Interlinkages

Addressing the agreed regional priority to improve economic performance and competitiveness is key to achieving the objectives to create high quality employment opportunities and to develop a culture of ongoing engagement and excellence in learning and skills; to develop a strong culture of enterprise and  innovation; and to provide the physical conditions for a modern economic structure. The economy impacts significantly on people’s quality of life and wellbeing and has clear interlinkages with all the other issues highlighted within this IRS. Economic activity in the region, for example, impacts upon the use of resources such as energy and resource efficiency, environmental quality and the generation of waste. Employment opportunities, in particular, also impact upon people’s health and skills.

National Policy Context

Government has recently made a number of highly significant changes to the way in which regional and subregional partners will deliver economic growth and development in the future.  The Sub National Review of Economic Development (SNR), published in July 2007, aimed to better provide regions and localities with the tools and incentives to build on their indigenous assets and allow them to respond quickly to changing economic circumstances.

The SNR proposes that Regional Develoment Agencies (RDAs) will be given additional responsibilities, currently held by Regional Assemblies, for housing, transport and planning. RDAs are currently tasked with producing Regional Economic Strategies on behalf of the region. From 2010, they will be responsible for delivering the Single Regional Strategies. These will co-ordinate regional policy on economic growth, job creation, housing, planning, transport and environmental objectives.  Until then the RES remains the primary strategy to tackle sustainable economic growth and development in the East Midlands.

The East Midlands’ Regional Economic Strategy, A Flourishing Region, was published in July 2006. It provides an economic blueprint to take the region towards 2020, and sets out a clear vision to create a flourishing region, characterised by sustainable growth, economic wellbeing and good quality of life.  The RES is underpinned by the most comprehensive evidence base assembled on the East Midlands. This outlined the key challenges and opportunities facing the region’s economy and included contributions from a number of regional partners including the Regional Assembly, the East Midlands Learning and Skills Councils, the East Midlands Public Health Observatory, the Environment Agency, English Nature, English Heritage and the Countryside Agency. 

The East Midlands is a large, active and diverse region, with 4.3 million people and over 260,000 businesses. On some measures, the economy of the region is doing very well. We have historically high levels of employment (the East Midlands is the only one of the five northern and midlands regions to have an employment rate above the national average) and relatively high levels of economic growth (in 2005 the East Midlands, along with London and the North East, was the fastest growing region in the country). Levels of business activity have been increasing through the first half of 2007 and businesses are increasingly confident about their prospects in the next twelve months.

However, the region still performs less well than the UK average on productivity. GVA per hour worked is 96.7% of the UK average and the region is ranked 5th among the English regions, behind London, the South east, the East of England and the South West. In addition we face a particular challenge in raising skill levels so we are better able to enhance our economic performance. In the East Midlands, 28.1% of the economically active were qualified to NVQ Level 4 or above in 2006. This is below the UK average of 31.1% and well below the leading region (which is London with 41.2% qualified to this level). In the context of existing high levels of employment, future productivity growth in the region is unlikely to be driven simply by getting more people into employment.

Additionally, significant sub-regional disparities in wealth creation and employment quality remain. Recent earnings estimates indicate that differences between the East Midlands sub-regions are more profound than the differences between the region and the national average.  The Indices of Multiple Deprivation 2004 demonstrates that the  former Coalfields, a number of the more remote rural areas, the Lincolnshire Coastline, and ‘pockets’ in each of the region’s main towns and  cities continue to exhibit characteristics of marked deprivation. Notably, the geographical spread of such areas has not changed significantly between 2004 and 2008.

The Regional Economic Strategy (RES),outlines a number of challenges which the region must address if we are to achieve our shared economic ambition:

• Globalisation: the East Midlands is part of an increasingly globalised economy and subject to ever increasing amounts of external competition from emerging economies. This presents both threats and opportunities to the East Midlands economy, which need to be negated and maximised appropriately. The key threat of the growth of developing economies is the on-going transfer of economic activity to these locations. The benefits will include lower prices, redeployment of labour into more productive activity, higher profits for East Midlands’ businesses, along with reverse linkages such as Chinese and Indian investment 'on shore' and increased exports.
• Reducing the productivity gap: given the region's high employment rate and low unemployment rate there is relatively little scope for increasing wealth through increased labour market participation, with the exception of some of the more deprived parts of the region. The challenge is to increase wealth by making the region and its workers more productive.
• Diversifying and strengthening the economic base: the overall economic structure of the region is a key determinant of its adaptive capability - that is, the ability of an economy to cope with challenges from outside at the same time as developing sustainable new paths of development from within. Development of the service sector and of high value added manufacturing activities, and the creation and growth of smaller and innovative businesses is essential if the region is to remain competitive.
• Enhancing learning, skills and employability: in order to address the challenges of the low skill low pay equilibrium we need to improve the skills and productivity of the region's workforce, develop a knowledge intensive economy and retain our high levels of employment. People with higher skills will be more productive, add more value and create more wealth for the economy.
• Reducing intra-regional disparities: there remain significant disparities in terms of employment, earnings and wealth within the East Midlands. Reducing these disparities will not only increase the welfare of a significant proportion of the residents of the East Midlands, it will also contribute to closing the gap in economic performance between the East Midlands and the UK's leading regions.
   
  More detail can be obtained from the individual chapters of the RES evidence base. This can be accessed by clicking on the following link: The East Midlands in 2006: A Statistical Portrait of the Region

Current Position on Regional Policy

The aim of the Regional Economic Strategy (RES), ‘A Flourishing Region’, is expressed in its shared regional vision: “by 2020, the East Midlands will be a flourishing region - with growing and innovative businesses, skilled people in good quality jobs, participating in healthy, inclusive communities and living in thriving and attractive places.”

The RES vision is supported by the three Structural Themes or cross-cutting principles, and Ten strategic Priorities. 

To measure the RES vision for 2020 emda has developed a new performance management framework. This includes a groundbreaking composite measure of economic wellbeing – the ‘Regional Index of Sustainable Economic Wellbeing’ (Regional ISEW). This enables the region to measure its aspirations to ensure that economic growth and increased productivity are shared for the benefit of the whole region, that disparities within the region are being addressed and that our shared ambitions for increasingly cohesive, inclusive and participative communities are being fulfilled.

For more information download a technical paper

Innovation & Research

To combat the comparative advantage that the developing world has, the Region has prioritised innovation support for introducing techniques and product development in research and development (R&D); process innovation; and knowledge transfer, .The regional Innovation Strategy, (EMIS)  (Insert link) has 12 interlocking policies which centre on supporting networks for business to business transfer of expertise using iNets, iHubs and iTeams.  These help to load up the support inputs and are to be concentrated in centres of expertise and are expected to work within clusters of companies.  Skills for innovation and marketing to raise the awareness of innovation are also highlighted.  Finance for innovation is also a part and the strategy talks about leveraging new sources of funding (both public and private), to achieve its goals.   Web based working is also highlighted through the Regional Innovation Portal (RIP). Market capitalisation is an important thread and creating cogent investment planning is a major non spatial element.    Such a move helps to create the higher added value products, processes and services on which the future success of the region will depend.

Research gathered for the RES Evidence Base reveals something of a mixed picture in the East Midlands towards achieving an innovation-led economic base. For example OECD 18   research proves a strong correlation between investment in Business Research and Development (R&D) and positive effects on multi-factor productivity (MFP)19     In  2004, in the region Business Enterprise R& D was equal to 1.4% of GVA, compared to 1.2% for the UK. Between 1995 and 2004 BERD was higher in the East Midlands than in the UK in every year.

Enterprise and Business Support

A region with a strong entrepreneurial base is responsive to structural economic change. Through innovation and creativity these businesses stimulate and exploit new market opportunities, create jobs and contribute to our future economic growth. It is estimated that new businesses also create between 20-40% of the region's productivity growth. Total Entrepreneurial Activity in the East Midlands was 6.1% in 2006, compared to 5.8% for the UK.  Although this is a positive story it is imperative to our future prosperity that these new businesses are able to innovate, and adapt to ensure they survive and grow.  Our small businesses have a particularly important role to play in the regional economy and employ a total of 1.4 Million people out of a total workforce of around 2 million.

There are many areas of untapped potential in the region. Business start up rates among women are less than half those of men in the East Midlands. Geographically, Nottingham and Derby have particularly low rates of business creation. The region also has low rates of business starts among qualified people aged 35-55. This group tends to start the most successful businesses in terms of value and survival rates. The greatest barrier for start-up in the East Midlands (especially in the 35-55 group) is not entrepreneurial potential or ideas, but risk aversion- being unwilling to leave secure employment for the potentially risky venture of self-employment or starting a business. Encouraging this group to overcome their risk aversion is key to creating more high value businesses.

To provide improved support to our businesses emda re-launched the regional Business Link service in April 2007.  This new service, delivered by a single agency, provides a range of business support services via a number of prominent companies and organisations.  emda and partners have also championed a number of initiatives aimed at stimulating enterprise in the region. The New Business New Life campaign, is a notable example which aims to stimulate an enterprise culture across all communities in the East Midlands and increase the number, quality and sustainability of new businesses. 

Links to the relevant sections of the State of the Region Report for 2008

• Employment, Learning and Skills
• Enterprise and Innovation
• Modern Economic Structure

Links to the relevant sections of the East Midlands Integrated Toolkit (EMIT)

• Social Capital
• Employment Opportunities
• Enterprise and Innovation

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