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Summary of European Structural and Investment Funds Strategy February 2014. North East LEP European Structural and Investment Funds 2014-2020. An opportunity for growth.
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Summary of European Structural and Investment Funds Strategy February 2014 North East LEP European Structural and Investment Funds 2014-2020
An opportunity for growth • North East LEP received £473m allocation of European Structural and Investment (ESI) Funds. Provides enormous opportunity to make a real, lasting difference in the North East. • Clear overlap between Europe 2020 agenda of smart, sustainable and inclusive growth and North East LEP context. • ESI Funds Strategy responds to North East Independent Economic Review and fits within emerging Strategic Economic Plan. Approach based on detailed understanding of the North East LEP area, and also utilises finding from research studies on smart, sustainable and inclusive growth, and consultation events.
More and better jobs • Proposals for ESI Funds key component in delivering Strategic Economic Plan and its ambition that: The North East economy will be globally competitive, with more and better jobs created through making, trading and innovating • Strategic Economic Plan sets out ambitious aims: By 2024, halve gap between North East and English average (excl. London) on 5 key indicators: GVA per FTE; private sector employment density; business density; employment rate; unemployment rate. • ESI Funds Strategy therefore identifies 5 local objectives, with activities and outputs for each, and aligns European priorities with Strategic Economic Plan
Allocation and spend • ESI Funds Strategy for £239.9m ERDF, £212.3m ESF, further allocation of £10.5m EAFRD, and extra £7.7m for the Youth Employment Initiative (in County Durham only). • Ring-fenced allocation of ERDF and ESF to County Durham due to ‘transition region’ status (£134.2m). Northumberland and Tyne and Wear classified as ‘more developed region’.
Local Objectives for ESIF • Increase levels of research and development, and improve the commercialisation of innovation with particular focus on areas of Smart Specialisation. This will be supported by building the networks and environment for social and open innovation. • Increase entrepreneurship, the number of start-ups, and the level of trading, contributing to business growth. This will include improving access to finance and business support. Growth in underrepresented groups and places with high deprivation will be targeted, alongside high value and strategically important businesses and sectors. • Increase the role of the low carbon economy and energy generation sector. The area will be an exemplar of a low carbon economy, enhancing environmental sustainability, resource efficiency and sustainable transport systems to drive business growth. • Improve employability and skills to overcome barriers preventing access to the labour market. In particular, we aim to enable more people to move towards employment or self-employment and to enhance aspiration and participation in underrepresented groups. • Improve skills provision by matching it to economic opportunities and better meeting the needs of business, including skills at intermediate and higher level. This will enable more people to enter the workforce and progress their career and enhance the area as a place to invest and start and grow a business.
EAFRD and Rural Areas • The rural economy makes an important contribution in the area, contributing 26% of employment and 25% of GVA. The North East Independent Economic Review analysed the North East’s rural areas, finding that: • The rural economy has a similar industrial sector spread to urban areas • 75% of output in the area’s rural areas is derived from four sectors: public sector; business services; distribution, hotels and retail; and manufacturing • Rural areas provide significant assets in terms of quality of life resulting from a high standard of landscape, heritage and natural environmental factors • There is a predominance of micro-businesses (88% of businesses) and significant home working (38%) with accompanying benefits and challenges • Strategy includes measures that will be applied across the area, while also delivering appropriate investment in rural areas, including bespoke interventions through the EAFRD allocation. Recognition that rural and urban locations have clear interdependencies.
Delivery – Opt-ins • Diverse strands of the ESI Funds- requires a flexible approach. Therefore propose a range of delivery mechanisms including opt-ins, financial engineering instruments and Community-led Local Development. This is in addition to calls for projects and specific commissioning. • Potential opt-ins for limited initial period to establish relationships, ensure effective delivery and assess local impact. This will be fully reviewed after 3 years to ensure local requirements are being met. • Opt-in approach enables us to align activities with existing central spend and activity where this supports our objectives and where control remains locally directed and responsive. • In the Strategy we have identified opportunities for the opt-ins to support the delivery of key themes around exports, high-growth potential and productivity improvements. We are therefore looking to continue discussions around the UKTI, MAS and Growth Accelerator Opt-ins. • We have also identified clear opportunities for the opt-ins provided by the Skills Funding Agency, Department for Work and Pensions and Big Lottery Fund to support our objectives and are intending to opt-in for a significant proportion of our ESF allocation.
Delivery – Financial Instruments • Access to Finance an essential requirement. Regeneris Consulting mid-term review of North East JEREMIE Project by Regeneris Consulting confirms the contribution to the economy that such a fund can make, concluding that “net additional job creation and GVA are in line with… expectations for a project of this nature and that unit costs are reasonable at this stage in the life of [the fund]. This is even “before… [considering] the potential legacy to the public sector.” • We plan to build on JEREMIE’s success in the North East to set up a JEREMIE 2. Current JEREMIE will cease to invest in December 2015- must prevent a shortfall in finance for SMEs. • Total fund size will be £160m, covering both the North East LEP and the Tees Valley Unlimited area. Capital will then be matched by a new European Investment Bank facility, as with the current JEREMIE, and early discussions are positive. • Use experience to design new suite of funds and procurement of fund managers. Given the successful delivery of JEREMIE through these funds, we anticipate that broad key investment themes may be similar, i.e. micro finance, proof of concept, technology and early stage venture capital and growth capital.
Delivery – Financial Instruments • Ex-ante evaluation will guide and validate design of the suite of funds, being mindful of the Strategic Economic Plan objectives for the area. Clear opportunity for the fund to contribute to European objectives of Innovation (technology and proof of concept investment) and Social Inclusion (micro-finance) in addition to its core thematic objective of SME Competitiveness. • Redesigned fund will build on the learning from the success in the current programme of using local presence to enhance take up including a presence in County Durham. However, these objectives will need to be balanced against the need for financial returns, in order to attract the EIB as a lender, and to provide a legacy for the future re-use for SME competitiveness in the region. • Partners have demonstrated keen interest in establishing sustainable mechanisms to support infrastructure and capital expenditure. This would build on the success of the North East Investment Fund using Growing Places and Regional Growth funding, with £38.5m of spending committed. This potential new fund could see investment of up to £60m of ESI Funds, but is subject to an ‘ex-ante’ evaluation to assess anticipated demand.
Delivery – Community-led Local Development • Significant interest has been shown in developing a programme of CLLD in the North East LEP, recognising the unique opportunity to support capacity building in some of our most deprived communities. • We are therefore proposing a competitive application process for up to 10 Local Area Groups to deliver individual strategies, of which up to 8 would be in Northumberland and Tyne and Wear and up to 2 would be in County Durham. In Northumberland and Tyne and Wear, this would represent a maximum of £12m of ESF investment and up to £3m of ERDF investment over the period of the programme. • In County Durham, a maximum of £6m ESF and up to an additional £1m of ERDF investment would be allocated to CLLD for the period of the programme. • The approach for establishing the precise nature of these areas will be undertaken in due course, according to the timetable set out in government guidance.
Governance • To ensure that the strategy is effectively delivered, it must build on local understanding and relationships. We have developed an approach to governance which aligns the local processes of the Managing Authority and the North East LEP’s role in providing the strategic leadership for the funds. • Approach is designed to provide a clear and responsive process for project applicants and ensure local strategic objectives are met. We will continue to work closely with the Managing Authority to align our roles and processes to provide sufficient local determination and a clear route for project applicants. • We identified five key roles for the North East LEP through the North East European Investment Group supported by the North East LEP’s executive team and local authority partners. These roles include: • Developing and making calls for projects and commissioning activities around access to finance, opt-in proposals and other key delivery routes. • Endorsing the proposed projects both at an initial stage and for the final funding agreement. • Performance management of the strategy with the opportunity to challenge, stop and re-design and re-commission where performance is not being met. • Support applicants in developing their application to understand opportunities, process and requirements including communications. • Ongoing support for projects including guidance on delivery and planning for successful eligibility.
