What Works Centre for Local Economic Growth: Supporting the Industrial Strategy

Lead Research Organisation: London School of Economics & Pol Sci
Department Name: Geography and Environment

Abstract

The What Works Centre for Local Economic Growth will undertake work to help the development of the Industrial Strategy. This will include additional review work to produce 'toolkits' that summarise the available impact evaluation evidence on areas of policy design that are particularly relevant to the Industrial Strategy. We will also work with a group of local areas (a mix of Local Authorities, Combined Authorities and LEPs) on the use of evidence in development of Local Industrial Strategies. Similar work will help further develop the local policy response to Brexit. A final project will further develop methodological approaches for evaluating the impact of place specific interventions (e.g. moving large public sector employers) that are being considered as part of the Industrial Strategy.

Planned Impact

Likely beneficiaries will be all decision makers involved in the development of the Industrial Strategy. This might include officials within Central Government (particularly those departments most closely associated with the development of the Industrial Strategy). It should also include officials working in local government in both Local Authorities and Combined Authorities as well as Local Enterprise Partnerships and other governmental or third sector organisations.

The toolkit work will be of wider interest to decision makers developing policy interventions in related areas, whether or not they are specifically developed as part of the Industrial Strategy. Similarly for the work to develop methodologies that can be used to consider the impact of place specific interventions.

The main benefit will come from a better understanding of the impact evaluation evidence on specific policy design questions (toolkits); an understanding of how this evidence can be used to help develop Local Industrial Strategies, including the response to Brexit (Local Industrial Strategy and Brexit working groups); a better understanding of how to undertake ex-post evaluation of interventions delivered as part of these strategies.
 
Description Our toolkits highlight a huge range of key findings summarised in a way that is useful for decision makers. Here are some examples from the Local Industrial Strategy Toolkits:

• For effective schemes, financial incentives (including benefit sanctions) may play a key role in increasing employment durations or wage progression. However, evaluations of active labour market programmes suggest these outcomes can be achieved without in-work financial support when people are placed into the right jobs in the first place. This suggests that effective job placement may be more cost-effective than in-work support.
• Collaboration may have a positive effect on spin-offs, but the evidence is less clear on the appropriate funding mix. There is some evidence that private sector funding may reduce spin-offs - possibly because collaborating firms use any resulting innovations directly.
• The (limited) available evidence suggests that science park co-location impacts positively on firm-level patenting of research, but that spillover effects may die away rapidly with distance. This is consistent with our toolkits on incubator and accelerator programmes, in which we report generally positive outcomes for firms co-located in the same building or room.

Our work on designing an effective Local Industrial Strategy identified and discussed 10 key principles:

What is the state of the local economy?
• The appropriate mix of policies for a LIS will vary across different places.
• Do not focus on measuring economic performance against high-level numerical targets; clarify high-level local objectives, and monitor and evaluate individual programmes and projects that contribute to them.
• Choose the most useful comparison for informing specific policy decisions (for example, the national average or a specific group of places with similar characteristics).
• Sectoral analysis can help to target 'horizontal' policies (for example, skills and employment training programmes) and identify local strengths to facilitate coordination with national interventions. But be wary of trying to achieve a particular sectoral composition.
• Look for new sources of data (data extracted from websites, for example) and find ways to combine quantitative data with qualitative data to build a more granular understanding of the local economy.

How is the economy evolving?
• Recognise, and try to mitigate, the political pressures that will tend to favour support for existing employment over new activity that can help to diversify and grow the economy over the longer term.
• Use scenario planning, as opposed to complicated, and often expensive, local economic models to structure thinking about the future and potential changes.
• Be very careful before incurring large fixed costs on a project, and consider options for waiting until there is less uncertainty.

Supply side or demand side?
• Distinguish between supply side (for example, constraints on finance) and demand side (for example, weak business plans) as explanations for under-performance.
• Avoid 'build it and they will come' supply side strategies intended to generate sufficient demand.
• Use market signals (for example, land prices and wages) to help make decisions, such as where to put specific investments.

Targeting the policy response
• Identify the market failures that impact the local economy and whether these can be usefully addressed at the local level.
• Identify a range of policy options to address each local development challenge, and compare the intended costs and benefits.
• Look beyond economic averages to the likely consequences for different types of firms and households.

Impact on competition
• LIS will be designed to change market outcomes. But distorting competition may have a negative impact on innovation and productivity growth.
• Preferencing particular sectors or large local employers should be justified on the basis that their size means there are large benefits relative to the costs of addressing market failures that affect them; not simply because they constitute a large share of the local economy.
• 'Horizontal' interventions (i.e. not targeted at particular sectors) mitigate any negative competition effects by supporting multiple firms and sectors.

Experimentation
• Experiment to find more cost-effective ways to support economic growth, with a clear idea of what constitutes success (and failure) and observable criteria for monitoring it.
• Share plans for, and results of, experimentation with other local authorities to identify opportunities for collaboration and so everyone can benefit from your experience.

Independent experts
• Use independent panels (drawing together individuals with the appropriate expertise, no conflicts of interest and protected from political interference) and peer review mechanisms to scrutinise evidence and policy priorities.

Sharing the risk
• Find ways to share the risk of investing by co-funding interventions with the private sector and involving them in the decision-making process.
• Develop ongoing contact and communication with the private sector to help identify and remove obstacles to growth. But remain autonomous and be careful to avoid 'capture' by local vested interests.

Evaluation and feedback
• Evaluation, embedded from the start of the policy design process, helps to improve policy design and inform future decision making, by assessing whether policy has the desired impact and is cost-effective.
• Evaluation should be proportionate, and focus on specific programmes and projects where good evaluation is feasible.
• Build in sunset clauses and use monitoring and evaluation to make decisions about whether to continue funding the programme or re-design specific elements.

Coordination
• Coordinate across different stakeholder organisations, related policy areas and spatial levels with a broader vision and objectives in mind.
• Accountability and transparency is essential to keep everyone informed and on board.
Exploitation Route Following on from the LIS partnership project we have also undertaken work to develop methods for evaluating the kind-off place-based interventions that will form part of many LIS. As part of this work, we have completed preliminary analysis on the employment impacts of the BBC's move to Media City in Salford. As a 'big push' relocation the BBC's move is of substantive public and policy interest. Channel 4's planned relocation from London makes it timely to understand what such policies may or may not achieve in economic terms.

The project also tests a new and potentially important impact evaluation design, the synthetic controls methodology, which we think can be deployed by many WWC users in local and national government.

We will be refining the analysis during the Autumn and sharing preliminary findings with key stakeholders, including the BBC. We will consider the most appropriate format / approach to make the findings public.
Sectors Communities and Social Services/Policy,Leisure Activities, including Sports, Recreation and Tourism,Government, Democracy and Justice,Retail,Transport

 
Description For the Local Industrial Strategies project, we recruited 11 places to work with us: Liverpool, Milton Keynes/SEM LEP, Greater Lincolnshire, Newcastle/North of Tyne, D2N2 LEP, Peterborough, West Mids CA, Southampton/Portsmouth, Preston/Blackpool/Lancashire LEP, York and Bristol/WELEP. Teams from CfC and LSE visited each place to discuss their understanding of the LIS and how they are planning to undertake the work. These visits took place in Jan and Feb 2018. We hosted two group meetings in London to discuss issues of joint interest. Attendance was very nearly 100%. Topics covered by the project included: • Working practices • Role of stakeholders • Sources of data • Questions for government • Evidence base in business environment, innovation, skills and infrastructure • Academic literature on strategy development • Updates from the trailblazers on progress and lessons learned • Balancing local growth ambitions with goals of the IS and thinking about how to make growth inclusive • Methods to encourage experimentation and evaluation in the implementation of LIS programmes We produced a report 'Developing effective Local Industrial Strategies' with ten steps based on a combination of academic work on strategy development and the evidence base from our own work. We launched the document with a public event. Over 80 policymakers and experts from local regional and national government attended and Lord Henley gave the keynote address. We also explored ten new toolkit topics, 4 of which had enough evidence available to be developed into full toolkits: Local Hiring, Spinoffs, High Involvement Management Practices, and In Work Progression. Finally, we completed preliminary analysis on the employment impacts of the BBC's move to Media City in Salford. As a 'big push' relocation the BBC's move is of substantive public and policy interest in its own right. Channel 4's planned relocation from London makes it timely to understand what such policies may or may not achieve in economic terms. The project also tests a new and potentially important impact evaluation design, the synthetic controls methodology, which we think can be deployed by many WWC users in local and national government. After the LIS project completed, we worked with Cities and Local Growth Unit on the LIS to run workshops on specific aspects of LIS. They produced detailed guidance which LEPs can use in the People, Business, Place, and Innovation. Our advice informed proposals from the Industrial Strategy Council. We continue to work with Local Areas on improving the use of data, monitoring and evaluation in developing their LIS.
First Year Of Impact 2018
Sector Government, Democracy and Justice
Impact Types Societal,Economic,Policy & public services

 
Description Four lessons from our policy evaluation experiments 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact The best way to grow our understanding of what works in local economic growth is to undertake experiments and evaluate their effectiveness. It may sound obvious, but there are a number of reasons why this can be difficult to implement. We want to find ways to make it easier for policymakers, by designing a programme that will overcome some of the most common obstacles. Here is what we have learned from the demonstrations that failed to get off the ground.
Year(s) Of Engagement Activity 2018
URL http://www.whatworksgrowth.org/blog/four-lessons-from-our-policy-evaluation-experiments/
 
Description Group meetings held in London with 11 Local Councils to discuss inssues of joint interest 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Main purpose of the meeting was to discuss working practices; role of stakeholders; sources of data; questions for government; evidence base in business environment, innovation, skills and infrastructure; academic literature on strategy development.
Year(s) Of Engagement Activity 2018
 
Description Public event to launch report, 'Developing effective Local Industrial Strategies'. 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Over 80 policymakers and experts from local regional and national government attended the launch of the report. During the meeting the participants explored ten new toolkit topics, five of which had enough evidence available to be developed in full toolkits: co-location; local hiring requirements for area-based-initiatives; support for university spinoffs; high involvement management practices; work progression.
Year(s) Of Engagement Activity 2018
 
Description Reflections on the launch of '10 principles for developing effective Local Industrial Strategies' 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact In June 2018 we launched our 10 Principles for developing effective Local Industrial Strategies. We developed our principles by working with ten cities to understand their challenges; talking to central government; drawing on (and translating into English) academic work on economic policy development; and taking the lessons from the evidence base. In many ways, it summarises much of our advice on how to make better policy.
Year(s) Of Engagement Activity 2018
URL http://www.whatworksgrowth.org/blog/reflections-on-the-launch-of-10-principles-for-developing-effect...
 
Description Second group meeting in London to discuss issues of joint interest 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact More in-depth discussions covered: updates from the trailblazers on progress and lessons learned; presentation from Cities Team about their ambitions from the programme, plans for roll out to other areas and current thinking on what to include; balancing local growth ambitions with goals of the IS and thinking about how to make growth inclusive; methods to encourage experimentation and evaluation in the implementation of LIS programmes.
Year(s) Of Engagement Activity 2018
 
Description What is the state of the local economy? Developing a granular understanding 
Form Of Engagement Activity Engagement focused website, blog or social media channel
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact The Government expects all places to have agreed Local Industrial Strategies by early 2020. The 'trailblazers' - Greater Manchester, Oxford-Milton Keynes-Cambridge corridor and the West Midlands - are currently working with the government to agree their LIS by March 2019 and the next wave of places was announced in July. All places are being encouraged to think about their priorities for LIS in the meantime.
Year(s) Of Engagement Activity 2018
URL http://www.whatworksgrowth.org/blog/what-is-the-state-of-the-local-economy-developing-a-granular-und...