Business members ready to walk out of LEPs

Local enterprise partnerships (Leps) epitomise the government’s approach to economic development – business itself tasked with finding ways to spur the private sector renaissance. However, recent research conducted by The Work Foundation shows that many business members of Lep boards are frustrated at the lack of progress to date and are considering terminating their involvement if the government fails to back Leps with greater power and resources.

This would have significant implications for the thirty-nine Lep areas in England. The country as a whole recently returned to growth, but it is likely that some parts are not growing (we don’t know the regional breakdown yet – the Office of National Statistics releases regional accounts some time after the national accounts). Moreover, some areas will find it hard to adjust to the effects of public sector spending cuts; in many regions outside London the majority of growth during the boom years was accounted for by increased public sector spending. It is therefore vital that effective institutions are in place to support jobs growth in the regions. As heard from the lips of many a disgruntled economic development practitioner, Leps are the only game in town, and it is important that they succeed.

Another key finding from our research is that Leps are struggling to recruit small business to their boards in sufficient numbers. We found that almost two thirds of businesses on Lep boards were large businesses – employing over 250 people. These businesses are important, and many are in fact ‘anchor institutions’ – businesses of huge importance to the region that have a significant effect on the local economy. Leps must of course involve these businesses. However, it is also very important for small businesses to be represented on Lep boards – for at least three reasons.

First, Lep boards should represent all types of businesses. This includes any important local sectors, as well as businesses of different sizes, since all these businesses have different needs. And it’s worth noting that in all areas, small or medium sized businesses are responsible for the majority of employment.

Second, Leps need new ideas and new ways of thinking. They are faced with the tremendously difficult task of encouraging private sector growth during the worst recession in a century. Moreover, they have very few resources at their disposal. They must think creatively. The problem with many large businesses is that they are ‘familiar faces’ (in the words of one business person we interviewed), and have sat on numerous public-private sector boards in the past. Old ways of working don’t apply now, and Leps must ensure they have access to the widest possible pool of ideas.

Thirdly, many Lep activities rely on using the business networks of the business board members themselves. Leps must have well-networked small businesses on their boards so that their projects, ideas and initiatives can be dispersed among as wide a group of local businesses as possible.

It is not easy to encourage more small business owners to get involved. Many simply cannot afford to give up their time, whereas we found that members from large businesses generally have supportive employers who actively encourage participation. One solution, if slightly crude, would be for Leps to compensate small business owners for their time. At present, business members of Lep boards are not paid for their involvement, which means the only businesses that get involved are those that can afford to. If cost is an obstacle for a business, Leps might consider using some of their recently acquired £250,000 p.a. running costs for this purpose.

The government’s business-centred approach to economic development is therefore not without its problems – sustaining business interest and ensuring all businesses are represented are just two issues we identified. In theory Leps are a good idea, but it is essential that government now puts its weight behind them so that they can get to work on the very difficult task they have been set.