UK Economic Context & Growth Opportunities

- The Structural & Investment Funds challenge -

17 May 2013

2

Why we need to act

UK Industrial Strategy

Implications for places

Structure

Progress to date

3

No return to the old growth model

• Previous growth model based on government spending, consumption and property speculation

• Contribution to GDP from Government activity grew from 0.3% between 1990-99 to 0.7% between 1999-2008 – becoming the second most important driver of growth

A stable macro business environment is key to enabling growth

• The deficit means Government spending cannot contribute to growth to the same degree

Why we need to act

Expenditure Contributions to Growth

-4

-3

-2

-1

0

1

2

3

4

1997-07 2008-09 2010-11 2012 2013 2014-15 2016-17

Ave

rage

ann

ual c

ontri

butio

n (

ppts

)

Govt consumption & investment Net tradeOther$ Business investmentHousehold consumption & NPISH#

3.3%

- 2.5% 1.4% 0.2%

2.7%

2.0%

0.6%

GDP growth

OBR forecasts

$ includes dwellings investment & changes in inventories

# non-profit institutions serving households (mainly charitable sector)

Expenditure Contributions to Growth

-4

-3

-2

-1

0

1

2

3

4

1997-07 2008-09 2010-11 2012 2013 2014-15 2016-17

Ave

rage

ann

ual c

ontri

butio

n (

ppts

)

Govt consumption & investment Net tradeOther$ Business investmentHousehold consumption & NPISH#

3.3%

- 2.5% 1.4% 0.2%

2.7%

2.0%

0.6%

GDP growth

OBR forecasts

$ includes dwellings investment & changes in inventories

# non-profit institutions serving households (mainly charitable sector)Source: Office for Budget Responsibility Economic and Fiscal forecasts March 2013

4

UK’s relative position is under threat

• Globalisation and rise of BRICS are changing UK’s relative position in global economy

• Developing countries are competing higher up the value chain, threatening the UK’s traditional comparative advantage

If the UK stands still there is a danger we will be left behind

Why we need to act

Rising to the challenge: UK Industrial strategy - government and industry in partnership -

Industrial Strategy

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Strategic partnerships – the sectors

Industrial Strategy

PublishedAerospace (March 2013)Aim: Maintain existing UK market share; secure UK employment

Nuclear (March 2013) Aim: Increase inward investment in energy supply chain

Spring 2013 Summer 2013

Life Science Strategy (Dec 2011)

Life Science Strategy one-year-on (Dec 2012)

Information EconomyAim: Optimise ICT use by business

Agri-techAim: Developing and exporting innovative technologies e.g. in food security

EducationAim: Grow UK education exports

Offshore windAim: Increase inward investment in energy supply chain

Oil and Gas (March 2013) Aim: Increase inward investment in energy supply chain

AutomotiveAim: Repatriate supply chain and exploit low carbon technologies

ConstructionAim: Improve competitiveness and productivity to support increasing exports

Professional Business ServicesAim: Export opportunities in developing economies

ProgressSectors Publication of Sector Strategies

o Aerospace “Reach for the skies” - £1bn to fund Aerospace Technology Institute; match funded by industry

o Nuclear “The UK’s Nuclear Future” – £15m for new National Nuclear Users Facility o Oil and Gas “Business and Government Action Plan” - measures to boost supply chains and tackle engineering skills gap

£500m to support other key industrial strategy sectors in Budget 2013• Life Sciences: commitment to sequence the whole genome of 100,000 NHS patients• £125m invested in supply chains to encourage advanced manufacturing investment

Progress to date

• First strategy update for the Business Bank; launching £300m investment scheme• Funding for Lending scheme is encouraging the banks to lend more - if it can mobilize

the projected £60-£80bn• UK Green Investment Bank operational since October 2012 - funded with £3bn

Access to Finance

Procurement• Publishing £84bn of Procurement pipelines• Addressing strategic capabilities, e.g. tunnelling

8

Progress

• Employer Ownership Pilot gives employers direct access to public investment for training through a competitive fund

o £90m of funding to support 37 projects in the first tranche; more than matched by £115m of employer contributions

o Second round closes 28 March 2013; prioritising industrial strategy sectors• 'Rigour and Responsiveness in Skills‘; action plan to update skills priorities, April 2013

Skills

Progress to date

Technologies• Seven Catapult Technology and Innovation Centres

o High Value Manufacturing, Cell Therapy, Offshore Renewable Energy, Satellite Applications are open

o Connected Digital Economy, Future Cities and Transport Systems open by June 2013

• Support for “eight great technologies” o £600m funding in Autumn Statement 2012

• Patent Box introduced progressively from April 2013 will provide reduced corporation tax rate of 10% for companies exploiting patented inventions

Regenerative Medicine

Agri-science

Energy storage

Robotics

Big data Synthetic biology

Advanced materials and nanotechnology

Space technology

Implications for places & LEPs• Represents an opportunity – and a challenge for LEPs • Important to recognise and build on their comparative strengths

to build successful economic development propositions• Look at all the levers available – EU Structural & Investment

Funds + Single Local Growth Fund, UKTI, EZs, RGF, transport funds, etc

• Mapping sector and technology priorities • What else would be helpful?

Sir Andrew Witty’s Review of Universities and Growth• In response to the Heseltine Review, the Government invited Sir

Andrew Witty to lead a review to explore how universities can work with Local Enterprise Partnerships (LEPs) and other local organisations to support growth.

• The review has a focus on research relevant to sectors and technologies in the industrial strategy, but it also recognises the wider role of universities in supporting local growth.

• A short consultation period is currently open, and is due to conclude on May 31st; the Review is keen to engage with LEPs and other local actors and views are welcomed.

• Preliminary findings will be released in June; the Review will report in full in September.