Agenda item

(i)          Joint Report of the Director of Transformation and Partnerships and the Corporate Director of Regeneration and Local Services.

(ii)        Presentation by Professor Brian Tanner, Chairman, County Durham Economic Partnership.

The Chair welcomed the Chair of the County Durham Economic Partnership (CDEP), Professor Brian Tanner who was in attendance to provide the Committee with an overview of the activity in relation to the CDEP (for copy see file of minutes).

The Chair, CDEP thanked the Chair and Committee for the opportunity to once again speak in relation to the work of the CDEP.  He explained that the Members noted that in participation of the drafting of “Vision 2035” the CDEP vision was for: a County of enhanced prosperity and well-being; a modern and dynamic County characterised by excellent quality of place, competitive business, a highly skilled labour market and high levels of economic activity; and sustainable places that people want to visit and in which to live, work and invest.  The Chair, CDEP noted that how we achieved this would be the issue and that, as in previous years, the top priority was to improve the employment rate.

Councillors noted that in order to help judge levels of success, five measures were looked at: employment rate; gross value added (GVA) per head; number of businesses; household disposable income; and employment deprived index deprivation.

The Chair, CDEP noted it was important to understand that the targets set out were for 2030, and that while there was progress in terms of the employment rate, the other measures had lost some ground.  He noted the current performance in terms of the employment rate was 74.4 percent, above the 73 percent target for 2030, although below the national average of 75.3 percent. 

It was noted that the GVA per head was below the 2030 target of 87 percent, 83.1 percent and had fell from a 2016 value of 84.5 percent.  The Chair, CDEP explained that the target for the number of additional businesses by 2030 was 4,300 and the current performance was 2,240, 105 less than the 2017 figure.  He noted that the disposable household income was below the 2030 target, however had remained roughly static over the last few years.  Members noted that in terms of the employment deprived, the index of deprivation, there had not been any new data since 2015, coinciding with changes in benefits, the move to Universal Credit.  It was noted that accordingly this measure may be removed.

Members were referred to a graph showing the change in employment rate over the period June 2016 to September 2018 and there was a steady increase over time, a real increase, not a “statistical blip”.  The Chair, CDEP noted that as the 2030 target had been reached it could be the time to shift focus from the employment rate to “better jobs” or perhaps better described as “more fulfilling jobs”.  Members were referred to a map of the County showing the large geographical disparity in terms of employment deprivation.

Councillor M Wilkes left the meeting at 9.40am

Councillors noted that GVA was a measure of the value added by the processes, products and services provided in County Durham, a measure of our productivity.  Members noted a graph showing that there was a widening gap between the County Durham GVA and that of the North East and England. 

The Chair, CDEP explained that this meant that the value of jobs in the County were low, or they were not very productive, or both.  He added that figures in terms of the GVA per filled job and Members were referred to a further graph showing this trend over time from 2002 to 2017, with the projection of trend up to 2020 also shown.  It was noted that the GVA per filled job reflected the quality of job and while the figure for County Durham was below the national average it was rising. 

The Committee were informed as regards business survival rates for the County and noted that over the last five years there had been an average of 1,700 new businesses created each year, with an average of around 1,300 businesses failing each year, with 1,510 failing in 2017.  The Chair, CDEP noted that this represented a large churn of businesses and there was a challenge in being able to help support and extend the life of businesses.  It was added that three-year survival rates had increased since 2010, though there was approximately a one in two chance of a business failing in the first three years.  Members noted it was how support to businesses in those initial stages was important in being able to maintain and sustain those businesses.  The Chair, CDEP noted the work of Business Durham in terms of such support and noted that a large proportion of the programmes were EU funded.

Councillors noted that addressing mental health issues in small and medium sized enterprises (SMEs) was seen as being an important step to help with productivity.  The Chair, CDEP explained that around 97 percent of businesses had less than 50 employees and therefore did not have the large human resources structures in place that could help deal with such issues.  It was added that there was a need to address the issue, remove the stigma attached to mental health issues, and to identify where there was risk.  Members noted that the Director of Public Health, Amanda Healy, was working with the CDEP in this regard, with a specific role grant funded for this year.

The Chair, CDEP noted a restructure of the CDEP Board, with a portfolio approach aligned with the National Industrial Strategy (NIS).  It was explained that there were six portfolios linked to the six pillars of the NIS; Resources; Business Competitiveness; Ideas and Innovation; Infrastructure; Inclusive Growth; and People.  It was added that there were also three cross-cutting portfolios: Public Sector; Voluntary Sector; and Business.  The Chair noted that the Council’s Corporate Director of Regeneration and Local Services, Ian Thompson was a non-portfolio Board Member.

The Committee noted that in terms of challenges ahead, there was the uncertainty around Brexit, with estimates showing that a no-deal was likely to have a greater negative economic impact on the North East than any other part of the UK and that it would be a major long-term impact.  The Chair, CDEP added that current uncertainty was also impacting, he noted anecdotal evidence that EU companies were working on a no-deal scenario and therefore their planning and investment would be on this basis.

He added that another issue was a low level of research and development (R&D) spend and also that businesses may not be equipped to face the impact of artificial intelligence.

The Chair, CDEP noted that challenges ahead included issues such as spend within higher education institutions and business, noting a substantially lower spend in the North East compared to other areas such as the East Midlands.  He added that looking Innovate UK funding by location within the County, there was spikes within NETPark, Durham City and Newton Aycliffe, a high concentration geographically.

Councillors were informed that the UK Shared Prosperity Fund (SPF) was intended to at least match the €13 Billion that the UK regions would have received under the next EU Programme.  The Chair, CDEP noted that Leaders of less-developed regions, including Councillor S Henig as Leader of Durham County Council (DCC), had wrote a letter to the Minister to urge Government to bring forward the plans in terms of matching EU funding and bring forward long overdue consultation on the matter.

Members were reminded of the partnership approach undertaken with a continuation of place-based investment, human capital and business growth.  It was explained that the CDEP was working to: continue to understand and tackle barriers to investment; continue to respond to change and effectively collaborate; and to promote Durham as an area to do business and play to our strengths.  The Chair, CDEP noted the continued delivery in terms of sites such as NETPark, Forrest Park, Aykley Heads and Integra 61.  He added as regards business growth and the investment that had been made at Spectrum in Seaham and the work in terms of people, skills and growth, including DurhamWorks, Skills Support for the Unemployed and Department for Work and Pensions (DWP) Support.  The Chair, CDEP concluded by noting the “Durham, Powered By People” brand was important in helping bring people into Durham to invest and work and build their businesses, with partners including: DCC; Business Durham; Durham University; North East Local Enterprise Partnership (NELEP); North East Chamber of Commerce; and Federation of Small Businesses (FSB).

The Chair thanked the Chair, CDEP for his update and asked Members for their questions and comments.

Councillor E Adam thanked the Chair, CDEP for his presentation and noted some good news, some uncertainty and many positives.  He asked as regards business survival rates, noting his concern at the number of failures, in terms of: were figures since 2010 as regards new businesses and was the annual figure always net positive; and how much help and support was given to those businesses that were failing.

Councillor R Crute left the meeting at 9.55am

The Chair, CDEP noted that the figure for new businesses up to July 2018 was 2,240.  He added that year on year figures varied, and that 2018 had lost ground, being 105 fewer businesses that 2017, however, there was an on average increase in the number of businesses.  In relation to business support he noted the excellent work of Business Durham and the facilities at Salvus House, Aykley Heads, with the Durham City Incubator, in partnership with Durham University and New College Durham, with a variety of businesses being offered support and mentoring.  He added the mentoring was an important factor and should be encourage as there was not an associated cost other than people’s time.  Councillor E Adam asked whether mentoring was enough.  The Chair, CDEP noted that unfortunately some businesses would fail, for a variety of reasons, and that it was important to push the numbers of those surviving through a mix of activities and to ensure when EU projects come to an end that the support does not just stop.

Councillor R Ormerod agreed with the shift to “better jobs”, however, asked how this would be achieved, noting that inevitably some jobs would not be high paid.  He asked what the Council could actually do in improving the job quality offer.  The Chair, CDEP noted that there was renumeration as an element, however, empowerment within a job was also important.  He added that if there was no scope for creativity or innovation then this could be an issue.  He referred to “The Deal”, a scheme developed by Wigan Council as a model for new structures.  The Chair, CDEP explained that in creating new high-level jobs, lower-level jobs should not be forgotten and indeed that the high-level jobs can often lead to those other jobs within supply chains.

Councillor E Scott noted that if jobs were not fulfilling, within which sectors were these new high-level jobs being created.  The Chair, CDEP noted this was not clear and added that there were very few large employers within County Durham, with 88 percent of jobs being within microbusinesses which varied widely from town centre traders to high-tech start-ups.  Councillor E Scott asked if anyone had the information as regards this.  The Chair, CDEP noted that it may be possible to look at the details in terms of spend.

Mrs R Morris asked as regards the 74.4 percent employment rate and whether this was for the end of the quarter in December 2018.  The Chair, CDEP confirmed this was the case. 

Mrs R Morris asked if the figure in June would be different, given information from the NELEP noting a worrying drop in the region and was the County outperforming the region.  The Chair, CDEP noted that County Durham was performing better than the region and quarter one statistics followed this trend.  Mrs R Morris noted interest in the latest figures and asked as regards workforce, human growth and future jobs.  She explained she was not sure she bought into “better jobs”, rather she felt that listening to industry to find out what skills they needed to fill jobs was important, having a skills base which she felt was not there in the County.  She added that she felt that a good economic strategy was a good education strategy, looking to help train young people and retrain those over the age of 50 linking businesses, skills and education together, especially in the science, technology, engineering and mathematics (STEM) fields.

The Chair, CDEP noted the excellent FE College in Durham, New College Durham, with the work of the Principal, John Widdowson and his staff, including Dawn Fairlamb, Vice Principal – Economic Development and Student Progression.  He added that the Vice-Principal was on the CDEP Board and was Portfolio Holder for People.  He explained that careers advice in schools was under stress, central funding having disappeared, and school’s own budgets being squeezed.  He noted that it was an issue and that in the past business leaders had been encouraged to come into schools.  He noted that an issue in terms of mentoring was being able to find time within the school timetable.

Councillor P Howell asked for clarification in terms of the base regarding employment.  He referred to the map which showed deprivation, the information being old, from 2015.  He noted the map within the presentation showed high deprivation in Newton Aycliffe, however, there was the large industrial estate and a number of skilled jobs.  He emphasised we needed up to date information in order to see what initiatives we needed.  Councillor P Howell noted he was disturbed by the widening GVA gap between the County and both the regional and national figures.  He added that he was worried in terms of the business survival rate, albeit being better than the UK average, and would welcome initiatives in this regard.  The Chair, CDEP agreed as regards support for new businesses and reiterated that there had been no new data as regards deprivation, and no indication of any new data coming forward.  He added that while this was employment deprivation, other measures of deprivation were similar and information on these could be found at the durhaminsight.co.uk website.

Councillor J Atkinson noted the 1,300 business failures and asked what processes were in place to ensure that those business start-ups were realistic and viable, what advice is given in this regard.  The Chair, CDEP note that in was inevitable that some businesses would fail, and that businesses would be offered help as previously mentioned.

Councillor J Maitland asked as regards the measure relating to GVA, with the data being reported upon from 2017, she asked if we had received 2018 data yet, given it was now 2019.  The Chair, CDEP noted that the 2017 data was the most up-to-date available from the Office for National Statistics (ONS).  He added there was always a fluctuation in terms of numbers and that the CDEP looked at confidence intervals to ascertain where actual trends were occurring.

Councillor S Dunn reiterated a point he had made at a previous meeting in respect of being able to understand the number and types of jobs, and the number of people having multiple part-time jobs as this implied the statistics were skewed and multiple part-time jobs were not likely to be “better jobs”.  He added that if there was not up-to-date statistics gathered nationally in terms of deprivation, would it be possible to look to evaluate this for the County ourselves to see which of our communities need help the most. 

Councillor S Dunn noted the comparison with the East Midlands and looked at the investment strategy the Council was undertaking, in terms of Salvus House, Jade Industrial Park; NETPark, Integra 61 and Aykley Heads.  He noted that he felt the strategy was correct, looking to invest now to be ready for those better-quality jobs in the medium and longer term.  Councillor S Dunn noted concern in terms of the EU funding that would be lost and the impact this could have in terms of the large number of microbusiness in the County.  He noted the prospect of “no-deal Brexit” and that Government had not yet guaranteed that the SPF would be allocated by deprivation and felt that without up-to-date deprivation statistics, Government may say it was not possible to use this as a criterion.  The Chairman, CDEP noted durhaminsight.co.uk used the ONS data mentioned and noted he felt all the points raised were valid ones.  The Chair agreed that a lot would depend upon how the SPF was allocated.

Resolved:  

That the report and presentation be noted.