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Lord Sainsbury of Turville
Greater Peterborough Environmental Cluster Launch
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Ladies and Gentlemen, I am delighted to be here this morning at the launch of the Greater Peterborough Environment Cluster. I am particularly pleased as business clusters and the environment are two subjects of great importance. Another issue of importance – science & technology contribution to environment.
It was back in 1998 that the DTI's Competitiveness White Paper first highlighted the potential contribution that clusters can make to the competitive advantage of specific regions and locations. It was decided that a change of gear was needed in the Government's approach to clusters policy and I was therefore asked to set up a high-level Clusters Policy Steering Group to identify barriers to the development and growth of clusters and to recommend appropriate new policy initiatives.
Clusters are extremely important for the UK's economic development. Research has shown that the concentration of companies and institutions operating in a particular field aids the growth of the organisations which are within them. And clusters are particularly important in knowledge-based high-tech sectors - as seen here today with a cluster centred around environmental technologies - because the type of knowledge that creates competitive advantage often requires proximity in order to be effectively communicated.
Clusters can raise innovation and productivity in a number of ways:
- companies benefit from sharing knowledge about best practice;
- they can reduce costs by jointly sourcing services and suppliers;
- the interactions within clusters facilitate knowledge transfer and encourage the formation and efficiency of collaboration between institutions with complementary assets and skills; and
- the critical mass effect of clusters attracts further companies, investors, services and suppliers into the cluster as well as creating a pool of skilled labour.
But, of course, it is not the Government's role to create clusters - they must be business-driven and, they can, and do, develop due to a variety of reasons - specialised demand, historical accident or the prior existence of related industries or institutions. Clusters arise from making the most of synergies across and between companies and academic and research institutes.
However, it is the role of Government to create the conditions to encourage the formation and growth of clusters, and we can ensure that national and regional priorities do not inadvertently place barriers to cluster development, and ensure that research and innovation support programmes building on existing strengths so as to work with the grain of cluster development.
Which is why we already done much to support cluster development. My Clusters Policy Steering Group has now looked at the role of incubation, planning, funding and finance issues, the role of the RDAs and the relationship between clusters and universities, and new policy initiatives have arisen as a result. And in February 2001 we published the Trends Business Report "UK Business Clusters: A first Assessment", which represents the first UK-wide systematic study of existing clusters. And we also introduced the £150m Regional Innovation Funds, 50m a year over 3 years to be used by RDAs to support clusters and networks of businesses.
We have asked the RDAs to produce documents drawing on their regional strategies and using information such as the Clusters Mapping Report to identify further potential centres of growth. These documents have now been produced and will be developed into the next versions of the RDAs' Regional Economic Strategies. In addition, the Corporate Plans being developed by the RDAs will include a focus on the growth of clusters, and how to remove barriers to their development and growth.
It is particularly crucial where industry is relatively immature, but where there is huge growth potential, as is the case in the environment industry, to establish effective and efficient linkages and I am therefore very encouraged by what has been achieved in Peterborough, and the opportunities that have been highlighted. The work by the UK Centre for Economic and Environmental Development (UK CEED) has shown that the environment sector in Greater Peterborough plays a significant role in the area's economy, with a turnover of approximately £340m and with over 3% of the working population employed in the sector.
And, very importantly, there are also a wide range of other environmentally focused clusters and initiatives across the region:
- the East of England Energy Group which provides substantial support to the traditional offshore oil and gas industries based on Great Yarmouth and Lowestoft and the emerging markets and technologies for sustainable energy;
- the Cambridge Environment Knowledge cluster - an emerging cluster seeking to build upon the world-class environmental knowledge base in Cambridge; and
- the environment knowledge base resident on some of the region's universities particularly the University of East Anglia's world reputation in the field of climate change. I have found through my study of clusters that it is often crucial for the development of a cluster to have world-class science to hand.
I think it is vital that all of these initiatives should work together to form a network - pooling their mutual strengths and resources - to develop a framework in order to maximise the benefits of these linkages.
Because there are significant opportunities in the environment sector to drive economic prosperity, whilst at the same time providing environmental and social progress. The UK market for environmental services and technologies is estimated to grow from £16bn to over £20bn over the next 10 years. And world-wide the market is expected to grow from £345bn to £490bn over the same period. In order to exploit this growing demand, the UK needs to be among the front runners in this green industrial revolution, and the DTI has therefore set a target of increasing by 20% the UK share of world markets for environmental technologies and services. The potential market for services and goods is on the same scale as the world pharmaceutical industry which is why the Prime Minister said we must become a leader in the coming green industrial revolution.
In the past, companies have focused primarily on increasing labour productivity. We now need to give similar priority to improving resource productivity. It is good for the environment and is also makes good business sense. This is the goal of the DTI's Sustainable Development Strategy. And it is something the Performance and Innovation Unit looked at in their report to Government, "Making more with less".
The UK, like the rest of the world faces a massive challenge if it is to continue enjoying economic growth and development while protecting the environment.
Global pressures in resources and the environment are increasing and becoming more urgent. Global population is forecast to grow from 6 to 9 billion by 2050. And we are all aware of the urgent need to tackle climate change.
But sustainable development also makes good business sense - businesses that pursue environmentally sustainable business strategies can outperform those that do not. It is becoming more fundamental to business success. Some major businesses have already started to realise these gains - for example, over the last decade, Proctor and Gamble's eco-efficiency programme has saved the company around half a billion US dollars. And because the nature of the economy has changed so fundamentally in recent years innovation and new technology are pervasive. This is creating unprecedented opportunities to meet consumer's needs and aspirations with vastly reduced environmental impact. It is enabling companies to re-think the way they do business and to develop radical new products and service concepts.
And, here, the Government also has an important role to play. It has to create the conditions and deliver the support to help businesses reap the benefits. For example, the DTI/DEFRA Envirowise programme, which is enabling British business to achieve annual cost savings of £100 million through its advice on waste minimisation and reducing usage of raw materials. And we are also creating the right fiscal and regulatory framework. The Chancellor is using the tax system to reward resource productivity and penalise waste and pollution. The climate change levy is part of a long-term change in the fiscal framework to give business an incentive to cut energy use and switch to low carbon alternatives. The Green Fuel Challenge and Green Technology Challenge will provide further tax incentives for investments in leaner technologies and cleaner fuels.
And we are on course to launch the world's first economy-wide trading system in April. This will put the UK at the forefront of trading and could cut carbon by at least two million tonnes a year by 2010. And with 180 countries signed up to the Kyoto Protocol there is a huge potential marker overseas - a very real prize for countries and companies that get ahead of the game. That is why we have set up the Climate Change Projects Office to help British business take advantage of new opportunities and markets from low carbon technology. It is working alongside the Joint DTI/DEFRA Environmental Markets Unit which promotes and supports the environmental goods and services sector.
And we are already looking ahead and planning for the future. The DTI Innovation and Growth Team (IGT) on Environmental Services, which will run over the next few months and report its findings in the autumn, has been asked to identify new trends and emerging factors which impact on competitiveness within the environmental goods and services industry, and a set of actions to establish a future environmental industry in the UK that will maximise exploitation of opportunities globally. The IGT is reviewing existing environmental industry initiatives, examining the scope for new ones, and bringing influence to bear on policy and developments across a range of stakeholders in both public and private sectors, which might affect the industry's future growth. This will include identifying new opportunities that enhance the benefits on offer to consumers.
In the past, the UK has often missed opportunities in new industries. We are determined this does not happen again.
The DTI Sustainable Development Strategy sets out a pro-active approach to promoting resource productivity across the department's policies. The PIU Report on resource productivity develops this approach and takes it across Whitehall. DEFRA have lead responsibility for taking forward the report's recommendations but they will be working closely with the Treasury and the DTI. DTI will have a key role to play. Innovation will be crucial because it is through innovation that we raise productivity and competitiveness. And the changes we are making to the department following the DTI Review will enhance our ability to drive forward and deliver change. Experience has taught us that trying to protect the environment without innovation raises costs and harms the competitiveness. Innovation and technology need to become drivers of environmental protection. That is why we are fully integrating environment into our innovation strategy. It will enable us to engage actively in the aggressive promotion of resource productive innovation within government and throughout the economy.
The cluster of environment-related business and public agencies in Peterborough has the potential to create sustainable economic growth for the city which will benefit the whole of the UK. Technologies and techniques developed here could be applied across the world in the rapidly growing market for environmentally beneficial goods and services. Peterborough - and the UK - has the potential to become a world leader in this market. The government is committed to supporting these ambitions. This is an exciting initiative and I believe that it can make a great contribution to Peterborough, the environmental services industry and sustainability agenda.
(the following are available from the archive)