DEPARMENT OF TRADE AND INDUSTRY

NEIGHBOURHOOD RENEWAL IMPLEMENTATION STRATEGY

Foreword by The Rt Hon Patricia Hewitt MP

Secretary of State for Trade and Industry

DTI are proud to be working at the heart of the National Strategy for Neighbourhood Renewal.  This 10-20 year programme to turn round our most disadvantaged neighbourhoods is the largest and most ambitious exercise in joined up Government yet attempted. Unlike previous failed attempts, this exercise is long term, and is focussed on people. Most importantly, for the first time it recognises the key importance of economic regeneration. We can only have sustainable renewal if it is based on rebuilding the local economies on which neighbourhoods depend for jobs and prosperity.

Over the last two years DTI have been taking forward the enterprise component of the National Strategy.  We have established the Small Business Service with the mission of making the UK the best place to start and grow a business by 2005. Unlike its predecessors, the SBS has a specific remit to encourage enterprise in disadvantaged neighbourhoods. We have set up and then more than trebled the size of the Phoenix Fund.  This phenomenally successful venture to encourage innovative forms of business support for socially disadvantaged entrepreneurs has been 6 times over-subscribed, despite funding 115 projects worth  £40m to date.  We have put in place a new Social Enterprise Unit to champion this sector, which has huge potential to deliver quality services whilst re-engaging local people in valuable social and economic activity.   We are encouraging businesses to appreciate the business case for investment and to mobilise corporate social responsibility.

Today we are publishing our strategy for building on these activities. With it we have set ourselves the demanding target of closing the business start up gap between our most and least disadvantaged neighbourhoods, initially by a percentage point each year until 2005.  To meet it we will continue to work and mobilise support across the public and private sectors.

Whilst our strategy is focussed on enterprise, do not overlook the other contributions that DTI makes to social inclusion. Our support for the Citizens’ Advice Bureaux movement, our work on fuel poverty, the drive to modernise the Post Office network whilst retaining a viable network in disadvantaged neighbourhoods, setting up Universal Banking Services and tackling over indebtedness and loan sharks - where we work with other government departments and the private sector where appropriate – all have a distinct impact on social inclusion.

In the modern world economic and social issues are different sides of the same coin.  Our competitiveness as a nation depends on our ability to make the most telling use of all our people.   DTI will continue to work for this.

Patricia Hewitt

21 December 2001

What are the problems?

1.  People living in disadvantaged neighbourhoods want better access to good jobs, products and services, together with a higher standard of living.  Enterprise in or near to these neighbourhoods can help generate these. But generally fewer people living in disadvantaged neighbourhoods run enterprises and fewer enterprises operate in the vicinity.

2.  Moreover many of the problems in the neighbourhoods have been caused or made worse by the decline of the local economy. Long term lasting regeneration will only occur where local economies can be put into good health. This depends on new local enterprises being set up and existing enterprises making investments in the vicinity based on competitive advantage. This cannot happen in a vacuum.  Enterprise cannot thrive in areas where people have inadequate education and skills, where people are distracted by high levels of crime, or where people do not want to live because housing or other services are inadequate.  Successful regeneration requires a concerted attack on all these issues, locally led so that it meets the needs of local people and conditions. This is being done through the National Strategy for Neighbourhood Renewal, towards which this DTI strategy contributes.

3.  Enterprises are not started by Government, but by individuals who wish to build their own future and have a vision for a product or service that customers will want and be able to buy.  Successful entrepreneurs have to have the skills, aptitudes and confidence to deliver this, together with access to finance, business support and markets. People living in disadvantaged neighbourhoods find it harder to access finance and business support, have less prosperous local markets and are more likely to lack skills and confidence. Existing firms often perceive insufficient potential to justify investment locally.

What is the role of the Department of Trade and Industry in Neighbourhood Renewal?

4.  Government policy is to encourage everyone who so wishes to set up and run successful businesses, regardless of where they live or their social background. As part of this, DTI is working to reduce the barriers that people face in setting up or developing enterprises in disadvantaged neighbourhoods, such as those in the 88 local authority districts covered by the National Strategy for Neighbourhood Renewal. This includes social enterprises, which are businesses that primarily exist to deliver social objectives. DTI encourages business investment in disadvantaged areas. DTI also promotes corporate social responsibility, where activities of individual companies can contribute significantly to regeneration.

5.      DTI’s strategy is to build on these activities by:

·        championing social enterprise;

·        improving access to business finance;

·        encouraging better business support;

·        promoting business skills;

·        raising confidence;

·        encouraging people to move from benefit to enterprise;

·        widening markets for local enterprises;

·        enhancing the competitive advantage of disadvantaged neighbourhoods;.

·        targeting corporate social responsibility.

These should encourage more local people to set up and develop businesses and existing businesses to invest in the vicinity. Whilst some of this involves enhanced delivery of DTI services, much of it will require joined up working across the public sector and with business.

What are DTI’s targets?

6.  DTI has a public service agreement target to generate more sustainable enterprise in the 20% most disadvantaged local authority wards, 69% of which are in the 88 local authorities covered by the National Strategy for Neighbourhood Renewal. Also relevant is DTI’s target to improve the economic performance of each region, measured by the trend growth in each region’s Gross Domestic Product per head. DTI will measure its progress in promoting enterprise in disadvantaged neighbourhoods by measuring the gap in business start up rates (measured by VAT registrations) between the most and least 20% disadvantaged wards. This is currently 35%. DTI’s initial target is to reduce the gap by a percentage point each year until 2005.  This is 5 times the current trend rate.

7.  To enable all the various parties to Neighbourhood Renewal to focus on this target and to measure progress locally, SBS will be publishing (on www sbs.gov.uk) data for each of the 88 local authority districts, disaggregated to ward level. This will be updated annually as data becomes available from the Office of National Statistics.  SBS will also be commissioning triennial surveys of business attitudes. This is being used to set longer term targets to increase the proportion of local people involved in enterprise (reducing the shortfall compared with the least disadvantaged wards, currently 22%, by a quarter by 2005), or considering setting up their own business in the next 2 years (currently 7% to increase to 10% by 2005).

What has DTI done so far? What more is it planning to do?

Setting the right delivery framework

8.  DTI works across Government to help develop a climate in which business can thrive. For example it works with the fiscal departments to develop a business friendly tax system, and with regulatory departments to minimise regulatory burdens on business. DTI has various schemes to encourage enterprise, investment and innovation, which are available to firms throughout the country including the 88 local authority districts. (see www.dti.gov.uk for details).  The structure and support offered by DTI is currently being rationalised to make them more accessible to business.   

9.  To champion enterprise the Government has set up the Small Business Service, an agency of DTI. The mission of the SBS is to make the UK the best place to start and grow a business by 2005. Unlike its predecessors, it has a core objective to champion the importance of entrepreneurship across society, particularly in under-represented and disadvantaged groups. It operates the £96m Phoenix Fund designed to encourage enterprise among disadvantaged or under represented groups, including those living in disadvantaged neighbourhoods.  It does this by supporting innovative projects designed to give enhanced access to business support and finance and subsequently evaluating them and disseminating good practice thus identified.  Over 80% of the projects funded to date from the Phoenix Fund operate in the 88 local authority districts. Details of SBS activities can be found on www.sbs.gov.uk.

10.  The Small Business Service has set up a national network that offers access to business advice through 45 local Business Links.  These are independent organisations, with a significant degree of autonomy, so that their operations can reflect widely varying local economic circumstances.  However, their performance against contract is reviewed by SBS Regional Staff, whilst their services are subject to quality assurance.

11. In agreeing resources for Business Link Operators, SBS makes allocations based on: the number of  businesses in the area (and therefore have most demand); the level of  deprivation (as measured by the number of 20% most disadvantaged wards they contain); and the level of  enterprise in the area (which need stimulation). For 2001-2002 the allocations made on these basis were £100m, £15m and £15m respectively.   

12. Each Business link is expected to:

• know about the demography of their area, to ensure that they can target all groups within it including those which are disadvantaged;
• ensure they know local entrepreneurs and are known by other business support players;
• be involved with local players active in regeneration such as Local Strategic Partnerships and those providing business support at a community level;
• know about good practice in reaching and helping businesses in socially excluded communities and be prepared to share it with others;
• be aware of all the financial and other resources available in an area; and
• be prepared to explore creative and innovative approaches to business support, such as outreach to disadvantaged communities and groups or activities focused on activities aimed at business segments relevant to disadvantaged neighbourhoods such as small retailers or social enterprises.

13.  The Government has also set up Regional Development Agencies (RDAs). These non-departmental public bodies have been designed to join up the economically focused regional activities of Government departments including DTI within a regional strategic framework. They have statutory duties to further economic development and regeneration; promote business efficiency, investment and competitiveness; enhance the development and application of business skills; and contribute to sustainable national development.  Like Business Links they have a great deal of autonomy so that their activities can meet widely varying economic circumstances. From April 2002 they are being given a single programme of funding to pursue their duties.

14. RDAs will be expected to support activities including regeneration, urban and rural issues, physical development, employment, skills, productivity, enterprise, investment and innovation.  All these contribute to their over-arching target of improving their region’s economic performance. They operate through partnerships with national, regional and local organisations. Some 30% of the 2002-2003 allocation of £1.5bn to RDAs has been allocated on the basis of disadvantage.

15. The Government Offices are responsible for implementing and communicating government policy in the regions. Their strong links with local authorities and sub-regional partners mean that they are well placed to influence a wide range of policies and provide information about how they are working on the ground. They deal with many issues that are important to business including:

• physical planning;
• transport infrastructure and planning;
• crime reduction;
• education and skills;
• the management of European structural funds;
• environmental issues and sustainability; and
• neighbourhood renewal, which is of particular significance in that it provides a focus for pulling all these elements together at local level.

16. The GOs are responsible for the co-ordination and implementation of neighbourhood renewal policies in their region. They encourage business engagement with local strategic partnerships, so that enterprise and business issues are reflected in neighbourhood renewal strategies and community plans. GOs also provide background and advice on the DTI initiatives mentioned in this paper.  As a result, the local business community can ensure that their local business environment fosters business start-ups and growth. This will help achieve DTI’s targets for establishing new enterprises in deprived areas.

17. DTI launched its new Social Enterprise Unit in October 2001.  Its remit is to promote understanding of social enterprise across Whitehall and beyond, help with the co-ordination and dissemination of information and best practice, and act as a champion for the sector. A number of Working Groups, primarily composed of practitioners and other key stakeholders, are currently examining a range of issues including legal and regulatory frameworks; mapping and research; training and business support; finance and funding; promotion; impact assessment and evaluation; replicable good practice; and public procurement.  They will report to Ministers early in 2002 and their recommendations for action will help shape the Unit’s targets and long term strategy.

Championing social enterprise

18. At the heart of neighbourhood renewal is the need to improve public services in disadvantaged neighbourhoods. Social Enterprise can unleash the entrepreneurial talents of public service workers, enabling them to deliver local services that are more responsive to local needs. DTI and DTLR have a common interest here. Already, there are many examples of social enterprises successfully delivering a range of public services, from leisure to childcare, from recycling to house maintenance.  

19. As the Inner City 100 survey showed, social enterprises are likely to constitute around 10% of the fastest growing businesses in those areas.  Through their economic activity, social enterprises contribute to wealth and job creation. They can provide sustainable jobs and help long term or hard to place individuals back into work. They offer accessible opportunities for people to develop confidence and skills as well. They are close to their customers and provide locally rooted role models for business and personal success. They can improve life by providing goods and services not otherwise available. They show that a flexible, innovative approach can create new and sustainable markets in trading environments not conducive to mainstream businesses.  Social enterprises can make a direct contribution to neighbourhood renewal through their focus on the economy – on business solutions to social problems.

20. DTI’s Social Enterprise Unit’s work will enable more and better social enterprises to start, be sustained and develop. The unit is already working with Jaguar Cars and Business in the Community on a scheme to match 1000 social enterprise to business managers, who will act as mentors. Business link services are already available to social enterprises. SBS is working with Business Links to encourage them to develop a better understanding of social enterprise and to reach out to them.

Improving access to business finance

21. People living in disadvantaged neighbourhoods often find it harder to obtain finance for good business ideas.  SBS is working closely with HM Treasury and private sector business fund providers to improve this. Support from the Phoenix Fund is currently being given to 15 community development finance initiatives, which provide alternative sources of funding. Part of this is in the form of loan guarantees to encourage private sector investment. The results of an additional funding round worth up to £15m will be announced in February 2002. SBS and Treasury are working on a training and development package for community development finance initiatives, and are encouraging the setting up of a trade association to foster the spread of good practice, including that identified through the Phoenix Fund supported projects.

22. SBS will be working closely with HM Treasury, Inland Revenue and private sector sources of business funds, to implement the recommendations of the Social Investment Task Force for a Community Development Venture Fund and Community Investment Tax Credits.  The Phoenix Fund has set aside  funds to match  private sector contributions to the former, which will support firms operating in disadvantaged areas. It is planned to have the fund up and running by April 2002, subject to State Aids Clearance by the European Commission. The latter, also subject to state aids clearance, is designed to encourage private sector funding in community development finance initiatives. Legislation for this is planned in the Finance Bill 2002.

Encouraging better business support.

23. Entrepreneurs everywhere need help to address some of the problems they face in setting up and growing their enterprises.  Enterprise support is provided by a plethora of private and public sector organisations. However, the availability of this can be patchy, and entrepreneurs may be unable to judge where best to go for assistance. These problems are frequently worse in disadvantaged neighbourhoods, where market incentives tend to be lower and clients have specific and widely differing needs. SBS is working to address this, both directly and by encouraging other business support organisations to become more fully involved.

24. Business Links help by providing unbiased advice. As announced by the Chancellor of the Exchequer on 23 June 2000, they provide a start up package worth up to £2000 in areas of high unemployment such as disadvantaged neighbourhoods and up to £500 elsewhere.

25. Much needs to be done to identify good practice in providing the most suitable forms of business support, so that business support providers including the Business Links can put appropriate specific arrangements in place. The Phoenix Fund has a development fund to encourage innovative projects aimed at reaching and helping different groups of people, whose needs and attitudes to enterprise vary widely. So far it has supported 96 projects in a wide range of geographical locations, and with targets including black and minority ethnic groups, older people, people with disabilities, women, and people from communities experiencing large scale industrial retrenchment.  Each of these projects will be thoroughly evaluated and the lessons widely disseminated to business support providers and those involved in regeneration, including local strategic partnerships.

26. People with no previous experience of business often welcome an experienced mentor to help them. These are in short supply in disadvantaged neighbourhoods.  The SBS has piloted a scheme of volunteer business mentors, funded by the Phoenix Fund. Following successful evaluation, this has now been rolled out nationally, and is available through Business Links. 

Promoting business skills

27. People in deprived neighbourhoods often lack some of the skills needed by successful businesses. Enterprises can receive help with a wide range of business training through Business Links. These also work with local Learning and Skills Councils, to ensure that appropriate training in skills needed locally is available. 

28. Nationally, SBS is working with DfES and others to take forward the Performance and Innovation Unit’s recommended national strategy for work force development, with a top priority that all workers should have at least basic skills and a long-term objective of all workers having access to at least level 2 skills. It is working also with DfES on Investors in People, with UfI (a “university for industry”) to ensure that its programmes and policies meet the needs of business, and with the new Sector Skills Councils and Sector Skills Development Agency to develop appropriate skills.

Raising confidence

29. Individuals will not start enterprises unless they believe they can succeed. SBS and the Treasury are supporting the Inner City 100, a showcase of the fastest growing 100 enterprises in disadvantaged inner cities. These successful enterprises can act as role models, encourage inner city investment and highlight opportunities for local people.  The first awards were announced on 27 November 2001, and included 7 social enterprises among the winners.

30. Nationally, SBS is seeking to promote a more entrepreneurial culture by supporting initiatives such as Enterprise Insight, which seeks to develop a more positive image of entrepreneurship among young people.  It is working with DfES on the national curriculum proposals to encourage young people to be entrepreneurial. Teachers and career guidance staff are being encouraged to be aware of the opportunities which enterprise presents, and every teacher is being asked to take opportunities for contact and interchange with business.  

31. In conjunction with the Prison Service, SBS have a Phoenix Fund supported project to encourage offenders to consider legitimate enterprise after they are discharged. SBS plan to develop this further with the Prison Service and the Home Office.

Encouraging people to move from benefit to enterprise

32. Many people on benefit fear they will be worse off if they become self-employed. DTI is working with DWP and other Departments on welfare to work and regeneration issues. SBS is already supporting through the Phoenix Fund a project to investigate bridging this gap with the local benefits agency.  SBS are similarly using the Phoenix Fund to support a project seeking to encourage people to move from the black to the formal economy. This is being run in conjunction locally with Inland Revenue, HM Customs and Excise and the Benefits Agency.

Widening markets for local enterprises

33. Local markets may not be able to generate enough sales to sustain enterprises in disadvantaged neighbourhoods. Business Links can provide help with tackling wider markets. They also help enterprises with access to public procurement (in conjunction with RDAs), exporting (as part of UK Trade & Investment-jointly run by DTI and the Foreign and Commonwealth Office) and using e-commerce (as part of UK online for business). DTI has allocated £30m to RDAs to encourage innovative schemes to extend broadband networks and encourage their use, predominately to overcome social exclusion. 

Enhancing the competitive advantage of neighbourhoods

34. Businesses can fail to appreciate the opportunities available in disadvantaged neighbourhoods.  City Growth Strategies, being developed by SBS and Treasury, are being piloted. These are business led approaches to regeneration, based on a thorough examination of the strengths (such as the potential size of local markets) and weaknesses of the selected cities. Expressions of interest have been invited through the RDAs for funding the underlying research. Again the results of these will be widely disseminated.

35. DTI offers selective financial assistance to companies wishing to make capital investment in designated assisted areas that have been selected because they offer a balance of disadvantage and investment opportunity.  Smaller companies are eligible for enterprise grants that cover applications up to £75k, and offers simplified application procedures together with a wider geographical coverage. Regional Selective Assistance covers applications for over £75k, and has a narrower geographical coverage. 

Targeting corporate social responsibility

36. The corporate social responsibility activities of companies are wide ranging, but can often help neighbourhood renewal. DTI has a Corporate Responsibility Minister, to encourage companies to do more. Much of this involves working with business representational organisations including Business in the Community, whilst co-ordinating government activity across Departments. An annual report is published on his activities.  These are currently improving the understanding of the business case for corporate social responsibility; identifying and celebrating good practice and disseminating this; assisting in the development of international codes of practice; and working for a productive regulatory and fiscal framework. In all of this Government helps lead debate, but seeks to strike the right balance between volunteerism and regulation. Further details can be found on www.societyandbusiness.gov.uk.

37. DTI is compiling a database of high profile UK exemplars of good corporate social responsibility practice, and is working with Business in the Community to draw on US experience. Further activities will also be encouraged by the City Growth strategies and the Community Investment Tax Credits.

38. DTI is working with the Home Office and the Neighbourhood Renewal Unit to pilot business brokers.  Businesses are often keen to be involved in neighbourhood renewal, and particularly in the economic aspects of it, but are discouraged by frequent and uncoordinated appeals for philanthropy. The business brokers will match calls on corporate social responsibility to likely companies in 9 neighbourhood renewal districts. This programme will be run by Business in the Community and British Chambers of Commerce.

Monitoring progress

39. Each Summer SBS publishes an annual report to Ministers, which will contain an overview of performance against targets. SBS Regional Directors will be monitoring the progress of Business Links. They will also measure the footfall through these, to ensure that it reflects the social make up of the Business Link area. They will investigate shortfalls and encourage remedial action where appropriate. These Directors are being co-located with RDAs and will share information with them during regular progress meetings.

40. RDAs have been set a suite of 11 agreed targets as part of the single finance programme. They will be judged on the performance of all of these as a whole. RDAs corporate plans have to be approved by Ministers. They must address the agreed targets, and will have three tiers covering objectives, outcome targets (longer term), and milestones (outputs). Annex A lists these. Progress towards these will be monitored by the appropriate Departments, and failure to meet them may affect future funding allocations. RDAs must have monitoring and evaluation arrangements in place by April 2002. After this, they will be required to report progress on Tier 3 outputs quarterly and Tier 2 outcomes annually. The single programme of funding will also be evaluated biennially.

41. RDAs are being required to  collaborate with the SBS and the local Business Link Operators on plans to meet the enterprise target for disadvantaged neighbourhoods in their region. The Government Offices have been tasked with assessing the performance of the main players in their regions including the RDAs.

Staying on track

42. This strategy necessarily carries risk because the disparities in enterprise levels are entrenched and culturally and historically driven, and subject to considerable geographical and social variation. Moreover the target is challenging, and the institutions faced with this task are new. There is little corpus of recognised good practice, and the level of resources necessary to make appropriate progress is currently unknown. These problems may be exacerbated by economic downturn, the local impact of which is unpredictable. Close monitoring and promulgation of good practice are the keys to managing these risks.

43. The Phoenix Fund has an important role here, in identifying and costing good practice, disseminating it to Business Links, RDAs, Local Strategic Partnerships and other business intermediaries, and raising understanding of the differing barriers which the various groups of entrepreneurs face.  SBS will also be working to raise the capacity of Business Links to deal more effectively with entrepreneurs from disadvantaged backgrounds and social enterprises. The RDAs have set up a group to exchange good practice in the area of social exclusion. Members of the Phoenix Fund Project Board will attend as necessary to help share good practice.

44.       DTI will continuously review the effectiveness of this strategy, taking action where necessary to enhance the delivery of services.

Annex A

RDA Targets and Milestones