.
• We have a significant university base in this region.
• How do we make sure HS2 delivers to its full potential to the whole of the region?

6. Andrew and Jo, how do we build back better in terms of inclusivity?

• Andrew – We need to focus on young people and how we give them opportunities. We need to ensure that education is linked to a skills agenda to create opportunities. The North East isn’t lacking skills, we just have the wrong skills. So we need to re-skill our adult population.
• Jo – Inclusive growth is one of the cornerstones of our industrial strategy. We have seen significant employment growth but no filter through to the wider community. So, we have high paying jobs but high unemployment. There has to be better devolved tools to enable local areas to tackle these issues.

7. Julia, how important has it been to have a clear mayoral voice championing your region?

• It’s been incredibly helpful. We’ve been able to challenge government on how their national policies are translating into reality. This has helped the government tailor their policies in response to this crisis.
• Mayoral and combined authorities also have huge convening powers that can cut through stultifying conversations.