Here in BDO’s Management Consulting team, I’ve recently been supporting one of my private sector clients – Cathedral Group PLC – to implement an ambitious regeneration scheme in Hayes, West London. At the heart of this mixed use development is a plan to make Hayes a centre for entrepreneurial activity. We aim to achieve this by setting up the Central Research Laboratory – a centre in which venture capitalists, entrepreneurs and universities collaborate to translate the amazing ideas generated in West London into thriving 21st Century businesses. It also provides start-ups with access to world class digital manufacturing technologies – such as the new wave of 3D printers.
What makes the project so inspiring is that the site (The Old Vinyl Factory, Hayes) was once home to some of the country’s most innovative entrepreneurs. It was the base for HMV and EMI in the hay day of vinyl record production and entrepreneur-inventors on the site created revolutionary technologies including stereo sound and CT scanners. The CRL aims to return this spirit of creative entrepreneurship to the site and to give inventors the free reign to innovate that they had back in the ‘60s. Or as a Property Week article put it, it’s helping West London get its groove back.
So, what does this have to do with local government?
Well, the Greater London Authority (GLA) announced at the start of the month that they would support the programme, providing £7.7m of funding through London’s Growing Places Fund. Moreover, the London Borough of Hillingdon has been and continues to be a key supporter.
The GLA’s access to funding, combined with the vision to back projects like the CRL, has made this possible, as has Hillingdon’s willingness to think differently about what regeneration means. Few private investors would have felt able to provide such funding, especially since the CRL is establishing a new model for start-up ‘incubation’ that has not yet been seen in the UK. The GLA has a vision to create what it calls Smart London – a city where investors, researchers and entrepreneurs interact and collaborate. And they’re putting their money where their mouth is.
What lessons can we learn?
We had some debate in the office about what the role of local authorities should be when it comes to promoting enterprise and supporting start-ups. Some felt that local authority interventions have historically tended to displace jobs from one region or locality and simply moved them to another, rather than promoting wholesale increases in economic output. Others felt that councils are in fact duty bound not just to invest in social infrastructure, but to use their access to funds like these – or indeed Regional Growth Funds or EU funding – to promote self-sustaining enterprise. In general I fall into the latter category, but with a few caveats. If local authority investment in private sector development is to be successful, a few criteria should be met:
1. Large scale investment should focus on self-perpetuating models for growth, such as business incubation (providing start-ups with investment, low-cost workspace and the mentoring they need to grow), rather than one-off projects. These models have been proven to produce new, high growth businesses year after year. My favourite examples are: Bolt in Boston, TechStars in San Francisco and Entrepreneur First in London.
2. Local authorities should invest in structures that are reactive to changes in the market, rather than providing funding to meet short-term goals. The risk with funding small, individual businesses is that their business models may become obsolete as rapid changes in technology and customer demand occur. But, by supporting mechanisms for growth – e.g. providing low-cost workspace or facilitating links between private investors and start-ups – Councils can have a more enduring impact.
3. Focus on removing blockages to growth e.g.: access to capital, new technologies and links with research institutions. Councils have many levers to facilitate this – from directing enterprise investment funding to facilitating forums for cooperation between universities, investors and start-ups.
In essence, these can all be summarised in a few words: give entrepreneurs the tools they need to innovate and take risks and remove the blockages to their doing so.
More generally, Haringey Council’s Chief Exec, Nick Walkley, thinks that economic growth should be seen as being at the centre of councils’ agendas. In an interview with The Guardian, he put it…
“Generating economic wealth moves from being something the economic development team is doing to being what the council is about”.
Projects like the Central Research Laboratory can make that happen.
James Nettleton is a consultant in BDO’s Management Consulting team