Regional Innovation Monitor Plus 2016 - European Commission · Regional Innovation Monitor Plus 2016 i Table of Contents Executive Summary 2! 1. Advanced Manufacturing: Advanced Materials

www.technopolis-group.com

30 May 2016

Regional Innovation Monitor Plus 2016 Regional Innovation Report Yorkshire and the Humber (Advanced Materials)

To the European Commission

Internal Market, Industry, Entrepreneurship and SMEs Directorate-General

Directorate F – Innovation and Advanced Manufacturing

Regional Innovation Monitor Plus 2016

Regional Innovation Report Yorkshire and the Humber (Advanced Materials)

technopolis |group| in cooperation with

Dr Peter Kolarz, Technopolis Group Xavier Potau, Technopolis Group Martin Wain, Technopolis Group

Dr Anoushka Davé, Technopolis Group

Regional Innovation Monitor Plus 2016 i

Table of Contents Executive Summary 2!1. Advanced Manufacturing: Advanced Materials 6!

1.1 Overview of performance and trends 6!1.2 Business sector perspective 8!1.3 Scientific research potential 10!1.4 Role of intermediary institutions 13!1.5 Developing skills for the future 13!1.6 Major investment projects 15!1.7 International cooperation 16!1.8 Policy support and delivery mechanisms 18!1.9 Good practice case - Advanced Manufacturing Research Centre (AMRC) 18!1.10 Leveraging the existing potential 22!

2. Regional Innovation Performance Trends, Governance and Instruments 25!2.1 Recent trends in innovation performance and identified challenges 25!2.2 Institutional framework and set-up 27!2.3 Regional innovation policy mix 31!2.4 Appraisal of regional innovation policies 37!2.5 Policy good practice 39!2.6 Possible future orientations and opportunities 41!

Appendix A Bibliography 44!Appendix B Stakeholders consulted 45!Appendix C Economic indicators for the region 46!

Table of Figures Figure 1 Percentage of 25-64 year olds with tertiary qualifications .............................. 25!Figure 2 Total R&D personnel and researchers (Percentage of active population) ..... 26!Figure 3 The counties and LEPs of Yorkshire and the Humber, and the region in England ........................................................................................................................... 28!

Regional Innovation Monitor Plus 2016 ii

List of Tables Table 1 Industrial activity of LEPs in Yorkshire and the Humber .................................. 7!Table 2 Data from ERC’s Growth Dashboard for LEPs in Yorkshire and the Humber .. 8!Table 3 Proportion of firms reporting these as main barriers to growth. Companies in the LEPs covering Yorkshire and the Humber ................................................................ 9!Table 4 Total intramural R&D expenditure (€ per inhabitant) .................................... 26!Table 5 Make-up, personnel headcount and core funding of the four LEPs (late 2015)......................................................................................................................................... 28!Table 6 Local government structures in the Yorkshire and the Humber region, UK ... 29!Table 7 Growth deals in the Yorkshire and the Humber region .................................... 30!Table 8 Yorkshire and Humber LEPs – overview .......................................................... 31!Table 9 Regional policy mix for innovation in Yorkshire and the Humber .................. 33!

Regional Innovation Monitor Plus 2016 1

PREFACE In the context of the growth and investment package set out in the Investment Plan of the European Commission, the Regional Innovation Monitor Plus (RIM Plus) provides a unique platform for sharing knowledge and know-how on major innovation and industrial policy trends in some 200 regions across EU20 Member States.

Launched in 2010, the Regional Innovation Monitor aimed at supporting sharing of intelligence on innovation policies across EU regions. Building upon the experience gained and results obtained during the period 2010-2012, the RIM Plus 2013-2014 provided practical guidance to regions on how to use the collected information, via a network of regional experts. Since 2014, the RIM Plus has introduced a thematic focus on advanced manufacturing.

The RIM Plus 2015-2016 evolved from a general monitoring of innovation policies towards establishing a more thematic focus in selected areas in order to contribute to improving the competitiveness of European regions.

Particularly, the RIM Plus aims through its activities and in close cooperation with the regional stakeholders and other relevant initiatives to:

•! Contribute to the development of new and open spaces of collaboration and exchange on advanced manufacturing, each with a clearly defined thematic focus.

•! Play an enabling role in providing evidence-based information on specific themes and bring in outside perspective from other regions.

•! Map out regional practices in support of advanced manufacturing and relevant pilot/demo projects and work towards involving the relevant stakeholders.

•! Provide an easy access and comparative overview of regional innovation policies and relevant actions in the field of advanced manufacturing.

•! Share the lessons learned with the European Commission services to feed into the preparation of future programmes.

The main aim of 30 regional reports is to provide a description and analysis of developments in the area of advanced manufacturing with a clearly defined thematic focus and regional innovation policy, taking into account the specific context of the region as well as general trends. All regional innovation reports are produced in a standardised way using a common methodological and conceptual framework, in order to allow for horizontal analysis, with a view to preparing the Final EU Regional Innovation Monitor Plus report.

European Commission official responsible for the project is Alberto Licciardello ([email protected]).

The present report was prepared by Peter Kolarz, Xavier Potau, Martin Wain and Anoushka Davé ([email protected]). The contents and views expressed in this report do not necessarily reflect the opinions or policies of the Regions, Member States or the European Commission.

Copyright of the document belongs to the European Commission. Neither the European Commission, nor any person acting on its behalf, may be held responsible for the use to which information contained in this document may be put, or for any errors which, despite careful preparation and checking, may appear.

Further information:

https://ec.europa.eu/growth/tools-databases/regional-innovation-monitor


Executive Summary This report presents a profile of the Yorkshire and the Humber region of the UK. Under current arrangements, the economic governance of the region is made up of four Local Enterprise Partnerships (LEPs). LEPs are business-led boards that have the formal policy remit from the UK Government to lead on economic development, and as such are the main intermediary bodies between the private and public sectors. Now in their third year of operation, the LEPs have begun to design and deliver policies and programmes to deliver economic growth for their local areas. This broad remit includes both innovation policy and maximising regional strengths, such as advanced manufacturing and materials.

1. Advanced Manufacturing: Advanced Materials

The region of Yorkshire and the Humber is historically a manufacturing region, and like many regions that experienced deindustrialisation, Yorkshire and the Humber has been disadvantaged in recent decades. The region lags behind the UK average on many economic indicators, such as unemployment and regional Gross Value Added (GVA). However, there are some bright spots. Recent figures show that 28% of the region’s GVA is still accounted for by production activities. Despite recent difficult economic conditions in the region, the areas of particularly strong manufacturing output have underpinned some recovery. Three of the four LEP areas in Yorkshire and the Humber demonstrated growth in manufacturing employment between 2009 and 2012. The latest data show that 11.5% of all jobs in the region are in manufacturing – the third highest in the country. In the region, manufacturing activity is mostly concentrated in the urban areas of Sheffield City Region and Leeds City Region, with activity in advanced manufacturing or materials located in certain hotspots due to specific companies, university-industry collaborations or research centres, rather than homogeneously throughout. These two city regions are also home to a strong population of fast growing businesses and high survival rates for start-ups. The latest Research Excellence Framework (REF) exercise highlighted several examples of advanced materials spin-offs and start-ups established from research conducted in the region, including: advanced ceramic composites, nanomaterials for organic electronics research, bioresorbable shape-memory polymers, and nonwoven fabrics. Indeed, REF 2015 sets out a number of research strengths and specialisms within the region’s universities in the area of advanced materials.

Making the most of the region’s advanced manufacturing and advanced materials activities for the economy can be summarised by three key challenges:

•! Challenge 1: Scale-up the impact of manufacturing in terms of jobs and economic activity more broadly across the region

The crisis has shown that areas with traditional strong manufacturing output have been more resilient in terms of employment (e.g. those around Sheffield, Leeds). Moreover, Yorkshire and the Humber rebounded strongly in manufacturing jobs in the 2009-2012 period, compared to other regions in England. Pockets of high value manufacturing activity exist and new ones are being created through the establishment of sustained R&D collaborations and through public and private investment initiatives. However, the general picture still tells us that, overall, manufacturing activity is still being replaced by lower value-added retail or service jobs. Additionally, while there is a regional specialism in selected manufacturing activities, these are not in the top sectors of employment.

•! Challenge 2: Anchor advanced manufacturing and advanced materials to the region’s economic development

Yorkshire and the Humber has a good climate for start-ups, with comparatively more fast-growing businesses and better survival rates than other UK regions (except for London). Figures about businesses managing to scale up are more similar to the national average. The region has a strong scientific landscape in manufacturing and advanced materials, with examples of strong links to the national manufacturing


sector through research institutes/centres. Collaborations and initiatives in advanced manufacturing are usually channelled through the University and research sector, or through the different government-supported growth and investment deals. However, most large-scale or long-term collaborative research initiatives target UK and international industrial champions, not local companies. Major investment projects with the potential to change this picture are being initiated over the past 2-3 years.

•! Challenge 3: Provide an environment conductive to talent retention in manufacturing

There is no shortage of training opportunities in manufacturing and advanced materials in the region and the training offer spans from activities of vocational training and further education, to higher education and doctoral programmes. However, talent retention in manufacturing is a challenge that is also contingent on the availability of good jobs and career prospects. Skills programmes run by LEPs or other local/regional intermediaries run the risk of effectively subsidising stronger/richer regions in the UK by training people that then leave the area anyway. Training programmes that are tied to internships or industrial doctorate programmes can partly mitigate this situation by linking students to local or national companies established in the region.

2. Regional Innovation Performance Trends, Governance and Instruments

The innovation performance of the region mirrors its broader economic performance, as set out above. Like those economic indicators, the region’s innovation performance is lower than the UK as a whole. In particular, investment in R&D is significantly below the UK and EU28 averages. There have been recent marked improvements, but Business Enterprise R&D (BERD) remains low. Government sector R&D (GovERD) is also low. More positively, however, due to the presence of three highly ranked and research-intensive universities, the Higher Education sector’s investment in R&D (HERD) in the region is closer to UK and EU28 levels. Though still low, the region continues to grow its skills base, with the level of 25-64 year olds with tertiary qualifications increasing at a comparable level to the broader UK and EU28 trends. The number of R&D personnel and researchers has also grown sharply in recent years, before levelling off. These factors together add up to a number of key challenges for the region as a whole, including: i) addressing the low overall levels of R&D investment; ii) addressing the lagging levels of highly-skilled labour and research personnel, and; iii) facilitating a full recovery from the 2008 financial crisis (including boosting the number of people in employment, education or training). As the main vehicle of economic governance, the LEPs set out challenges and goals such as these within Strategic Economic Plans. To deliver economic growth, each LEP has been awarded money by national government through a competitive process to deliver a package of projects specific to their own area, among which are skills programmes, business growth initiatives, specific innovation projects such as clusters, hubs or centres and other economic development investments.

3. Future Actions and Opportunities

With regard to the advanced materials thematic area

There are two key actions related to advanced materials opportunities in the region:

•! Building capacity in the LEPs to enable more collaborative working

Devolved structures like the LEPs enjoy more autonomy than their predecessors and could theoretically engage in stable collaborations with other European regions (i.e. they do not need permission from others). However, in their current state they may lack actual capacity and incentives to do so. Aside from specific one-offs or commercial missions, LEPs are mostly focused on their constituencies and in engaging with neighbouring LEPs. Building this capacity would allow the LEPs to make more of key regional innovation assets, and to run collaborative initiatives based around those assets.


•! The UK Science and Innovation Audits (SIAs) will provide the evidence necessary to identify local investment opportunities in the sector

Regions in the UK need to improve their ability to “identify where existing and growing research excellence is coupled with emerging innovation strengths”. As stressed in the Witty Review “the strongest basis for regional economic growth is activity rooted in a sound understanding of a locality’s comparative economic advantage” (2013, p.6). The UK Government has recently commissioned the elaboration of regional Science and Innovation Audits (SIAs) to: (i) provide an evidence base for strategic decision making on local innovation priorities; (ii) strengthen future applications for local investment; (ii) drive local collaborations, between universities and between local businesses, local authorities and LEPs; and (iii) encourage more efficient investment decisions by providing an evidence base that identifies regional strengths. For the region of Yorkshire and the Humber, this exercise will uncover some opportunities in the area of advanced materials and manufacturing. It is likely that these future areas of opportunity will cluster around initiatives currently being set up such as the new Enterprise Zones, the Devolution Agreement in Sheffield, and initiatives such as the Advanced Manufacturing Research Centre (AMRC) in the Sheffield City Region.

With regard to innovation policy

There are three key future orientations to consider for broader innovation policy in the region of Yorkshire and the Humber:

•! Working collaboratively across LEP boundaries

This applies to advanced manufacturing and advanced materials specifically as well as to innovation performance more generally, and as such it appears twice. Here we explore inter-LEP collaboration more generally in the governance and policy-making sense. The ability for LEPs to design and deliver specific policies and programmes for their local area is powerful, but some initiatives require greater scale. In general, the localisation agenda risks fragmentation of the policy agenda across local areas. There are two particular instances of LEPs working together across their boundaries within the region to develop or deliver initiatives. BioVale, a collaboration between Leeds City Region and York, North Yorkshire and the East Riding, and early talks between Sheffield City Region and Leeds City Region around specific financial instruments provide two positive examples of this. There is no doubt that local actors are pragmatic in these arrangements. Collaboration requires an issue, and that issue will inform the choice of partners. Collaborations maybe be pan-Yorkshire, or between the eight English Core Cities. This is very flexible, and effective and sustained partnership working will require a certain amount of capacity building in the LEPs themselves to take full advantage of these opportunities.

•! Taking a dual track approach to enhancing the business base Each of the Yorkshire and the Humber LEPs is prioritising business growth through programmes and dedicated business growth hubs. Consultation revealed that there is a dual focus on business innovation. On the one hand, they are aiming to support innovative companies to innovate more – providing innovation support, grants or loans for equipment, de-risking investment in R&D, support for PhD placements, etc. On the other hand, there is an acknowledgement that local and regional innovation performance largely reflects the business base of the LEP. For this to change, some LEPs are looking to shift the balance toward more knowledge-intensive businesses, start-ups and spinouts, as well as attracting new businesses to the area. A central aspect of this is the use of business rate flexibility through Enterprise Zones. The Advanced Manufacturing District in the Sheffield City Region, and several newer Enterprise Zones around York provide opportunities for LEPs to develop thematic business clusters, and to begin the ‘latching’ process to embed companies into the local economy. This is another area where a Devolution Agreement and the financing and relative autonomy that brings provides a greater number of options.


•! Focusing on talent attraction and retention to complement skills development

Each of the LEPs is focusing on developing skills, and we see a dual approach here. Skills programmes focus efforts to boost basic skills and reduce the number of individuals not in work, education or training in the region, and also to up-skill those in the labour market to address the relatively low number of skilled workers in the region, and to give local businesses the skills base to grow. A risk remains in that huge investments in skills developments may result in loss of skilled workers who move away for career reasons, effectively allowing poorer regions to subsidise richer regions’ labour markets. This is a natural process, but it does raise a need for these LEPs to consider initiatives to retain talent that has been invested in.


1.!Advanced Manufacturing: Advanced Materials

This section of the RIM report focuses on the thematic area of advanced materials in the topic of Advanced Manufacturing in Yorkshire and the Humber. We cover the main players and developments in the region and offer examples of best practice and lessons learned that might be useful for policy makers going forward.

In England, between 1994 and 2011, NUTS 2 regions had devolved government functions. However, from 2010, devolution of powers to the local level left them only as administrative divisions. While some headline statistics are published at the regional level, information is increasingly being collected at the level of Local Enterprise Partnerships (LEPs). The following LEPs are active in the Yorkshire and the Humber area: Humber; York, North Yorkshire and East Riding; Leeds City Region; and Sheffield City Region. Northern and north-eastern parts of an adjacent region, Lincolnshire, are included as well.

This report uses data at the region level and at the LEP level. Some of the LEPs in the region have overlapping constituencies, making it sometimes difficult to obtain regional data from published figures at the LEP level. The geography of the region, governance and institutional setup is explained in more detail in the second part of this report.

Where conversions are made, all Euro values in this section are calculated at the rates prevalent at the time of specific investments, using the European Commission’s InforEuro tool.

1.1!Overview of performance and trends Of the non-financial economic output in terms of Gross Value Added (GVA), production activities account for 28% of the economy of Yorkshire and the Humber.1 The LEPs of the Yorkshire and the Humber region present lower than average levels of economic output per capita, with three of the five LEPs covering the region presenting values at the bottom 25% of LEPs. The most productive LEP area is Leeds City Region (18,900 GVA pc, 2012), with productivity on par with the Greater Manchester area, but still far from the England average of 21,900 GVA pc in 2012 (The LEP Network, 2014). Sheffield City Region was experiencing very high annual growth rates in the ten years preceding the recession, but growth rates have fallen substantially ever since. In terms of overall growth, LEPs covering the region were in line with the England average, recovering their pre-recession nominal (unadjusted) output in the two years after 2008.

After the crisis, there have been general improvements in labour market conditions across England. In terms of jobs, employment in England after the crisis (2009 to 2012 period) grew by 0.7%. However, most of this growth was in the London area (+7.3%) and in a few selected LEP areas. In Yorkshire and the Humber, employment in this period fell sharply. The LEP areas most affected in employment terms were the Humber area (-4.8%), York, North Yorkshire and East Riding (-4.0%) and Lincolnshire (-3.1%), while the most resilient areas were the Sheffield and Leeds city regions (around -2%).

In the 2009-2012 period, only 14 of the 39 LEPs saw manufacturing employment rise. However, in the Yorkshire and the Humber region, all LEPs except for Leeds City region had employment growth in manufacturing. In the past year, the number of manufacturing jobs in the region has increased to 287,000 jobs (+7%). The latest data for Q1 2015 shows that around 11.5% of all jobs in the region are in manufacturing activities, only behind the regions of East and West Midlands (House of Commons, 2015).

1 See: http://www.ons.gov.uk/ons/rel/abs/annual-business-survey/2012-regional-results/sum-abs-2012-regional.html


A recent study on the localisation of industrial activity across England’s LEPs provides information on the different activity sectors in terms of jobs and specialisation with respect to the national average (Table 1). The study also comments on the changes in sectoral specialisation between the 2008 and 2012. In general, we see a shift towards less value-added activities with some manufacturing activities being replaced by retail or service jobs in the list of most important sectors in each LEP area.

Table 1 Industrial activity of LEPs in Yorkshire and the Humber LEP Sectoral

concentration (2012)

Local specialisation Sectors with high specialisation and size in terms of jobs

Humber Top 20 sectors = 144,930 jobs (39%)

Sectors related to transport, including manufacture of caravans and trailers; coastal related activities (e.g. mineral oil refining; marine fishing; sea and coastal transportation; and the processing and preserving of fish); production and retail of agricultural products

Few sectors with high specialisation employed significant numbers of people. Exceptions: manufacture of caravans; processing and preserving of fish, crustaceans and molluscs

Leeds City Region

Top 20 sectors = 477,062 jobs (38%)

Dominated by the manufacturing sector: manufacture of textile and related products, such as fibres, dye, rugs, outerwear and mattresses; manufacture of metal forming machinery; fabricated metal products and fasteners; fluid power equipment; sugar confectionary and kitchen furniture

Due to size of employment in LEP none of the manufacturing sectors are at the top twenty sectors for employment.

Greater Lincolnshire


Freight transport; the activities of temporary employment agencies; and activities related to the growing and processing of fruit and vegetables

Other sectors involved in food production Growing of cereals (except rice), leguminous crops and oil seeds

Sheffield City Region


Activities surrounding the production and manufacture of iron and steel and, related products, such as cutlery and tools

Despite the predominance of the manufacturing sectors, their employment contribution was limited, with most individual sectors employing 4,000 or less. Manufacturing, mainly involved in production of other types of machinery or metal containers

York, North Yorkshire and East Riding


The top sectors by local specialisation changed between the two years. In 2008 repair of fabricated metal products was top, but had just 852 jobs; whilst in 2012 it was the manufacture of ice cream, again however employment was insignificant, totalling just 518

Little crossover in terms of the most important sectors by specialisation and employment

Source: Michael Anyadike-Danes, Karen Bonner, Cord-Christian Drews and Mark Hart. ERC Research Paper No. 15. Localisation of industrial activity across England’s LEPs. December 2013

Manufacturing activity is mostly concentrated around the areas surrounding Sheffield and Leeds. Also, activity in advanced manufacturing or materials is located around certain hotspots (specific companies, university-industry collaborations, research centres, etc.) rather than homogeneously throughout these areas.

Almost 70% of the UK’s R&D investments are in the manufacturing sector. In the Yorkshire and the Humber region, €272 per inhabitant were spent in total R&D activities in 2012, €140.1 by the business enterprise sector (about 52% of the UK


average). R&D employment stood at 0.93% of total employment in 2012. The number of patent applications has decreased sharply during the past years. EPO patent applications decreased from 62.83 patents per million inhabitants in 2007 to 39.35 in 2011. UK patents granted in 2014 were 143, down from 165 in 2013, contributing only 6.5% of the UK’s patent applications in 2014.

The attitudes of companies in the region towards innovation are reflected in the UK Community Innovation Surveys. Around 43% of the companies in the region were ‘innovation active’ in the 2010-2012 period, with 6% carrying out both product and process innovation and 19.4% either product or process innovation. On average, companies in the region spent around 50% of their overall innovation expenditure in acquisition of capital goods, 30% in internal R&D activities and only 3.7% in external R&D activities. These figures are higher for manufacturing companies across the UK. The survey does not provide data disaggregated at the level of region and company sector, just one or the other.2

1.2!Business sector perspective The dynamism of the business sector in Yorkshire and the Humber differs across LEPs and across urban areas, and this is shown in the figures for all types of companies. For example, the Leeds and Sheffield Primary Urban Areas (PUAs) have shown strong proportion of fast-growing businesses (17% and 14.5%, respectively), slightly behind London, which has the highest proportion in the UK at 18.6%. In terms of new ventures, the proportion of surviving start-ups in 2011 reaching £1m (€1.2m) turnover by 2014 was around 6% nationally. The Leeds (7.5%) and Sheffield (8.3%) PUAs had some of the highest survival rates for start-ups in the country, both surpassing the national average and with Sheffield even surpassing London. At the LEP-level, there are 11 LEPs with above average rates of start-ups showing early signs of scaling. Three of these are LEPs in the Yorkshire and the Humber region (Sheffield City Region, Leeds City Region and Greater Lincolnshire). The survival rate for start-ups in the Humber is lower than the national average and for ‘York, North Yorkshire and East Reading’ it is way below at around 5%.

Table 2 Data from ERC’s Growth Dashboard for LEPs in Yorkshire and the Humber LEP Context Start-ups Growth Humber •! Population:

922,200 •! Private Sector

Jobs: 246,295 •! Businesses:

23,982

•! 2,155 new registered employer businesses in 2014 – 23 per 10,000 population

•! 3-year survival rate (2011 start-ups): 51.5% survived to 2014

•! 5.8% of 2011 surviving start-ups grew to £1m (€1.2m) turnover by 2014

•! 14.7% fast-growing firms – 2011-2014

•! Net Jobs: 4,021 (2014) •! Net Job Creation Ratio:

1.7% (2014) •! 6.1% of £1m (€1.2m)

turnover businesses in 2011 grew to a minimum of £3m (€3.6m) by 2014

Leeds City Region

•! Population: 2,988,900

•! Private Sector Jobs: 912,579

•! Businesses: 86,758




•! 16% fast-growing firms – 2011-2014


4.5% (2014) •! 6.8% of £1m turnover

businesses in 2011 grew to a minimum of £3m (€3.6m) by 2014

Greater Lincolnshire





•! Net Jobs: 8,246 (2014) •! Net Job Creation Ratio: 3%

2 See: Community Innovation Survey. Available at: https://www.gov.uk/government/collections/community-innovation-survey


LEP Context Start-ups Growth •! Businesses:

32,487 •! 3-year survival rate (2011

start-ups): 55.3% survived to 2014


(2014) •! 6.1% of £1m (€1.2m)









•! 15% fast-growing firms – 2011-2014


3.8% (2014) •! 7.2% of £1m (€1.2m)











4.3% (2014) •! 5% of £1m (€1.2m)


Source: Enterprise Research Centre (ERC) and Business Growth Service. Growth Dashboard. June 2015.

Firms managing to scale up through the next growth phase, from £1-2m (€1.2-2.4m) of turnover in 2011, reaching £3m (€3.6m) in 2014, are having a harder time in the region than start-ups. While the national average is the same (6%) the percentages of Sheffield and Leeds go down to around 7% and 6.7%. While they are still above the national average, they lose positions in the ranking of English urban areas. These data show the overall picture for all companies in the region and specific figures for materials, advanced manufacturing (or even just plain manufacturing) companies are not readily available. However, the general picture points at companies having a difficulty to scale in the region, which does not benefit advanced materials companies, as moving up through the Technology Readiness Level (TRL) scale in this area is usually associated with large capital investments, and these need large revenues to happen and be sustainable.

The Growth Accelerator programme is part of the Business Growth Service3, a government-backed service that offers support to businesses with the potential to improve and grow. The Diagnostic of the Growth Accelerator sheds some light on the main barriers to growth for companies located in the different LEPs covering the region (Table 3).

Table 3 Proportion of firms reporting these as main barriers to growth. Companies in the LEPs covering Yorkshire and the Humber

LEP Strategy and Management

Skills and Staff

Sales and Marketing

Finance

England ~53% ~49% ~38% ~27% Humber ~25% ~25% ~4% ~40% Leeds City Region ~48% ~32% ~27% ~22% Greater Lincolnshire ~66% ~49% ~42% ~26%

Sheffield City Region ~57% ~34% ~38% ~18% York, North Yorkshire and East Riding ~28% ~33% ~14% ~31%

Source: Enterprise Research Centre (ERC) and Business Growth Service. Growth Dashboard. June 2015.

3 The closure of the Business Growth Service was announced in late 2015.


In terms of particular examples, the information compiled as part of the latest UK Research Excellence Framework through case studies provides some success stories involving university spin-offs and start-up companies that were the product of research carried out in the region. In the area of advanced materials, there are examples in advanced ceramic composites, nanomaterials for organic electronics research, bioresorbable shape-memory polymers, and nonwoven fabrics.

For example, XeraCarb Ltd is a spin-out company formed in 2011 that uses research carried out in Sheffield Hallam University. The novel ceramic composites used by the spin-out were developed in 2008 and 2009 with the support of a knowledge transfer activity from the Materials and Engineering Research Institute (MERI) and several research projects funded by the UK Ministry of Defence (UK MoD). The underpinning research won the 2011 national award in most promising UK materials system for commercialisation. The company is already accepting orders and has received substantial amounts of venture capital investment (the REF case study states that the company reached a valuation of £163.1m, €195m).4

In the area of organic electronic devices, a success case is that of the spin-out company Ossila Ltd, using research performed at the Soft Matter Physics (SMP) group in the Department of Physics and Astronomy of the University of Sheffield. The company provides specialised organic and thin film LEDs, photovoltaics and FETs for diverse commercial and research applications. Since 2010, the company has grown and achieved profitability, exporting 85% of their products overseas. When the case study was drafted, the company’s staff was 10 people and their turn-over had increased between 50-100% annually.5

The work done in the University of Bradford6 on solid phase orientation processing of polymers and polymer composites has led to the development of spin-offs in the US (Eovations LLC), commercialising novel polymer composite building materials, and in bioresorbable shape memory polymers aimed at soft tissue fixations. The latter are being commercialised by Smith & Nephew (S&N), a global leader in medical devices. The collaboration between the company and the university continues to this day through joint Engineering and Physical Sciences Research Council (EPSRC) research on manufacturing and biomedical materials development.

A final example, from the University of Leeds, is the creation of the Nonwovens Innovation and Research Institute (NIRI) in 2005 as a spin-out from the university’s research on the foundation, structure and properties of non-woven fabrics. NIRI now provides product development, prototype development, technical assistance and joint venture support to both SMEs and large companies. It has annual sales of ~£1m (~€1.2m), more than 300 completed projects for more than 150 clients and has developed solutions in different application domains, from wound dressings to building materials, industrial filters and baby wipes.7,8

1.3!Scientific research potential In the UK, statements on the research potential of universities around the country are collated through the ‘environment statements’ of the Research Excellence Framework9. These statements are drafted by the institutions and provide details on: the research strategy of the different research units within the institutions, their income, infrastructure and facilities, their main collaborations, and their contribution

4 See: http://impact.ref.ac.uk/CaseStudies/CaseStudy.aspx?Id=4957 5 See: http://impact.ref.ac.uk/CaseStudies/CaseStudy.aspx?Id=12012 6 See: http://impact.ref.ac.uk/CaseStudies/CaseStudy.aspx?Id=43399 7 See: http://impact.ref.ac.uk/CaseStudies/CaseStudy.aspx?Id=6404 8 See: http://www.nonwovens-innovation.com/index.html 9 See: HEI Submissions to the 2014 UK Research Excellence Framework. Available at:

http://results.ref.ac.uk/Results/SelectHei


to the discipline. What follows is a summary of the main research strengths related to the advanced materials topic of Yorkshire and the Humber’s main universities.

The Department of Materials Science and Engineering (MSE) at the University of Sheffield is one of the largest hotspots in the UK for materials research. In the 2008-2014 period, the department received 204 grants, totalling £39.9m (€47.7m, of which £4.7m (€5.6m) were in direct collaboration with industry) and collaborated with more than 150 organisations across 53 countries. It invested £5.6m (€6.7m) in equipment during this period, £3m (€3.6m) in the update of specialist facilities. The research activities are structured around three broad areas:

•! Advanced structural materials: metallurgy, nuclear materials and surface engineering;

•! Functional materials and devices: ceramics, magnetics and nanoengineering;

•! Biomaterials and polymers: biomaterials & tissue engineering and polymers.� �

Although it would be impossible to summarise all of the MSE activity here, we provide some highlights. The activities of MSE target most application sectors, including defence, the environment, health, energy and transport applications. MSE comprises eight different eight university research centres or groups:

•! The Institute for Materials and Mechanical Process Engineering (IMMPETUS): integrates physical metallurgy, mechanical and systems engineering to advance the processing of metals;

•! Mercury Centre for Innovative Materials & Manufacturing: focuses on all metal alloys, powders, and difficult to process materials. From design and modelling of components, to manufacture and characterisation;

•! Centre for Advanced Magnetic Materials & Devices: fabrication, application and basic understanding of magnetic materials such as MagMEMS biosensors, spintronics, magnetic nanowires, thin films and bulk hard and soft magnetic materials;

•! Ceramics & Composites Laboratory: with research strengths covering Ceramics, Glasses, Polymers and Polymer Matrix Composites for applications such as electro-ceramics for battery applications and refractory materials for the steel industry;

•! Centre for Biomaterials & Tissue Engineering: scaffolds for tissue engineering, drug release and biocompatibility;

•! Leonardo Centre for Tribology and Surface Technology: specialising in matters relating to the production, evaluation and characterisation of coatings and surface treatments for engineering applications; and

•! The Sorby Centre for Electron Microscopy: investigates the microstructure and chemistry of materials.

The University of Leeds has several capacities related to these topics. The Institute for Materials Research (IMR) carries out applied research into the structure, properties, processing and applications of most advanced function and bio-materials. IME comprised 11 academic staff in 2014. The institute builds strongly on research into microstructural and nanochemical characterisation techniques, covering the following topics:

•! Functional and Bio-Materials including ferroelectric, piezoelectric and multiferroic ceramics, thin films and crystals; photonic materials (active optical fibres and thin films) carbon & carbide fibres, nanotubes, carbon composites, electrochemical and biological sensors, dental materials and nanotoxicity;

•! Metallurgy including the non-equilibrium processing of alloys, powder metallurgy and extractive metallurgy of rare earth elements;


•! Characterisation and modelling including electron microscopy especially of nanostructures and biological specimens, EELS, modelling of 2D structures and microstructural modelling.

Finally, within the University of Leeds, the Institute of Engineering Thermofluids, Surfaces and Interfaces (iETSI) also carries out some multidisciplinary research in materials and tribochemistry applied to engine lubrication and tribology.

Sheffield Hallam University (SHU) has a strong area dedicated to materials, metallurgy, electrical and electronic engineering. This research area operates through the Materials and Engineering Research Institute (MERI), which was established in 1990 and expanded in 2004 to host multidisciplinary applied research in several engineering disciplines. Of the four research centres within MERI, three are dedicated to materials research: The Polymers, Nanocomposites and Modelling Research Centre, working in polymers and nanocomposites, materials and fluid flow modelling; the Structural Materials and Integrity Research Centre, working in sol-gel and corrosion technology, ceramics and glasses; and the Thin Films Research Centre, working on PVD, HIPIMS, electronic materials and sensors. During the period 2008-2013, MERI had an external income of £19.4m (€23.7m), with ~56% coming from research grants and contracts. Sheffield Hallam University has invested £5.5m (€7m) in refurbishing the labs during the 2013-2015 period. Their main collaboration during the past years has been with the Fraunhofer Institute for Surface Engineering (IST). In 2010, MERI established the first joint centre of Fraunhofer in the UK, the Joint Sheffield Hallam University-Fraunhofer IST HIPIMS Research Centre.10 Researchers from MERI were awarded The Worshipful Company of Armourers and Brasiers Venture Prize in 2011 for the Xeracarb spin-out and the Cyril Hilsum Medal of the British Liquid Crystal Society in 2012 for notable contributions to liquid crystal science and technology. MERI researchers work with both local and overseas companies, from SMEs to publicly traded multinationals.

The University of Bradford has a strategic research area in Advanced Materials Engineering (AME). The AME area hosts the Polymer Micro & Nano Technology and the Advanced Materials Engineering research and knowledge transfer centres. These centres focus on structuring advanced polymeric and biomedical materials via processing and modelling with applications in health such as orthopaedic components for joint repair or replacement and tissue fixation devices, shape memory bioresorbable polymers, orthodontic products, spinal braces, and structured films for wound dressing. Those working at these centres are able to take advanced in-process measurements and undertake advanced modelling of the materials’ behaviours. The research centres of AME received over £3.2m (€3.7m) funding, including around £1m (€1.2m) capital investment from the university in an initial three-year period from 2010-11.

In the University of Huddersfield, the engineering area comprises the Centre for Precision Technologies (CPT), which hosts the ESPSRC Centre for Innovative Manufacturing in Advanced Metrology. A part from this, the main research focus of the university is not on the development of advanced materials research. The University of Hull does not have a main focus on advanced materials, but states that medical engineering activities will include biomaterials in the future. The Optoelectronic Nanotechnology Group presently does some work in the advanced materials area. The University of York does not cite advanced materials as a strength, but has some facilities for characterisation of magnetic, magneto-optic and spintronic materials.

10 See: http://hipims.fraunhofer.de/en/collaboration/


1.4!Role of intermediary institutions Currently, the main intermediary institutions between the private and public sectors are the LEPs. While LEPs are not formally recognised by the EC as part of the delivery of the ESIF programmes, they are the organisations that create and ratify the economic strategies of their areas. An agreed accountable body often administers funding and support programmes, which is rarely the LEP itself and rather a nominated Local Authority or specially created Combined Authority (see section 2.2). The role of these LEPs is not circumscribed to the area of advanced manufacturing, but to all the perceived strengths of each underlying constituencies.

More specialist intermediaries are, for example, the centres of the High Value Manufacturing Catapult (HVM).11 The HVM Catapult is an initiative backed by Innovate UK, the UK’s innovation agency, to rejuvenate the UK’s manufacturing sector by funding top-notch research at seven centres of excellence across the UK. The Catapult model is now an established way in the UK of providing core government funding for commercialisation of research and fixing particular market or system failures that are restricting research and innovation in a targeted sector. Funding also comes from the ERDF and UK research councils particularly Higher Education Funding Council for England (HEFCE) and the Engineering and Physical Sciences Research Council (EPSRC).

Another type of intermediaries are for example technology parks, such as the Advanced Manufacturing Park (AMP) in South Yorkshire. The AMP hosts materials and advanced manufacturing organisations such as the University of Sheffield Advanced Manufacturing Research Centre (AMRC), Rolls-Royce, Castings Technology International (CTi), TWI Technology Centre (Yorkshire) and the Nuclear AMRC.

Additionally, around the UK we can also find other types of intermediary organisations capable of delivering programmes, ranging from private consultants to universities to industry councils or representative bodies, and individual charities. Most of these, except for the charities, usually have a national remit. For example, some local and national charities are mentioned in the section on skills with programmes for improving the manufacturing skills of the population in the region.

1.5!Developing skills for the future There is a considerable variety of offer for skills development in Yorkshire and the Humber in the area of manufacturing and advanced manufacturing. These mostly local initiatives target pupils from 13 years old all the way up to on-the-job and post-doctoral training. The particulars of materials engineering and advanced materials, however, are usually taught as a particular subject within the manufacturing courses. At an advanced level, there are some masters’ level courses and PhD programmes in the region’s universities that particularly focus on the area of materials. These are usually taught in the same departments hosting most of the region’s research capacity in the topic, discussed in Section 1.3 of this report.

Another area of strategic investment is technical capacity building. The Yorkshire and Humber area has received funding to set up university technical colleges (UTCs), which will be backed by local businesses and universities, and will specialise in particular sectors. For instance, the Leeds UTC is backed by the University of Leeds, Kodak, Siemens, Agfa Graphics and Unilever, and will specialise in advanced manufacturing and engineering, while the Hull UTC will specialise in digital technology and mechatronics, and is backed by the University of Hull and the Spencer Group, one of the largest privately owned engineering and construction firms in the country.12 These developments are part of the government’s long-term economic plan to ensure the availability of a skilled workforce for the future.

11 See: https://hvm.catapult.org.uk/hvm-centres/ 12 See: http://www.insidermedia.com/insider/yorkshire/120722-


The Manufacturing Institute was incorporated in 1994 and is registered as a charity. The role of the institute is to support manufacturing excellence in the UK through education for the public benefit. Originally operating in the Manchester area, it is now bringing more than 20 years of experience in manufacturing training to Sheffield.13 The institute has educational programmes from the classroom (14 year olds solving their first manufacturing challenge) to the boardroom (Shingo business prize), and involves people with extensive experience in industry. The results of the institute in their 20 years of operation in the Manchester region are significant: they have involved more than 10,000 businesses, delivering more than £1b (€1.2b) worth of measurable results for their customers. Since 2006, they have interacted with more than 60,000 pupils and teachers through the Make It campaigns. In December 2015, the institute will start to roll out their Make It in Sheffield challenge, involving 12 teams of 13 and 14 year-olds that will compete to solve a manufacturing challenge.

In July 2015, work started in the Huddersfield’s National Process Manufacturing Centre (NPMC). The Centre aims at addressing the current skills shortage, mainly due to an aging workforce in the region’s chemical, pharmaceutical and food sectors. It is expected that it will open for training in early 2016 and will create 26 jobs, and train 800 students over a four-year period.14 An investment of £5m (€7.1m) is being made at the Centre by Kirklees College, in partnership with Kirklees Council, several manufacturing companies (such as Syngenta, Kodak, Siemens, Nestle and others15), and industry support groups (such as Cogent, the science based industries sector skills council). This investment is complemented with £3.1m (€4.4m) capital funding awarded from the Leeds City Region Enterprise Partnership (LEP).16 The Centre will stand alongside the college’s existing engineering centre at Turnbridge. Although not precisely an initiative about materials, it will also contribute to skills related to maintenance engineering; electrical, control and instrumentation; and process operatives development within the region.

In addition to these particular initiatives, the Leeds City Region Enterprise Partnership (LEP) publishes on their website a list of some other national initiatives and avenues for developing skills in manufacturing.17 These include, for example, the charity Proskills UK tasked to support and provide training and education for people working in the material, production and supply industries. Proskills UK contains the UK National Skills Academy for Materials.18

In terms of doctoral and post-doctoral skills development related to the manufacturing and materials topics, we need to look at different types of early researcher contracts and early researcher support schemes. Research career trajectories in the UK are commonly based on a series of fixed-term contract positions. Some centres in the regions try to foster a mixed environment of research and consultancy or applied roles, so that researchers can be nurtured from relevant industrial collaborations, which also helps provide support through difficult transitional career phases. In other cases, early career researchers are supported through ‘Career Development Lectureship’ appointments (AME), the ‘Think Ahead’ programme of skills training and career mentoring (MSE, Sheffield), the ‘The Sheffield Crucible’ programme (MSE, Sheffield), and more generally the EPSRC programmes of Centres for Doctoral Training (CDTs), Doctoral Training Partnerships (DTP) and Industrial CASE Studentships.

Finally, a singular initiative combining professional and academic training is the AMRC Training Centre of the University of Sheffield. The Regional Growth Fund and

13 See: http://www.manufacturinginstitute.co.uk/sheffield/ 14 See: http://www.ycf.org.uk/national-process-manufacturing-training-centre 15 See: https://www.kirkleescollege.ac.uk/downloads/leaflets/Process%20Manufacturing%20booklet.pdf 16 See: http://investleedscityregion.com/invest/news/£5-million-manufacturing-training-hub-breaks-

ground 17 See: http://www.leeds.gov.uk/leedspathways/Pages/Adv-Manufacturing-and-Engineering.aspx 18 See: http://www.proskills.co.uk/national-skills-academy-materials-production-supply-launches-

revamped-training-partner-network/


European Regional Development Fund support the Centre. It aims to provide practical and academic training needed by manufacturing companies, ranging from apprenticeships through to doctorate and MBA level degrees, continuing professional development and bespoke training support in manufacturing.19 The Centre opened its doors in January 2014 and is based in a 5,500 m2 building alongside the AMRC with Boeing and Nuclear AMRC on the Advanced Manufacturing Park, part of the Sheffield and Rotherham Enterprise Zones. The Centre can host classes of 150 advanced apprentices, aiming to provide both economic educational opportunities to local people, with a significant involvement of companies such as Boeing, Tata Steel, Rolls-Royce, Sheffield Forgemasters, AES Seal, MTL Group, Newburgh Engineering, and others.

1.6!Major investment projects The Sheffield City Region is the hub for Advanced Manufacturing not only in the Yorkshire and Humber region but also in the UK, and consequently, it attracts most of the investment in this area. This region is also home to the UK’s most successful Enterprise Zone for Modern Manufacturing and Technology20, which has led to the establishment of other enterprise zones recently, particularly the M62 corridor Enterprise Zone near Leeds that also aims to support Advanced Manufacturing enterprises. Major sources of investment include government (through the LEPs, e.g. through Growth Deals), ERDF, UK Research Councils, venture capital and corporate investment.

Overall, Yorkshire saw a 145% increase in inward investment projects in 2014 compared to 2013, which has been attributed to a strong manufacturing sector and the rise of Leeds as the UK’s fourth most successful city (Ernst and Young, 2015). Investment in the advanced manufacturing sector has also risen by 12% in UK as a whole.21 It appears that the UK’s concerted and strategic efforts to build excellence in selected manufacturing sectors have paid off, inspiring confidence among foreign investors and attracting them to the region. KD Navien, a South Korean boiler manufacturer has chosen Rotherham for its UK headquarters and research and development facility, as has Nikken Kosakusho Europe, a Japanese precision engineering business, which is investing £3.6m (€4.2m) for its research, development and training centre22.

In terms of venture capital, Yorkshire and Humber saw investment worth £397m (€474m) coming to the region in 2014 compared to £361m (€441m) in 2013, which was distributed among 53 and 39 companies respectively. In 2014, 24% of the money was invested as venture capital rather than earmarked for expansion, replacement, etc. This was a drastic change from the previous year when only 1% of the money was invested as venture capital. However, in terms of number of companies the increase was only from 5% to 8% from 2013 to 2014. Moreover, the oil and gas, basic materials and industrials sector, which includes advanced manufacturing industries, accounted for 7% investment for both companies and capital.23

Corporate investment has also been growing in the region along with foreign direct investment (FDI). In February 2015, Rolls-Royce opened a new £110m (€147m) advance blade casting facility in Rotherham24, while in January 2015, Siemens began construction on a new wind turbine blade factory in Hull as part of its £310m (€396m) investment in the region for developing world-class offshore wind manufacturing and

19 See: http://www.amrctraining.co.uk/ 20 See: http://sheffieldenterprisezone.co.uk 21 See: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/435646/UKTI-

Inward-Investment-Report-2014-to-2015.pdf 22 See: http://www.insidermedia.com/insider/yorkshire/135726-nikken-hands-esh-amp-brief/ 23 See: http://www.bvca.co.uk/Portals/0/library/documents/IAR%20Autumn15.pdf 24 See: http://www.electroless-nickel-plating.co.uk/news/rolls-royce-aircraft-engine-blade-casting.php


assembly facilities25. In addition, Leeds has seen investment in cloth manufacturing with a proposed £50m (€64m) investment from British global luxury brand Burberry for a new trench coat manufacturing facility26 and £1.5m (€1.9m) from luxury mattress manufacturer Harrison Spinks for its fabric weaving and upholstery business27. All these investments are also due to bring more jobs to the region.

The planned expansion of Sheffield’s Advanced Manufacturing Research Centre site, termed AMRC2, has also been attracting large investments from funders including the EU, UK government and business. Plans include a £30m (€38.3m) National Material Institute, part of the Sir Henry Royce Institute for Advanced Material Science; a £20m (€25.5m) Fast Make Centre of Excellence, where the lag between making prototypes and manufacturing can be reduced; and a £30m (€38.3m) Energy 2050 development to make energy more affordable, secure and sustainable.28 Another major development on the site is Factory 2050, one of the World’s most advanced factories, which is budgeted at £43m (€55m) with financial contributions from the ERDF and Higher Education Funding Council for England. Leading manufacturers including Boeing, Airbus, Rolls-Royce, BAE Systems and Spirit AeroSystems are also supporting the project. The factory will be a totally reconfigurable, digital factory that can respond quickly to demands for changes in product design. Another £11m (€14m) including £4m (€5m) from the Engineering and Physical Sciences Research Council (EPSRC) has been pledged for a facility to test and research engineering structures and systems from the component level to full scale, while a modular environmental chamber in the laboratory will be able to control temperature, humidity and wind speed as well as simulate rain and snow. This initiative has been widely endorsed by the industry including companies like Airbus and Rolls-Royce.29

In the field of advanced materials, academics at the University of York are leading a £11.1b (€14.2b) project along with other UK institutions to investigate safer and cheaper materials for the future in comparison to materials currently used in manufacturing which can be rare, expensive and in short supply.30 In addition, Huddersfield’s Reliance Engineering in collaboration with The University of Sheffield, Southampton-based company Ilika, as well as British multinationals GKN and BAE Systems has won £2.15m (€2.75m) in a government and industry competition to develop a “new generation” of self-healing alloys for the aerospace industry.31

1.7!International cooperation Much international collaboration for the development of advanced materials is established through direct consultancy or R&D contracts from the region’s research providers with multinational companies. For example, the Advanced Materials Engineering (AME) area of the University of Bradford has collaborated with multinational industrial partners such as Dow Chemical (UK), Autodesk Moldflow (US) and Johnson-Matthey (UK), and with clinical partners in Italy, the US and China. The Institute for Materials and Mechanical Process Engineering (IMMPETUS) of Sheffield Collaborates extensively with Tata Steel (India), Timet (US), Rolls-Royce (UK) and Airbus (France). The Institute for Materials Research (IMR) in Leeds has

25 See: https://www.siemens.co.uk/en/news_press/index/news_archive/2015/siemens-hull-work-begins.htm

26See:http://www.burberryplc.com/media_centre/press_releases/2015/burberry_to_invest_over_50m_in_new_trench_coat_manufacturing_and_weaving_facility_in_yorkshire

27 See: http://www.bqlive.co.uk/2015/11/09/yet-another-boost-for-yorkshire-manufacturing/ 28 See: http://www.thestar.co.uk/news/business/business-news/amrc2-masterplan-reflects-ambition-of-

the-region-sheffield-chamber-1-7237735 29 See: http://www.insidermedia.com/insider/yorkshire/144374-sheffield-uni-secures-major-engineering-

investment 30 See: http://www.yorkshirepost.co.uk/business/business-news/yorkshire-is-leading-the-way-in-

materials-research-1-6905728 31 See: http://pressvinepro.madeinyorkshire.com/news/215m-aerospace-manufacturing-project-gets-

funding-from-government/32


collaborations with Thales (France), Xaar (UK), Ceram (UK), and Morgan Advanced Materials and Technology (UK).

Another avenue for international collaborations between research providers and companies in the region are the participation in international research programmes such as the EU Framework Programme. The regional involvement in these initiatives supported many of the thematic areas in the NMP (nano, materials and production technologies), Green Car and Factories of the Future initiatives during the 2007-2014 period. Taking into account only such calls dedicated to the advancement of materials, these international participations amounted to around €15.1m from FP7 (around €3m to companies in the region), participating in international projects with an overall value of €203.9m. As of September 2015, the region’s participation in the new Framework Programme (H2020) in related areas amounted to €2.3m (around €370k to companies in the region), in projects with an overall value of €30.2m. Multiple technology developments and application domains are the subject of participation by regional players, such as:

•! Application of new materials including bio-based fibres in high-added value textile products;

•! Development of nano-scale detection and control techniques for large area substrates;

•! Innovative advanced lightweight materials and light high-performance composites for the next generation of environmentally-friendly electric vehicles;

•! Modelling of interfaces for high performance materials design, and modelling of ultrafast dynamics in materials;

•! Biomaterials for advanced therapies and medical devices, and for improved performance of medical implants (including biomimetic gels and polymers for tissue repair)

•! Nanostructured materials with tailored magnetic properties, meta-materials, and polymer-matrix composites;

•! New technologies based on physical processing of materials for mechanical or electro-technical applications;

•! Materials (including organics) for electronics and photonics;

•! Research and innovation for advanced multifunctional ceramic materials;

•! Smart materials for applications in the sectors of construction and of machinery and production equipment.

Some of these initiatives are specifically tailored towards the coordination of actions across materials researchers, some of which focus in other world regions beyond the EU. Examples of these are: the FP7 INFORM project (2009-2012) that was financed to reinforce the international dimension of EU research on nanomaterials in formulations in the Asia-Pacific region; the HARFIR project where the University of York participates in an EU-Japan consortium for the development of new materials for the substitution of critical metals in the 2013-2017 period; the POEMA project (2013-2016), where Sheffield Hallam University participates in a consortium researching materials for high-temperature power generation applications, more specifically Coatings for New Efficient and Clean Coal Power Plant Materials, together with partners from EU and Ukraine; and the TAGS project to foster the networking of materials laboratories, where the Nonwovens Research Institute in Leeds collaborates with partners in Italy, Austria and Germany in the area of textile products for an ageing society.

In addition to international collaborative research projects that involve both academic and industrial partners, international collaboration in the area of advanced materials is also established through the appointment of academics of the region to international advisory boards or from visiting chairs to the region’s research organisations.


However, these appointments are more common and relevant within the academic sphere.

1.8!Policy support and delivery mechanisms Advanced materials were identified by the previous UK Government as one of the ‘eight great technologies’. This meant that, nationally, the topic of advanced materials has recently featured in the UK’s industrial strategy and has been addressed as an enabling technology by Innovate UK, the UK’s innovation agency. As of today, there is also the Advanced Materials Leadership Council, which acts as a unified voice for the advanced materials community to identify strategic opportunities for additional investment, identify challenges and achieve a strategic vision on the area. At regional level, however, support mechanisms tend to be of a more generalist nature.

It is worth contextualising the current policy support and delivery mechanisms. In particular, the shift from a regionalist to a localist agenda needs to be considered here. Regional innovation policy – centred to a large extent on the concept of innovation clusters – has somewhat fallen out of favour in the UK, owing in part to a lack of demonstrable effect of cluster policies (Uyarra and Ramlogan, 2012). Moreover, there has been a long-term trend in the UK towards devolution in many domains (Giddens, 1998), culminating most recently in ambitions to devolve policy to a sub-regional level.

The perceived lack of efficacy of cluster policies and the long-term trend towards widespread devolution in the UK therefore led to a paradigm change. The cluster-approach sought to incentivise economic actors to move to new places through various taxes and payments, thus aiming to grow clusters. However, in addition to the developments noted above, evaluations suggest these measures did not have much effect, particularly if they failed to address underlying issues such as skills shortages or low productivity. Concepts from urban economics such as agglomeration and congestion further add uncertainty to this paradigm of incentivisation.

The shift has therefore been from encouraging actors to move toward engaging industry, i.e. giving economic actors local decision making and control, with the aim of generating more local growth. Put simply, the aim here is no longer to artificially create mobility, but to encourage local actors to help consolidate existing strengths. This shift aligns well with the post-clusters approach of the EU Smart Specialisation Strategy32, but additionally contains a focus on local innovation that needs to go beyond wider innovation systems to explore local connections; as such, it presents a substantial shift with important economic and social implications. This shift requires not just better alignment and understanding of local innovation systems and contexts, but also with national policy, given the added ‘distance’. There is also likely a need to address other spatial levels of influence, for instance between university research and local firms. Relatedly, it is unclear whether the capabilities to achieve this level of alignment and coordination can at all be provided by modestly funded, business-led organisations like the LEPs.

There are therefore at this point clearly some open questions about the recent reorganisation towards localised innovation policy in the UK, and the policy support and delivery mechanisms in Yorkshire and the Humber need to be viewed in the context of this recent shift and the questions it raises, particularly as these changes are at an embryonic stage with little evaluation evidence thus far available to draw any substantive conclusions.

1.9!Good practice case - Advanced Manufacturing Research Centre (AMRC) Background and origins

In the last decade, Sheffield has become an international hub for the aerospace, automotive and nuclear industries and has attracted high-profile investors like Boeing, Rolls-Royce and Alcoa. About 10.2% of the Sheffield region’s workforce is involved in

32 See: http://s3platform.jrc.ec.europa.eu/documents/10157/0/smart_spec_growth_agenda.pdf


manufacturing, and in 2013, Sheffield produced 5.6 patents per 100,000 population, the eighth highest among all UK cities.33 The University of Sheffield’s Advanced Manufacturing Research Centre with Boeing (or the AMRC hereafter) has been central to this growth and has been instrumental in coalescing advanced manufacturing activity in this region.

The AMRC was started in 2001 with a 15m (€24m) initial funding for collaboration between the University of Sheffield and the aerospace giant, Boeing. Funders included the European Regional Development Fund (ERDF) and Yorkshire Forward, the erstwhile regional development agency for Yorkshire and the Humber. Since then, the centre has expanded to purpose-built premises at the Advanced Manufacturing Park (AMP), a 0.4 square kilometre site on the Rotherham-Sheffield border in South Yorkshire.

The AMRC is currently taking its research forward with the following mission statement in mind:

To create centres of excellence that focus on making a significant difference to the Advanced Manufacturing sector by:

•! Maintaining a world-class community where research, design, manufacture and study interact effectively to put technology into practice;

•! Having a manufacturing capability for showcasing best practice, tools and techniques associated with metal forming:

•! Being a global centre for the benchmarking of tools and techniques for aerospace manufacturing:

•! Developing knowledge-based simulation tools and techniques:

•! Incubating and spinning out technology to raise the performance of both local and national manufacturing companies:

•! Developing vocational engineering student programmes.34

In the field of Advanced Materials Research, the centre’s aim is to develop lighter, cheaper and more environmentally friendly materials and techniques, through collaborations between AMRC researchers, big businesses and start-ups specialising in robotics and materials such as aluminium and titanium35. Since exports containing Advanced Materials are estimated to be about £53b (€67.7m) and 15% of UK GDP is believed to be dependent on materials, the importance of Advanced Materials Research for the UK has been acknowledged by the Government by identifying Advanced Materials as one of the UK’s Eight Great Technologies (EPSRC, 2014).

Organisation, funding and research themes

The AMRC occupies a strategic position as a core member of the AMP, which was established to capitalise on the available regional engineering and manufacturing expertise and is part of Sheffield City region’s Enterprise Zone. Crucially, this location puts the AMRC in close proximity with major players like Rolls-Royce, Casting Technology International, the TWI Technology Centre and the Nuclear AMRC. Such an environment allows access to more innovation opportunities and collaborations between industry and research, a highly skilled workforce and an ‘unrivalled’ regional supply chain involving small, medium and large companies that provide services in the forging, machining, casting and coating of aerospace components.36 On-site facilities include the Rolls-Royce Factory of the Future, which includes an open-plan workshop that allows partner companies to develop and trial new technologies and processes

34 See: http://www.amrc.co.uk/about/background/our-mission/ 35 See: http://www.ft.com/cms/s/0/ae764b8a-9fe8-11e4-aa89-00144feab7de.html#axzz3sJrwk475 36 See: http://www.attheamp.com/#!why-choose-the-amp/c2o3


before introducing them in their factories, a laboratory, and office and conference space.

The AMRC with Boeing is part of the wider AMRC group, which includes AMRC Castings, the AMRC Training Centre, Knowledge Transfer Centre, National Metals technology centre and Nuclear AMRC which are all on the same site. The group employs 560 staff and turns over £50m (€64m) a year, the equivalent to a medium-sized business.37

The AMRC also acquires funding from more than 80 industrial partners including Boeing, Rolls-Royce, BAE Systems and Airbus who pay an annual fee to use research staff and equipment. There are two tiers of membership: Tier 1, which costs £200,000 per year and Tier 2, which costs £30,000 (€38,000) per year.38 Tier 1 members get an individual seat on the industrial board, giving them the opportunity to influence the AMRC’s research strategy and to propose specific projects. Tier 2 members also get a say but through a single board member. Nevertheless, all members can participate in and obtain the results of all generic research. However, businesses that are not members can also collaborate on specific research projects and business support initiatives.

AMRC research is organised into core groups viz. the Process Technology Group, the Integrated Manufacturing Group, the Design and Prototyping Group, the Structural Testing Centre and the Composite Centre.7 Most of the AMRC’s advanced materials research is conducted at the Composite Centre39, which is dedicated to the generation of new composite materials as well as research into automated production, machining, curing and other processes for use with the novel materials. For example, some of the current research has been focused on extending the AMRC’s expertise in metals production to carbon fibre composite materials and combining high-performance metals and composites in a single structure.

Key initiatives: results and impact

The AMRC’s research activity is almost entirely driven by the needs of its industrial partners. This is achieved through close relationships at both the senior managerial and practitioner levels. For example, Rolls-Royce keeps some staff at the AMRC to ensure that the user perspective feeds into the research strategy, even in the short-term. The proximity enables the AMRC to pick research problems with industrial significance and thus its research has an immediate impact on industry. For instance, the AMRC has cut production times by pioneering manufacturing techniques such as the use of ceramic drills, which can cut faster than metal without overheating. Cutting production times helps companies keep work in the UK rather than outsourcing. Similarly, robotic advanced fibre placement systems developed by the AMRC have driven down costs in the last 10 to 15 years and are now commonplace in the UK supply chain.

The Centre actively showcases its technical capabilities to SMEs and member companies resulting in large-scale collaborations and novel products and manufacturing techniques such as the manufacture of advanced composite blades for GE Dowty Propellers.40 Novel curing techniques, including microwave curing and hot pressing, to consolidate composites using less time and energy without compromising in quality is increasing the wider adoption of composite materials and interest in developing these materials and associated manufacturing techniques. This expertise has led to collaborations with Boeing, EPSRC funding for developing new curing techniques and opportunities to train MSc students.9

37 See: https://hvm.catapult.org.uk/news-events-gallery/news/major-changes-as-fast-growing-research-centre-plans-for-further-expansion-at-home-and-abroad/

38 AMRC with Boeing. A world-class centre for advanced manufacturing 39 AMRC with Boeing. AMRC Composite Centre Capability Directory 40 AMRC with Boeing. AMRC Composite Centre Capability Directory


The Centres’ work on biocomposites in collaboration with the engineering design company Performance Engineering Solutions (PES) Ltd and technology development group Teks UK has been instrumental in driving the development of bio-derived composites as a more sustainable and environment-friendly alternative to conventional composite materials (i.e. carbon fibre and epoxy materials).41 The two companies were able to benefit from the resources and expertise available at the AMRC to showcase the material to the rally sport sector and are now in talks with a number of clients to provide structural panels for life cycle testing. Moreover, the centre is actively pursuing long-term relationships with local weaving SMEs to make full use of the potential of composite weaving techniques in engineering.

Other initiatives include the development of corrosion-resistant CRES steel for aircraft landing gear as a cheaper but comparable alternative to carbon steels and titanium alloys42 and exploring the use of advanced materials for medical devices, e.g. orthopaedic devices and innovative assistive devices for multiple sclerosis patients43.

Sustainability and future directions

The AMRC group’s business model, which includes funding from businesses through project funding and memberships, makes long-term sustainability more likely even if public sector funding were to be withdrawn. The close links with business also ensure that the research remains relevant and commercially viable. Therefore, solving problems for specialist manufacturers and thus attracting commercial partners remains a core strategy for the AMRC. This strategy seems sound in light of the fact that, for instance, Rolls-Royce requires research expertise to fulfil over £70b (€89.5b) worth of orders for products that are still being developed. Moreover, since 48% of its income comes from services, it also needs new technologies to service and maintain its new products.

The current plan for the future is to increase the turnover to £80m (€102.2m) by 2019.44 A step in this direction is the opening of Factory 2050 at the end of this year. This will be a £43m (€55m) new facility with £10m (€12.8m) each from HEFCE and ERDF.45 The assembly and component manufacturing facility will have the latest robots and manufacturing techniques, which will be reconfigurable for any industry, and allow manufacturers to respond rapidly to customer demands for new designs, thus allowing them to make the more of changing trends.

The Centre is also due to receive further funding as the Sheffield ‘arm’ of the Sir Henry Royce Institute for Advanced Materials, a major new UK government undertaking. Plans are to establish a new £30m (€38.3m) National Material Institute for Sheffield concentrating on powder metallurgy; new high strength, low weight materials; and related manufacturing techniques.46

All these developments are part of a master plan towards the establishment of the UK’s first Advanced Manufacturing Innovation District in the Sheffield and Rotherham district encompassing the AMP, the neighbouring Sheffield Business Park, local universities, start-ups and business incubators. The District Council hopes to bring more leading manufacturers and entrepreneurs to the area and hence wants to add transport links, leisure facilities and housing to create a space that is ‘liveable, walkable, bike-able and transit connected’47 as well as a leader in high value manufacturing.

41 See: https://hvm.catapult.org.uk/wp-content/uploads/2015/08/Impact-Evaluation-full-report.pdf 42 See: http://www.rothbiz.co.uk/2015/10/news-5518-amrc-developing-new-aerospace.html 43 AMRC with Boeing. A world-class centre� for advanced manufacturing 44 See: https://www.sheffield.ac.uk/news/nr/amrc-advanced-manufacturing-five-year-plan-1.418947 45 See: https://www.sheffield.ac.uk/news/nr/amrc-factory-2050-1.278634 46 See: http://www.rothbiz.co.uk/2015/04/news-4186-amrc-shaping-sir-henry-royce.html 47 See: http://www.amrc.co.uk/news/the-next-phase-of-the-advanced-manufacturing-research-centre/


However, the shortage of skilled workers remains a potential bottleneck in this expansion. The AMRC is addressing this issue as well to some extent through the AMRC Training Centre by providing training from the apprenticeship level to doctorate level. The apprenticeships in particular help to train young people in the workplace, thus increasing employment/employability and reducing skills shortages. This number of apprentices being trained here has increased from 150 to 300 in just one year.48

Best practice lessons and transferability

The AMRC model has already been applied successfully to the civil nuclear manufacturing supply chain through the Nuclear AMRC, which also has a base in Sheffield.49 It helps UK companies win work in the civil nuclear sector – in new build, operations and decommissioning. Recently, the AMRC group also launched a joint venture to establish an AMRC in South Korea.50

The AMRC model offers working strategies that have the potential to be replicated successfully elsewhere. For example:

•! By bringing government, industry, academia and the region together, the AMRC can ensure that it does not function in isolation, thus allowing research and innovation to meet the needs of and generate returns for all stakeholders;

•! The focus on industry problems reduces the possible time lag in the translation and commercialisation of research as it produces research that is tailor-made for industry. The availability of a test facility and one-off parts means that businesses do not lose time in the production of prototypes;

•! The AMRC also provides sector experts and business advice, which is helpful for SMEs. Through the AMRC they can also build contacts with other companies in the same or different sectors, avail of the latest research and get help with developing new technologies/products. This is of crucial importance to SMEs for whom the financial risks associated with investments in innovation can be prohibitive;

•! The AMRC was the first organisation of its kind to adopt a commercially recognised Quality Management System for research, identical to the one used by its industry partners, thus making its research readily transferable;

•! The location of the AMRC in Sheffield, close to the UK’s main motorway M1 and in a region already known for its manufacturing capabilities has also been an asset;

•! Finally, identifying opportunities to apply existing technology in other contexts, for instance, in the medical devices or civil nuclear industries, offers new avenues for economic growth and innovation, and can ensure long-term sustainability.

Thus, the AMRC provides an example of how to successfully integrate research and innovation with industry needs and regional capabilities. Moreover, it shows the potential this kind of setup has to create a competitive and financially sustainable innovation hub that can accelerate regional growth.

1.10!Leveraging the existing potential There are a number of challenges and opportunities for the future of industry in the region, presented below:

48 See: http://businesslife.ba.com/Ideas/Features/Inside-the-UKs-Advanced-Manufacturing-Research-Centre.html

49 See: http://namrc.co.uk/ 50 See: https://hvm.catapult.org.uk/news-events-gallery/news/major-changes-as-fast-growing-research-

centre-plans-for-further-expansion-at-home-and-abroad/


Challenges

•! Challenge 1: Scale-up the impact of manufacturing in terms of jobs and economic activity more broadly across the region

The crisis has shown that areas with traditional strong manufacturing output have been more resilient in terms of employment (e.g. those around Sheffield, Leeds) Moreover, Yorkshire and the Humber had a strong rebound in manufacturing jobs in the 2009-2012 period, compared to other regions in England. Pockets of high value manufacturing activity exist and new ones are being created through the establishment of sustained R&D collaborations as well as through public and private investment initiatives. However, the general picture still tells us that, overall, manufacturing activity is still being replaced by lower value-added retail or service jobs. Additionally, while there is a regional specialism in selected manufacturing activities, these are not in the top sectors of employment.

•! Challenge 2: Anchor advanced manufacturing and advanced materials to the region’s economic development

Yorkshire and the Humber has a good climate for start-ups, with comparatively more fast-growing businesses and better survival rates than other UK regions (except for London). Figures about businesses managing to scale up are more similar to the national average. The region has a strong scientific landscape in manufacturing and advanced materials, with examples of strong links to the national manufacturing sector through research institutes/centres. Collaborations and initiatives in advanced manufacturing are usually channelled through the University and research sector, or through the different government-supported growth and investment deals. However, most large-scale or long-term collaborative research initiatives target UK and international industrial champions, not local companies. Major investment projects with the potential to change this picture are being initiated over the past 2-3 years.

•! Challenge 3: Provide an environment conductive to talent retention in manufacturing

There is no shortage of training opportunities in manufacturing and advanced materials in the region and the training offer spans from activities of vocational training and further education, to higher education and doctoral programmes. However, talent retention in manufacturing is a challenge that is also contingent on the availability of good jobs and career prospects. Skills programmes run by LEPs or other local/regional intermediaries run the risk of effectively subsidising stronger/richer regions in the UK by training people that then leave the area anyway. Training programmes that are tied to internships or industrial doctorate programmes can partly mitigate this situation by linking students to local or national companies established in the region.

Future opportunities

•! Building capacity in the LEPs to enable more collaborative working

Devolved structures like the LEPs enjoy more autonomy than their predecessors and could theoretically engage in stable collaborations with other European regions (i.e. they do not need permission from others). However, in their current state they may lack actual capacity and incentives to do so. Aside from specific one-offs or commercial missions, LEPs are mostly focused on their constituencies and in engaging with neighbouring LEPs. Building this capacity would allow the LEPs to make more of key regional innovation assets, and to run collaborative initiatives based around those assets.

•! The UK Science and Innovation Audits (SIAs) will provide the evidence necessary to identify local investment opportunities in the sector

Regions in the UK need to improve their ability to “identify where existing and growing research excellence is coupled with emerging innovation strengths”. As stressed in the Witty Review “the strongest basis for regional economic growth is activity rooted in a sound understanding of a locality’s comparative economic


advantage” (2013, p.6). The UK Government has recently commissioned the elaboration of regional Science and Innovation Audits (SIAs) to: (i) provide an evidence base for strategic decision making on local innovation priorities; (ii) strengthen future applications for local investment; (ii) drive local collaborations, between universities and between local businesses, local authorities and LEPs; and (iii) encourage more efficient investment decisions by providing an evidence base that identifies regional strengths.

For the region of Yorkshire and the Humber, this exercise will uncover some opportunities in the area of advanced materials and manufacturing. It is likely that these future areas of opportunity will cluster around initiatives currently being set up such as the new Enterprise Zones, the Devolution Agreement in Sheffield, and initiatives such as the AMRC.


2.!Regional Innovation Performance Trends, Governance and Instruments

2.1!Recent trends in innovation performance and identified challenges The economy of the Yorkshire and the Humber region

The Yorkshire and Humber region has a long tradition of manufacturing industry, as well as a heritage of innovation in the 19th and 20th centuries. However, with the decline of traditional manufacturing in the UK, this region has been particularly disadvantaged in recent decades. On many key economic indicators, Yorkshire and the Humber ranks consistently below the UK average. The latest available data from Eurostat (2013) show that in Yorkshire and the Humber, Gross Domestic Product per capita is approximately €25,000, compared to the UK average of approximately €31,000 and the EU28 average of approximately €26,000. The region also has a consistently higher proportion of young people (aged 18-24 years old) not in employment, education and training.

Moreover, the recent economic crisis has affected Yorkshire and the Humber disproportionately, with unemployment rising more sharply than elsewhere in the UK, and remaining above the UK average. Likewise, even though economic recession had largely ended in the UK by 2011, most recent figures show that Yorkshire and the Humber has not yet returned to consistently positive growth. The real growth rate of regional Gross Value Added (GVA) remains below the UK average, having also fallen more sharply that the UK and EU28 averages following the global economic crisis of 2008. Charts relating to these economic data are available in Appendix C.

The innovation performance of the Yorkshire and the Humber region

The overall underperformance of the region in contrast to the UK more broadly is also reflected in key innovation indicators. Investment in R&D is a case in point: on a per capita basis, total intramural R&D expenditure ranks significantly below that of both the UK and EU28 (€272 per capita compared with €524.5 and €533.1 respectively in 2012). In the Business Enterprise and Government sectors respectively, the contrast is similarly clear. However, in HE sector R&D, Yorkshire and the Humber is closer to UK and EU28 levels. This is at least in part due to the presence of three highly ranked research-intensive universities in the region: the universities of Leeds, York and Sheffield.

Whilst the absolute performance on key indicators is a source of concern, the development over time is positive in many key areas. The region is keeping pace in terms of a growing skilled labour force, with the share of 25-64 year-olds with tertiary qualifications increasing at a comparable level to both the UK and EU28.

Figure 1 Percentage of 25-64 year olds with tertiary qualifications

Source: Eurostat.

0.0

10.0

20.0

30.0

40.0

50.0

2010 2011 2012 2013 2014

Yorkshire and The Humber

United Kingdom

European Union (28 countries)


This trend is also to some degree reflected in the total population share of R&D personnel and researchers, which increased markedly between 2009 and 2011, though it has since flat-lined, as has the equivalent UK trend.

Figure 2 Total R&D personnel and researchers (Percentage of active population)

Source: Eurostat.

Most notably, R&D investment in the Business enterprise sector has increased markedly in recent years, a trend that was only briefly interrupted in 2008-09, but has since continued. The rate of increase on this indicator is significantly higher than the equivalent UK and EU28 trends. In government and HE sector R&D, such increases are not evident, and in particular in the HE sector, Yorkshire and the Humber has not kept pace with UK and especially EU28 trends.

Table 4 Total intramural R&D expenditure (€ per inhabitant)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 All sectors

Yorkshire and The Humber 228.2 249.7 262.9 234.3 220.9 237.5 240.9 272

United Kingdom 498.9 526.9 561.5 598.1 523 467.9 491.6 500.6 524.5 513

EU28 394.5 408.6 435.7 460.6 479.5 472.5 490.7 514.5 533.1 536 Business enterprise sector


101.6 104.4 113.9 122.4 107.2 101.3 109.3 118.5 140.1

United Kingdom 312.2 323.4 346.2 374 324.2 282.7 299.6 318.3 332.2 330.9

EU28 250 257 276.3 293 303.1 291.7 303.4 325.1 338.4 340.2

Government sector Yorkshire and The Humber

14 14.1 17 14 14.5 13.2 12.1 12.5 13.4

United Kingdom 53.5 55.6 56.1 54.8 47.9 42.9 46.8 42.9 42.2 37.5

EU28 52.6 55.8 57.4 59.1 61.3 62.8 63.2 64.2 65.3 65.9

HE sector Yorkshire and The Humber

113.3 120.2 131.4 140 112.6 106.5 115.8 109.7 118.1

United Kingdom 123.3 135.6 146.7 156 138.6 130.8 133 130.3 140.1 134.9

EU28 88.5 92 97.4 103.8 110.3 113.4 118.9 120.6 124.8 125.2 Source: Eurostat.

0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00

2007 2009 2011 2012


United Kingdom



Though the overall picture is one of a disadvantaged region that is showing many signs of improvement, particularly in terms of Business Enterprise R&D, it is critical to note the large disparities and differences that exist within the region. Yorkshire and the Humber comprises four Local Enterprise Partnerships (LEPs): Sheffield city region, Leeds city region, the Humber, and York, North Yorkshire and East Riding. The two city regions have seen significant investment in past decades, and have access to key infrastructures, as well as hosting major research-intensive universities. The Humber benefits considerably less from such factors and is in some ways still path dependant on its status as a major shipping hub. York, North Yorkshire and East Riding are largely rural areas. Keeping in mind the issues of this divergence, the top challenges for the region are:

•! Challenge 1: Low overall levels of R&D investment

Despite the strongly positive upward trend in Business Enterprise R&D, overall levels are still significantly behind UK and EU28 levels. Recent research has also highlighted lack of finance as a key barrier to growth in the Humber and York, North Yorkshire and East Riding LEPs (Business Growth Service, 2015).

•! Challenge 2: Lagging levels of high-skilled labour and research personnel

Especially in its emergence from a traditional manufacturing economy, a strong supply of skilled labour is essential. In both tertiary attainment levels and total researcher and R&D personnel, the region continues to lag behind overall UK levels. Particularly in the case of researchers and R&D personnel, the trend no longer appears to be moving in a consistently positive direction.

•! Challenge 3: Need for a full recovery from 2008-09 crisis

Overall, the region still has high levels of unemployment, young people not in education, training or employment, and low growth and productivity compared with the rest of the UK. Though on many indicators the trend is overall positive, it is critical to ensure improvements continue.

2.2!Institutional framework and set-up The institutional framework of the Yorkshire and the Humber region

Since the closure of the Regional Development Agencies (RDAs) in 2010, 39 Local Enterprise Partnerships (LEPs) have been established in England. The LEPs are public-private partnerships introduced by the government in 2010. LEPs operate as business-led boards based around self-defined functional economic geographies, which were decided by the local actors themselves in the process of developing and submitting their LEP proposals to National Government. Now in their third year of operation, LEPs are the main vehicle of sub-national economic governance in England, though they do not exist in the rest of the UK (i.e. the Devolved Administrations of Northern Ireland, Scotland and Wales).

As a replacement for the RDAs, LEPs have a formal policy remit to determine their local economic priorities, and to carry out activities that drive economic growth and job creation. In Yorkshire and the Humber, there are four LEPs. The maps below show the placement of the LEPs in the region (green), the administrative counties in the region (blue) and the location of the region in England (red). The key to the green LEP map is: (4) York, North Yorkshire and East Riding LEP; (6) Leeds City Region LEP; (9) Humber LEP, and (10) Sheffield City Region LEP. Hashing in the green map indicates Local Authorities that are within more than one LEP area, such as Barnsley Metropolitan Borough Council, which is a member of both Sheffield City Region LEP (10) and Leeds City Region LEP (6).


Figure 3 The counties and LEPs of Yorkshire and the Humber, and the region in England

Source: The LEP Network, 2014, Wikimedia and European Commission. Latter available at: http://ec.europa.eu/regional_policy/archive/atlas2007/uk/maps/uke_en.gif.

The LEPs each operate with a similar remit, though size, scale and approaches differ. Resourcing was provided through a package of funding from Government, which was awarded to underpin the core activities of the LEPs as they became established and began operation. This included an initial payment to each LEP of £125,000 (€169,379) for financial year 2012/13. In 2013/14 and 2014/15, LEPs were able to draw down up to £250,000 (€338,758) per year, though this was on a match-funded basis, and so differed between LEPs. The make-up of the four Yorkshire and the Humber LEPs is as follows.

Table 5 Make-up, personnel headcount and core funding of the four LEPs (late 2015) LEP

Pub

lic

sect

or

mem

bers

Pri

vate

se

ctor

m

embe

rs

HE

/FE

se

ctor

m

embe

rs

Cor

e ex

ecut

ive

staf

f

Core funding

2012/13 2013/14 2014/15


6 7 2 17

£125,000 (€169,379)

Up to £250,000 (€338,758) match funded

Up to £250,000 (€338,758) match funded

Leeds City Region 9 6 1 Humber 7 11 2 15 Sheffield City Region 11 7 1

Source: LEP publications, BIS.

LEPs are the main institutional body for innovation policy, but a range of bodies of governance and government surround the four LEPs in Yorkshire and the Humber. This means that the region’s governmental structures (in common with the rest of


England) are complex. The region has four sub-regional counties and also takes in a small part of Lincolnshire, an adjacent county. Of these counties, three are non-metropolitan counties governed by a county council51 (North Yorkshire), and five unitary authorities52 (two in the East Riding of Yorkshire, one in North Yorkshire and the two unitary authorities representing North and North East Lincolnshire). The two metropolitan counties are made up of nine districts, boroughs or cities53 (four in South Yorkshire, five in West Yorkshire). In addition, in 2014 the Sheffield and Leeds City Regions each established a Combined Authority54 to bring together the leaders of the county’s four borough councils on a statutory basis.

Table 6 Local government structures in the Yorkshire and the Humber region, UK County Metropolitan/

non-metropolitan

County Council

Unitary Authority

Combined authority

Local Enterprise Partnership

East Riding of Yorkshire

Non-metropolitan Humber/York, North Yorkshire and East Riding

North & North East Lincolnshire

Non-metropolitan

North Yorkshire Non-metropolitan South Yorkshire Metropolitan Sheffield City

Region West Yorkshire Metropolitan Leeds City

Region Source: Technopolis Group, from publicly available information.

The general strategic approach to regional innovation policy

In England, innovation policy is mostly centralised, with national bodies such as BIS and InnovateUK taking responsibility for the design of innovation policy. This means that there are many national schemes that LEPs – or their businesses – can tap into, as well as supranational schemes such as the European Commission’s Horizon 2020. However, there are mechanisms by which the LEPs can design specific, differentiated policy programmes for their local economy and secure funding from Government to run them. Gradually, more power and control is being handed to local and regional actors to do so.

The incremental handover of powers began under the previous National Government (2010-2015), when two waves of City Deals were agreed. City Deals were intended to give new powers and freedoms to England’s cities, and specifically control to: i) take charge of decisions that affect the local area, ii) decide what is best to help their businesses grow; iii) create economic growth; and iv) decide how public money should be spent. The first wave of City Deals targeted the eight largest cities outside of London (the ‘Core Cities’, which includes Leeds and Sheffield55), and the second wave

51The county administrative level covers large urban areas (metropolitan counties) or large rural areas (typically with populations greater than a quarter of a million inhabitants). County councils have responsibilities for, for example, education, strategic planning, transport planning, transport, highways, emergency services, social services, libraries and waste disposal. Metropolitan county councils were abolished in 1986 and their responsibilities devolved to their districts and boroughs. Non-metropolitan county councils are still in place, and form the upper level of a two-tier arrangement of local government. The lower level is comprised of district or borough councils performing duties such as local housing, local planning applications, leisure and recreation, waste collection, environmental health, and revenue collections.

52Unitary authorities are areas with only one council providing all local government services described above (i.e. not in a two-tier arrangement).

53 District, borough and city councils cover smaller geographic areas, as part of the two-tier arrangement for local government in England in non-metropolitan counties, and performing devolved duties in metropolitan counties.

54 At the time of writing, five Combined Authorities exist in England, which operate as accountable bodies and manage certain functions.

55 The First Wave included: Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham, and Sheffield.


targeted another 20 cities and surrounding areas (including Hull and the Humber56). These powers, however, did not include taxation powers to enable fund-raising, and so projects and initiatives remain dependent upon the competitive bidding process.

Transfer of further powers is now being discussed and agreed between national Government and some city regions via Devolution Agreements. The Sheffield City Region was the second city to sign such an agreement. The Devolution Agreement includes powers handed over to a new, directly elected Mayor as well as to the Combined Authority, and devolved funding of £1b (€1.4b) over 30 years. The devolved powers give the Sheffield City Region more freedom to tailor services to local needs, including employment support, skills and business growth, as well as strategic planning, infrastructure and transport. Importantly, this agreement gives the Sheffield City Region the ability to plan longer term, and with greater control of financial instruments. Particularly relevant to this report is further Government support to the Sheffield City Region for the development of the SCR Advanced Manufacturing Innovation District, comprising expert advice and support for a City Region led proposal to undertake a Science and Innovation audit. These initiatives are part of the drive to realise the “Northern Powerhouse” concept – boosting the economic potential of the North and tackling the North-South economic divide.

Not all of the LEPs discussed here received a City Deal or a Devolution Deal. Future changes to the way that councils are funded, announced during the Government Spending Review in November 2015 may mean more control over revenue raising and local budgets by 202057, but for now the main mechanism for designing specific local policy that the local and regional actors have is the Local Growth Fund. The Local Growth Fund is a £2b (€2.7b) national Government pot for projects that benefit the local economy. First run in summer 2014, and extended at the beginning of 2015, the Local Growth Fund was a competitive process that promised to award projects to each LEP that would deliver economic growth. The resulting awards are set out in “Growth Deals”, which detail the amount and the specific package of projects. The following table summarises the awards to each LEP in our discussion.

Table 7 Growth deals in the Yorkshire and the Humber region Mechanism York, North

Yorkshire and East Riding

Leeds City Region

Humber Sheffield City Region

Growth Deal 1, 2014 £110m (€149m) £573m* (€776.4m)

£103m (€139.6m)

£320m (€433.6m)

Growth Deal 2, 2015 £12m (€16.3m) £55m (€74.5) £10m (€13.6m) £30m (€40.7m) Devolution Deal -- -- -- Signed City Deal -- Wave 1 Wave 2 Wave 1

Source: BIS. Note: * = largest growth deal in England.

A large proportion of the Growth Deal funding awarded to the LEPs discussed in this report has been dedicated to projects for regeneration, infrastructure and house building, as well as schemes directed toward business grants and skills development for the local economy. Some projects are focused specifically on innovation, or include innovation as a distinct policy goal.

56 The Second Wave included: The Black Country, Brighton, Cambridge, Coventry and Warwickshire, Hull and the Humber, Ipswich, Leicester and Leicestershire, Norwich, Oxford and Oxfordshire, Plymouth and South West Peninsula, Preston, South Ribble and Lancashire, Southampton and Portsmouth, Southend-on-Sea, Stoke-on-Trent and Staffordshire, Sunderland, Swindon and Wiltshire, Tees Valley and the Thames Valley Berkshire.

57 The 2015 Spending Review stated that the Revenue Support Grants given by the Government to Local Authorities will be phased out. This will be replaced by other sources of income such as receipts from Council Tax and Business Rates. Consultation is underway to support the implementation of 100% business rate retention for Local Authorities. See: https://www.gov.uk/government/news/local-government-funding-at-the-spending-review-2015.


The LEPs focused on here also benefit from some large projects awarded through the Regional Growth Fund, a national Government pot of £3.2b (€4.3b) designed to support specific projects that leverage private investment and help local businesses grow. Such projects include large, privately run business support schemes for specific sectors or types of business. Investments from European Structural Funds also contribute to several large programmes.

2.3!Regional innovation policy mix As previously established, the LEPs are able to design and fund specific local policy for their area through the Growth Deals agreed with government. These deals reflect the projects that local actors feel are most likely to yield a high return for the local economy. As in most northern English economies, many of the economic priorities of these LEPs lie with job creation and business growth, improving skills in the local labour market, increasing housing supply and broader physical regeneration (including improving transport and other infrastructure). However, as mentioned in section 2.1, this is a region with varying elements due to the differing nature of each of the LEP area geographies.

Each LEP has produced a Strategic Economic Plan to outline their specific growth priorities – and how these will be met – for the coming years. These documents are a key reference point for the activities of the LEP, and cover all areas that the local actors see as contributing to economic growth, including innovation. In doing so, the LEPs present concise summaries of their main challenges, opportunities and activities, and provide links between these and the investment secured from the Growth Deals, European Structural Funds and access to projects and programmes funded through the Regional Growth Fund. The following table summarises the policy priorities of the four LEPs as set out in their Strategic Economic Plans.

Table 8 Yorkshire and Humber LEPs – overview

LEP Strategic plan objectives LGD additional activities

Leeds City Region

•! Supporting growing businesses – ensuring access to finance and other quality business support;

•! Developing a flexible and skilled workforce; •! Building a resource smart City Region (energy); •! Delivering the infrastructure for growth (transport)

The Local Growth deal funding for Leeds City Region also funds projects related to housing and physical regeneration


•! Ensuring that businesses have the support they need to realise their full growth potential;

•! Ensuring that businesses become more outward looking (inward investment and new markets);

•! Providing the conditions that businesses need to prosper and become more resilient (skills and infrastructure)

The Local Growth deal funding for Sheffield City Region also funds projects related to sustainable transport

Humber

•! A skilled and productive workforce; •! Thriving successful businesses (business support); •! An infrastructure that supports growth (transport, flood

defence, energy and digital communications infrastructure, housing)

The Local Growth deal funding for the Humber also funds projects related to infrastructure, regeneration, and managed workspace for businesses


•! A global leader in food manufacturing, agri-tech and biorenewables;

•! Successful micro and small businesses (including: increasing innovation in small businesses by improving links between business and academia and de-risking investment in R&D);

•! Inspired people (ambition, skills), •! Connected economy (infrastructure); •! Tourism/sense of place

The Local Growth deal funding for York, North Yorkshire and East Riding also funds projects related to infrastructure, flood defence and housing supply

Source: Published Strategic Economic Plans and Local Growth Deal documents.


This is a broad mix of economic development policy priorities, within which are specific elements related to business innovation, future skills, and larger projects or investments aimed at developing sectorial or research strengths that would come under the banner of innovation. Examples of such investments include:

•! The joint BioVale initiative between York, North Yorkshire and East Riding and Leeds City Region, to develop an innovation cluster for biotechnology;

•! Leeds City Region’s new Innovation and Enterprise Centres focused on advanced manufacturing, health and medical, and the digital and creative sectors;

•! Sheffield City Region’s development of an Advanced Manufacturing District based around the Enterprise Zone at the AMRC;

•! The emergent Business Growth Hubs seen in the region that include a wide range of business support, from high-level advice to marketing support and innovation support;

•! The focused approach seen to develop skills in the sub-regional economies that aim to improve the local labour markets, from reducing NEETs to improving vocational skills and also providing skills needed for the future in innovation-centred sectors.

Table 9, below, summarises those policy programmes related to innovation across each LEP.


Table 9 Regional policy mix for innovation in Yorkshire and the Humber Title Duration Policy priorities Budget Organisation

responsible More information

Sheffield City Region Business Growth Hub

2015- 4.2 Organisational, process and other non-R&D innovation 5.4. Innovation management and advisory services Supporting private sector growth. To help firms create over £1b (€1.4b) of additional GVA over the 10 years of the plan, creating ~15,000 jobs in the process. Includes business advice, innovation assistance, access to finance, and skills development. A government investment of up to £49.5m (€67.1m) over 6 years in Sheffield City Region’s Business Support Programme to provide grants to local businesses to invest and expand

£500,000 (€677,515) per annum £2m (€2.7m) Devolution Agreement money

Sheffield City Region LEP

https://www.gov.uk/ government/ publications/sheffield-city- region-growth-deal

Skills and capital investment in training facilities

2015-2021 3. Human Resources for Science, Technology and Innovation To maintain and improve facilities for learners, including the creation of a new Rail Engineering Campus in Doncaster, comprising a new £50m (€67.8) Centre of Excellence for Rail Engineering with the HS2 National College. The Sheffield City Region Skills Bank – a £100m (€135m) investment to provide local businesses with more of the skills they need. A new £5m in a new Glass Innovation Centre to provide training for working in one of the City Region’s traditional industries. A further £13m (€17.6m) to improve the quality of college facilities across the City Region

£168m (€227.6m)

Advanced Manufacturing District

2012-2037

7. Others Enterprise Zone – business-friendly taxes and planning processes

£26.9m (€36.5m)

DotForge 2013- 4.3. Fostering start-ups and gazelles 5.5. Seed and early-stage capital vehicles, business angel networks A programme to support start-up businesses, which providers intensive training and £25,000 (€33,875) of private venture capital in each venture

DotForge http://dotforge.com/

UK Steel Equity Growth Fund

-2017 4.1. Direct funding to business R&D and innovation Private-sector run (UK Steel Foundation), part of a broader scheme to provide up to £1m (€1.4m) of investment capital to growing companies

£6m (€8.1m) UK Steel Enterprise

http://www.uksteelenterprise.co.uk/

Grow on Growth

-2017 4.1. Direct funding to business R&D and innovation 5.5. Seed and early-stage capital vehicles, business angel networks Funding support for early stage businesses looking to exit their incubation environment, funded by RGF and managed by the University of Lincoln (available in several UK locations)

University of Lincoln

http://growongrowth.co.uk/

Leeds City Region Business Growth Programme

2015-2021 4.1. Direct funding to business R&D and innovation Funding that will provide for capital grants for businesses. This will increase commercial lending and equity, and make a valuable contribution to work on supply chains, innovation and inward investment. The business grants programme is designed to help more companies to start, grow, innovate and exploit supply chain opportunities

£108m (€146.3m) Leeds City Region LEP

https://www.gov.uk/government/publications/leeds-city-region-growth-deal

Skills Capital Programme

2015-2021 3. Human Resources for Science, Technology and Innovation Investment in further education colleges and training providers that will support sectors which are likely to generate the largest contribution to economic growth, as well as ensuring a world-class learning environment for young people.

£100m (€135.5m)

Innovation 2015- 2.1. R&D cooperation projects between academy and industry


Title Duration Policy priorities Budget Organisation responsible

More information

and Enterprise centres

2.3 Knowledge transfer structures between academic and industry Located at the Universities of Huddersfield and Leeds to support advanced manufacturing, health and medical and digital and creative sectors

Energy Hub 2015-2021 2.4. Demonstration projects, proto-types and proofs of concepts 5.1 Cluster development Specialist vehicle responsible for the development of a pipeline of new energy infrastructure projects (including energy efficiency, energy generation, supply chain and distribution and storage). The Decentralised Energy programme enables large scale energy investments which exploit new resource smart technologies.

BioVale, York

2015- 2.4. Demonstration projects, proto-types and proofs of concepts 5.1 Cluster development 5.2. Science, technology parks and incubators A joint project with the York, North Yorkshire and East Riding LEP. An innovation cluster for biotechnology, focusing on the development of high value chemicals, natural products, next generation biofuels and bio-waste valorisation.

£50m (€67.8m) Leeds City Region LEP and York, North Yorkshire and East Riding LEP

Business Growth Calderdale project

2012-2020

5.4. Innovation management and advisory services 4.5. Knowledge transfer and cooperation between firms (incl. technology acquisition)

£1m (€1.4m) Business Growth Calderdale

http://www.businessgrowthcalderdale.co.uk/

Humber Skills capital programme �

2015-2021 3. Human Resources for Science, Technology and Innovation Investment to maintain and enhance the current Further Education building stock and enhance learning provision across the Humber �

£1M (€1.4m) The Humber LEP

https://www.gov.uk/government/publications/humber-growth-deal

Skills Projects – to become Centre of Excellence for Energy Skills

2015-2021 3. Human Resources for Science, Technology and Innovation CATCH, North East Lincolnshire: new training facility for specialist offshore wind training New build learning centre by Grimsby Institute – renewable and environmental technology skills Extension to Goole College's vocational skills workshop and classroom refurbishment – engineering and renewable technologies training

‘Growing the Humber’ Capital Grant scheme

2013-2020

4.1. Direct funding to business R&D and innovation 4.2. Organisational, process and other non-R&D innovation 5.2. Science, technology parks and incubators Investment programme to offer flexible grants to help job-creating businesses grow across the Humber.

£31m+(€42.0m+)

Humber Local Enterprise Partnership Business Loan Fund

2013-2020

4.1. Direct funding to business R&D and innovation 4.2. Organisational, process and other non-R&D innovation

£7m (€9.5m) http://www.humberlep.org/business/funding/loan-fund/

UK Steel Equity Growth

-2017 4.1. Direct funding to business R&D and innovation

£6m (€8.1m) UK Steel Enterprise

http://www.uksteelenterprise.co.uk/


Title Duration Policy priorities Budget Organisation responsible

More information

Fund Private-sector run (UK Steel Foundation), part of a broader scheme to provide up to £1m (€1.4m) of investment capital to growing companies

Green Port Hull

2013-2020

4.1. Direct funding to business R&D and innovation 4.2. Organisational, process and other non-R&D innovation 3.5. Retaining knowledge and experience of older knowledge workers 2.4. Demonstration projects, proto-types and proofs of concepts

£25.7m (€34.8m) Hull City Council, with partners

http://greenporthull.co.uk/

York, North Yorkshire and East Riding National Agri-Food Innovation Campus and York Bio Hub

2015- 2.4. Demonstration projects, proto-types and proofs of concepts 5.1 Cluster development 5.2. Science, technology parks and incubators Key projects supporting the LEP’s ambitions to be a global leader in food, agricultural technologies, and bio-renewables. There is a link to the Malton Food Enterprise Zone in the area.

£13m (€18.0m) York, North Yorkshire and East Riding LEP

https://www.gov.uk/government/publications/york-north-yorkshire-and-east-riding-growth-deal

Improving vocational skills �

2015-2021

3. Human Resources for Science, Technology and Innovation Developing world-class training in agriculture and engineering at Askham Bryan College and upgrading facilities at Harrogate College to provide hands-on training for learners.

Business Growth Hub

2015-2021

4.2 Organisational, process and other non-R&D innovation 5.4. Innovation management and advisory services

Let’s Grow North & East Yorkshire

-2017 4.1. Direct funding to business R&D and innovation Private-sector run (BE Group), part of a broader scheme funded through RGF Grant support for capital investment and R&D projects that will create new, sustainable jobs The programme is aimed at manufacturing and service sector businesses operating beyond the regional level for business growth and diversification Grants of £25,000 to £1m (€33,875 - €1.4m) for between 10%-25% of eligible expenditure

£4M (5.4m) BE Group http://www.be-group.co.uk/services/commercial-development-programmes/lets-grow-programmes/lets-grow-north-east-yorkshire/

Regional Finance Yorkshire

4.1. Direct funding to business R&D and innovation A private-sector run scheme to provide finance to SMEs to relocate to the Yorkshire and Humber region, from seed corn to equity-linked investments (£15,000-£2m, €20,325-€2.7m).

Finance Yorkshire

http://www.finance-yorkshire.com/

Manufacturing Advisory Service – Yorkshire and Humber58

2002-2015

4.1. Direct funding to business R&D and innovation 4.2. Organisational, process and other non-R&D innovation 5.4. Innovation management and advisory services The grants for SMEs range between £300 and £3,000 (€407 and €4,065)

UK Department of Business Innovation and Skills (BIS)

http://www.mas.bis.gov.uk/

Source: Published documents, including Local Growth Deals, Regional Growth Fund programmes and projects, ESIF plans, Strategic Economic Plans and other local documentation. Note: all Euro values calculated at current rates (at the time of publishing), using http://ec.europa.eu/budget/contracts_grants/info_contracts/inforeuro/inforeuro_en.cfm.

58 The Manufacturing Advisory Service was subsumed into the Business Growth Service, which was subsequently closed in 2015, with part of the money diverted to new LEP-run Business Growth Hubs.



2.4!Appraisal of regional innovation policies In this section we provide an appraisal of the innovation policies in the Yorkshire and the Humber region with the aim of assessing the extent to which they present a suitable policy response to the challenges that exist in this particular region.

Though there are differences across the four LEP areas within the region, we were able to set out in section 2.1 three overarching challenges that policy could address. For clarity, we re-state them here:

•! Challenge 1: Low overall levels of R&D investment •! Challenge 2: Lagging levels of high-skilled labour and research personnel •! Challenge 3: Need for a full recovery from 2008-09 crisis

In addition to these challenges, consideration also needs to be given to the arrangements in place for policy-making. There is a tension between the ability for greater tailoring of policy for local needs, and the potential fragmentation brought on by the localist approach now in force.

Efficacy and impact

There are disparities and different challenges within the region, as already noted in this report. Previous evaluation work on region-wide policies (notably the 2011 mid-term ERDF evaluation for Yorkshire and the Humber) noted some successes, but with very different outcomes across the region (Regeneris, 2011, p.65). This evaluation covered the period prior to the abolition of the Regional Development Agencies.

With no substantive evaluation yet of the LEPs or their new policies and programmes, little can be said at this time about the efficacy or impact of these measures. Following the announcement to dissolve the Regional Development Agencies and transition from a regionalist to a localist policy landscape, the LEPs themselves came into existence from 2012 and have only recently submitted their strategic economic plans. Most initiatives have only been in existence for a short time (typically from 2013 or later), and as such there are no evaluations of the LEP-driven policy measures so far.

Of the few policy tools that reach beyond LEPs and cover the whole region, there is likewise no substantive evaluation evidence. Finance Yorkshire, for instance, regularly showcases its achievements through case studies of individual projects59, but whilst these demonstrate the initiative to be active and achieving individual results, they are insufficient to comment of the overall efficacy or value added by the initiative as a whole.

As such, this particular point in time does not allow for more than speculative assessment on the efficacy of the policy initiatives currently in place. In the coming years, increasing numbers of initiatives conducted by the LEPs will likely be evaluated60, and will thereby enable a clearer view on the extent to which the localist agenda of UK innovation policy has succeeded in the Yorkshire and the Humber area, and indeed elsewhere.

Addressing challenges in the four regional LEPs

In terms of salience and ‘fit’, there is an overall positive verdict for the Yorkshire and the Humber region. We see across the three main identified challenges for the region as a whole, that each LEP appears to be tackling these issues with their own programmes . While it is not possible to speak about the efficacy and impact of these

59 See: http://www.finance-yorkshire.com/case-studies/ 60 The Government provided LEPs with a monitoring and evaluation framework and set out expectations

for the implementation of evaluation and reporting. In addition, a number of Government-supported Science and Innovation Audits are due to be undertaken in 2016.


newer programmes and policy initiatives, it is possible to comment on the approaches being taken by the LEPs, challenge by challenge:

Lagging levels of high-skilled labour and research personnel

Across the LEPs of the Yorkshire and the Humber region, some policy priorities are constant. Most notably, all four have some degree of emphasis on skills. Given the comparatively low levels of highly skilled workers in the region, this is clearly a challenge that requires responses in all LEPs, and these responses are clearly present. However, even here these are at times tailored to the specific industries or thematic areas most relevant in each LEP.

Low overall levels of R&D investment

In terms of overall R&D investment, a more complex picture emerges. The LEPs are by their very nature business-led, and therefore have a focus in this domain, with a key result being that most investment programmes of all four LEPs are strongly aimed at the business sector, often also targeting start-ups, or providing support for larger, existing businesses. Overall, low levels of R&D investment are relatively low in the Yorkshire and the Humber region. However, whilst there are negative trends for HE and government R&D, the trend in business sector R&D expenditure is overall in a positive direction. In this respect, innovation policy in Yorkshire and the Humber is therefore aimed more at the region’s strengths than at addressing its most evident weaknesses.

As noted, the business-focus of the LEPs accounts for this mismatch to some extent. Further, HE and government R&D are additionally coordinated through the national level, with the business sector having fewer national-level structures in place to stimulate investment. Additionally, it needs to be kept in mind that although business sector R&D expenditure is on an upward trend in the region, it is still below overall UK levels, so this is nevertheless an area in need of attention. In this sense, the focus on capital investment specifically for businesses is not misplaced as such. However, there is a question around whether other forms of investment to address, for instance, the low levels of R&D expenditure outside the business sector, will be sustained or improved in the future. Particularly following the most recent government spending review, through which the Department for Business, Innovation and Skills is now obliged to achieve savings of £2.4b (€3.3b) by 2019/20,61 there appears to be little guarantee that elements of capital investment not addressed through the LEPs will necessarily be maintained through central government.

Need for a full recovery from 2008-09 crisis

This is an ongoing challenge across the north of England, with various policy measures needed to address what is a multifaceted issue in itself. Most notably, we see the introduction of business growth programmes (or advisory and mentoring services) across all of the LEPs in the Yorkshire and the Humber region. This coincides with the national reorganisation of business support, under which each LEP is supported to implement a Business Growth Hub.

Use of specific mechanisms to encourage business investment, such as Enterprise Zones, grant schemes and relevant sectoral programmes are seen across the region. This will be a gradual process.

The potential tension between differentiation and fragmentation

Our headline conclusion is that whilst there is an excellent level of congruence between the policy landscape and the challenges that exist in the area, this has been

61 Details: https://www.gov.uk/government/news/department-for-business-innovation-and-skills-settlement-at-the-spending-review-2015


facilitated through a localisation agenda that risks fragmentation and lack of coordination across different local areas.

The transition from a regionalised policy landscape embodied primarily through the Regional Development Agencies (RDAs) towards a localist approach was a bold move on the part of the last UK government. It moves the UK away from the regionalisation practiced at EU level, and in this sense creates a greater diversity of different governance and policy levels. However, despite thereby creating a more complex (and potentially bewildering) picture than might be the case in other member states, the localisation of innovation policy in this particular area has a critical benefit: it has allowed four areas that are distinct in many ways to formulate their policies in a more tailored manner. This ability to tailor policy to local strengths and challenges is particularly important in a region as diverse as Yorkshire and the Humber.

The central observation regarding the four LEPs’ respective policy mixes is that they are each respectively suited to the contours and challenges of their local areas. This is also the case for elements of the LEPs’ activities not immediately related to innovation policy, e.g. the emphasis on infrastructure and tourism orientation in the York, North Yorkshire and East Riding LEP, which are critical elements for this large, rural area, but not so much for other parts of the region.

The contextual differences between the four LEPs in the region are likewise reflected in innovation policies specifically. This includes both policies that relate to established thematic strengths and industrial heritage (e.g. an instrument focused on agricultural engineering in the rural LEP of York, North Yorkshire and East Riding, or a capital investment fund aimed at the steel industry in the Sheffield city region LEP), as well as to newly emerging strengths in each area (e.g. an emphasis on energy infrastructure in Leeds City Region LEP or offshore wind and renewable technologies in Humber LEP).

Whilst the LEP structure is evidently helpful in terms of allowing local areas to tailor policy measures to local challenges and opportunities, this advantage simultaneously contains the risk of fragmentation. Particularly for larger collaborative projects, it is evident that all best-suited parties might not be located in close enough proximity for all to fall within the same LEP. Such cases are already evident in the policy landscape: the BioVale York initiative is a collaboration between Leeds City Region and York, North Yorkshire and East Riding LEPs. This is an innovation cluster for biotechnology, focusing on the development of high value chemicals, natural products, next generation biofuels and bio-waste valorisation, where expertise and interest evidently existed in multiple LEPs, leading to a cross-LEP approach. There are other examples of LEPs beginning to work together, such as discussions between the Sheffield and Leeds City Regions on financial instruments, however, such initiatives are overall rare in the region, which casts some doubt on whether the present system is suited to easily facilitating such activity. The BioVale initiative itself therefore represents a form of solution to an important challenge of the present system, and will not least for this reason be discussed further in the next section.

2.5!Policy good practice The bioeconomy sector in Yorkshire and Humber, which covers all bio-based industries including food, agri-tech, biotechnology and bioenergy, provides an interesting policy case study for regional and local innovation agencies with regards to supporting the growth of emerging sectors by capitalising on locally available skills and resources. As mentioned in the previous section, it also represents the need for synergy between individual LEPs for holistic, unfragmented sector development within a region.

In the UK, the bioeconomy contributes £36.1b (€48.9b) in gross value added (2% of the national total) and about 6m jobs to the economy (Capital Economics, 2015). The government views it as a sector with immense potential for further growth and a significant positive impact on environmental sustainability. This aspiration stems


from the fact that the UK has a world-class science base and leading businesses in this area.

These assets are also present in the Yorkshire and the Humber region, which is home to 10% of the UK’s bioeconomy.62 The region is home to 11 universities and several internationally renowned research centres. The region also has two agricultural colleges: Askham Bryan and Bishop Burton. Further expertise is available from the Food and Environment Research Agency (FERA) on the National Agri-Food Innovation Campus which specialises in the agri-food supply chain, the Biorenewables Development Centre (BDC) which offers scale-up facilities and the Stockbridge Technology Centre which is a leader in horticultural R&D.

The knowledge base is matched by a diverse agricultural sector that includes the cultivation of arable and horticultural crops, livestock rearing and agri-tech industries like Cargill, Syngenta, AB Agri, etc. In addition, the region hosts large, medium and small businesses associated with the bioeconomy. For instance, food and drink businesses in the UK including household names such as Nestle, McCain, Quorn and Mars; bio-based speciality chemical companies; and biofuel concerns (bioethanol and biodiesel).

Despite the availability of these assets in the region, businesses are underperforming because the assets are not integrated.62 To tackle this problem, an innovation cluster ‘BioVale’ has been established to support the growth of the Bioeconomy sector in the region. It receives funding from ESIF, ERDF, LEPs, UK Trade and Investment (UKTI), the universities, HEFCE, the Skills Funding Agency, Innovate UK and the private sector. BioVale is a ‘one-stop shop’ for providing businesses support from the initial R&D stage to product commercialisation through the following support activities (BioVale, 2015):

•! Business networking and dialogues: 200 small businesses have already been connected;

•! Practical assistance to businesses especially SMEs in terms of access to technical expertise, scale-up facilities, support funds for innovation, etc.;

•! Training for entrepreneurs and young person in the form of apprenticeships, technical courses, PhDs and Masters as well as specific courses on legislation, standards and IP;

•! Development of bio-based supply chains, e.g. supply chains where one business uses the waste products of another;

•! Provision of business growth space at the National Agri-Food Innovation campus, Askham Bryan College and the proposed BioVale centre;

•! Promoting trade and investment through representing SMEs in international forums and networking with similar innovation clusters internationally (currently links with clusters in France, Holland and Germany);

•! Engaging with policy makers and regulators to communicate the needs of the sector to them

BioVale involves cooperation between the Leeds City Region; York, North Yorkshire and East Riding; and the Humber LEPs as well as local councils (e.g. York City Council) and national agencies like UKTI and Innovate UK. This is an interesting development because it suggests that a similar local council level or even LEP level

62 See: Accelerating+ innovation+ and+ market+ uptake+ of+ biobased+ products+ BRIDGE+ 2020+ July+ 2012+http://bridge2020.eu/wpFcontent/uploads/2013/05/BRIDGEFVision.pdf+


initiative might be inadequate – perhaps because such an approach would be too fragmented. Nonetheless, while these separate entities collaborate through BioVale, they also support the Bioeconomy sector through their own programmes. For example, the York, North Yorkshire and East Riding LEP has made major contributions to funding the creation and growth of key assets63, like the National Agri-food Innovation Campus, through its Growing Places scheme. It has also been instrumental in establishing a Food Enterprise Zone in Malton to support the expansion and recruitment of food businesses. In contrast, the City of York Council, which is also responsible for local business development albeit in a smaller area, has limited resources and drivers to contribute. It is a “small cog in the whole” according to a representative of the Council, but it still plays an important supportive role with limited finances at its disposal. The council nurtures local clusters and business networks, offers grants and provides advice regarding external funding sources, links new entrants with existing businesses, provides business space and offers reduced business rates for businesses in key sectors including the bioeconomy. In the long-term, sustainability of the initiative is vital to ensure that bioeconomy businesses especially SMEs continue to receive the support that they need. Over-reliance on public funds will be risky. Therefore, BioVale is hoping to progress towards a model where one-third each of the total funds will come from core public funds, competitive grants and membership fees (currently there is no fee).64 Although BioVale formally came into existence only in July 2014, and its full impact is unknown, there are some potential lessons that could be applied in different sectors and regions. Firstly, effective implementation of economic strategy requires a synergy between national, regional and local priorities, and cooperation between councils, LEPs and the national government so that innovation and economic activity are supported efficiently and effectively. Secondly, the availability of assets is not enough; local and regional assets need to be integrated through effective and dynamic networks. Better communication among businesses in the same and different sectors as well as research establishments and businesses might help to create new supply chains and innovations to fulfill existing needs. Lastly, collaboration with similar clusters in other countries can allow clusters to share experiences and might help with developing new supply chains and markets. BioVale has formal collaborative links with other bioeconomy clusters in France, Holland and Germany. This has led to joint research, sharing of facilities, cooperation on developing new markets and sharing of best practice. Thus, BioVale seems to have started off on the right note and appears to be well suited to supporting the Bioeconomy in Yorkshire and the Humber. Moreover, it is a model that can easily be replicated in other contexts.

2.6!Possible future orientations and opportunities Now that the LEPs are fully operational and have published strategies, plans and other documentation, there is some scope to consider future orientations. The LEPs are now in a better position to consider their next steps, and indeed, consultation reveals that this is happening in at least one case, but these are still early days and so another year of delivery may be needed before the LEPs begin to commit such thoughts to paper.

Nonetheless, the current policy mix appears to be appropriate. As set out in the appraisal section (2.4), the LEPs of Yorkshire and the Humber are implementing policies and programmes that seem to align well with their specific needs. These

63 See: http://www.businessinspiredgrowth.com/whatwedo/ 64 Interview insight.


programmes are still in their infancy and have not yet been reviewed or evaluated, which limits the amount to which we can offer informed opinions on any iterative changes to those programmes. The Science and Innovation Audits scheduled to be undertaken in 2016 will be important in setting future orientation as they define strengths and potential in more detail than is currently available.

The differing nature of these four LEPs means that future orientations are likely to vary within the region. This is furthered by the fact that one LEP – Sheffield City Region – has signed a Devolution Agreement, which means that the conditions for financing and implementing policy over the next 30 years will be different from the other LEPs, unless they each reach Devolution Agreements as well. Impending changes to the way that Local Authorities are financed may also play a part in the coming five to ten years, particularly if this improves local actors’ ability to raise revenue. It is unclear at this point exactly how this will unfold.

Based on the policy appraisal section above and our interviews with expert stakeholders, we can make some considerations for future orientations. These follow below.

•! Working collaboratively across LEP boundaries

The ability for LEPs to design and deliver specific policies and programmes for their local area is powerful, but some initiatives require greater scale. In general, the localisation agenda risks fragmentation of the policy agenda across local areas. We have highlighted in this report two instances of LEPs working together across their boundaries to develop or deliver initiatives. BioVale, a collaboration between Leeds City Region and York, North Yorkshire and the East Riding, and early talks between Sheffield City Region and Leeds City Region around specific financial instruments are two positive examples of this.

There is no doubt that local actors are pragmatic in these arrangements. Collaboration requires an issue, and that issue will inform the choice of partners. Collaborations maybe be pan-Yorkshire, or between the eight English Core Cities. This is very flexible, and effective and sustained partnership working will require a certain amount of capacity building in the LEPs themselves to take full advantage of these opportunities.

•! Taking a dual track approach to enhancing the business base Each of the LEPs is prioritising business growth through programmes and dedicated business growth hubs. Consultation revealed that there is a dual focus on business innovation. On the one hand, they are aiming to support innovative companies to innovate more – providing innovation support, grants or loans for equipment, de-risking investment in R&D, support for PhD placements, etc. On the other hand, there is an acknowledgement that local and regional performance in business innovation reflects the business base of the LEP. For this to change, some LEPs are looking to shift the balance toward more knowledge-intensive businesses, start-ups and spinouts, as well as attracting new businesses to the area.

A central aspect of this is the use of business rate flexibility through Enterprise Zones. The Advanced Manufacturing District in the Sheffield City Region, and several newer Enterprise Zones around York provide opportunities for LEPs to develop thematic business clusters, and to begin the ‘latching’ process to embed companies into the local economy. This is another area where a Devolution Agreement – with the financing and relative autonomy that such an agreement brings – will provides a greater number of options.

•! Focusing on talent attraction and retention to complement skills development

Each of the LEPs is focusing on developing skills, and we see a dual approach here. Skills programmes focus efforts to boost basic skills and reduce the number of individuals not in work, education or training in the region, and also to up-skill those in the labour market to address the relatively low number of skilled workers in the region, and to give local businesses the skills base to grow. A risk remains in that huge


investments in skills developments may result in loss of skilled workers who move away for career reasons, effectively allowing poorer regions to subsidise richer regions’ labour markets. This is a natural process, but it does raise a need for these LEPs to consider initiatives to retain talent that has been invested in.

To conclude, we must reiterate that while these considerations for future orientations are based on the research conducted for this report and consultation with stakeholders, these structures and programmes are still young. Timescales for policy learning can often be in the range of a decade, and so it is very early to assess these new arrangements at this stage. Due to the stage in these arrangements’ lifecycles, there is a lack of formal evaluative evidence, and therefore it is impossible to be definitive in stating what these LEPs’ future orientations will be. Nonetheless, it is worth bearing these in mind for the Yorkshire and the Humber’s future innovation policy mix as and when more formal evidence becomes available.


Appendix A!Bibliography

Local Enterprise Partnership documents

1.! Humber LEP (2014) Strategic plan 2014-2020. Available at: http://www.humberlep.org/wp-content/uploads/2014/11/StrategicEconomicPlan.pdf

2.! Humber LEP (2012) A plan for the Humber, 2012-17. Available at: http://www.humberlep.org/wp-content/uploads/2014/11/plan-for-the-humber.pdf

3.! Humber LEP (2014) Humber ESIF strategy 2014-2020. Available at: http://www.humberlep.org/wp-content/uploads/2014/11/Humber-ESIF-Strategy-January-2014.pdf

4.! Leeds City Region LEP (2014) Strategic economic plan 2014. Available at: http://www.the-lep.com/LEP/media/New/SEP%20documents/SEP-Final-Exec-Summary-website.pdf

5.! Leeds City Region LEP (2014) Growth plan 2014. Available at: http://www.the-lep.com/LEP/media/New/SEP%20documents/Leeds-City-Region-SEP-Part-A-Growth-Plan.pdf

6.! Leeds City Region LEP (2014) Leeds ESIF Strategy. Available at: http://www.the-lep.com/LEP/media/New/ESIF%20docs/Leeds-City-Region-ESIF-FINAL.pdf

7.! Sheffield City Region LEP (2014) Strategic economic plan. Available at: http://sheffieldcityregion.org.uk/wp-content/uploads/2014/09/Business-Leaflet-September-2014.pdf

8.! Sheffield City Region LEP (2014) Plan and growth deal, Executive summary. Available at: http://sheffieldcityregion.org.uk/wp-content/uploads/2013/12/Deal-and-Plan-Executive-Summary.pdf

9.! Sheffield City Region LEP (2014) ESIF strategy. Available at: http://sheffieldcityregion.org.uk/wp-content/uploads/2013/05/SCR-ESIF-FINAL-1.pdf

10.! York, North Yorkshire and East Riding LEP (2014) Strategic economic plan. Available at: http://www.businessinspiredgrowth.com/wp-content/uploads/2015/06/strategic-economic-plan-sections-1-2.pdf

11.! York, North Yorkshire and East Riding LEP (2015) Annual report 2015. Available at: http://www.businessinspiredgrowth.com/wp-content/uploads/2015/08/2015-Annual-Report-web-version.pdf

12.! York, North Yorkshire and East Riding LEP (2014) ESIF implementation plan. Available at: http://www.businessinspiredgrowth.com/wp-content/uploads/2015/06/EUSIF-Implementation-Plan.pdf

Other documents and webs-sources

1.! BioVale (2015) BioVale: A strategy for a bioeconomy innovation cluster across Yorkshire and Humber.

2.! Business Growth Service (2015) Growth Dashboard June 2015. Enterprise Research Centre, UK.

3.! Capital Economics (2015) The British bioeconomy. An assessment of the impact of the bioeconomy on the United Kingdom economy.

4.! EPSRC (2014) Report on the outcomes of the Advanced Materials Monitoring Portfolio Evolution Pilot.


5.! Ernst and Young (2015) UK attractiveness survey 2015. Available at: http://www.ey.com/Publication/vwLUAssets/The_UK_Attractivness_Survey_2015_-_full_report/$FILE/1595088_UKAS_report_2015_FINALWEB.pdf

6.! Giddens (1998) The Third Way. Cambridge: Polity.

7.! House of Commons (2015) Briefing paper number 01942, 6 August 2015. Manufacturing: statistics and policy.

8.! Regeneris (2011) Yorkshire and Humber ERDF Operational Programme 2007-13: Mid Term Impact Evaluation. Regeneris Consulting, September 2011. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/91938/ERDF_Yorkshire_and_the_Humber_mid_term_evaluation_September_2011.pdf

9.! The LEP Network (2014). Building local advantage: Review of Local Enterprise Partnership area economies in 2014.

10.!Uyarra, E., and Ramlogan, R. (2012) The Effects of Cluster Policy on Innovation.

11.! Witty, A. (2013) Encouraging a British Invention Revolution: Sir Andrew Witty’s Review of Universities and Growth. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/249720/bis-13-1241-encouraging-a-british-invention-revolution-andrew-witty-review-R1.pdf

Appendix B!Stakeholders consulted

1.! Dr Maggie Smallwood, Head of BioVale (date of interview 11 December 2015).

2.! Mark Alty, Principal Strategy & Economic Policy Officer, City of York Council (date of interview 15 December 2015).

3.! David Hewitt, Senior Economic Policy Manager, Sheffield City Region Executive Team (date of interview 17 December 2015).

4.! Prof. Paul Nightingale, Professor of Strategy, Science Policy Research Unit (SPRU), University of Sussex (date of interview 17 December 2015).


Appendix C!Economic indicators for the region

This appendix presents the full set of charts related to economic performance of the Yorkshire and the Humber region, drawn from the latest available data (Eurostat). For each indicator, the region is presented comparative to the UK and EU28 averages.

GDP per capita (Euros)

Source: Eurostat.

Percentage of Young people (18-24 yrs.) neither in employment nor in education and training

Source: Eurostat.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


United Kingdom


0.0

5.0

10.0

15.0

20.0

25.0

2010 2011 2012 2013 2014


United Kingdom



Unemployment rate (15 years and over)

Source: Eurostat.

Real growth rate of regional gross value added (GVA) at basic prices (% change on previous year)

Source: Eurostat.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2004 2005

2006 2007

2008 2009

2010

2011 2012

2013

2014


United Kingdom


-8.00

-6.00

-4.00

-2.00

0.00

2.00

4.00

6.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013


United Kingdom


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Documents

Regional Innovation Monitor Plus 2016 - European Commission · Regional Innovation Monitor Plus 2016 i Table of Contents Executive Summary 2! 1. Advanced Manufacturing: Advanced Materials