Agenda item

Report of the Corporate Director, Regeneration and Local Services – Managing Director, Business Durham, Regeneration and Local Services.

The Chairman introduced the Manager Director, Business Durham (BD), Dr Simon Goon who was in attendance to give an update as regards BD activity (for copy see file of minutes).

The Managing Director reminded Members that BD had three teams: Business Space; Business Development; and Innovation and Growth. 

Councillors noted Table 1 within the report which set out the performance information for BD and the Managing Director highlighted the good performance last year and that performance for the current year was on trend to meet and in some cases exceed, target.

Members were informed of activities in terms of enterprise, engagement and outreach, with such activities including working with partners, including the four enterprise agencies, to not only provide help in terms of retaining jobs, but also to provide advice to individuals who wished to start a business by delivery of the Welfare Reform Self-Employment Programme.  Councillors noted that the Future Business Magnate (FBM) was in its twelfth year and engaged with over 200 young people each year, and connected County Durham businesses with schools.  Members noted that last year the theme was the “The Home of Manufacturing” with Durham Johnson being the winning school, working with the Zumtobel Group to produce a “Lock and Dock”, a wheelie bin docking device.  It was added that the 2016/17 FBM competition would feature two schools from outside of County Durham, the Longfield Academy, Darlington and Emmanuel College, Gateshead.

Members learned of FBMplus, which involved 30 students from Further Education (FE) colleges and continued support for Durham University’s Blueprint Competition and Dragons’ Den activities.  It was noted that there had been a number of events promoting Science, Technology, Engineering and Manufacturing (STEM) including talks by the Author and Technology Journalist, Andrew Smith at Framwellgate School and the Gala Theatre.  The Managing Director added that there was a “Physics Future” event held at NETPark in March 2016, in partnership with the White Rose Physics Academy from York University, the Institute of Physics and Durham University.  Members were pleased to note the work done by BD on a NETPark outreach module for New College Durham (NCD), with the taster sessions held for students having generated positive feedback, the full module being launched in September 2016.

Councillors learned that in terms of supporting rural businesses, a number of activities had taken place, including a “pop up” kitchen event at the Durham Dales Centre, Stanhope and a number of workshops and mentoring sessions.  Members also noted work ongoing with BD in partnership with Durham University to hold a “Durham International Festival of Enterprise” to be held over three days, 27 February to 1 March 2017, with the aim to get County Durham on the map as an enterprise destination.  It was added the festival would be held in the Town Hall and Gala Theatre in Durham City.

The Managing Director explained that in terms of business engagement, there were a number of ongoing activities, as set out within the main report and Appendix 3, with examples from companies such as Altec Engineering and ResQ.  Members were informed of the support of the “Let’s Grow” grant scheme, a Regional Growth Fund (RGF) operating across the North East and that in Phase Two of the scheme, County Durham Businesses had been awarded £3.88 million, with a match funding of £25.49 million helping to create 1,095 jobs.

The Committee noted that the BD initiated Business Park Communities were continuing to go from strength to strength and it was added that Newton Aycliffe had become self-sustaining.  Members noted there were around 30-40 Business attending the Durham 2sday business networks in Durham City and the quality is such that businesses from Newcastle are regularly attending.

Councillors were informed of the European Rural Development Fund (ERDF) funding for the Durham Business Opportunities Programme (DBOP) and the Managing Director added that there was a need to change business support from simply a list of services available to being able to identify opportunities.  Members noted opportunities could be local or national and international, with an example given of healthcare opportunities in Dubai.

The Managing Director explained that manufacturing was a vital part of the County Durham economy and that BD was working with a newly formed network, the County Durham Engineering and Manufacturing Network (CDEMN), supporting them in terms of taking forward issues and opportunities.  Members were reminded of the Hitachi Rail Europe Rail Vehicle Manufacturing Facility at Newton Aycliffe and noted that Business Durham had worked with four local suppliers to reach European accreditations and there were other companies that were also looking to become suppliers.  It was added that GlaxoSmithkline (GSK) had announced an investment of £92 million in Barnard Castle that would look to sustain over 1,000 jobs and that Thorn Lighting at Spennymoor had introduced new products that had been developed by a business at NETPark.

The Committee noted inward investment enquiries received, with the lower operating costs in the North East being highlighted as a helpful driver, and BD having learned from previous approaches to inward investment.  Members noted that there were several sites at Hawthorn, Integra 61 and Forrest Park that were being brought forward, ahead of the proposed International Advanced Manufacturing Park at Sunderland.  Councillors noted Table 7 within the report set out the successes in 2014-15 in terms of inward investment, with companies including: Atom Bank, Aykley Heads; Kans and Kandy, Seaham; Complement Genomics, Lanchester; Two Touch, Seaham; Encore Envelopes, Peterlee; and Great Annual Savings, Spectrum.  The Managing Director explained that those companies were roughly at 75% of their predicted jobs forecast and he was comfortable that they were on track overall.  Members noted that there were a number of potential investments in the pipeline as well as a number of reinvestments by multi-national businesses in County Durham, for example GSK.  It was acknowledged that Brexit was an issue, with the current uncertainty making the UK less attractive for investment, and there was another issue in terms of the Government’s Apprenticeship Levy and how this would apply to not only small businesses, but also larger “blue chip” companies as this could make their UK plants less competitive than their sister plants worldwide.

The Managing Director explained that in respect of innovation there was a lot of work that had been undertaken at NETPark and that BD continued to work with Harwell, the Space Applications Catapult Headquarters in terms of the space sector.  Members noted BD had led a successful bid to the UK Space Agency to deliver the North East Space Incubator programme at NETPark and the North East Space and Satellite Applications Hub (NESSA) was working to secure further funding.  Councillors noted the work of BD and the North East Local Enterprise Partnership (NELEP) in looking at this market.

The Committee were reminded that Cabinet had agreed the creation of a £20million evergreen venture capital fund, with the procurement process currently underway.  Members noted that modelling had suggested that the fund would help to create and safeguard about 2,000 jobs and support between 70-80 businesses over a 10 year period.

Councillors noted that in respect of business properties, NETPark was in its eleventh year and was home to 31 science and technology businesses.  Members were reminded that the road and utility infrastructure to be provided by a NELEP award of £6.8m would create a further serviced land that would ultimately create a further 750,000 sq. ft. of space and a further 2,400 jobs over the next fifteen years.  The Managing Director explained that DCC had acquired Salvus House at Aykley Heads, adding high quality office space to that managed by BD and added it would be the preferred location for the Durham City Incubator a partnership between the Council, Durham University and New College Durham.  Councillors noted the overall occupancy for the whole BD portfolio, at 87.5% and it was explained that there would be work undertaken in terms of retaining tenants, with targeted property marketing to include the new Explorer Buildings at NETPark, together with Tanfield Lea Business Centre and the Durham Dales Centre.

The Managing Director explained the BD approach to communications, based on several loose categories (five stories): innovation; inward investment; business engagement; enterprise; and property, together with a series of campaigns in terms of spotlighting aspects of doing business in County Durham, such as manufacturing.  The Managing Director concluded by noting the use of social media and highlighted the improvements in terms of the number of social media impressions over the period April to September 2016, with an increase from 4 million to 15 million.      

The Chairman thanked the Managing Director and noted the good news in terms of developments.  The Chairman noted the Apprenticeship Levy, in the context of Brexit and foreign investment, and added that skills development and retention would be important, as highlighted by the work of the Committee.  The Chairman asked in terms of post-Brexit, what gaps and threats may appear.

The Managing Director explained developing skills had come through as a common theme, however, what skills exactly would be dependent upon the nature of technology and business practices moving forward.  Members were reminded of a disconnect in terms of qualification providers and the development of skills and attitudes, such that people were ready to start work, and it was added that for high level studies there was a very limited pool of people, for example at the Centre for Process Innovation, there was a person who was one of three people in the world leading on organic light emitting diode (OLED) technology.  The Managing Director reiterated that there was a need to try and connect businesses to skill development organisations, such as colleges.  The Managing Director added that another aspect was incentivising staff to then be able to retain them, not only in terms of money, but also in moving to more flexible working.  It was added that since the EU Referendum there had been less certainty and “as things firm up” there would be greater clarity, with no negative impact having been felt yet.  The Chairman noted that the issue would be in terms of the impact in the medium to long term.

The Portfolio Holder for Assets, Strategic Housing and Rural Issues, Councillor E Tomlinson noted that training was a two-edged sword and as regards the Apprenticeship Levy there could be scope in the longer term for those apprentices to cascade down to the businesses that could not take apprentices on themselves.  The Chairman noted that the Working Group which looked at skills development had noted that an issue was in letting businesses know what support was available to them.

Councillor M Davinson noted the FBM competition was in its twelve year and, as those people who had been involved in the first few years would be in their mid-20s, asked whether there was an opportunity to follow up with those former pupils and hear some of their stories, to see if there has been a “brain drain” or whether people had become self-employed and if their skills were retained within the County.

The Managing Director noted that the FBM competition began prior to Local Government Reorganisation (LGR) in County Durham and looked to develop skills that would help entrepreneurship.  It was added that there was a particular mind-set in terms of entrepreneurs, with many successful entrepreneurs having noted that one of the main reasons for their success was having surrounded themselves with good people/employees and therefore it was important to be able to have not only the entrepreneurs themselves, but also “good people/employees” too.  It was added that tracking some of the participants 10 or so years after the competition has proven to be difficult and there are data protection issues.  The Managing Director noted anecdotally a former FBM participant had secured employment at Atom Bank, and while there was no “cause and effect” as such there was no harm in helping to promote the competition and help bring educators and businesses together.  Members noted that retention of skills was an issue; however this was improving in County Durham.  The Managing Director added that when focusing specifically on County Durham, there were activities to create opportunities and to help our resident access those opportunities, and that employment in the County had increased.

Councillor E Adam noted that the Overview and Scrutiny Management Board Members had received performance information as regards the employment rate and County Durham was still behind the North East and National rates.  Councillor E Adam accepted that progress was being made in County Durham, however it was not a step change in terms of substantially increasing the performance.  Councillor E Adam asked as regards the “data gathering exercise” in terms of the CDEMN, as mentioned within the report, what issues had come to light, and whether the work of South West Durham Training (SWDT) or indeed the Committee and its Working Group had been looked at in conjunction.

The Managing Director explained that while there had not been a focus on skills per se, there had been an exercise looking at skills and competencies that would be needed to deliver aspirations, including: the make-up of their management team; equipment/machinery; turnover; suppliers and looking locally; spend on research and development; and growth ambitions.  It was added that a lot of the issues reflected the scale of the businesses, with many being micro or small businesses.  It was explained that around 74% of those businesses spoken to had noted a target of 20% growth based upon their current product line and customer base, with this being more of a hopeful estimate and that the average number of suppliers each business has was around 200, with around 10 of those being critical to the business.  Councillors noted that there was an aim to help businesses buy better and sell better, and that this was biggest opportunity available to many businesses and therefore how, through the CDEMN, businesses could be helped to take those opportunities was important.  Members noted that access to finance and new innovative approaches were also issues for businesses to consider, with the issue of skills always an undercurrent, though there was a need to ensure that any work was not replicating what colleges may already be offering. 

The Managing Director noted that the employment rate in County Durham was lagging behind the North East and national rates; however it was not deteriorating and was moving forward slowly but steadily.  Members were reminded that the large numbers of new jobs, for example akin to the Hitachi (900) or ResQ (1,200), were not the norm, however if there were three or four of these types of investment there would then be an issue of supply in terms of workforce.

Councillor A Patterson asked in terms of the FBM competition and tracking the destination of previous participants, was the data not already collected and held by our One-Point service.  The Managing Director noted data at age 16 was known, however not beyond 6 months after that for example.  Councillor A Patterson noted that DCC had an obligation to track young people up to age 19.  The Managing Director noted that at 19 it was likely those young people were in some form of training, and that in their mid-20s it would be difficult to track those at University or who had then moved into work.

Councillor A Patterson noted a lot of the business developments seemed to be in the East of the County, especially at Seaham and asked why this was.  The Managing Director noted this was an issue of the availability of suitable property and space at Spectrum and Seaham Grange.  Councillor A Patterson noted 50% occupancy at the Durham Dales Centre and noted some people had found cheaper accommodation at Stanhope and therefore was there merit in looking at the charges and to look for incentives to aim for 100% occupancy.  The Managing Director explained that the current rates were competitive and those cheaper offers elsewhere were incentivised, with reduced first year rents for example, to attempt to attract new business.  It was added that the issue was not in terms of retail space, rather office accommodation and therefore an artisan/craft area was being considered for conversion to office space.  The Managing Director added that a lot of microbusinesses would look at whether they actually needed to have such an office space, weighing up the cost base required.  The Managing Director noted that in terms of Member’s suggestion to undertake a focused piece of work looking at the support provided to the retail business sector in County Durham useful contacts would include the Economic Development Manager, Graham Wood and the Community Economic Development Manager, Wendy Benson, with a number of town centre capital improvements being carried out.  It was added that the Durham Business Improvement District (BID) Manager, Adam Deathe could also be useful contact, though noting the Durham BID was subject to the process of funding renewal in 2017.

Resolved:   

(i)              That the report be noted.

(ii)             That the Economy and Enterprise Overview and Scrutiny Committee include in the

          refresh of its Work Programme for 2017/18 a further update on the work of Business

          Durham.