1. business and industrial

Foreword for supporting London business clusters
Stimulating private sector jobs growth has never been more important, given
the estimated loss of half a million public sector jobs over the next four years.
With reduced government funding to support businesses, government at all
levels needs to be very clear about what works to stimulate business growth
and innovation.
London Councils commissioned Colin Buchanan and Bone Wells Urbecon to
undertake a study on business clusters in London – to identify and map
business clusters, to draw lessons from home and abroad about what does
and does not work in developing them, and to make recommendations for
London boroughs and their partners on how best to support them.
The report demonstrates that place matters – that a critical mass in skills,
services, knowledge and institutions can underpin economic competitiveness.
It shows that business agglomerations exist across London and that London
boroughs need to understand these clusters – the depth of the supply chain
and linkages between firms – to effectively support these.
Business support is likely to become more generic and institutional, and
privately-funded support could have a greater role to play. Boroughs are well
placed to co-ordinate this support to encourage local growth and innovation.
The report also highlights how boroughs can use their planning and regulatory
duties to support business clusters – creating the right conditions for business
growth and innovation. It provides practical steps for boroughs to decide when
and how they support business clusters in their area.
It also highlights that business clusters spread beyond borough boundaries
and boroughs need to work together, with the Mayor, with higher education
and other specialist institutions and with the businesses themselves to help
them flourish. It shows that London has some great assets that we collectively
need to draw on to create more jobs and growth in all parts of London.
Cllr Chris Roberts
Portfolio holder for economic development and infrastructure
London Councils
London Councils
Supporting
London Business
Clusters
colinbuchanan.com
Final Report
Supporting London Business Clusters
Final Report
Project No: 18267-01-1
August 2010
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Prepared by:
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John Siraut
Status: Status
Issue no: 0
Date: 07 December 2010
18267-reportv12.doc
(C) Copyright Colin Buchanan and Partners Limited. All rights reserved.
This report has been prepared for the exclusive use of the commissioning party and unless otherwise agreed in writing by Colin
Buchanan and Partners Limited, no other party may copy, reproduce, distribute, make use of, or rely on the contents of the report.
No liability is accepted by Colin Buchanan and Partners Limited for any use of this report, other than for the purposes for which it
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Opinions and information provided in this report are on the basis of Colin Buchanan and Partners Limited using due skill, care and
diligence in the preparation of the same and no explicit warranty is provided as to their accuracy. It should be noted and is expressly
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been made
Supporting London Business Clusters
Final Report
Contents
1
Executive Summary
5
2
Introduction
9
3
3.1
3.2
Clusters: an overview
Introduction
The sources of agglomeration
10
10
10
4
4.1
4.2
The Central London Context
Clusters in Central London
Policy context
12
12
11
5
5.1
5.2
5.3
Clusters in Greater London
Introduction
Issues to be aware of in identifying clusters
Mapping 12 Clusters
12
12
12
13
6
6.2
6.3
6.4
6.5
6.6
6.7
Business support in Greater London
Conclusions & Recommendations from this Chapter
Rationale for Publicly Funded Business Support
Examples of Cluster Specific Support
Business Support in Greater London
LDA sector initiatives
Solutions for Business
28
28
29
30
30
33
34
7
Best practice approaches
Key Conclusions and Recommendations
Specific Recommendations for Boroughs and London Councils
7.2
Introduction
7.3
Featured case study – Uppsala BIO
7.4
City Growth Clusters in London
7.5
Work in Progress: London Sustainable Industries Park (SIP)
38
38
39
39
40
42
48
8
Clusters: Development Toolkit
8.2
Overview
8.3
Guide to Applying the Toolkit
8.4
Steps for the Cluster Toolkit
Table 8.1:
Tasks in Detail
50
50
50
52
53
Appendix 1: The Clustering Process
8.5
The Clustering process
8.6
The policy rationale
58
60
Appendix 2: Overview of Business Support
Appendix 3: Additional Best Practice Case Studies
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Tables
Table 5.1:
Activities and Location of Selected Agglomerations in Greater London
14
Table 6.1:
Business support hierarchy
31
Table 6.2:
Solutions for Business products relevant to clusters
35
Table 7.1:
SWOT Park Royal food manufacturing cluster
43
Table 8.1:
Tasks in Detail
53
Figure 3.1:
Overview of the components of a Business Cluster
11
Figure 4.1:
Key Concepts in Cluster Development
13
Figure 4.2:
A Map of the Key Business Clusters in the Central Activities Zone
(CAZ)
14
Figure 6.1:
Examples of Cluster Specific Support
30
Figure 6.2:
Brief Cluster Case Study: Humberside Seafood
33
Figure 6.3:
Brief Cluster Case Study: The case of Italian industrial districts36
Figure 6.4:
Brief Cluster Case Study: Norwegian Centres of Expertise
37
7.4.21
Figure 7.1: The Anatomy of the MICE Cluster (next page)
46
Figure 8.1:
The Anatomy of the Castellano Ceramics Cluster
59
Figure 8.2:
Concepts within the Clustering Process
60
Figure 8.3:
The Diamond Model of Industry Development
61
Figures
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1
Executive Summary
Why Promote Business Clusters?
Business clusters have gained currency as an approach to regional economic development in the last
10-15 years. There have been numerous initiatives and case studies of cluster development around
the world, building on the work of Professor Michael Porter and the experience of industrial districts in
Europe and in the US, in the latter case Silicon Valley being the most notable.
Clustering can be a powerful process for economic development and building local economic
resilience. The agglomeration of businesses in a particular location not only aids competition but can
also produce external benefits that all businesses share in. These relate to the sharing of knowledge,
specialised inputs and skilled labour. A location in the cluster can help firms to achieve innovation and
develop value added in both their products and processes. Cluster dynamics typically involve
interactions between businesses, supporting institutions and development agencies towards shared
goals which can result in the development of new markets for products, inputs and services. This
attracts more firms to the cluster and further strengthens the benefits of agglomeration.
In this report we have identified and mapped 12 concentrations of specific business activities in
Greater London. This is not intended to be an exhaustive analysis of the fastest growing sectors or
represent ideal business clusters. Often a more in-depth investigation is needed before it can be
confirmed that the concentration of certain types businesses in a certain location produces value
added activity.
Recommendations
The value added from clustering to a business means that locating elsewhere would be inherently less
productive. Clusters enable businesses to collaborate in ways that improve their products and meet
their client’s needs through ways that would otherwise be cost-prohibitive if they were geographically
dispersed. Below we provide specific recommendations for London Boroughs who may consider
cluster development as a business growth strategy.
London Boroughs
1. As part of their remit to promote economic development within their boundaries boroughs will often
begin cluster initiatives locally. However, functioning clusters will tend to go beyond the immediate
area and local initiatives should ultimately work with neighbouring boroughs from an early stage.
This is to understand important issues such as the depth of the business supply chain and the
geographical extent of linkages between firms.
2. In most boroughs there are a number of agencies providing generic business support on behalf of
or in addition to local authorities. Once a functioning cluster is identified, boroughs should engage
with support agencies to examine the scope for providing more focused support to the cluster and
reduce any duplication of generic services provided by other support providers. Greater
collaboration between local authorities in deciding the scope of support services will help to
reduce the number of brands presented to businesses, and enhance their ability to offer effective
and tailored support to clusters.
3. Local authorities’ statutory functions of land use planning, trading standards and environmental
services need to be aware of business clusters in the locality and ensure that their policies
facilitate the development of a critical mass.
4. Cluster development projects need to be incremental. In some cases value added can result from
firms simply engaging with each other and exchanging ideas. Initiatives such as sector-focused
networking events and creating a directory of complementary buyers, suppliers and service
providers can help overcome coordination problems and raise mutual awareness between firms.
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Boroughs are well placed to make these interventions and should consider this before investing
resources in more sophisticated support.
5. The emergence of the localism agenda and move towards Local Enterprise Partnerships (LEPs)
presents an ideal opportunity for local authorities to investigate business clusters. It is
recommended that LEPs be underpinned by partnerships of local authorities covering a relevant
functional economic area. The spatial extent of such areas can be defined by the flow of goods
and services in the local economy - which would involve tasks such as the mapping of business
linkages and supply chains. These have been identified in this report as necessary initial steps in
cluster development.
6. around two-thirds of London boroughs view the promotion of innovation among existing firms and
key sector support as a priority activity for LEPs. The process of identifying relevant supply chains
and business linkages in the formation of a LEP provides the opportunity to bring complementary
businesses and other relevant agency and institutional activities together from different boroughs.
The local authorities should play a facilitating role in developing the intensity of relationships as
outlined in figure 4 of this report (p.9).
London Councils/GLA & LDA
1. In many cases clusters operate at the regional (London-wide) level but encounter similar problems
of a lack of coordination which can be addressed by the public sector. Where there is a good
business case for greater collaboration, London Councils should work with GLA and LDA (while
still in existence) towards reducing the barriers to support agencies and businesses working
together. This could involve London-wide provision of specialised training courses or focused
networking opportunities and should target areas where there are known clusters or
concentrations of particular industries, such as those identified in this study.
2. The Mayor’s Economic Development Strategy acknowledges that more could be done to take
advantage of university research for commercial uses. As in the Swedish case study cited in this
report; effective coordination between universities, local councils, regional public agencies and
business organisations can add value in developing non-core business activity from universities
that may serve a wider business and economic development objective. London Councils, working
with GLA and/or LDA should strengthen links between similar pan-London organisations such as
London Higher and London Chambers of Commerce in increasing the role of higher education
within the Boroughs’ economic development policies.
3. More specifically, London Councils can work with London Higher to identify areas of expertise
within London universities and match this up with areas containing concentrations of relevant
businesses. This information can then be communicated to businesses via the Boroughs, with
London Councils co-ordinating activities where necessary. For example, special events can be
presented to showcase research and collaboration between academe and business, and to recruit
new partners to pool resources. This will help to kick-start the process of developing a critical
mass of business and agency interaction within the sector concentrations.
Cluster and Business Support in London: the current picture
Virtually all local authority funded business support in London is generic support rather than providing
cluster or sector specific services. This includes services available through the national Solutions for
Business framework.
London boroughs are involved in providing business support to varying degrees, with some providing
only a statutory service and leaving responsibilities to sub-regional organisations and Business Link.
Often support services are outsourced to local enterprise agencies who work across boroughs
providing a wide-range of services.
Government efforts to simplify the provision of business support has streamlined the number of
initiatives and programmes, but there remains a relatively complicated web of provision overlapping at
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the national, regional, sub-regional and local levels. There is a gap for targeted assistance aimed at
businesses within clusters.
The provision of cluster specific support can be vital in embedding and attracting similar businesses to
the locality (with the aim of achieving critical mass), but this does require an understanding of the
needs of the cluster and its geographic coverage. Often local authorities lack the resources or the
capability to provide tailored services, with measures largely based around organising general
business networking events.
Cluster development initiatives which have been pursued in London consist of a mix of LDA-funded
and central government-led initiatives such as the City Growth Strategy which targeted specific
sectors at the borough level. Although the prevailing LDA/GLA approach is to promote all businesses
in London, there are a number of priority sectors for which they have developed strategies or provided
indirect support to.
In light of the 2010 Economic Development Strategy and era of budget constraints, the London-wide
approach is set to move further towards providing generic business support. However, the new
emphasis on localism has the potential to favour cluster initiatives as best practice methods require an
understanding of the needs of local business and individual sectors. London boroughs, in
understanding local conditions and having regular contact with businesses are well placed to take the
lead in this.
Best Practice Approaches to Cluster Development
The study analyses a number of examples and featured case studies of cluster development that are
relevant to London. These identify the cross-cutting issues typically encountered when implementing
cluster development policy; paying attention to the pre-conditions for growth, common pitfalls and
areas of good practice. The following key conclusions were made:
Up-front investment: All cluster initiatives require some form of up-front investment. This is needed
to map the cluster, identify the various players and understand their needs and motivations for
involvement, as well as establish technical matters such as supply chains and technologies. Without
this any projects will be working blind and are unlikely to succeed.
Small investments can also work. Low cost projects such as hosting focused networking events,
business directories or publishing a map of film/TV businesses have all generated tangible results.
Take a cautious approach. Local cluster initiatives should be considered only where the conditions
are appropriate, e.g. very high concentrations of businesses such as jewellery in Hatton Garden. As
was the case with many of the City Growth projects, the local scale of the targeted clusters was much
smaller than that originally proposed; meaning few of the cluster projects contained the depth or
breadth of businesses necessary to generate self-sustaining activity. For London effective clusters are
equally likely to operate at a regional as a sub-regional level.
Work with the grain of business: While nearly all cluster projects seek to encourage businesses to
commit more effort to innovation, this cannot be forced. Firms need to accept the argument for
innovation and collaboration with others before they will commit. Achieving this is most probably the
major challenge facing any cluster initiative.
The presence of a supply chain is important: Innovation tends to be driven by firms’ attempts to
meet the needs of their customers by improving quality and/or developing niche products. Therefore,
having at least two levels of a supply chain within the area can assist businesses in engaging with
customers and encourage them to seek new ways of meeting their needs.
Clusters are not suitable for everywhere. There are limitations to what cluster initiatives can
achieve and where they are appropriate. Experience of City Growth demonstrated that by treating the
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cluster approach as a panacea, it was applied under inappropriate circumstances and failed to
achieve the desired results.
Use planning to assist agglomeration. Local authorities, as planning and regulatory bodies, have a
key role to play. Understanding land use and premises requirements, as well as the impact of
regulations, can make all the difference in achieving a critical mass of complementary businesses.
Understand the key market failure that should inform any intervention from the outset; which can be
characterised as “externalities and co-ordination failures”. Essentially there are too many obstacles
and uncertainties facing individual firms, especially small businesses, for them to develop the trust and
co-ordination with other firms by acting of their own accord.
Maintain a clear brief for intervention. Addressing market failures is a common feature of publicly
funded cluster projects. However, a large amount of resources are dedicated to delivering a range of
other (often generic) services including business support. A more focused approach based on the
steps set out in the development toolkit in Chapter 7 could prove more cost effective.
Explore university linkages. Universities, as providers of learning and research, generally tend not
to see themselves as part of the business infrastructure. This contrasts distinctly with the Norwegian
and Swedish experiences highlighted in this study, where there is a strong focus on supporting local
businesses.
CLUSTER DEVELOPMENT TOOLKIT
Chapter 7 of this report (from p.51) contains a practical guide to cluster development. It is not intended
to be a comprehensive manual but instead proposes a set of coherent and incremental steps towards
development, based on first hand experience and the analysis contained in this report.
8
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2
Introduction
2.1.1
Colin Buchanan in association with Bone Wells Urbecon have been commissioned by
London Councils to undertake a review into business clusters in London, to assist with
the development of local authority policies to support businesses.
2.1.2
There has been a considerable amount of restructuring in recent years with regard to
publicly funded business support, most notably through the Business Support
Simplification programme led by the Department of Business Innovation and Skills. The
election of the coalition government and era of spending cuts means there is likely to be
further restructuring of support services and local economic development powers in
general.
2.1.3
London has also seen a number of cluster-led initiatives assisted by the work of Michael
Porter, the leading exponent of the cluster model. This document provides an overview of
the case for business clustering with a focus on Greater London and an up-to-date
picture of business support provision and cluster initiatives in the capital. The report
seeks to set out a best practice approach to cluster development for London Boroughs,
drawing on the lessons learned from featured case studies.
2.1.4
The report is structured as follows:
ƒ
Chapter 2: provides an overview of the case for business clusters and the main
concepts underpinning the clustering process.
ƒ
Chapter 3: provides an overview of the role of business clusters in Central London
and how various business activities hang together to drive competitive advantage
and innovation.
ƒ
Chapter 4: identifies and maps clusters and agglomerations of business activities
in Greater London and outlines the steps and pitfalls in involved in identifying
clusters.
ƒ
Chapter 5: sets out a review of business support in London and an audit of the
provision and scale of publicly funded business support and sector specific
initiatives in the surveyed London boroughs.
ƒ
Chapter 6: reviews case studies of cluster and sector development programmes
focusing on a range of projects and the lessons learned in each case. The chapter
is rounded off with best practice recommendations.
ƒ
Chapter 7: drawing on the findings of the previous chapters we set out a toolkit for
cluster development aimed at providing practical steps and guidance to boroughs
in understanding, identifying and nurturing cluster activity at the local level.
2.1.5
The content of this report is based on a combination of existing research, discussions
with borough representatives and key individuals, case study material and first hand
experience in setting up cluster initiatives. While it sets out the case for clusters it is not
intended to promote cluster strategies as the ideal model for local economic
development. Instead it sets out a pragmatic analysis of the conditions for success and
the pitfalls that are commonly encountered in encouraging and sustaining such initiatives.
2.1.6
Moreover, while cluster development may not be appropriate for every London borough it
is hoped that this document will assist local authorities in strengthening their role in local
economic development and in forming Local Enterprise Partnerships or similar
arrangements with neighbouring boroughs. This would include tasks such as mapping
and auditing complementary business activities, supply chains and understanding the
competencies and competitive strengths of local businesses.
9
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3
Clusters: an overview
3.1
Introduction
3.1.1
Business clusters have gained currency as an approach to regional economic
development in the last 10-15 years. There have been numerous initiatives and case
studies of cluster development around the world, building on the work of Professor
Michael Porter and the experience of industrial districts in Europe and in the US, in the
latter case Silicon Valley being the most notable.
3.1.2
Business clustering is viewed as a path to improved regional competitiveness and
productivity, but the focus on clusters and specialisation is not a new concept. The
industrial district was first observed in the textile industry in 19th Century Lancashire by
the economist Alfred Marshall, who gave rise to the understanding of why firms
agglomerate in a specific location.
3.1.3
The recent renewed interest in clusters has led to many varied definitions of a cluster,
and in 1990 Porter identified them as:
“Geographical concentrations of interconnected companies, specialised suppliers, service
providers, firms in related industries and associated institutions (eg universities,
standards institutions, trade associations) in a particular field that compete but also
cooperate”.
3.1.4
The key theoretical argument behind clustering is that a business gains from being in
close proximity to other businesses that undertake similar activities or provide inputs and
support to the core business. This leads to a process of agglomeration and economies of
scale that all businesses benefit from.
3.2
The sources of agglomeration
3.2.1
Alfred Marshall identified three economies of scale that are the source of industry
localisation:
1.
access to a pooled market for labour, enabling the costs of searching and training
skilled and specialised workers to be lowered. This is especially important for small
firms operating in uncertain market conditions and who are constrained in their
ability to invest in factor inputs that rapidly become redundant.
2.
the cost of specialised machinery, technical services and other inputs can be
spread over a large number of firms that are spatially concentrated. This acts as a
draw on additional firms, and in turn supplier and other subsidiary businesses,
encouraging additional cost competition.
3.
there is the ease of information and knowledge transfer facilitated by close
proximity and regular interaction, which creates a learning environment and an
impetus for continuous improvement and innovation.
3.2.2
Localisation economies are different from city-wide agglomeration economies in that they
are much more place and industry specific. They are distinct from the agglomeration
effects that accrue to all firms located in cities and can be accessed readily such as
transport networks, skilled labour and a wide range of support services.
3.2.3
In reality there is an element of localisation and urbanisation economies in urban areas.
The classic example in London is the financial institutions densely clustered in the City of
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London’s Square Mile. A location in the financial district maximises a firm’s access to the
right kind of personnel and specialist services, such as IT support, which are critical to the
everyday activities of finance. They also benefit from the excellent public transport links
and proximity of a variety of other services based in and around the City, such as
marketing support and facilities management.
3.2.4
Perhaps most importantly, clustering enables the flow of information between firms,
service providers and institutions both formally at conferences, training courses and
seminars; as well as informally in the pubs, bars and cafes around the City. The access
to information enabled by working in close proximity helps individuals and businesses
generally to keep up to date on industry trends, market opportunities and what
competitors are up to. This can be a highly localised phenomenon depending on the
knowledge intensity of the business, but undoubtedly is a critical factor determining the
level of innovation and the development of the cluster.
Figure 3.1:
Overview of the components of a Business Cluster
Source: Glen, Brunel University 2006
3.2.5
Appendix 1 contains more detailed analysis of the drivers of business clusters and their
role in promoting competitive advantage. The remaining chapters in this report are
structured as follows:
ƒ
ƒ
ƒ
ƒ
ƒ
Clusters in the Central London Context
Identifying and Mapping Clusters in Greater London
The Structure and Scope of Business Support Services in Greater London
Case Studies and Best Practice in Cluster Development
Cluster Development Toolkit
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4
The Central London Context
Key points from this chapter:
ƒ Central London contains many of the UK’s most competitive and fastest
growing business agglomerations
ƒ Historical factors have played a role in this, but most importantly:
ƒ Critical mass in skills, services, knowledge and institutions, as well as
competition underpin economic competitiveness
ƒ Scale and scope of activity promotes spin-off ventures and innovation
ƒ Policy is largely to facilitate critical mass, i.e. in planning and transport
infrastructure, rather than to target growth of particular sectors
4.1
Clusters in Central London
4.1.1
Central London is known for a number of high profile and economically significant
business clusters which underpin the capital’s economic geography. They are also
considerably varied in their nature – some of which are due to historical factors and
others are more recent developments. Classic examples (beyond the financial district)
are the jewellery quarter in Hatton Garden, which still retains a local critical mass of
jewellery makers, designers, wholesalers and retailers; and nearby the legal activities
around the Inns of Court in Chancery Lane and Holborn. Just to the north in Clerkenwell
is the long-standing print and publishing cluster on the fringes of the City.
4.1.2
The cultural and entertainment activities are famously centred around the West End, and
related to these is the concentration of media and creative businesses based in Soho.
Further west towards Mayfair are property and management consulting businesses and
more recently hedge funds which have grown rapidly in recent years and opted for
prestigious addresses in West London rather than a Square Mile location. Central
government functions are located around Whitehall and there is of course the main
shopping districts of the West End and more specialised retail further west, such as
antique dealers in Notting Hill.
4.1.3
Figure 4.2 provides an overview of the main areas within the Central Activities Zone
(CAZ) where various clusters are located.
4.1.4
The nature of linkages between firms is important in distinguishing clusters from
concentrations. Central London, as a world city, means there is a sheer critical mass of
high quality labour, services and infrastructure which promotes specialisation in the same
way as the ceramics cluster example highlighted in the appendix. The difference is that
all firms benefit from economies of scale across range of supporting activities, assets and
facilities rather than one particular sector. In this context it is the urbanisation economies
that are the strongest drivers of the economic benefits of clustering, rather than the
sector-specific localisation benefits mentioned in Chapter 2.
Proximity, scale and scope
4.1.5
Of course there are still localised clusters within the central area - banks in the Square
Mile benefit from ready access to complementary activities in fund management,
accountancy and tax consultancy. But they can, for example, also draw on specialised
marketing and PR services which will also serve law firms and management consultants.
It is this inter-dependency between the different clusters which makes the economy of the
central area quite different from the rest of London.
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One example is the mergers and acquisition business in London. This is an international
business requiring a range of specialised and highly skilled services involving investment
banking, corporate financing, brokering and law. The ability to get key individuals in the
same room and on a regular basis is critical to the successful completion of the work –
something that would be less achievable if people were located in different cities or even
countries. The importance of clustering is underpinned by the need to develop strong
working relationships demanding trust and regular face to face contact between
professionals.
4.1.6
Through a combination of critical mass, competition and specialisation, therefore, firms
are able to ‘pick and mix’ inputs enabling them to tailor products and offer a wider range
of services both nationally and abroad. This is also critical for innovation.
Innovation and Networking
4.1.7
The value added potential of business clustering relies heavily on the strength of
relationships between firms. Developing relationships does not necessarily occur
spontaneously and often third party agencies play an important role in facilitating
interactions to a level where entrepreneurs clearly recognise that there can be mutual
benefits of cooperation and collaboration.
4.1.8
Figure 4.1 outlines the important theoretical concepts underpinning the stages of cluster
development. This is discussed further in appendix 1.
Figure 4.1:
4.1.9
Key Concepts in Cluster Development
Porter emphasised the importance of having sophisticated and market-aware clients who
push suppliers to upgrade their service, who in turn can draw on a range of highly skilled
and specialised inputs to meet that need. The interdependency between different clusters
in central London supports these conditions through the sharing of ideas and knowledge
between sectors, leading to product development and diversification; as recently
highlighted by a GLA Economics report (2008):
“The critical mass (or agglomeration) of specialisations, including skills, knowledge, inputs and
markets in the central area encourages growth and innovation. A location within the CBD is often
a critical competitive advantage for a business. A ‘cross pollination’ of ideas occurs between
different but interrelated business activities which enables further diversification and strengthening
of the economic base. Nowhere has this been demonstrated more than in the rapid growth of
London’s creative industries sector”.
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Figure 4.2:
A Map of the Key Business Clusters in the Central Activities Zone (CAZ) by Super Output Area
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Supporting London Business Clusters
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4.1.10
The ‘cross-pollination’ of ideas within clusters often occurs tacitly - either through strong
working relationships, movement of employees between competing firms or chance
meetings. The pubs, restaurants and bars around the centre even act as a conduit for the
sharing of information – and all of this is intensified by spatial proximity.
The role of institutions
4.1.11
The networking function equally operates within a more formal infrastructure. Many
successful clusters involve supporting institutions who actively diffuse new ideas,
technology and best practice which promotes a culture of innovation and collaboration
between firms. In Central London there is a plethora of nationwide professional and
technical bodies serving particular trades, industries and occupational areas. These
support skills development, improving standards and knowledge diffusion through training
events, conferences and seminars – many of which are in highly specialised activities.
Well-known examples include the Chartered Insurance Institute, Chartered Financial
Analyst Institute and the London College of Fashion.
4.1.12
The role of such institutions is often concerned principally with bringing professionals
together within and across sectors to share knowledge about developments in products,
markets and professional standards. This in itself aides competitor visibility and promotes
a culture of innovation. In other cases, such as in manufacturing regions, there are more
dedicated cluster organisations providing more technical and bespoke services to the
cluster members to embed a culture of improvement and innovation. A good UK example
is the Humberside Seafood Institute highlighted in chapter 6.
4.1.13
When viewed as a whole Central London can be seen as having a number of interlocking
components which, through agglomeration, assist a virtuous cycle of innovation and
value added activity. Although it could be argued that it is defined by a number of
functions largely dependent on a global financial centre, the interdependence between
them results in a highly complex and diversified economy that supports business growth
and greater resilience to fluctuations in the wider economy.
4.2
Policy context
4.2.1
London has built a reputation as a world service centre not as a result of a specific policy
or strategy. Indeed, the approach largely reflects a lack of intervention – such as towards
immigration and financial regulation which have attracted skilled workers and leading
institutions, and which often reflects the policy approach nationally. London has achieved
the status of a regional innovation system and international reputation largely by attaining
critical mass rather than devising policies specific to any one sector.
4.2.2
Instead, this has occurred through getting fundamentals right such as planning policy
(allowing key sectors to grow) and transport (improving accessibility to skills) as well as
creating a successful brand image (which can be attributed to the work of a wide variety
of public and private sector-led organisations). In short, success has been about getting
the general business environment right, and within this there are lessons for those
considering cluster and sector development.
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5
Clusters in Greater London
In identifying clusters:
ƒ It is important to distinguish simple agglomerations of businesses from
concentrations which consist of genuine linkages between firms/activities
ƒ The number and concentration of businesses is important as well as the level
of employment
ƒ We have mapped 12 clusters across the 32 London boroughs outside of
Central London containing a mix of manufacturing and service activities
5.1
Introduction
5.1.1
The previous chapter provided an overview of the key business clusters in Central
London and why having a central location is so important for certain types of business.
This also highlighted the interdependencies that exist between different business
activities and the positive environment they can produce for innovation between different
sectors. The following chapter now aims to identify concentrations of business activities
outside of the central area which similarly have an important function in the economy of
Outer and Inner London.
5.1.2
In identifying clusters we have drawn on the approach used in the Department of
Business and Innovation (formerly the DTI) in their original cluster mapping project. This
considers the employment location quotient (LQ) which is commonly used to analyse the
level of specialisation in a particular sector within a region or district.
5.1.3
The LQ is measured by the proportion of employment in a given sector at the district (or
defined area) level divided by its corresponding share at the regional or national level.
Hence an LQ of one and above indicates a degree of specialisation.
5.1.4
The geographic scale of the denominator depends on the spatial coverage of the market
– for example steel-makers in Sheffield export to other UK regions and abroad, whereas
food producers in London have a more regional market but also export to other parts of
the UK. As our focus is businesses in Greater London we are assuming their markets
are, on the whole, local and regionally oriented, so have used a London-wide
employment for each sector as the LQ denominator.
5.1.5
Below summarises the criteria used to identify clusters/concentrations of interest which is
based on the earlier BIS cluster mapping work:
ƒ
ƒ
ƒ
Employment and Workplace LQs of 1.25 or above
0.2% or more of total firms in the borough
the actual number of firms in the relevant output area
5.2
Issues to be aware of in identifying clusters
5.2.1
Through a combination of the data analysis, desktop searches and interviews with
borough council economic development officials we have distilled the four digit
classifications into 12 core business activities represented across Greater London
(Westminster and City of London excluded).
5.2.2
An analysis of the data shows certain activities emerging in many boroughs particularly
food manufacturing and processing, construction, health services and, to a lesser extent,
transport and logistics. This pattern partly reflects that a number of activities are local
12
Supporting London Business Clusters
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services serving the borough and sometimes neighbouring boroughs and seldom have
linkages or markets beyond this area.
5.2.3
On the other hand, ‘traded’ clusters serve markets over a wider area and often have
suppliers and other support services based close to major purchasers or producers.
Therefore, correctly identifying clusters should take into account the number of firms
relative to the district/borough because sites employing many people in a single activity
(e.g. food processing or a hospital) may lead to a high LQ but support few related and
complementary activities locally. It is therefore less likely to have features that represent
a genuine business cluster.
5.2.4
It can also be seen from the mapping work that LQs and concentrations of manufacturing
and other space-dependent businesses are much higher in outer boroughs, reflecting
better access to suitable premises and the strategic road network. The movement of
major manufacturing out of London generally has been a long-term process and many of
the older factory premises in inner and central areas have been converted to use by
service industries. Indeed, that many of the information, management and technical
services become more common towards the central area highlights a well established
trend of manufacturing moving out and new types of service industries moving inward.
5.3
Mapping 12 Clusters
5.3.1
As highlighted earlier it should be noted that thematic mapping alone will not distinguish
between clusters and more simple agglomerations of activity. The criteria underpinning
the cluster mapping are based on areas with the highest employment and workplace
locations quotients as well as the absolute number of firms in the output area.
5.3.2
The selected sectors encompass a wide variety of activities within the supply chain for
that sector. Hence the darker the area, the more likely they will represent a greater
element of the supply chain and in turn retain cluster-like characteristics and be locationsensitive. However, it should be noted that this still does not guarantee there will actually
be linkages between them.
5.3.3
The following clusters have been identified. A more detailed breakdown is provided in
figure 4.1.
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
ƒ
5.3.4
Food Manufacturing, Processing, Distribution and Related
Textile and Apparel Supply Chain
Business Information, Management Services and Support
Auxiliary Services to International Finance
Information and Communications Technology (ICT)
Architecture, Engineering and Technical Services
Electronics, Electrical Equipment Manufacturing and Related
Health and Medical Research
Media Services and Creative
Hospitality and Events Management
Transport, Logistics and Related Services
Machinery/Heavy Equipment Manufacturing and Related
The above are intended to reflect activities which individually make-up a significant level
of London’s total employment and business base and are also felt to be important
components of the regional economic geography. The remainder of this chapter
accompanies the maps with a table outlining each cluster’s constituent activities and the
borough location of the largest agglomerations shown in the maps.
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Table 5.1:
Cluster
Food Supply Chain
Activities and Location of Selected Agglomerations in Greater
London
Preparation, finishing, manufacture of
textiles and apparel, footwear, wholesale
and specialised retail,
Main Agglomerations
North Lambeth, Wandsworth (New
Covent Garden), north
Lewisham/Greenwich, East Ealing (Park
Royal), Waltham Forest (Spitalfields
Market), Kingston (town centre)
Kensington & Chelsea, Tower Hamlets
(City Fringe), Havering, Haringey, East
Ealing, Kingston UT
Electrical components services,
manufacture and support including
specialised retail/wholesale
North East Ealing (Park Royal), South
Camden, City Fringe Hackney, Tower
Hamlets (Isle of Dogs & Lower Lea)
Media and Creative
Services
Radio & TV broadcasting, sound recording,
publishing, computer games & web portals,
advertising, media representation,
performance
Hammersmith & Fulham, Kensington &
Chelsea, Camden, Islington, North East
Wandsworth, City Fringe Hackney, East
Hounslow, West Haringey
Auxiliary Services to
Finance
Accounting/auditing, life/non-life insurance,
financial services admin. Data processing,
call centres
Business
Information,
management and
support services
market research, PR and communications,
business and other management
consulatancy, data processing, combined
office support & admin.
North Richmond, East Hounslow, City
Fringe Islington, North Southwark,
Tower Hamlets (City Fringe & Isle of
Dogs), City Fringe Southwark, Merton
(Wimbledon)
Architecture &
Engineering
services
achitecture & related, engineering & related
technical consultancy, scientific and
technical activities, specialised design
Richmond UT, East Hounslow,
Hammersmith & Fulham (south),
Wandsworth, Harrow, Merton, Tower
Hamlets (City Fringe & Isle of Dogs),
City Fringe Islington
Hospitality, Events
and business
tourism
Convention & trade show organisers, event
catering, media representation, hotels and
similar, events facilities, reservation
services and related, renting and leasing
services, business and employer
organisations
North Lambeth, South Brent, City Fringe
Camden, Kensington and Chelsea
Hospitals, specialist medical activities,
research & development in biotech,
manufacture of medical instruments,
pharmaceutical manufacturing, technical
testing & analysis
North Hillingdon, Camden, Enfield,
Barnet
Clothing Supply
chain
Electrical/Electronics
supply chain
Health and Medical
Research
Activities
Food Manufacturing, processing
distribution and related
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Cluster
Information
Communications
Technology
Activities
repair of ICT equipment, computer facilities
management, renting and leasing of ICT
equipment and other ICT services; data
hosting services, web portals & information
service activities, computer programming &
consultancy, wholesale of computers,
software & related
Main Agglomerations
City Fringe Hackney, North
Lambeth/Southwark, Tower Hamlets
(City Fringe & Isle of Dogs), South
Kingston UT, Hillingdon, Barnet
Machinery &
Equipment
Manufacturing,
Support
manufacture of pumps, compressors, lifting
equipment, turbines, valves, generators,
office machinery & equipment, machine
tools, civil engineering equipment.
Machinery installation, servicing & repair.
Wholesale of specialist machinery &
equipment
Hillingdon, Ealing Park Royal, City
Fringe Islington Enfield (Upper Lea
Valley), Barking & Dagenham, North
East Bexley, South Bromley
Freight transport, warehousing & storage,
passenger air transport, servicing to
land/air transportation, repair and
maintenance of aircraft, transport
equipment, postal & courier activities
South Hillingdon, Tower Hamlets (North
East), West Hounslow, Ealing Park
Royal, South Havering, North Bexley,
North Greenwich
Transport &
Logistics
15
16
Main agglomerations - no. of businesses
Food Manufacturing, Processing, Distribution a
141 to 197
80 to 140
60 to 79
45 to 59
17
Main agglomerations - no. of businesses
Textile and Apparel Supply Chain
121 to 174
81 to 120
56 to 80
45 to 55
18
Main agglomerations - no. of businesses
Business Information, Management Services and Support
250 to 554
186 to 249
136 to 185
116 to 135
100 to 115
19
Main agglomerations - no. of businesses
Auxiliary Services to Finance
62 to 119
31 to 61
16 to 30
10 to 15
20
Main agglomerations - no. of businesses
Information and Communications Technology (ICT)
151 to 274
101 to 150
66 to 100
50 to 65
21
Main agglomerations - no. of businesses
Architecture, Engineering & Technical Services
201 to 554
101 to 201
71 to 101
40 to 71
22
Main agglomerations - no. of businesses
Electrical Manufacturing and Services
91 to 250
51 to 90
35 to 50
23
Main agglomerations - no. of businesses
Health and Medical Research
26 to 48
16 to 25
10 to 15
24
Main agglomerations - no. of businesses
Media and Creative Services
110 to 2,300
100 to 109
90 to
99
70 to 89
30 to 69
25
Main agglomerations - no. of businesses
Hospitality and Events Management/Business Tourism
50 to 156
41 to 50
25 to 41
26
Main agglomerations - no. of businesses
Transport, Logistics and Related Services
105 to 308
71 to 105
51 to 71
40 to 51
27
Main agglomerations - no. of businesses
Machinery/Heavy Equipment Manufacturing Services a
21 to 40
10 to 21
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6
Business support in Greater London
6.1.1
This chapter provides details of the business support regime as it operates in London
covering the borough picture, national programmes, LDA and private sector activities.
The chapter also contains brief overview of successful case studies. It begins with the
rationale for publicly funded business support and an example of the types of support
offered to clusters.
6.2
Conclusions & Recommendations from this Chapter
1.
Many London boroughs provide business support directly or indirectly through
enterprise agencies or cross borough/sub-regional organisations. This is in addition
to programmes such as Solutions for Business and Business Link.
2.
Government efforts to simplify the supply of business support through the Solutions
for Business programme have not necessarily achieved this. It is still clear that there
is much variability and not all 30 of the services are available in the capital.
Furthermore, boroughs report that Business Link’s profile is not consistent across
London.
3.
Practically all the publicly funded support in the Boroughs is generic and not cluster
specific. Boroughs pursuing cluster development have an opportunity to co-ordinate
streams of support between different delivery agencies to achieve more targeted
assistance.
4.
Tailored services are aimed at developing critical mass and collaboration between
businesses, institutions and public agencies. These could involve providing
specialist training and advice, vital facilities and services, publication of directories
and industry trends, marketing and networking events focused heavily on clusters.
5.
Such activities could be undertaken by a mix of public, institutional or private sector
organisations. Local authorities are well placed to take the initiative and encourage
the relevant partners to pool resources.
6.
Local authorities should, nevertheless, take a cautious approach to cluster
development before committing resources to tailored support: identify and map the
cluster and understand the depth of the supply chain.
7.
Clusters appear to demand a dynamic relationship between local and regional
geographies. While the needs of individual firms are best identified locally, their
linkages will go beyond the borough and possibly to a regional level. A mechanism is
needed that incorporates these two perspectives.
8.
Boroughs have a key role to play in business support through their duties as
planning and regulatory bodies. These should be mindful of the presence of business
clusters and should accommodate and facilitate their development e.g. through the
land-use classification of premises.
9.
ERDF funding provides the opportunity to design and deliver cluster development
projects. However, there are concerns around the administrative burdens associated
with this form of funding and businesses’ reluctance to get involved with any
activities that involve red tape.
10. We were unable to find examples of where the full range of business support
offerings, e.g. private consultancies, chambers, the boroughs, academia and trade
associations were truly ‘joined-up’. As in point (3) there is an opportunity for local
authorities to take the lead in bringing together the various providers.
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Supporting London Business Clusters
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6.3
Rationale for Publicly Funded Business Support
6.3.1
The government has stated that the rationale for publicly funded business support is to
“help address market failures or equity gaps, so allowing everyone in society to unlock
their talents and realise their full potential1”. This support tends to be generic and not
aimed specifically at firms within business clusters.
6.3.2
Over the last 20 years a major industry has developed around the provision of assistance
to business. This includes both traditional management consultancy and more recently,
publicly funded business support. While the former is almost exclusively delivered by
private firms, the latter involves a host of providers including government agencies, local
authorities, public/private partnerships, and not for profit organisations as well as private
businesses.
6.3.3
By 2007, the complexities of business, regional differences and multiple sources of
funding had led to a plethora of publicly funded initiatives and support packages. While
this may have offered some degree of customisation to local needs, it was also seen as
wasteful and confusing to the client. In 2008, the Department for Business, Innovation
and Skills (BIS, though BERR at the time2) concluded that simplification and consistency
were required. This resulted in the Business Support Simplification Programme and the
development of a package of 30 support products known as “Solutions for Business”. It
was intended that “by March 2010 Solutions for Business should be the only government
3
help businesses will see” . (See the appendices for a full list of the 30 products currently
available.)
6.3.4
Furthermore, Business Link is now intended to provide the portal through which firms
access business support. Typically, enquirers are led through an information, diagnostic
and brokerage process (which is itself one of the Solutions for Business products) and
signposted to appropriate assistance, e.g. one of the other Solutions for Business
products.
6.3.5
However, other mechanisms still exist to allow public funds to be used to help
businesses. These include direct delivery by local authorities, grants/service contracts to
other organisations, ERDF4 (European Regional Development Fund) and other
government agencies, e.g. Transport for London. In a number of cases, there may be a
requirement for activities to be aligned to the Solutions for Business product categories.
This may not always be apparent to clients as many of the ERDF projects are marketed
at local businesses and by-pass the Business Link portal.
6.3.6
It should be noted that the key aim of this drive for simplification is to assist businesses
access support more easily, i.e. aimed at the demand side. The supply side appears to
have retained a significant degree of complexity, though cut backs in funding have also
led to a reduction in duplication.
6.3.7
Finally, it should be noted that the boroughs have a key impact on the business
environment through their role as planning and regulatory authorities. How they go about
discharging their statutory duties and the interest they take in their local economies can
have a major impact on how attractive a location may be as a place to do business.
1
BERR, 2008, ‘Simple Support, Better Business: business support in 2010’
Department for Business, Enterprise and Regulatory Reform.
3
BIS website
4
European Regional Development Fund is intended to part fund business support initiatives. The balance of
funding tends to come from public sector sources.
2
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Supporting London Business Clusters
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6.4
Examples of Cluster Specific Support
6.4.1
Cluster support is about developing a specific infrastructure to attract specific types of
business and build critical mass. Critical mass promotes economies of scale meaning the
costs of support can be spread across a high number of firms. The support infrastructure
is aimed at increasing firms’ ability to upgrade products and processes and promote
specialisation through the supply chain. This in itself creates new streams of demand for
specialised inputs and services - attracting more firms to the cluster who can offer niche
products and services at a lower cost. Successful clusters are able to achieve a selfsustaining process of innovation and growth and the support infrastructure (which is often
provided by a mix of public, quasi-public, institutional and private sector bodies)
underpins this. Figure 6.1 provides examples of cluster specific support.
Figure 6.1:
6.5
Examples of Cluster Specific Support
ƒ
Bespoke training courses and mentoring for start-ups
ƒ
Technical advice, support services and expert research
ƒ
Provision of high cost facilities and equipment often out of reach to SMEs
including product development, technical and testing facilities
ƒ
Trade fairs and exhibitions dedicated to marketing the cluster’s offer
ƒ
Dissemination of business directories, industry updates and market information
ƒ
Focused networking events
ƒ
Provision of incubator and move-on premises
ƒ
Dedicated cluster champions
Business Support in Greater London
GLA Approach
6.5.2
The Mayor’s Economic Development Strategy5 (EDS) supports publicly-funded business
support programmes where it is shown to be cost effective and does not duplicate
services that can be provided efficiently by the private sector. This largely echoes recent
government efforts to streamline and simplify business support across the UK.
6.5.3
With regard to innovation, it indicates that collaborative activity between institutions (e.g.
universities, research bodies, NHS etc) should be essentially private sector-led utilising
the best professional expertise. The role of the public sector should be to facilitate
collaboration rather than lead.
6.5.4
The EDS does acknowledge that more could be done to exploit higher-educationbusiness linkages for the commercial development of ideas and that the public sector has
a role to play in making things happen. Significant public resources should only be
directed to such efforts where absolutely necessary (i.e. where the market fails to
provide) and where a return to the taxpayer can be demonstrated.
6.5.5
This does, however, represent a different emphasis from the earlier EDS which tended
towards a stronger role for business support and priority sectors (the latter of which are
outlined below). With the change of government and an incoming era of tighter public
budgets the market failure approach is likely to become more dominant.
5
See Chapter 2 of Mayor’s Economic Development Strategy 2010
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6.5.6
Furthermore, the new government of 2010 stated its intention to promote localism with
the proposed abolition RDAs including the LDA and possibly replaced with Local
Enterprise Partnerships (LEPs). This will probably mark a move away from London-wide
initiatives towards business and sector development, although its uncertain whether LDA
funded programmes will be devolved to the boroughs or any LEPs that are created.
Overview of Current Provision
6.5.7
Despite attempts to simplify the business support offer via the Solutions for Business
approach, a wide variety of assistance is still available within London boroughs. The
overall picture for business support remains therefore confusing.
6.5.8
In addition to Solutions for Business, there are ERDF funded projects, services offered by
Chambers of Commerce, enterprise development agencies, sub-regional partnerships
and local authorities. Broadly, these are set out below.
Table 6.1:
Geographical
Level
National
Regional
6.5.9
Business support hierarchy
Business Support Services Provided
Full programme of 30 Solutions for Business.
Limited selection of Solutions for Business that are funded by
the LDA plus ERDF and other pan-London programmes, e.g.
Gateway Asia, BAA Heathrow Meet the Buyers events.
Sub-regional
Mix of ERDF and other services funded by LDA and subregional partnerships targeted at sub-regions, e.g. events run
by West London Business, South London Business property
database.
Local
Similar mix to that provided at the sub-regional level with the
addition of activities delivered by or funded by the London
Boroughs. For example, ERDF projects that are targeted at
specific communities, locations or sectors; e.g. Finance for
Change programme part-funded by ERDF targets SMEs in
Croydon; Ealing Council Environmental Health Officers
working with food businesses in the borough and Barking and
Dagenham’s (with LDA) Dagenham Dock Sustainable
Industries Park.
In London there are two main streams of publicly funded business support:
1.
6.5.10
Local or sub-regional activities that are led by the Boroughs, local agencies or subregional organisations.
2.
Pan London initiatives, such as Solutions for Business – largely accessed via
Business Link London
Private sector offerings follow the national pattern, viz:
1.
2.
3.
4.
Management and specialist consultancies
Chambers of Commerce
Trade Associations
Professional bodies
Local and sub-regional activities
6.5.11
These fall into two distinct categories:
1.
Activities that are undertaken by local authorities and other statutory bodies as part
of their normal duties using in-house staff.
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Supporting London Business Clusters
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2.
Project based activities or the work of organisations funded to undertake this type
of activity, e.g. the sub-regional bodies, e.g. North London Business or Park Royal
Partnership.
On going in-house activities
6.5.12
Local authorities are under no obligation to undertake business support activities and
many choose not to do so. However, all London boroughs are required to act as planning
authorities and to undertake certain regulatory duties that have an impact on businesses,
e.g. environmental health. Furthermore, in many areas local authorities are the largest
employer and control major budgets, so they have an important role to play as buyers of
goods and services.
6.5.13
Spatial planning affects all businesses and along with the availability of suitable premises
is regularly cited as a key constraint on businesses’ ability to grow. Thus the nature of the
planning regime and provision for employment land is a key factor in determining how
attractive a location is as a place to do business. For industries with specific
premises/land requirements this can be of particular importance, e.g. the film/TV facilities
cluster in Park Royal is located there because of the availability of large sheds and easy
access to both Soho and the large studios at Shepperton and Pinewood. Premises for
start-ups and Small and Medium Enterprises (SMEs) are a major challenge within high
cost inner city areas, and local authorities such as Ealing, Enfield, Hackney and Camden
have all undertaken initiatives to make subsidised premises available. Camden’s use of a
Section 106 agreement to provide work space for designer/makers of jewellery is of
particular note.
6.5.14
Several local authorities host or sponsor events aimed at assisting SMEs gain access to
public sector procurement opportunities. These ‘meet the buyer’ and related events
enable small firms to understand better what councils purchase as well as the
procurement process. Examples include Lambeth, Haringey, Sutton, North London
Business and BAA – Heathrow (Hillingdon and Hounslow). In most cases these are
generic and not cluster specific, though Construction Marketplaces are planned by South
London Business and Camden Council hosted a similar event in 2009 around work taking
place at Kings Cross.
Project based activities
6.5.15
Local and sub-regional business support is largely provided by a mix of sub-regional
organisations, enterprise agencies and sector-based bodies. Most, if not all, of these
organisations are funded to deliver projects and do not receive core funding. Though the
City Fringe Partnership, which closed in 2009, did receive funding for its organisational
costs. GLE (was Greater London Enterprise), a major player in this arena, is owned by all
33 London boroughs.
6.5.16
The key sources of funding are:
1.
6.5.17
LDA/GLA, e.g. TfL, which provides a mix of grants and service contracts to deliver
specific activities.
2.
Other government departments
3.
ERDF
4.
Local authorities, core funds or from central government, e.g. Working
Neighbourhoods Fund, area based grant.
While it is not feasible to provide a definitive list of all the local and sub-regional
organisations and their activities, a brief overview of services and by sub-region and
selected boroughs can be found in the appendix.
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Figure 6.2:
Brief Cluster Case Study: Humberside Seafood
Despite the rapid and near total collapse of the fishing industry on England’s east
coast, Grimsby now processes some 70-80% of all the seafood consumed in the
UK. In the early 1980s this once thriving fishing town experienced unemployment
of 20% and faced a trajectory of terminal decline. Since then efforts have focused
on turning it into a global seafood processing, research, training and innovation
hub. The area is now Europe’s leading centre for processing salmon – much of it
from Norway. Companies located in the area include: Findus Group’s The Seafood
Company, Icelandic Group’s Seachill and Brake’s-owned M&J Seafoods, Young’s,
Coldwater, Sealord, and Five Star Fish (which is near completing an €8 million
investment project). Key features include a focus on innovation, a well integrated
supply chain, access to markets, a well trained labour pool and dynamic leadership
that has galvanised rivals to collaborate wherever possible. The cluster won the
inaugural Cluster Mark competition run by BIS. Much of the success is owed to the
Humber Seafood Institute (HSI) –a public-private partnership set up by the Fish
Merchants Association and Grimsby Institute of Further and Higher Education. It is
guided by a non-profit company owed by the major seafood companies. HSI
provides a range of complementary services to support the industry and in
particular gives access to incubation and managed workspace units, new product
development kitchens, refrigeration research facility, chemical and environmental
laboratory equipment as well as process hall and microbiological laboratories. The
Institute also provides practical, technical support and guidance for product
innovation and business development for the region’s seafood companies, helping
companies who might not have been able to afforded specialist services*.
Lessons include a need for radical thinking when faced with major change,
engaging the private sector, marshalling significant resources, utilising specialist
assistance and dynamic leadership.
*with assistance from Grimsby Institute of Further and Higher Education
6.6
LDA sector initiatives
6.6.1
The LDA currently supports a number of priority sectors within its overall business
support and development remit. These are cross London initiatives focused on industries
seen as emerging and/or important to London’s image as a world city including:
6.6.2
6.6.3
ƒ
Creative Industries including Film London and London Fashion
ƒ
Life Sciences Strategy
ƒ
Green Industries
Activities range from sponsoring networking and trade events such as London Fashion
Week to more interventionist projects such as providing start-up space and specialist
support facilities. Examples include support for several bio-sciences innovation/incubator
centres (of which there are several in London) and the 01zero-one centre for media
businesses. All of these are based within higher education establishments.
LDA funded projects are generally led by business, quasi-business organisations or
universities rather than the LDA itself. The Life Sciences Strategy, launched in July 2003
is coordinated through several initiatives including the Global Medical Excellence Cluster
(GMEC) which groups together leading universities in the capital, London Genetics (a
commercial venture to facilitate partnerships between industry and world class academic
and clinical centres of excellence in genetics research) and NHS Innovations which
promotes technology transfer from London NHS Trusts.
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Supporting London Business Clusters
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6.6.4
Non-sector LDA projects tend to focus on specific themes such as the Innovation
Network and Knowledge Connect which encourage networking and collaboration. The
manufacturing advisory service as part of the Solutions for Business programme covers
all production activities in London and also receives financial support from the LDA.
6.6.5
As highlighted earlier, it is unclear how or whether the above services will continue in
their present form following the proposed abolition of the LDA. It is possible that they may
continue under the GLA. Another issue is the extent to which LDA initiatives will be
pursued by local enterprise partnerships should they be formed and take over some LDA
functions. A more likely outcome is that provision of business support at the Greater
London level is likely to become more generic along the lines of the Business
Link/Solutions for Business model.
6.7
Solutions for Business
6.7.1
Within the national business support framework the products that are most obviously
aligned with assisting business clusters are Business Collaboration Networks and
Networking for Innovation. The official Solutions for Business document6 offers the
following guidance:
6.7.2
LDA indicates that 12 of the possible 30 Solutions for Business products are available to
firms operating in London, namely:
1.
2.
3.
4.
5.
Maximising Foreign Direct
Investment
Accessing International
Markets
Developing your Trade
Potential
Business Collaboration
Networks
Starting a Business
6.
7.
8.
9.
10.
11.
12.
Intensive Start-Up Support
Manufacturing Advisory
Service
Designing Demand
Innovation Advice and
Guidance
Coaching for High Growth
Enterprise Coaching
Innovation Vouchers
6.7.3
On the whole, these services are aimed at SMEs, new firms and pre-start-ups, though
some, typically innovation and export related services, are open to large companies. The
products that are most obviously aligned with assisting business clusters are Business
Collaboration Networks and Networking for Innovation. The official Solutions for Business
document guidance is outlined in table 6.2 (over page).
6.7.4
However, there is no mention of the term “cluster” within the document. This raises
questions regarding official policy towards business clusters. Furthermore, while LDA
makes reference to a number of sectors on its website, it has stated that it has no cluster
initiatives underway at present.
6
‘ Solutions for Business – funded by government’, BERR, March 2009
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Table 6.2:
Solutions for Business products relevant to clusters
Business Collaboration Networks
What’s the product?
Collaboration networks typically provide facilitated opportunities for businesses to collaborate together
to develop and pursue market opportunities which they would be unable to do on their own. They have
been established or will be established for identified growth sectors, markets or technologies within the
English regions. Collaboration networks will be developed and facilitated by appropriate organisations
in line with priorities in Regional Economic Strategies.
What does it aim to achieve?
This product will encourage collaboration and the sharing of best practice between businesses
operating in key regional sectors, markets, and technologies to exploit opportunities that stimulate and
accelerate economic growth.
Who’s eligible?
Businesses will be able to join a network, where one is available, that is relevant to the sector, market
or technology they operate within or look to move into. The composition of a network will depend upon
its focus and the sector/market/technology it is representing. Eligible businesses will primarily be small
and medium sized firms, although some networks will have more large firm participants than others.
Not every sector, market or technology will have a supported Collaboration Network.
Networking for Innovation
What’s the product?
Support to help business build relationships with knowledge base institutions to develop and exploit
new ideas.
What does it aim to achieve?
This product aims to encourage businesses to build relationships with other businesses, intermediaries,
knowledge base institutions and government – thereby improving knowledge exchange and linkages
across business supply chains and leading to more collaborative innovation activity.
Who’s eligible?
Businesses from all sectors that are interested in developing innovative products, processes or
services, or adopt new management, organisation or business models. Knowledge base institutions
who are willing to engage in networks with the primary purpose of assisting businesses to exploit
knowledge through new products, services and processes. Trade Associations and similar
organisations that wish to promote the interests of their members in the context of innovation and
regulatory frameworks.
Private sector
6.7.5
Typically, private sector based business support is delivered as management consultancy
by private firms. Within London there is a full spectrum, of both broad consultants, e.g.
accountancy based firms, and those that specialise within particular sectors/industries,
e.g. music marketing, food manufacturing, engineering etc. Furthermore, London’s status
as the leading world city means that industry leading expertise is available, should it be
required.
6.7.6
London is also home to other centres of excellence able to provide business and
technical support:
1.
2.
3.
4.
Chambers of Commerce
Education including universities and research institutes
Trade associations
Professional bodies
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6.7.7
The Chamber of Commerce movement within the UK is somewhat patchy. The London
Chamber of Commerce and Industry (LCCI) covers the whole region, it has five affiliated
local Chambers and there are a number of independent bodies. The London Chamber
offers a range of general support services such as help with exporting, legal and
personnel issues, some of which are covered by membership and others which are paid
for. However, the members have indicated that they prefer to use, and pay for, specific
support rather than rely on help offered by public agencies. This is most pronounced with
services offered by professional advisers such as accountants and lawyers. LCCI
members still continue to be confused about the range of funded support services and
how to access them.
Figure 6.3:
Brief Cluster Case Study: The case of Italian industrial districts
In the late 1970s a number of locations, or industrial districts in central/north east
Italy were identified as strongly outperforming other regions. Research indicated
that these places were home to many small firms that appeared to be prospering
through specialisation, cooperation and flexibility. A number of industries were
involved: textiles, leather, ceramic tiles and furniture. While most small firms are
unable to become leading experts due to their size, the Italian firms overcame this
by concentrating on only a small part of the overall process and relying heavily on
a vast array of subcontractors, who also specialised on their element of the overall
supply chain. This focus also meant that know-how and quality were significantly
higher than in generalised firms of a comparable size. This level of specialisation
was possible because of high levels of trust and cooperation a large part of which
was due to the local, family ownership of the businesses along with the cultural
norms of the area. The levels of trust enabled the development of more formal
institutions providing technical services, expertise, marketing and lobbying to local
government. Finally, the mix of trust and degree of outsourcing meant that there
was significant flexibility within the overall process or enterprise chain. Thus
changes in volume, specification or design could be accommodated relatively
easily. It is difficult to see how the industrial districts could be replicated in London
over the short-term especially given that the loss of much manufacturing has
reduced depth in the local supply chain for many producers. However, a parallel
does appear to exist with jewellery in Hatton Garden.
Viewpoints on Publicly Provided Business Support in London
6.7.8
Organisations such as LCCI and London First (which represents major companies based
in London) generally view the public sector role in supporting businesses in terms of
“getting the fundamentals right” to provide an environment that is amenable to growth.
This relates to areas such as planning policy to support critical mass in key and emerging
sectors, investing in the public transport network including major projects to increase and
upgrade capacity, and ensuring the tax regulatory regime is not unduly burdensome.
6.7.9
There is less enthusiasm for initiatives aimed at kick-starting growth in particular sectors
or locations. Also major investments in specialist support and facilities should only take
place where it can be demonstrated that the market has failed to provide such services
and where it can deliver value for money for the tax-payer. However it is recognised that
public intervention which aim to encourage collaboration between e.g. universities and
business or other institutions can have catalytic effect in bringing people together,
although it should be understood from the outset why such activity is not occurring in the
first place.
6.7.10
Similarly there is a degree of scepticism about the role of local authorities in providing
business support and the complex array of programmes and initiatives on offer between
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the different geographies which promotes confusion. There are also concerns about
effectiveness in dealing with basic infrastructure and procedural issues such as planning
applications and rate relief. However, the importance that generic support services can
have to small and start-up businesses locally is recognised and any scaling back of
provision should be based on a value-led approach which understands where individual
initiatives/services are having a positive impact.
6.7.11
Overall, business organisations emphasise factors fundamental to the business
environment and dealing with these effectively at both the local and regional level. This in
their view should be the priority before focusing on more tailored or specific measures.
Involvement with Universities
6.7.12
While there is a long tradition of some large and technically sophisticated businesses
engaging with universities, the extent of collaboration between academe and the broad
business community in London is still limited. While universities are largely funded by the
state, firms wishing to engage them are required to pay standard, often commercial rates.
6.7.13
Acknowledgement that innovation underpins competitiveness has led to numerous efforts
to encourage and assist firms, especially SMEs, to engage with the knowledge base. A
number of the Solutions for Business allow for businesses to work with the knowledge
base, see the appendices for examples.
6.7.14
However, there appear to be few active initiatives in London that involve universities
working with business clusters. The case studies paint a picture that shows universities in
Scandinavia having an explicit remit to work with businesses in a way that does not, in
the main, apply to the UK.
6.7.15
Trade associations such as the Association of British Pharmaceutical Industries (ABPI)
encourage inter-firm activity, and actively work to share good practice, e.g. seminars on
how to protect their brands from counterfeiters and IP thieves as well as working with the
NHS (the principal customer) to develop new products and services.
6.7.16
Professional bodies operate at an individual, rather than corporate level, though they aim
to achieve many similar goals, e.g. sharing of good practice. For example, most
professional bodies have active networking arrangements such as events and social
media to encourage interaction between members.
Figure 6.4:
Brief Cluster Case Study: Norwegian Centres of Expertise
Six regional clusters were identified in 2006 as centres of expertise. All six focused
on aspects of engineering and technology, ranging from materials, through microsystems, cybernetics and the design of advanced ships. Exports accounted for
between 60 and 90 percent of total sales indicating a significant degree of
international competitiveness. Characteristics of the clusters include: high levels
of educational attainment (Masters/PhD), a core of dominant firms that are
constantly innovating and have strong links to the national and regional
universities and research institutes, close links to demanding customers and a
willingness to collaborate. The links between business and academe mean that
many courses are developed in collaboration and reflect the needs of employers.
The overriding feature of the clusters is the heavy reliance on the innovation
regime within Norway. It is clear that the higher education system and research
institutes are overtly focused on supporting businesses. There is a clear lesson for
London: much more effort and emphasis has to go into developing links between
academe and industry if the levels of collaboration are to match those found in
Norway.
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7
Best practice approaches
Key Conclusions and Recommendations
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Geography and scale are important. Clusters generally work best at a regional, rather
than local scale. While there are clearly some clusters which are more tightly bound
such as jewellery in Hatton Garden and film/TV facilities in Park Royal, these tend to be
a key part of a larger grouping.
All cluster initiatives require some form of up-front investment. This is to map the
cluster, identify the various players, understand their needs and motivations for
involvement and establish technical matters such as supply chains and technologies.
Without this projects will be working blind and are unlikely to succeed.
Clusters can be resource intensive. The case studies show that even well bounded
clusters can consume significant amounts of funding.
Small investments can also work. Low cost projects such as hosting networking
events, producing directories or publishing a map of film/TV businesses have all
generated tangible results.
Projects have to work with the grain of business. While nearly all cluster projects
encourage businesses to commit more effort to innovation, this cannot be forced.
Firms need to accept the argument for innovation and collaboration with others before
they will commit. This is probably the greatest challenge facing any cluster initiative.
Local authorities, as planning and regulatory bodies, have a key role to play.
Understanding land use and premises requirements, as well as the impact of
regulations can make all the difference. The Uppsala case showed how the Council’s
provision of land was a key factor in attracting Pharmacia to the city.
Collaboration and engagement has to happen for clusters to work. No matter how
many businesses are present within an area, unless there is active collaboration and
engagement it is unlikely to represent a genuine cluster.
The presence of a supply chain is important. Innovation tends to be driven by firms’
attempts to meet the needs of their customers. Therefore, having at least two levels of
a supply chain within the area can help businesses engage with customers and
encourage them to seek new ways of meeting their needs.
Clusters are not for everywhere. There are limitations to what cluster initiatives can
achieve and where they are appropriate. Experience of City Growth demonstrated that
by treating the cluster approach as a panacea, it was applied under inappropriate
circumstances and failed to achieve the desired results.
The key market failure that underpins public sector involvement in cluster projects can
be characterised as “externalities and co-ordination failures”. Essentially there are too
many obstacles facing firms, especially small businesses, for them to interact and
develop the necessary trust and co-ordination.
Addressing this market failure is a common feature of all the publicly funded projects.
However, much of the cost associated with cluster projects has been incurred in
delivering a range of other services including business support. A more focused
approach could prove more cost effective.
Traditionally universities in the UK have seen themselves as independent institutions
with a remit to undertake research and teaching. The notion that they are part of the
business infrastructure is somewhat alien. This is in stark contrast to the Norwegian
and Swedish experience where there is a strong focus on supporting local businesses.
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Specific Recommendations for Boroughs and London Councils
1.
2.
3.
4.
5.
6.
7.
London Councils, working with GLA/LDA should address the co-ordination failures
that can prevent clusters from developing value-added activity. They are well placed to
engage and co-ordinate cross borough and regional support agencies (e.g Chambers
of Commerce LDA, North / South London Business) who may not be aware of cluster
developments within certain boroughs.
Likewise the Boroughs are best placed to engage with local businesses and encourage
collaboration (e.g. through focused networking events). London Councils can assist
Boroughs in advocating the needs of a local cluster to regional agencies. This could
address issues such as technical advice, specialist facilities or technology transfer.
In identifying and mapping clusters Boroughs also need to work across boundaries
with neighbouring local authorities from an early stage. The emergence of the localism
agenda and move towards Local Enterprise Partnerships (LEPs) presents an ideal
opportunity for local authorities to investigate business clusters, as LEPs will require
partnerships between local authorities covering a relevant functional economic area,
such as supply chains.
Given the various streams of generic business support on offer in the capital,
Boroughs pursuing cluster development projects should explore the possibility of
developing more tailored support from existing programmes.
The current fiscal and political climate is likely to encourage a more rigorous demand
that business support is justified on the grounds of market failure. Boroughs should
therefore proceed with caution and any cluster specific support should initially focus
on those activities to address coordination failures (e.g. identifying and mapping,
networking events, disseminating specialist research and information).
There is a case for greater involvement of London’s universities in commercialising
spin-off research. London Councils working with GLA/LDA are well placed to act as an
intermediary between Boroughs to promote collaboration between businesses with the
potential to develop research and organisations such as London Higher.
Similarly London Councils, perhaps working with an organisation such as London
Higher should consider establishing areas of expertise within the universities and
match this up with areas showing concentrations of relevant businesses.
7.2
Introduction
7.2.1
This chapter features selected cluster case studies and distils the lessons learned into a
series of best practice approaches for London.
7.2.2
There are numerous examples of clusters in the literature – too many for a
comprehensive review. However, there are relatively few detailed analyses that provide
adequate information to enable meaningful insights to be gleaned or to offer robust
lessons. Moreover, it is clear that clusters come in a range of flavours. There is no
universal pattern and clusters cannot be created using some form of ‘cookie cutter’
template.
7.2.3
What is clear is that there are recurrent themes: co-location of businesses, access to
markets and demanding consumers, close relationships along the supply chain, high
levels of competition, active labour markets, access to specialised facilities and
resources, and constant innovation. Not all the factors cited in the cases, except for colocation, feature prominently in all cases, rather they form a thread that seems to connect
those groupings of activity that are clearly recognisable as clusters.
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7.2.4
Three sets of case studies are presented: the Uppsala Bio region in Sweden; The City
Growth Strategy in London and the London Sustainable Industries Park which is still in
the process of being established. These are intended to provide insight into the cluster
development experience and .
7.3
Featured case study – Uppsala BIO
7.3.1
Uppsala is located 70km to the north of Stockholm and has a long standing reputation as
a university town and for having close links between academe and industry, particularly
biotechnology. In 2008, approximately 18% of the local workforce was directly involved in
biotech across industry, academe or government institutions. In addition to 500 life
science companies with 4000 employees, Uppsala University and the Swedish University
of Agricultural Sciences are both based within the city and employ more than 900
researchers. There is also a teaching hospital, the National Veterinary Institute, Medical
Products Agency and National Food Administration in the area, along with organisations
charged with facilitating collaboration and economic development. Within the wider
Uppsala/Stockholm region there is a population of 3million, of whom over a quarter have
a university degree. Notably the region features in the top 10% of EU regions for
innovation – alongside the East of England and the South East (London is not in this
group).
7.3.2
Uppsala’s links with life sciences can be traced back to 1950 when the company
Pharmacia moved to the city. Two key factors were responsible; high level collaboration
between the company, academics and Uppsala University and the City Council making
land available.
7.3.3
Pharmacia has, itself, also been a major catalyst within the cluster. While the company,
as it existed in the 1990s, is no longer around it has spawned numerous other businesses
and grown local employment. Essentially, the divisions that were set up to exploit various
compounds and technologies have been sold off to a mix of major pharma companies
such as Pfizer and GE Healthcare, or spun out as separate entities.
7.3.4
In 1985, STUNS (Foundation for cooperation between the universities in Uppsala, the
business sector and the community) was founded by the Uppsala County Administrative
Board, Uppsala University, SLU – the Swedish University of Agricultural Sciences, the
Municipality of Uppsala, the County Council of Uppsala and the Chamber of Commerce
for Uppsala County in order to facilitate collaboration between the universities, business
and the public sector.
7.3.5
It was set up specifically to initiate and support projects of common interest that did not
fully fit the remit of each individual partner. STUNS now supports a limited number of
initiatives including Uppsala Innovation Centre and Uppsala BIO.
7.3.6
STUNS created Uppsala BIO in 2003 to enhance the competitiveness of the life science
cluster. It does this via six key activities:
1.
2.
3.
4.
5.
6.
Verify: takes ideas into proof-of-concept.
Commercialise: assists in business start-ups.
Grow: supports the development of young and mature companies.
Network: enhances professional contacts through face to face meetings and
online.
Educate: provides both short-term training and long term education programmes.
Reach Out: assists in marketing the region’s life science sector, both locally and
globally.
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Supporting London Business Clusters
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7.3.7
These are seen as a virtuous circle, with inward investment resulting from the reach out
phase leading to further research and the discovery of new chemical entities or medical
technologies. Specific initiatives include:
ƒ The Uppsala BIO-X, a cross-disciplinary focused research programme. It seeks to
bridge the phase between research findings and proof-of-concept, a particularly
difficult element in the development of any new technology/chemical entity. Financing
is combined with active support for product development and early contacts with a
prospective market. The goal is to generate a commercially ‘interesting’ proposition
that can either attract development funding itself or be acquired by an established life
science company.
ƒ A co-ordinated approach to bringing together support around Uppsala Innovation
Centre. Despite the breadth and depth of academic and agency support available
locally, not all of this was easily accessible from a central location.
ƒ The creation of Stockholm-Uppsala Life Science, a joint marketing initiative between
Uppsala, Stockholm and Strängnäs, where Pfizer has recently opened a state-of-the –
art biologicals plant, to market the region’s life science capabilities abroad. This
includes ensuring that any
potential inward investor is
carefully nurtured and
provided with suitable
contacts and introductions.
Uppsala BIO also acts as
an interface between
investors and funders, e.g.
EU to minimise the
administrative burdens
involved.
ƒ The events programme
covers a broad spectrum of
topics related to life
sciences. This spans
technical conferences
through to business
focused sessions on PR and media.
ƒ Uppsala BIO is run by a core team of six together with project based staff recruited on
an as-required basis. Funding is largely provided by Vinnova, the Swedish
Governmental Agency for Innovation Systems.
7.3.8
Over the five year period 2003-8 employment within life sciences has grown by 12% and
the turnover of businesses by 55%.
7.3.9
As a note of caution, research undertaken by the Stockholm School of Economics
suggests that the public sector has higher expectations of the impact of Uppsala BIO as a
cluster initiative than those in the business sector. The research does not undermine the
value of the cluster initiative but rather highlights the different goals and objectives of the
partners involved, e.g. businesses need to focus on short-term financial returns, whereas
public agencies seek to promote science and innovation.
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7.3.10
The lessons for London from the Uppsala experience include:
1.
Relationships between academe and business are built around individuals and take
time to develop. Uppsala BIO was set up over 50 years after Pharmacia moved to the
city and built on established relationships across numerous organisations.
2.
Long-term nature of the project – Uppsala BIO has now been going over seven years
and still retains a staff of six. Moreover, networking activity is still needed despite the
fact that the key institutions such as the MPA, universities, teaching hospital and
businesses have been in the city for many years.
3.
Innovation is a clear priority for Sweden. This commitment is put into practice through
Innova, a government agency charged with making “Sweden a leading research
nation”. There does not appear to be any direct UK comparison, rather it appears as
an amalgam of BIS, NESTA (National Endowment for Science, Technology and the
Arts) and the RDAs. This suggests that it may be difficult to replicate in the UK.
Certainly, London’s Bioscience Innovation Park, run by the National Veterinary
College, represents only a small part of the Uppsala BIO model.
4.
Sweden, along with the other Scandinavian countries places greater reliance on the
public sector than the UK. Therefore, public agencies are expected to take the lead in
delivering this type of activity, as STUNS have clearly done in the case of Uppsala.
5.
Scale: while Uppsala is small compared to London, the project covers the whole city.
In addition promotional activities involve a much wider region: Uppsala – Stockholm Strängnäs.
6.
Land and planning issues are important even in a sparsely populated country such as
Sweden. Making land available was a prime reason for Pharmacia relocating to
Uppsala.
7.
Highly technical nature of the assistance and support: For example, the BIO-X
programme relies on leading scientists and other professionals with hands-on
knowledge of drug development, regulation and financing. This cannot be left to
generalist project managers and support staff.
8.
It is likely that the partners in any such initiative will have differing goals and
expectations. These need to be identified from the outset and a range of activities
generated that allow each party to generate the returns that they require.
7.4
City Growth Clusters in London
7.4.1
The City Growth programme was launched as a pilot initiative in 2002. Based on the work
of Michael Porter it sought to adopt a business-led approach to the economic
regeneration of inner city areas. Rather than focusing on deprivation and the problems of
run down areas, it aimed to build on the inherent strengths to be found in many inner
cities, namely; good infrastructure and communications, concentrated demand, available
labour and proximity to thriving business districts. Business clusters formed the
centrepiece of the City Growth approach. Four locations within London were selected for
the pilot and a further three in 2004. The two rounds of City Growth led to a number of
cluster initiatives being set up. Below we feature the case of the Park Royal Food Cluster
followed by brief overviews of the other projects.
Park Royal Food Cluster
7.4.2
Park Royal was developed for industrial use mainly during the 1930s. For many years it
was a centre of engineering, with firms including Park Royal Vehicles, GKN and Landis
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and Gyr. In more recent years it has become a centre for food processing and
wholesaling, film/TV facilities, warehousing and a broad mix of other industrial uses.
7.4.3
The Edwardian heritage of the site, with narrow roads and relatively small floorplates,
coupled with major industrial restructuring meant that the Park Royal estate was in
serious decline by the 1980s. To address this the Western Arc programme was set up
comprising an area covering Park Royal, Wembley and White City. Research for the City
Growth strategy identified three clusters of note: food and drink, film and TV and transport
and logistics.
7.4.4
Food and drink is the largest of the clusters, with approximately 16,000 employees in
2002, which represented a location quotient of 4.57 and representing 17% of all
employees in the Western Arc area. Major employers include: Katsouris, McVities,
Bestway, Greencore, and
Bighams.
7.4.5
The research also indicated a range of strengths, weaknesses, opportunities and threats:
Table 7.1:
7.4.6
Strengths
ƒ Strong local supply chain
ƒ Proximity to the central London market
ƒ Strong labour pool
ƒ Availability of premises
ƒ Strong ethnic community
ƒ History of food innovation
ƒ Local business support services
Weaknesses
ƒ Skills shortages in basic and middle
management
ƒ Need for better pre-screening of job
candidates
ƒ Lack of cold storage facilities
ƒ Lack of support for innovation and
productivity improvement
Opportunities
ƒ Growth in the demand for ethnic foods
ƒ Growth in export demand for ethnic foods
ƒ Growing demand for health and
convenience foods
ƒ Potential for collaborative purchasing
ƒ Wembley development
Threats
ƒ Regulatory burdens
ƒ Potential relocation of businesses
out of the area
ƒ Product imitation
ƒ Increased insurance premiums
The strategy sought to focus development activity on:
1.
2.
3.
4.
5.
7.4.7
SWOT Park Royal food manufacturing cluster
Enhancing collaboration between companies
Developing links between businesses and the education system
Streamlining the recruitment process
Enhancing skills, including basic food hygiene and management
Developing a food hub capable of delivering targeted business support,
training,incubator space and a development kitchen
To date the following have been undertaken:
1.
7
A food Cluster Action Team was set up.
This means that there are 4.5 times the number of employees compared to the London average.
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Supporting London Business Clusters
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2.
7.4.8
Delivery of a range of seminars and workshops on various aspects of food
technology and marketing.
3.
Food hygiene courses have been delivered in a variety of languages including
Polish and Guajarati.
4.
Park Royal Workforce has undertaken pre-screening recruitment for a number of
food processors.
5.
Networking events.
6.
A feasibility study into setting up a food innovation centre.
The latter led to proposals for a food innovation centre. However, the study was unable to
establish potential revenues with any certainty due to the fact that new start-ups were the
most likely users of the development kitchen yet were the least able to pay. Larger and
more established businesses capable of paying market rates tend to have their own
facilities and are generally unwilling to share premises.
7.4.9
As a consequence it was decided that a pilot programme be set up using rented
accommodation and supported with revenue, rather than capital funding. This would
enable the concept to be tested fully and viability be established with more certainty.
7.4.10
After securing funds from ERDF the pilot was set up in late 2009 with the scheme
scheduled to run until the end of March 2011. It was intended from the outset that the
centre should be financially self-sufficient and not reliant on public subsidy.
7.4.11
The centre provides a state-of-the art development kitchen, training suite and offices, and
is intended to act as a hub for food processing, manufacturing and packing companies
across London.
7.4.12
The lessons for London from the Park Royal experience include:
1.
Developing a significant project takes time and involves significant development
costs. The feasibility study itself cost £50,000 and took four months to complete.
2.
Establishing financial viability is an art rather than an exact science. Despite being
undertaken by an established and reputable firm of accountants, the feasibility
study was unable to establish potential with any degree of certainty. This led to the
adoption of a pilot project whose performance could be evaluated after the fact with
much greater reliability. Should the results indicate that the project is viable a
robust business plan can be prepared.
3.
Geographically constrained cluster projects are feasible providing that there is
adequate breadth and depth of activity.
4.
Securing ERDF funding, while relatively straight forward is onerous and time
consuming. Furthermore, the current financial climate means that match funding is
difficult to win, so development budgets are constrained. Alternative sources of
funding and resourcing projects need to be found.
5.
A consistent and persistent approach over a period of time can achieve significant
results with relatively limited budgets.
Haringey
7.4.13
The City Growth strategy secured over £770,000 in funding for implementation and
cluster activities. This was spread across five clusters. The majority of the funding was
allocated to consultants to work with the clusters to form Cluster Action Teams (CAT).
These groups, made up primarily of business people, were intended to lead efforts to
promote collaboration and joint working for mutual benefit. It was hoped that this activity
would lead to increased levels of innovation, sales, employment and inward investment.
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Each CAT was expected to prepare a business plan which could be used to access
£20,000 to fund development work, e.g. set up websites, joint marketing etc. Three out of
the five initial clusters managed to achieve some sort of outcome. The remaining two
floundered due to a range of practical and political difficulties.
Creative and Cultural industries
7.4.14
Research for the City Growth strategy identified concentrations of creative businesses
based in and around the Chocolate Factory complex in Wood Green and the Hermitage
Road/Vale Road area of Seven Sisters. Haringey Arts (HA!) was established in 2008 as
the CAT to deliver the ambitions for the creative and cultural industries. The central aim
was for HA! to act as an agency for artists and creative businesses in the borough.
7.4.15
Actions included:
7.4.16
ƒ
Engaging the local creative community and getting them to sign up to HA!
ƒ
Facilitating a range of self-help and peer-to-peer support initiatives
ƒ
Setting up a Community Interest Company
ƒ
Arranging planned and impromptu showcase events
ƒ
Organising a launch event in Markfield Park
ƒ
Helping members of HA! secure funding for their businesses and projects
Despite the high levels of activity, the formal evaluation found that tangible outcomes for
businesses were limited. However, it appears that HA! is still operating as an informal
network now that funding has come to an end, so benefits may be generated into the
future.
City Fringe
7.4.17
The City Fringe comprises 13 wards straddling four boroughs (Hackney, Camden,
Islington and Tower Hamlets) bordering the City of London. It is home to some 25,000
businesses and 400,000 employees. It was by far the largest of all the City Growth areas
in London. The City Fringe provides stark contrasts with great wealth and poverty
juxtaposed with each other. A total of six cluster projects (jewellery, fashion, furniture,
publishing and print, visitor economy and health/social care) were developed, of which
jewellery was the most ambitious.
Business tourism – London MICE
7.4.18
This area of activity is usually referred to as MICE (Meetings Incentives Conferences and
Exhibitions) by those in the industry. The choice was largely determined by the
recruitment of a dynamic Business Champion who was passionate to promote and
enhance his industry. He was the chief executive of a growing events business and
wanted to see the MICE cluster prosper. A CAT was formed and incorporated as a
company limited by guarantee. The cluster took on a part-time manager and prepared a
business plan that sought to achieve financial self-sufficiency in 3 years.
7.4.19
Activities included:
1.
2.
3.
4.
5.
Development of an online business directory and showcase for MICE businesses
located in the area
An ambitious programme of networking events
Attempts to engage with key organisations such as Visit London
A series of meet the buyer events focused on large corporate, rather than the
public sector
Reciprocal arrangements with other event managers and MICE organisations
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7.4.20
By late 2008 over 2000 MICE businesses were registered on the online directory.
However, by the time funding ran out full financial self-sufficiency had not been achieved
and the activities of London MICE were taken over by London Launch, a commercial
organisation undertaking similar work.
7.4.21
Figure 7.1: The Anatomy of the MICE Cluster (next page)
Film and TV facilities
7.4.22
After publication of the City Growth strategy, Park Royal Partnership was awarded
£120,000 in funding to kick-start implementation. Research underpinning the strategy
identified a major hotspot in film/TV activity in the White City, Ealing and Park Royal
triangle. Specifically, this included: production companies, casting agents, set
construction, studios, camera and equipment hire, model makers, motion control, post
production, prop hire, record companies, special effects and specialist transport. Within
Park Royal the emphasis was on faculties, e.g. props, equipment and studios. A CAT
was formed under the aegis of Park Royal Partnership that reflected the businesses in
the area. While some funds were made available for activities such as specialist business
support, the CAT chose to focus efforts on promoting the capabilities of local businesses.
7.4.23
Thus actions included:
1.
2.
3.
4.
5.
Developing a website to promote local businesses and showcase capabilities
(www.westlondonmediahub.com)
Preparation of a cluster map showing some 200 businesses for use by props
buyers, agents etc.
Networking events – based at local premises
Advertising on hoardings and black cabs
A mentoring scheme for the owners/managers of small firms
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Supporting London Business Clusters
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7.4.24
Following the ending of funding most of the formal activity has ceased, though the
industry is still well connected through established networks.
7.4.25
A number of lessons can be taken from the various City Growth cluster projects. These
include:
1.
The local scale of the City Growth clusters was much smaller than that originally
proposed by Porter8. As a consequence, few of the cluster projects contained the depth
or breadth of businesses necessary to generate self-sustaining activity. Even the more
successful projects such as jewellery in Hatton Garden and London MICE eventually
widened their scope to the whole of London. Local clusters need to be considered with
caution and initiatives only considered where there are appropriate conditions, e.g.
very high concentrations such as in Hatton Garden.
2.
The cluster message, as delivered by Porter, can be compelling to the point where it is
implemented inappropriately. Several City Growth strategies selected clusters based
on weak evidence in order to “fill their quota of clusters”. It is important that cluster
initiatives are considered as an option, rather than as a panacea.
3.
True clusters require more than just co-location. There needs to be high levels of
interaction and inter-dependence between the various players. Attempts to set up
cluster projects with printers in London South Central and logistics in Park Royal were
abandoned when firms were unwilling to engage with each other.
4.
Clusters work best where there are shared needs that drive businesses and other
parties to collaborate. This was demonstrated in the Hatton Garden Jewellery and Park
Royal Food clusters where firms came together to support the provision of work space
and a food innovation centre.
5.
Businesses and other organisations need to generate tangible returns if they are to
engage and retain an interest. Most cluster initiatives failed to achieve these over the
period of funding, resulting in a fall-off in participation. Haringey Arts and Food
clusters maintained momentum as they continued to provide tangible assistance by
acting as a hub for artists and promoting members’ produce to local buyers. Projects
need to understand the motivations of the various partners and the resources and time
scales required to generate these.
6.
The objectives of public sector funders and businesses do not always align and
administrative burdens can smother enterprise. Specifically, London MICE saw its
future in building relationships and helping members win business, whereas the Pool
of London Partnership and LDA were seeking job and training outputs. In addition the
monitoring regime meant that the manager became preoccupied with paperwork and
was unable to focus on meeting the needs of members.
7.
Cluster projects can be expensive. The six cluster projects run in the City Fringe cost a
total of over £7.7m and resulted in 55 jobs being created, or £140,000 per job. While
jobs may not be the most appropriate measure to use, the returns in relation to costs
need to be understood.
8.
Not all cluster projects demand high levels of public funding. The Haringey Food
cluster achieved significant success by putting the manager of the local Budgens in
touch with local manufacturers. The supermarket now acts as a showcase for local
produce. The cost of this was minimal, yet generated worthwhile returns.
9.
Cluster projects tend to generate multiple returns. In terms of public policy these
include: job creation, job safeguarding, skills development, private sector investment
and co-ordination between public agencies. The evaluation of the North London City
8
Porter considered that a working radius of “half a day’s drive” was the limit of an ideal cluster.
47
Supporting London Business Clusters
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Growth programme (Haringey) indicated that these were, to a greater or lesser extent,
achieved.
10.
Cluster projects take time to become self-sustaining. Very few of the City Growth
cluster initiatives became financially sustainable following three years of support. The
Hatton Garden jewellery cluster attracted support for longest of all the City Growth
initiatives. This gave it the greatest opportunity to generate some form of sustainability
despite the closure of the City Fringe Partnership in 2009.
11.
There is the potential for legacy benefits. Both Hatton Garden and Haringey Arts have
shown that cluster based activities can live on after public funding has ceased. This
suggests that focusing in on building relationships, a common sense of purpose and
an agenda of work are vital elements in any cluster project.
7.4.26
Experiences of further London projects under the City Growth Strategy are outlined in the
appendix:
ƒ
ƒ
ƒ
ƒ
ƒ
Food and Drink – Haringey-wide
Sports and Leisure – Tottenham Partnership
London South Central
London Business B2B
Western Arc
7.5
Work in Progress: London Sustainable Industries Park (SIP)
7.5.1
The Sustainable Industries Park (SIP) at Dagenham Dock was initially the vision of the
London Borough of Barking and Dagenham. It is intended to provide the largest
concentration of industries involved in sustainable technology in the UK by occupying a
previously developed 125,000 sqm site. Part of the site was originally owned by LDA as
part of the Green Enterprise District but was eventually consolidated with London
Thames Gateway Development Corporation’s (LTGDC) holding who, together with the
Borough, brought forward a masterplan for the development of SIP.
7.5.2
The basis of the SIP masterplan is to develop an embedded green infrastructure for
emerging industries built around the areas of recycling operations, energy efficiency,
‘green linkages’ between businesses, transportation and waste minimisation. Currently
activities and plans at the site are:
ƒ
ƒ
ƒ
ƒ
ƒ
7.5.3
Closed Loop – a major plastics recycling facility with existing plans for an extension
Waste to Energy Plant – sustainable heat and power currently in planning
application
Anaerobic Digestion Plant – currently out to tender
Terms agreed for a paper recycling facility
Proposals for the Institute for Sustainability to be based on the Park
The aspiration is that these large core operations will help to fund the infrastructure for
the site and set high environmental standards that will eventually become fundamental
attractors of other green businesses. There are existing non-green industrial activities in
the wider Dagenham Dock area and it envisaged that these will begin to adopt
environmental technologies and practices, and in the process, also utilise the green
infrastructure. Examples include the creation of ‘green chains’ (eg waste products from
one business used as resource inputs for another) which is currently facilitated by
Dagenham Dock Occupiers Forum. This promotes collaboration among the new and
existing businesses to solve basic problems such as transport, but also to understand
where the sustainable processes could be integrated into their operations.
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7.5.4
The Institute for Sustainability (IoS) is part funded by the University of East London and
will provide research, training, incubator and a range of specialised business services at
the Park. This will assist with product and process development in environmental
technologies, dissemination of best practice, advice with regard to patent development
and technology transfer, networking and conference/workshop facilities for green
businesses and promoting better environmental management by existing businesses at
Dagenham Dock. The model is very similar to the Service Centre model common in
Italian business clusters and is viewed as crucial to the development the brand image of
the Park as the leading green industry location. Once the IoS is established it will offer a
significant competitive advantage over alternative sites focused on green technology and
green oriented industries.
7.5.5
The LTGDC are coordinating the development of plots and the types of businesses that
can locate at SIP. They assist with meeting environmental regulations for potential
tenants and also stipulate a number of criteria with regard to lettings as follows:
1.
Industrial Symbiosis – any occupier should be aware of and exploit the
opportunities, where feasible, to harness the potential synergies between its own
activities, particularly in relation to recycled products, energy production and
consumption, and those of other businesses on the SIP and neighbouring sites.
2.
Environmental Strategic Priorities – any occupier should be a contributor to the
local, regional and national environmental priorities - particularly in reducing carbon
dioxide emissions in line with the Government’s 2050 targets, through its own
business and supply chain activities and those of its product(s).
3.
Local Supply Chain – any occupier should harness, utilise and add value to
products sourced from across East London and the region, where practical.
4.
Local Customer Base – any occupier should engage with and sell to the local
market where possible, although not to the exclusion of wider regional, national
and international opportunities.
5.
Employment Opportunities – any occupier should be engaged with and actively
draw on the local labour market and, where appropriate, local education facilities,
and act to develop and foster skills in the environmental technologies, renewable
energy and resource efficiencies sector.
6.
Building Strategy - any occupier will deliver built space at LSIP to at least BREEAM
'Excellent' and seek to fully utilise and improve the site's sustainable infrastructure
in other ways which are not captured by the prevailing BREEAM rating system.
7.
Research and Development – any occupier, where appropriate, should seek to
promote research and development, using the Institute for Sustainability (IfS)
where appropriate, to deliver innovative product(s) and actively engage the
regional centres of excellence in their sector, e.g. research facilities at Universities.
7.5.6
In summary the SIP initiative can be viewed as a public sector-led intervention to promote
a growth industry through the provision of (1) hard infrastructure – both basic (ie roads
and drains) and specific (recycling, waste and energy); (2) setting standards to attract the
right kind of firms; and (3) soft infrastructure – the diffusion of information, knowledge and
expertise through the presence of the Institute for Sustainability. This, it is envisaged, will
create the right conditions for a critical mass of businesses and functions to develop at
the Park and set the clustering process in motion.
7.5.7
In the next chapter we develop the above conclusions into a cluster development toolkit
for local authorities.
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8
Clusters: Development Toolkit
8.1.1
This toolkit is intended to provide local authorities considering cluster based projects with
some practical guidance. It is not intended to provide a comprehensive manual on
defining a cluster, engaging businesses or the types of action to take. Rather it is
presented as a mix of first hand experience and suggestions on what Boroughs can do to
make a difference.
8.1.2
The toolkit is set out in three sections:
ƒ
ƒ
ƒ
An overview of the key steps
A schematic diagram of the steps
A list of the tasks in detail
8.2
Overview
8.2.1
We believe that any cluster initiative is predicated on the following key steps:
1.
2.
3.
4.
5.
6.
Establish that a cluster approach is appropriate.
Undertake research to understand the nature of local activities and how they may
fit into a wider arrangement.
Engage fully with the businesses and other partners such as trade bodies and
research institutes.
Set meaningful (SMART) objectives.
Develop and implement the workplan with each partner focusing on their areas of
strength.
Monitor, evaluate, learn and feed-back.
8.3
Guide to Applying the Toolkit
8.3.1
Key to all cluster initiatives is to ensure that this an appropriate approach to the challenge
at hand. The evidence provided by City Growth, amongst others, is that the inappropriate
use of cluster approaches is unhelpful and can lead to a significant waste of resources.
Thus the first stage of any project is to ensure that a cluster exists or there is sufficient
evidence to suggest that one might be present. Anecdotal information on similar
companies working together or moving into the area can provide an indication that some
form of clustering is taking place.
8.3.2
Once there is some reasonable evidence, anecdotal or otherwise a preliminary decision
can be made to go ahead and investigate further.
8.3.3
If the decision is to investigate further, a more detailed review will be needed that involves
both desk work and meeting the businesses along with other interested parties, e.g.
Universities, research bodies, trade associations etc. The aim is to assemble a detailed
evidence base about the cluster including the extent and nature of its activities along with
any challenges and opportunities that are faced and which the Council can help address.
8.3.4
A final decision is then needed on whether a cluster project is warranted or not. It is likely
that any such project will require the cooperation and involvement of neighbouring
boroughs and the application of resources, so the decision will not be trivial.
8.3.5
A decision to go ahead will demand further engagement with businesses and the
preparation of a detailed action plan with SMART objectives. It will be vital to ensure that
there is common understanding about what the project is intended to achieve for each of
the parties. The case studies indicated that tensions, misunderstandings and possible
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Supporting London Business Clusters
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conflicts can arise between public and private sector partners if this aspect is not
addressed fully at the outset.
8.3.6
The action plan needs to be implemented according to the plan.
8.3.7
The monitoring, evaluation and learning elements are vitally important if resources are to
be applied intelligently and goals for economic development are to be met.
8.3.8
The remainder of this chapter contains an outline of the steps within the cluster
development toolkit and details actions for each step in table 7.1.
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Supporting London Business Clusters
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8.4
Steps for the Cluster Toolkit
Available evidence
suggest that a cluster
is present
Decision taken to
investigate local
cluster with a view to
supporting it
No
Maintain watching
brief in relation to
statutory duties, e.g.
LDF/LEA
Undertake
preliminary work to
establish potential
Confirm
cluster
project
appropriate
Yes
Engage businesses
further. Set
objectives & metrics.
Develop agenda.
Prepare & undertake
programme of work.
Monitor
Evaluate
Learn
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Table 8.1: Tasks in Detail
Task
Justification
Assess available evidence
Evidence/Metrics
Review apparent concentrations
Assessment of whether a cluster is
Obvious collection of
of businesses
present
businesses
Investigate whether linkages exist
– undertake fieldwork
Consider local component of panFull extent of cluster not
Indications of ‘connections’
London cluster
immediately apparent
across London
Decide whether to investigate apparent cluster with view to supporting it
Initial assessment only on the
Resources will be required in
What might the returns be in
importance of the cluster. Is it
terms of time and effort
terms of jobs, local
worth the Borough investing
procurement and spending by
resources to support it?
employees?
Consider value of local cluster
What is the value of the cluster
Orders of magnitude only at
activities. This will include:
and how important is it to the local
this stage.
ƒ The number and type of jobs;
economy. Does it warrant further
skills and educational
investigation and possible
attainment
investment?
ƒ Occupation; senior
management or low level
processing
ƒ Value added activities, e.g.
manufacturing
ƒ Supply chains; extent of local
procurement
ƒ Ownership; how much of this
is local, regional or foreign
ƒ Innovation; to what extent is
this a sector that features
innovation?
Preliminary work to investigate the cluster and its potential (after decision has been taken to
proceed)
Map cluster:
There needs to be adequate
LQ of at least 1.25 and 0.2%
ƒ Establish activities undertaken
of total employment must
activity and co-location of
(UK SIC4)
apply at UK SIC 4 level.
businesses for cluster conditions
ƒ Establish employment and
to apply.
establishments
ƒ Calculate LQs
ƒ Establish growth/decline
Meet businesses to gain insights
The nature of the cluster has to be
across key issues:
understood
ƒ Extent of connections within
borough and across London.
ƒ Nature of interaction between
businesses.
ƒ Rationale for location.
ƒ Reliance on external support,
e.g. universities, business
support etc.
ƒ Nature of supply chains and
local sourcing.
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Task
Justification
Evidence/Metrics
From meetings with businesses
Without a clear understanding of
establish in broad outline what
the major issues it will not be
needs to be done to:
possible to establish whether a
ƒ Overcome obstacles
cluster initiative will be useful.
ƒ Assist growth
Extent to which land use is
Identify what the Borough could
Is the Borough in a position to add
value or not?
important.
do to assist firms prosper. Key
Impact of regulatory services.
issues are likely to include:
ƒ Land use
ƒ Any special requirements, e.g.
large floorplates, high levels of
traffic
ƒ Access to public transport
Interaction with regulatory
bodies, e.g. health and safety
etc.
ƒ Does the Borough purchase
any of these
products/services?
ƒ What can secondary schools
do to assist local sectors – e.g
training and business
mentoring?
Decision: Is a cluster initiative appropriate and what role should the Borough play?
Answer: No
Maintain watching brief and
The cluster may still be important
Ensure that the Borough is
engage with any relevant activities
to the local economy. The
engaged as an active partner
being undertaken by other
to any initiative.
Borough may be able to add value
organisations, e.g. LDA.
Quarterly briefings required.
even if it is not the lead player of
any initiative.
Answer: Yes
Engage businesses and set up project
Engage with businesses to
The businesses are the main
The Porter Diamond provides
understand the cluster in more
a useful benchmark of what
source of information and the
detail, eg:
needs to be known about the
driver of any cluster project.
Build relationships with key
cluster.
Getting companies to engage is
businesses including any major
the key challenge faced by any
companies and leading SMEs.
initiative. Only businesses will be
Develop a full directory of the
able to make this happen so a
companies involved in the cluster.
strong relationship with companies
Identify all other support agencies,
is fundamental.
e.g. universities, trade bodies,
agencies etc.
It is vital that the key features of
Map the main supply chains.
the cluster are understood if an
Identify any major gaps or
effective project is to be run and
vulnerabilities.
resources used wisely.
Identify the key issues faced, e.g.
poor margins, international
competition, changing legislation
and what actions can be taken to
address these, e.g. support to
undertake value engineering
The key challenges will set the
development agenda.
The list of issues should be
comprehensive but focus
clearly on the main challenges,
not just those of interest to the
project funders.
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Supporting London Business Clusters
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Task
studies, how to understand client
requirements better, access to
support for innovation.
Set out objectives for all the
partners – note these may not
coincide!
Justification
Without a clear and explicit set of
objectives the project is destined
to fail. The review of best practice
indicated that the private and
public sectors are likely to want
different things from any cluster
project. Making this explicit from
the outset will help build rapport,
trust and lead to more coordinated
effort.
Prepare and undertake the work plan
Develop a work plan aimed at
Building trust and getting firms to
achieving the objectives. The
engage takes effort and needs to
evidence of the best practice
be factored in.
cases indicates that cluster
Expectations need to be managed.
projects are long term initiatives.
Anticipating major results in the
short term may compromise the
ability to achieve the key
objectives.
Evidence/Metrics
Objectives should be limited in
number and SMART.
A minimum time scale of 3-5
years needs to be anticipated.
Use value for money metrics
(available from BIS or LDA) to
establish what can be
expected.
Note business start ups can
only be counted once firms
have been trading for 12
months.
Potential activities that Boroughs can lead on:
Including the cluster in any work
Boroughs have responsibility for
Ensure that cluster based
on the Local Economic
key activities that impact on
companies are contacted with
Assessment (LEA). The LEA
businesses. How well local
fact sheets and provided with
provides an ideal opportunity to
contact details for each
authorities discharge these
collect information and intelligence
service.
responsibilities can have a
on local clusters.
significant impact.
Ensure that the planning regime
takes account of the cluster. This
will include:
Ensuring that relevant land use
needs are known about, e.g. land
use classes involved, typical size
and facilities required and any
special requirements e.g. chimney
for restaurants, food production.
Anticipating potential
growth/decline and factoring this
into the Local Development
Framework (LDF) and plans for
employment land.
Identifying what activities of the
cluster may involve regulations
that fall under the control of the
Borough, e.g., health and safety,
fire safety, environmental health,
trading standards and alcohol
licensing. Put in place
arrangements to ensure that
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Supporting London Business Clusters
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Task
businesses are fully aware of the
regulations and any help to
achieve these.
Ensure that there is a cluster
champion within the Borough.
This is likely to be a member of
the Economic Development team.
The champion should seek to:
Understand the fundamentals of
the cluster, e.g. products,
services, trends, major changes
etc.
Meet businesses on a regular
basis and have a working
relationship with the main ones.
Be informed of new developments
through journals and websites.
Be aware of legislation and
regulations affecting the cluster,
implications and what role the
Borough may play in
implementation.
Engage and brief relevant senior
executives and elected members,
e.g. Cabinet member responsible
for the economy, about the cluster
on a regular basis.
Arrange for elected members to
visit key companies in the cluster.
Develop links with external
agencies such as trade bodies,
universities, LDA and other bodies
that impact the cluster.
Engage with other Boroughs that
have interests in the same cluster.
Where necessary set up Multi
Area Agreements (MAA) to
ensure that efforts are coordinated. Consider use of
shared resources, e.g. a cluster
champion, access to data,
research projects etc.
Boroughs can submit proposals to
ERDF to win additional resources.
Actions that a (group of)
Borough(s) may seek to sponsor
may include:
Networking events.
Cluster-focused Meet the Buyer
events.
Events to inform companies about
public sector procurement.
Events that bring together
businesses with public sector led
Justification
Evidence/Metrics
Local authorities are being given
increasing responsibilities and
resources for economic
development. Being informed
about local conditions is a prerequisite for any action and
supports decision making.
The effort should be
proportionate to the cluster
and its importance.
Overt support from elected
members demonstrates
commitment and helps build
rapport.
Quarterly briefings.
Up to 8 meetings per annum
by elected members, e.g. 2
per quarter.
Pan London cluster initiatives may
overlook the Boroughs, so
proactive engagement may be
required.
Few, if any clusters, will be
contained within a single Borough.
An MAA could provide an
opportunity to formalise
arrangements, share resources
and gain access to additional
facilities, e.g. replicate some of the
features of a cluster.
Quarterly/biannual updates or
more frequent depending on
level of activity.
Boroughs are well placed to
provide a convenient portal for
businesses to engage the public
sector.
As required. A quarterly event
should maintain the profile of
the Borough to businesses.
As required.
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Supporting London Business Clusters
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Task
agencies e.g. universities.
Acting as a portal to its own
services and the wider public
sector and how to engage it, i.e.
the one stop shop approach.
Implement the workplan.
It is important that the workplan is
both challenging but realistic.
Unmet expectations are likely to
be seen as more detrimental than
overachieving is seen as positive.
Actions should be allocated to
organisations whose core remits
most closely relate to the activity
planned. In this way costs will be
minimised and the likelihood of
action taking place to plan
maximised.
In line with standard project
management, activities need to be
monitored and changes
implemented where necessary.
Evaluation is becoming an
increasingly important tool in
assessing performance and
learning lessons.
It is vital that the lessons learned
from the evaluation are captured
and disseminated widely. Without
this performance is unlikely to
improve and the benefits of good
practice lost.
Justification
The workplan will place burdens
on staff that are already hard
pressed and demand resources
which are limited. Thus
expectations need to be managed
and a realistic view taken of what
can be achieved.
Monitor performance
Standard good practice. PRINCE2
is becoming a standard approach
for project management.
Evaluate
Standard good practice.
Learn lessons
Standard good practice.
Evidence/Metrics
As required.
As per the project
management plan.
The RDA Impact Evaluation
Framework sets out the
requirements for evaluating
major projects. ERDF
guidelines are also available
for smaller projects.
Reports, and presentations
available from the partners’
websites.
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Appendix 1: The Clustering Process
8.5
The Clustering process
8.5.1
So far we have highlighted the conditions supporting the existence of clusters and that
these are often maximised in dense urban areas. The concentration of certain types of
business is can be plainly observable (e.g. solicitors located around courts, bookshops
around universities) but the development of a cluster requires regular and intense
interactions between firms and clients that go beyond everyday business to business or
client to business transactions. Growing clusters and those that can adapt to a changing
business environment often contain strong linkages between firms, suppliers and
supporting institutions that exist throughout the supply chain.
An example: the Castellano ceramics district
8.5.2
As an up-front illustration of the components of a business cluster we have taken the
example of the ceramics industry in Castellano, Southern Spain (this could be applied
plausible to any business cluster). The region is one of 4 districts around the world that
are responsible for 40% of global ceramics production, with the majority of tile
manufacturers, suppliers and services concentrated within an radius of 30km. There is
the presence of several major producers and product purchasers, but the production
process is largely divided up between a plethora of SMEs which allows them specialise in
complementary phases of production.
8.5.3
There is a high level of subcontracting throughout the supply chain from manufacturing of
raw inputs such as clay, frit and glaze to tile colourers, glazers, designers, to tile
manufacturers, machinery makers and machine components through to retailers and
end-users. This promotes competition, specialisation and the ability to produce highly
differentiated and high quality ceramic products at a relatively low cost. It also keeps
entry costs to the industry low, enabling competition from new firms.
8.5.4
Figure 8.1 shows a schematic overview of the ceramics cluster containing the various
processes and partners involved in the production process. Intense rivalry between the
SMEs involved in tile-making provides a strong impetus for the accumulation of technical
knowledge and innovative activity. Local buyers are informed and demanding of
manufacturers encouraging them to innovate and subsequently this process cascades
through the supply chain. The capacity for innovation is supported by the local presence
of training institutes, research and development, providers of technology services and
professional associations all focused on the ceramics industry or closely related activities.
Such institutions provide collective services to the SMEs that they would normally find too
costly to provide in isolation.
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Figure 8.1:
The Anatomy of the Castellano Ceramics Cluster
8.5.5
An example of the role played by supporting institutions is the Institute for Ceramics
(ITC). This actively promotes firm competitiveness through the provision of research in
industrial design, the training of ceramic designers and also developing global design
standards. Also linked to the ITC are local university departments such as the
Department of Chemical Engineering at Jaume University developing research for the
sector in ceramic technology, chemicals, environmental pollution and also design.
8.5.6
Also present are a range of specialist supporting associations, including the national
producers association, machinery and equipment manufacturers, producers of glazes
and colours and tile technicians, which offer supporting advice and promote the
implementation of standards. These associations are strongly interlinked and through the
consultancy services they provide assist in the technological enhancement of the sector –
which consequently creates new streams of demand and specialisation. The associations
also collaborate to hold regular trade fairs and exhibitions which promote local products
and aid the diffusion of new product developments.
8.5.7
Together the different components of the cluster interact in a way that creates a dense
network of support infrastructure that favours collaboration, flexible production, innovative
methods and enterprise growth throughout the supply chain. This in turn results in a
competitive, though positive business environment characterised by a conscious drive for
knowledge intensive processes and continuous improvement. But above all this is only
possible through an understanding amongst businesses of the wider benefits of
collectively provided services that enhances the capacity to innovate and meet the needs
of demanding clients.
From Geographic Concentration to Innovation System
8.5.8
The Castellano example illustrates how a region with a largely primary industry has
developed into a leading exporter in the finished product – a process accentuated by
geographic concentration. Some of the contributory factors as to why it has occurred in
this location and no other can no doubt be attributed to chance, history and culture and
are almost impossible to replicate from scratch. However the capacity for highly
innovative activity and the diffusion of knowledge has occurred through more formalised
institutions which actively promote innovation and knowledge sharing on behalf of the
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industry. The clustering concept can therefore be viewed as a process where initial
collaboration or cooperation between businesses can be transformed into more formal
arrangements that eventually increases the capacity for innovation.
Figure 8.2:
Concepts within the Clustering Process
8.6
The policy rationale
8.6.1
Many successful clusters have come about from an exploitation of the competencies of
local firms, institutions and demand in which one or a number of interventions by the
public or private sector have been critical. For example, the ‘Silicon Fen’ cluster of IT and
biotechnology companies in Cambridge was largely attributed to a relaxation in the
planning regime (which paved the way for the development of a science park) and the
attentive attitude of the local small business advisor towards high tech start–up
enterprises. There is undoubtedly a strong case for the public and private sector working
together to make things happen from the outset.
8.6.2
The mutual benefits of cooperation between firms have so far been outlined, but getting
firms to link up with perceived rivals is naturally difficult due to the inevitable pressures of
competition. The public sector is able to play a role as a third party agent in encouraging
collaboration and economies of scale that all businesses can benefit from. However, the
formula for success is dependent on a range of factors including a good understanding of
the local and external business environment and the preconditions for growth.
Porter’s diamond
8.6.3
In examining a wide ranging number of case studies Porter attempted to place these
issues within an integrated framework that would enable public agencies to understand
how interventions might set clusters on a path to self-reinforcing growth. This is known as
the Diamond Model.
8.6.4
In summary there are four points to the diamond:
1.
2.
Factor conditions: the cost and quality of inputs – skills, machinery, other capital
goods and materials the need to upgrade these and create more advanced factors
has increased in a globalised economy
Demand conditions: the sophistication of local customers who can pressure firms
to innovate and pay attention to product development and where many customers
can pass information on changing market conditions better than a single major
buyer
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3.
The context for firm strategy and rivalry: involves the nature and intensity of local
competition and attitudes towards risk, long term investment and profitability
4.
Related and supporting industries – the local extent and sophistication of suppliers
and related industries; the ability to create a learning environment between
producers and suppliers through trust and regular interaction leading to the
development of new techniques, designs and problem solving.
Figure 8.3:
The Diamond Model of Industry Development
Source: Porter, 1990
The Diamond at Work
8.6.5
The relevance of the four points of the diamond to business competitiveness should be
viewed as an interacting system, where the contribution of each point is contingent on the
effectiveness of the other three. For example, factor input creation is strongly influenced
by domestic rivalry in determining investment in skilled human resources, technology and
specialised infrastructure. The quality of domestic demand influences the effectiveness of
interactions between producers and input suppliers in developing new product and
process innovations; which in turn impacts the intensity of firm rivalry. An effective
diamond is therefore one of a self-reinforcing cycle of innovation that leads to valueadded production.
8.6.6
Most importantly, however, the quality of the interactions within the diamond are defined
by spatial proximity. Hence, this goes beyond Marshall’s localisation economies to
explain the new importance of proximity in technology intensive products. Gaining and
sustaining competitive advantage is a process said to be increasingly determined by
differential knowledge, skills and rates of innovation that are embodied in skilled people
and institutional structures - processes that are intensely local.
8.6.7
The role of the public sector and supporting institutions, it is argued, can influence all
aspects of Porter’s diamond. For example, the setting up of a technology park on a local
university campus providing high quality workspace and laboratories is aimed at
improving factor conditions; as would be the provision of specialised training courses by
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industry institutes. The holding of trade fairs and exhibitions helps to influence demand
conditions and the sharing of early market signals while the provision of specialised
support services is aimed at encouraging product development encouraging more
specialisation and upgrading through the supply chain.
8.6.8
Although the diamond model may be viewed by some practitioners as too abstract a
concept to be applied to their local economy, it nonetheless provides a clear and useful
framework for understanding when and where cluster development policies are likely to
be effective or even appropriate. The economic development toolkit in Chapter 7 of this
report seeks to offer practical actions and steps towards this for Local Authorities.
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Appendix 2: Overview of Business Support
Business by London Sub-region and Selected Local Authorities
Geography/Organisation
Sub-region
LDA sub-regional
business agencies
Other enterprise agencies
(these tend to operate
within a ‘home’ sub-region
but increasingly consider
their market as the whole
of London)
Local (borough)
Barking & Dagenham
Barnet
Bexley
Brent
City of London
Croydon
Ealing
Enfield
Hackney
Hammersmith & Fulham
North
West
South
North
London
Business
Enterprise
Enfield
West
London
Business
Park Royal
Partnership
Harrow in
Business
South
London
Business
Business
Extra
Croydon
Business
Venture
Business
Focus
East
(Inner and
Outer)
Gateway
to London
Activity
Central
HBV
Cross River
Partnership
Enterprise
Greenwich
Portobello
Enterprise
Business Centre
Board
East
London
Small
Business
Centre
Note: the initiatives set out below are those led or funded by the
Borough unless otherwise indicated.
Funds Small Business Centre which delivers start up advice, training
and networking services. Sustainable Industries Park acting as focus
for green technologies.
Statutory Services Provided
Thames Innovation Centre –range of generic services
No business support services offered. Funds Park Royal Partnership
and West London Business to deliver this for them. Opportunity Area
Planning Framework provides a common arrangement across Park
Royal – see Ealing and Hammersmith and Fulham.
No sector interventions- mainly planning regime and information
service
Croydon Enterprise –providing a range of services. Cluster Action
Teams around mainly local services
No business support services offered by the Council. Focus is on
developing town centres, including shop front improvements. Using
LDF to ensure creative businesses have access to premises and
Environmental Health Officers to assist food companies. Opportunity
Area Planning Framework provides a common planning arrangement
across Park Royal – see Brent and Hammersmith and Fulham.
Enterprise Enfield, Chamber of Commerce, Business and Retail
Group and Education Business Partnership receive subsidies. North
London Business sponsor/host innovation competitions, food
networking, meet the buyer events and promote health and safety
regulations.
Hackney Enterprise Network run by HBV. Provision of managed
workspace. Actively use LDF to encourage provision of premises for
growth sectors. Identified need for more outreach to BAME owned
businesses.
Funds Park Royal Partnership. Opportunity Area Planning
Framework provides a common arrangement across Park Royal – see
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Geography/Organisation
Haringey
Harrow
Hillingdon
Islington
Kensington & Chelsea
Redbridge
Sutton
Tower Hamlets
Waltham Forest
Wandsworth
Westminster
Activity
Brent and Ealing.
Part funds North London Business. Hosts meet the buyer events and
how to tender for supply contracts. Significant help for clusters via
City Growth though funding has now ceased.
No direct business support services. Assistance via Harrow in
Business and West London Business.
Borough and BAA run meet the buyer events, though increasing size
of contract is excluding smaller local firms. Part of west London which
is trying to coordinate business support offer. Keen to see more local
commissioning.
No business support services offered by the Borough.
Using planning powers to safeguard antique dealers in Portobello, no
involvement in direct business support. Portobello Business Centre
operates across borough boundaries.
No business support services offered by the Borough.
Business Focus part funded by local authority. Procurement events
aimed at construction businesses.
No business support services offered by the Borough.
No business support services offered by the Borough.
Significant support for stallholders in New Covent Garden Market.
Focus on winning funds, e.g. ERDF to deliver services.
Borough does not seek to offer business support services. Prefers to
utilise planning regime to make the borough an attractive place to do
business.
Sector focused ERDF projects in London
As of January 2010, approximately 80 projects had been approved to receive ERDF funding under the
2007-2013 programme within London. Of these 15 were targeted at specific sectors or geographically
concentrated business9.
The 2007-2013 programme focuses on three priorities:
1.
Business innovation and research and seeks to enhance business-to-business
collaboration as well as accessing the knowledge base, e.g. higher education.
2.
Access to new markets and finance.
3.
Urban regeneration including diversity.
The organisations winning funding include:
1.
2.
3.
Local Authorities, e.g. Wandsworth, Westminster.
London Development Agency.
Partnerships, e.g. Park Royal Partnership, West London Business, Paddington
Trust.
4.
Business support organisations, e.g. GLE, Enterprise Enfield.
5.
Education, e.g. University College London, University of East London, Tower
Hamlets College.
Those projects with a sector/geographical focus target:
1.
2.
3.
Fashion/jewellery
Broadcast/new media
Construction
9
There is one project aimed at Business Improvement Districts within the central boroughs of Westminster,
Southwark, Lambeth, Camden and Islington. Those that merely focus on broad geographic areas such as
whole boroughs are not included in this group.
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4.
Manufacturing/rapid prototyping
5.
Theatres
6.
Business Improvement Districts.
The majority of projects are too new to have achieved any tangible outcomes. However, some are
developments of previous initiatives, so have been investigated under the chapter addressing current
activity within London.
Despite the apparent separation between ERDF projects and Solutions for Business, this may not
always be the case. For example, LDA’s Solutions for Business – Finance Readiness project is in line
to receive £2.4m of ERDF. While the source of funding may be of no interest to the business receiving
the assistance, it does cause some confusion when trying to understand the underlying support
regime.
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Appendix 3: Additional Best Practice Case Studies
Non-London/General Approaches
EEEGR
The East of England Energy Group acts as the hub for the range of businesses and organisations
involved in energy within the East of England region. The first British discovery of gas was in late 1965
in the West Sole field, off the coast of East Anglia. Since then Great Yarmouth has become the
principal centre for energy in the Southern North Sea. In the early 2000s the UK government initiated
the drive to generate electricity from offshore wind turbines and the Scroby Sands farm started
producing electricity in 2008 from 24 turbines. The area is now home to a full range of businesses
from gas production, drilling, geological survey, marine support, helicopter transfer, steel fabrication,
structural design, through to jack-up installation vessels. The key features of the cluster are the
integrated nature of the supply chain, regular interaction and constant innovation to address
international competition, regulation and technological change. The group highlights what can be
achieved with relatively little funding but strong backing of business.
Urban creative industry centres
A number of creative quarters or centres for the creative industries have appeared in UK cities over
the last 15 years. In most cases they involve the regeneration of former factories and warehouses for
use by small and medium sized firms and organisations working in design, new media, architecture,
film/TV, advertising, software and cultural activities. Notable examples include: Birmingham’s Custard
Factory, the Tea Building in Shoreditch, Haringey’s Chocolate Factory and the Cultural Quarter in
Sheffield. A modern variant is Westbourne Studios built under and around the M4 viaduct. The key
features of these centres are the focus on inter-firm linkages and generating an ‘innovative milieu’ as
well as access to some specialised facilities such as rehearsal rooms or auditoria. To an extent
London leads the field and shows what can be achieved when iconic buildings, a sympathetic planning
regime and developers with long term time horizons come together.
Greater London City Growth Strategies
Food and Drink
The strategy indicated that there were 900 businesses and 7,000 employees involved in the food and
drink sector in the area of Haringey covered by City Growth. Retailing, wholesale, restaurant and
catering, along with manufacturing formed the main activities.
While development efforts initially focused on promoting ethnic (mainly Greek and Turkish)
restaurants, subsequent activity concentrated on manufacturing.
Two ‘meet the buyer’ events formed the main the main focus of the food and drink cluster. These
resulted in the local Budgens stocking locally made goods and acting as a showcase for
neighbourhood manufacturers. Awareness of local procurement has increased with Haringey Council
now seeking to purchase supplies from local businesses.
Sports, leisure and tourism
The work of the cluster led to the formation of the Tottenham Partnership, which seeks to “develop a
clear and compelling image for Tottenham and implement a strong marketing and PR programme”. So
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far it has published a map of Tottenham showing local attractions and restaurants aimed at local
residents and visitors. The map was funded through sponsorship and advertising. While the
Partnership is still active, the current economic climate has meant that marketing activities have been
put on hold. That the majority of local SMEs were largely unengaged and unwilling to collaborate with
each other, seeing little potential benefit but possible dangers.
Jewellery – Hatton Garden
Hatton Garden has been the centre for diamond jewellery in London for some 200 years. In the late
1990s the fabric of Hatton Garden and surrounding areas was poor and this made the area
unwelcoming to the many potential visitors and purchasers. The City Fringe SRB Partnership, in
conjunction with the City of London Corporation and Camden Council undertook a number of physical
regeneration activities to improve the area’s appeal. Following publication of the City Growth strategy
in 2004, further efforts were made to invigorate the cluster and help it prosper. As with other City
Growth projects a Cluster Action Group comprising businesses, local authorities and higher education
was formed to guide activities.
Figure S 1:
Hatton Garden Jewellery Cluster Map
Actions included:
1.
Industry-led seminars and symposia focused on domestic and overseas markets.
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2.
In-house training facilities and courses open to the industry being set up by
jewellers R Holt & Co..
3.
Innovative training and development opportunities being created by organisations
such as the Diamond Trading Company (DTC), London Metropolitan University
and The Goldsmiths’ Company.
4.
Provision of work and retail space for local designer makers using funding from S.
106 agreements.
5.
Set up of London Jewellery Week sponsored by bankers Coutts & Co..
Despite the £3m invested in the cluster, overall employment in 2009 was less than in 2003, though
there is no indication of what might have happened in the absence of the project. In 2009 the City
Fringe Partnership was wound up following cessation of core funding from LDA. Prior to cessation
CFP allocated funding for Jewellery Week 2010 which was matched by the LDA. Camden Council
continues to provide some assistance but the high profile programme has come to a close.
The bounded geography of the area, regular business interaction and legacy of City Growth means
that there is still on going collaboration for the benefit of the cluster as a whole. This is demonstrated
by the efforts of local businesses to keep Jewellery Week going (and who are already planning for
2011) following the closure of the City Fringe Partnership and loss of sponsorship from Coutts and
LDA.
London South Central
The area known as London South Central comprised the portion of central London south of the
Thames between Tower Bridge and Vauxhall. Later elements of Wandsworth were included. The
original City Growth strategy identified six potential clusters (business services, publishing/print, health
and social care, ICT, niche retail and business tourism) based on high location quotients and
significant levels of employment. However, only two projects were taken forward with funding from the
Pool of London Partnership (Single Regeneration Partnership) and the LDA. During the course of the
first project the Pool of London Partnership closed, so there was no real continuity between the
original work and the development projects.
Business Services – London B2B
Soon after the launch of London MICE, LDA approved funding for further cluster activity in London
South Central. Following a survey of local businesses it was agreed that efforts should focus on the
range of business services that operate in the business-to-business (B2B) market. As with London
MICE, a CAT was set up involving the directors and partners of a number of small firms operating in
the area. Despite major recruitment efforts there was no real buy-in from the many large companies
located along the south bank of the Thames. The CAT decided not to incorporate in order to minimise
costs and administrative burdens. Wandsworth Council acted as the responsible body and project
manager.
Activities included:
1.
2.
3.
4.
Setting up a website and online directory. (www.londonb2b.net)
Running networking events.
Hosting a series of training sessions on trade and business effectiveness
Undertaking a trade mission to China - from which business was generated.
Some informal activity still appears to be underway and the website is still live, though updates are
infrequent. However, attempts to generate a regular income from subscriptions and fees proved
unsuccessful and financial viability was not achieved by the time funding ceased in 2009. While the
area clearly included enough businesses (14,000) to constitute a cluster, the lack of common interests
and focus generated inadequate interest to become self-sustaining.
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Western Arc
The Western Arc City Growth project covered Park Royal, Wembley and White City, in the boroughs
of Ealing, Hammersmith and Fulham and Brent. While Wembley and White City were included, the
centre of gravity and principal area of focus was the Park Royal industrial estate. Park Royal
comprises some 8km2 to the east of the North Circular and north of the A40 Westway, of largely
industrial premises built over the last 80 years. It is widely credited as being the largest industrial
estate in Western Europe. Three clusters were identified for development; food and drink, film and TV,
and transport and logistics. Film and TV is described below and food and drink is the subject of a more
detailed analysis. The logistics cluster was not developed once it was clear that the intense rivalry and
narrow margins meant that businesses were not willing to engage with one another.
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