The CBI Annual Conference 2022: unlocking opportunities through business clusters

The main theme of Day One of the Conference was innovation and ingenuity.

On Day Two, partnership and collaboration…and what better example of partnerships helping our innovation sector and economy to be greater than the sum of their parts, than clusters.

As CBI President Brian McBride said in his keynote address:

A thriving UK is essential for growth

In the panel session “A thriving UK is essential for growth”, Argent Managing Partner Robert Evans and Visa Global SVP Jenni Mundy urged delegates to look to towns – as well as cities – for growth opportunities, with recent VISA research noting 89% of UK towns have significant economic headroom.

Mundy also drew attention to aspects of the research that demonstrate there is no North/South divide – but that wherever there is a skills gap and lack of suitable infrastructure, productivity and the local economy suffer. Wherever there is strong infrastructure and high levels of complementary skills, local economies thrive.

When asked by Session Chair and Chief Executive of JLL UK, Stephanie Hyde to define the pre-requisites of a regionally thriving UK, Rob Shuter, Enterprise CEO at British Telecom, effectively provided the dictionary definition of a high-performing cluster, saying: “a truly thriving UK should allow anybody in any region to find it ‘easy’ to invent, start and run a business. This requires innovation, and entrepreneurial spirit of course – but crucially, also ready access to finance, skill and talent, and infrastructure.”

He went on to say that BTs entire location strategy is based on having 30 super-hubs across the UK, a regional or cluster model, rather than a central hub and spoke model.

West Midlands Mayor Andy Street built on this further, stating that the one fundamental aspect of “levelling-up” that has got to change is the “social mobility measure”, asking: “When you are 16, 18, 21…do you have to leave your town or city to get on in life?” He believes to enable burgeoning professionals to get on in their hometown or region, you’ve got to have brilliant local businesses.

For clusters to work practically, he stressed pragmatism, saying: “You can’t all be brilliant at everything, you’ve got to choose where your internationally competitive sectors are – they have got to be an area of really high growth potential – and you’ve got to keep polishing them”.

Using the electrification of the automotive industry as an example of an ongoing Midlands cluster success story, the Mayor outlined the three point plan they followed.

First you have to make sure, or know it’s already given, that your universities are genuinely leading in relevant research and development. Then, you set out what additional R&D and innovation infrastructure you need to put in place…in the case of electric vehicles in the Midlands, the establishment of the UK Battery Industrialisation Centre in Coventry.

Second, you must understand how you are going to attract the right inward investment in this area…which private sector relationships to really nurture.

Third – and most importantly according to Street – develop your skills pipeline to ensure you can recruit the right people. With 8 times the national average skills in the relevant sector, the West Midlands can confidently say to investors across the electric vehicle supply chain “this is where your future will be”.

Rob Shuter agreed, explaining that BT have – through a real regional focus – a detailed understanding of the skills profiles in different areas. This dictates where they locate inbound call centres, for example. Shuter stressed the need to work in “a partnership mode” particularly on more complex challenges and the need to facilitate a technologically enabled workforce.

The session wrapped up with panellists emphasising various aspects of the case for clusters driving regional growth and prosperity. Jenny Mundy urged delegates to nominate their own towns for 'Lets Celebrate our Towns' and share and celebrate the things that make each of them great.

Digital transformation is key – companies must lean in and embrace the new technologies was Rob Shuter’s takeaway for business leaders. A sentiment echoed by Andy Street: “You will not level up if you keep putting all your innovation cash in the same places: digital exclusion must come to an end”.

Finally, Robert Evans suggested that business work closely with education to drive skills early on “Support your local schools as businesses – you can play a role in, and enhance, the curriculum”.

Leveraging clusters to achieve green growth

Later on that day, leveraging the power and convenience of clusters was a repeated theme in the “Achieving green growth in times of crisis” panel session.

Professor Mercedes Maroto-Valer, Director of the UK Industrial Decarbonisation Research and Innovation Centre (IDRIC), had this to say about the industrial decarb challenge of the UK, a public private partnership of around £500m: “Working across all the clusters from Scotland to Wales to the Humber to Teesside and the Black Country - building on the infrastructure we have and building on the skills we already have - makes perfect sense. 50% of industrial emissions come from clusters…starting there we can really make progress.”

Anne Chassagnette, Group Chief Sustainability Officer at Johnson Matthey, agreed. “We need to create alliances…we can’t do it on our own, and with respect to decarbonisation, we cannot do it at the pace and extent that is required by our customers and our colleagues.”

In this sense the cluster approach is key as it can help to drive change efficiently and effectively. In fact, Laura Sandys CBE, of the Energy Systems Catapult, argued that the cluster approach should be built on further, such that we have true regional industrial strategies, tailored to suit relevant local areas.

The panel concluded that inaction is the greatest risk in decarbonisation, noting that there is often a perceived disadvantage in being a first mover. The proliferation of new technologies and possible strategies can lead to “paralysis by analysis” - the fear of not getting it quite right. This can lead to risk avoidance, which is particularly relevant for “big business”. One of the many advantages of the cluster model is that it necessitates collaboration. Collaboration, in turn, can help mitigate the risk of inaction by distributing the risk of doing things differently.

Collaboration is key

In a wide ranging conversation with Ahmed Goga, CBI Director of Thriving Regions and Clusters Policy, the Director General of the BBC, Tim Davie, cited clusters as critical to the success of regional prosperity in Salford and in Digbeth. He believes that to create clusters, partnerships are key – that firms need to overcome ideas of competition, or at least park them on occasion for the benefit of wider industry and growth.

“Salford has been a pilot for the idea of clusters for economic growth. This isn't just about the BBC...get together with your so-called competitors, get the investment - we've doubled the amount of people that work in the creative industries in the area”.

The concept of partnership was a notable feature of Sir Keir Starmer’s keynote address on Tuesday, with the Labour Leader mentioning the word no less than eleven times. It’s clear that a partnership between Labour and business is something he sees as crucial to the UK’s future.

Whether by accident or design, collectively many conference attendees clearly recognise the power of clusters and the necessity of collaboration and innovation across every region and nation.

On that point, the final word goes to CBI President Brian McBride: “To leverage the strength of UK research and build more of the partnerships we need, the CBI is working with business, government and universities to launch a second demonstrator cluster, called Cyber Tech West.

Based around Cheltenham and GCHQ, it will draw on the region’s technical and creative strength and drive collaboration to forge a world-beating cyber security cluster.”