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Department of Trade and Industry

Rt. Hon. Stephen Byers - Former Secretary of State for Trade and Industry (Dec 1998 - Jun 2001)

LGA Economic Regeneration Conference


Tuesday, November 21, 2000

Other speeches

Liverpool is an appropriate setting for today's conference.

Just a few years ago who would have thought that they would be building Jaguars at Halewood. Or that the Port would be handling more tonnage than ever before in its history.

The key to this renewal is very much the theme of this conference.

The development we're seeing in Liverpool is the result of partnership.

Partnership between the private and public sector. Local government working with business and central government to make a difference.

Today I want to look at some of the challenges that we face in regenerating communities and regions. And at the role of government in driving forward a radical regional policy to tackle these.

This is a good time to consider these issues.

We are at a very significant stage in the economic development of the United Kingdom. Over 1.1 million more men and women are now in work than in 1997. Claimant unemployment is now at its lowest rate since October 1975.

Long term youth unemployment has halved in every region of our country.

Inflation is at its lowest level for thirty years.

And long term interest rates are around the lowest for thirty years.

Full employment is a realistic target. We have moved away from the old 'stop go'economy of the past.

And that means we have a once in a generation opportunity now that we have laid those foundations for economic stability. An opportunity to establish lasting economic success.

The task of Government is to ensure that success filters into all parts of the country.

History teaches us that greater prosperity does not automatically lead to greater sharing of wealth across regions, cities or communities.

Even where poverty is on the decrease as it is in the United Kingdom, there can be areas of deprivation where people are excluded from the benefits of that economic growth.

This is unfair and divisive. It also represents a huge waste of economic and human potential.

The issues are complex. Within each region we can often see prosperity alongside areas of poverty.

Different communities face different local problems. The challenges facing inner cities, our rural communities and areas of industrial decline are shared between regions and not exclusively within one or a number of regions.

We are tackling these problems through targeted schemes, to improve health, education, housing and employment in areas with particular need.

We are taking a co-ordinated approach. That's why last week John Prescott published an Urban White Paper which sets out a strategy for revitalising our cities and towns.

And why the Government will shortly be publishing a Rural White paper, setting out a comprehensive approach to tackling the challenges faced by rural communities across the country.

No two places are the same. There is no single solution that can be applied across the United Kingdom.

What we need therefore are policies which empower communities so they can determine their own future and co-ordinate action at the neighbourhood, local, regional and national level.

Finding local solutions to local problems is what we need to do. And that means focused support on the needs of communities. So within regions we have to adopt an approach that addresses the differences which exist.

But we need to look beyond these local problems and consider the broader regional picture.

To draw on regional strengths and tackle regional weaknesses.

I want to begin by acknowledging that the description "north-south divide" is an over simplification. We just need to look at Cornwall in the South West that has such a low level of GDP that it now qualifies for objective 1 funding. It clearly demonstrates that the "north-south divide" description is misleading.

But having said that, it is clear that there are disparities between regions.

Regional disparities are not new. Unemployment in the North East has been more than double that in the South East throughout most of the last century.

But in the modern economy we can not build a strong economy, a strong nation, if we have a tail of under performing regions. We need all our regions firing on all cylinders.

The needs of our regions cannot be ignored.

A strong economy of the United Kingdom is the sum of its parts. In order to enjoy increasing prosperity in our country we need strong economic growth in all our regions.

In the North East as well as the South East. In the East Midlands as well as the East of England.

In a speech last week I set out the case for a radical regional policy. One which not only tackles the historic regional disparities but which also responds to the challenges of the modern knowledge economy.

Too many areas are still underperforming. The existing disparities have serious economic cost implications which lead to disturbing social costs - poverty, crime, poor education, ill health and social exclusion.

Taking action to address the causes of this economic under-performance must be a top priority.

This is the only way to tackle the deep-seated disparities which exist.

Past policies have failed to resolve the underlying weakness and the least successful regions have failed to capitalise on their own strengths.

Looking at what we should do, I am clear we can't return to the failed approach to regional policy.

That of trying from Whitehall to identify regional winners or subsidise businesses which are failing. And we can't go back to the centralised planning approach which ended up stifling growth in successful regions.

These approaches have been tried and have not been successful which is one of the reasons why we have regional disparities today.

We should also reject the approach of the last Government: laissez faire indifference, making regional problems worse through neglect.

Standing to one side and letting the market dictate is not a role Government should play in the 21st century. We need an active Government which delivers on a new agenda for our regions.

Nothing less than a new regional policy to make regions fit to compete in the knowledge economy. Building up the strength of the weakest regions.

The hard choices taken on the economy mean we now have the financial resources to invest in our regions. To tackle underperforming regions and areas.

Not a short term approach but one which begins the process of turning round our regions.

Our approach has to be forward looking. To enable regions to meet the challenges of the 21st century.

This new regional policy is based on two clear principles.

  • First, we need to strengthen the building blocks for economic growth in all regions: enterprise, skills, innovation, higher education and scientific excellence.
  • And second, our approach must be bottom up, not top down. The role of Government should be to enable regional and local initiatives to work.

What strikes me is that in every region there are great strengths. The challenge for Government is to make sure those strengths are brought to the fore.

This is not a quick fix. But a long term, sustainable approach.

Today I want to look at two particular areas - enterprise and e-commerce - where we need to build up strength.

Enterprise is the engine of this new knowledge economy.

Yet recent research conducted by the London Business School showed that only one in 33 adults in Britain is trying to start up a business, compared to one in ten in the United States.

Figures for VAT registrations - a good measure of business start-ups - show considerable differences within and between regions.

For example, in proportion to population, there were over three times as many registrations in London as the North East last year. And half as many again in the South East as in Yorkshire and the Humber.

But even within London, the figures varied considerably. For example there were 655 business start-ups in Lewisham compared to 2,285 in Camden.

The challenge we face is how do we create more business start-ups and more high growth firms in every region.

I want to set out a few ways in which we will address this.

First, we will improve the quality of small business support and ensure that it is tailored to local and regional needs.

We will increase funding for Business Links by 30%.

And for the first time we will be taking into account the needs of regions in allocating this funding.

As part of that we are also locating the regional operations of the Small Business Service with the Regional Development Agencies.

Together they will play a key role in job creation and economic regeneration

We are also providing the Regional Development Agencies with 35 million this year to spend on capital projects to support clusters of growth businesses.

We have also established a 30 million Phoenix Fund to help people in disadvantaged communities to set up and run successful enterprises. I hope to announce some of the first projects next month.

The Phoenix Fund is one way in which we are supporting the regeneration of urban areas by promoting enterprise.

We not only need to raise the levels of enterprise in our regions. We also need to ensure that our businesses are at the forefront of the digital revolution.

If we are to compete in the modern economy, businesses in all parts of the country need to embrace e-commerce.

E-commerce didn't exist three years ago. Last year it was worth 2 billion in the UK alone. All regions must grasp these new opportunities.

And we need to ensure that old disparities between and within regions are not re-inforced by a new digital divide.

Last September I published a study which showed that businesses in many regions were lagging behind London in making the most of information technology.

One year on, it's clear that businesses in our regions are rising to this challenge. The percentage of businesses here in the North West with internet access has, for example, shot up from 55 per cent last year to 84 per cent this year.

Similarly, over half of all businesses in every region now have a marketing website. And Northern Ireland, Wales and the North East have shown the biggest increase - of over 50%.

London businesses are still ahead of the other regions. But the signs are that the other regions are catching up.

With support from UK Online for Business, the programme established by my Department to help small firms, we are narrowing the gap.

This shows what we can achieve.

Of course to exploit the full potential of this new technology, businesses actually need to trade on-line.

The number of businesses trading on-line varies from 23% of businesses in the North East and West Midlands to 33% in London.

In order to compete in the modern economy we need a much higher proportion of businesses in every region to be trading on-line. But we need to pay particular attention to those regions where the uptake is slowest.

That's why, through UK Online for Business, we are establishing an Internet Incubator Fund, with over 3 million of Government funding.

Working with Regional Development Agencies, this will support the creation and growth of incubators. These will provide work space, with the right communications infrastructure and a supportive environment, for new internet businesses to develop.

Some parts of the UK already have excellent examples of internet incubation in place.

The Incubator Fund will therefore be targeted on regions with the greatest need.

It will focus on areas outside the London, the South East and East of England. Targeting areas with a lower uptake of communications technology.

We are also putting in place 100 extra local advisers as part of UK Online for Business. They will help new and established businesses to make the most of consumer and business-to-business e-commerce.

They will be targeted on areas where business needs their support most. In areas with low rates of enterprise and where there are companies with the potential to grow.

Supporting new growth firms and helping established businesses to adapt to the knowledge economy.

This is investment for our future. Aimed at boosting enterprise and stopping the cycle of run-down and deprivation.

We want Britain to be, in every area, every region, a creative, skilled and enterprising economy. That is not the case at the moment.

In the new economy, regional success will come through responding to competition, boosting enterprise and entrepreneurship, strengthening and harnessing the skills of our people, and getting the public and private sectors to work together.

But making the most of this is up to people in the regions - the Regional Development Agencies, local authorities, local businesses.

We all need to work together to address regional and local weaknesses in the key drivers of the modern economy.

To ensure that all our regions share in the nation's wealth and prosperity.

To break down those barriers that deny opportunity and which have held back some of our regions for far too long.

We must do so out of a sense of social justice but also because our future economic success as a country depends on all parts and all people of the United Kingdom achieving their full potential.

This is an ambitious target. I make no apology for that.

Government alone can not create vibrant, prosperous regions.

To do so requires a partnership between business, universities, regional development agencies and local government.

The regional agenda is one which is crucial to our future well-being. Our regions were at the heart of our first industrial revolution - they now need to be at the forefront of our new economy. We need to see our regions renewed.

That is the challenge that we face. But I am confident that by working together we can meet that challenge and ensure all our regions and all our people can benefit from increasing prosperity.

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