Innovacion

Innovacion to examine supply chain finance issues for automotive sector for SMMT

Following on from our initial Gearing Up Report, Innovacion and The Smith Institiute have been commissioned to complete a detailed investigation of finance issues affecting the automotive supply chain for the Society of Motor Manufacturers and Traders (SMMT).  Reporting by May 2012 the study will investigate: how well the current supply chain finance products fit with the needs of the vehicle manufacturers (VMs) Tier One suppliers and other suppliers; are there particular issues for firms looing to finance tooling costs; and are other financial products needed in addition to recent Government initiatives and the current product offers from the bank and non-bank sector. 

Andy Rumfitt's Gearing Up Report launched by SMMT

Our report, published today by the SMMT, has highlighted the need to get capital into the UK’s automotive supply chain to stimulate growth and take advantage of the opportunities created by recent OEM investment announcements. It also explores the mismatch between the banking sector’s current approach and the lending needs of suppliers.

Focusing on the relationship between financial institutions and the domestic automotive supply sector, the report looks for solutions to the lack of consistency and strategic vision in lending today. The study identifies how a more effective working relationship could help to rebuild and rebalance the economy if the industry and finance providers had a better understanding of the workings of both sectors and work together to address the type of finance offered to businesses.

“Improving access to finance and credit has the potential to stimulate growth in UK automotive’s small and medium-sized companies, enabling them to develop facilities, tooling and machinery to take advantage of broader automotive growth,” said Paul Everitt, SMMT Chief Executive. “The UK is recognised globally for its strength in automotive engineering and innovation and we believe that by achieving competitive funding for UK businesses, the UK can take a larger share of the components market.”

The UK has seen a wealth of positive investment announcements throughout 2011 with international companies committing millions of pounds to the country, introducing new models, building new facilities and employing more people. These announcements have included commitments to source more components locally, capitalising on lower transportation costs and high quality output of domestic suppliers.

Despite this wave of positivity, there is still expansion potential in the UK. Earlier this year, the Automotive Council reported that the UK has the capability to supply 80% of the country’s component types, but the Smith Institute found that just 36% of an annual £7.4bn automotive component spend was purchased in the UK.

The potential for the sector is clear, but many suppliers report that financial institutions were wary of the automotive industry despite the UK manufacturing sector performing strongly, exports achieving record levels and recent investment announcements demonstrating the long-term plans to base operations in the country.

The Smith Institute Report was launched at an event attended by the banking and automotive sectors and government representatives.

Download Gearing Up Report Launch Version 081211

Dare to Believe...A New Airport for London Part 2

Yesterday the Mayor of London launched his second report examining the economic importance of a new hub airport for London and the UK. What this process is helping to do is make some decisions explicit. And the argument goes something like this. London's success is linked to internationally traded sectors. But London's relative connection to future growth areas like central Chinese cities is declining and it is already falling behind other European airports. Inbound tourism and cargo generate the most potential for the sort of export-led growth that the UK desperately needs now and in the long term. Only a hub airport can provide a comprehensive network of direct long haul routes. Incremental improvements in other airports ('sweating the assets') do not solve the need for a hub airport which is a long term 50 year solution to projected air traffic demand. Regional airports will not be able to operate as a hub of this scale and Heathrow, already at capacity, is suffering 'friction' and resilience issues. High speed rail will only complement rather than replace air travel.  And airports (and to some extent their construction) are good at providing job opportunities at all levels in the labour market. For example we found that there are at least 58,800 air transport and cargo jobs alone in the 15 Local Authorities within a 20km footprint of Heathrow. So with constrained capacity the conscious decision is how much the UK wants to stay in the airport business in the future and how much we are willing to travel via Paris, Amsterdam and Franksfurt if we want to get to the BRIC economies.  As well as some sensible economic arguments there is a sense that a project of this scale will be important to build the UK's ambition and present a confident outward looking face to the rest of the world at exactly the right time.

The London Airport conundrum...

Machiavelli's dictum about the introduction of new things, "There is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage...for the initiator has the enmity of all who would profit by the preservation of the old system and merely lukewarm defenders in those who would gain by the new one."

And so it is with airports in London and the South East. However as the Mayor of London makes clear in his consultation response to the Government (‘Developing a sustainable framework for UK aviation’) something will have to be done and a Thames Estuary airport may be the least worst long term option.

Our economic and strategic development thinking that fed into this work highlighted that a Thames Estuary airport would:

• Support the £532 billion Greater South East economy which is the powerhouse of the UK - though its relative competitiveness is declining.
• Provide the economic catalyst that the Thames Gateway has been missing - and a key part of a long term UK Growth Plan focussed on international trading.
• Give a clearly defined focus and location for economic growth - the UK is now the only NW European country without any national and regional planning.
• Offer a long term rather than a 'muddle-through' response to Heathrow’s inherent capacity constraints - which will require the elusive element of long term cross party political comitment.

Yes it would be expensive but big visionary projects are and the UK's competitors seem to (a) make the business and political case and (b) find the money. Yes it would have engineering challenges but again no bigger than elsewhere in the world. But in the long run airports can have huge regional and national economic spin-offs. Washington Dulles airport and its technology corridor is now home to more telecom and satellite companies than any other place on earth. Stockholm Arlanda Airport has 65,000 associated science city jobs. We have to remember that we are where we are because Heathrow's original growth was unplanned and resulted from a series of incremental decisions.

£36 million for Emirates Air Line: A Taste of the Future of Funding?

In the past when there was money you could have a single objective project funded from a single source. In our new world major projects will look and feel more like the London Cable Car now known as the Emirates Air Line following the airline's £36 million sponsorship of the scheme over 10 years. In an area of London bedevilled by limited and ageing river crossing options the Cable Car, which will move from the design board to ‘all aboard’ in about 2 years, will offer a new way for tourists, event goers and commuters to cross the Thames. As well as adding an important landmark it will go some way to further knit together the emerging range of economic assets and attractions in the Royal Docks and on the Greenwich Peninsula into a vibrant cluster of activity for visitors and residents alike. As well as sponsorship, funding is also planned to be secured from an application for a European Regional Development Fund (ERDF) grant, additional sponsor agreements, retail space rental and fare revenue. While this blending of funding for multi-objective projects works well for major landmark projects in London the question is how viable this approach is for less glossy but equally important projects elsewhere.

Innovacion produced the ERDF application for TfL and we're keeping our fingers crossed for a successful outcome by Spring 2012.

 

Docklands Light Railway extension to Olympic Park opens

It is always a rewarding and comforting day when a large transport or infrastructure project that you have been involved with comes to fruition.  And today is one of those days. With just under a year to go to the London 2012 Paralympic Games the fully accessible Docklands Light Railway (DLR) Stratford International extension opened today (31 August 2011). Costing £211 million, the 3.7-mile expansion from Canning Town to Stratford International forms a key part of the London 2012 Olympic Games transport network and includes four new stations.

Innovacion produced the Statement of Case for the Stratford International Extension which successfully secured planning permission in October 2006 as part of a Transport Works Act Order application. Innovacion also reviewed potential sources of European grants and loans to support the development of the extension and provided bidding advice to DLR. As a result Innovacion produced a successful bid to INTERREG IVB for station enhancements to the DLR extension and secured €1.57 million in EU funds.

More about the extension from the BBC and Transport for London.

Regeneration effects of upgrading the Woolwich Ferry

Innovacion are helping Transport for London to develop the best approach to assess the regeneration effects of a range of options to upgrade the Woolwich Ferry. The Woolwich Ferry carries around one million vehicles and over two million passengers a year.

National Infrastructure Plan - Beware the strings with private investment.

While the £200 billion outlined in the  National Infrastructure Plan sounds a lot some estimates suggest that the UK needs £300-£400 billion of investment in road, rail and air infrastructure alone over the next 20 years to meet demand and existing power generating capacity is expected to fall by one third in the next decade. And the numbers in the NIP are summing public and private investment. While private investment will have to avoid the dangers of TfL's PPP for the underground it is also likely to come with specific characteristics such as increased tolling of any new roads, tunnels and bridges if we want them. Nothing is free.

 

The Regional Growth Fund - Regional, sure, but Strategic?

The Local Growth White Paper which includes  the Regional Growth Fund (RGF) suggests that the coalition is very much committed to regional rebalancing. The RGF will be deployed along with Tax Incremental Finance (TIF), more local controlled business rates, as yet undefined Growth Hubs and new Technology and Innovation Centres which are to be set up by an expanded Technology Strategy Board. However the first Round of the RGF (£325 million of £1.4 billion) feels like it is being done very much on the hoof (it only has a full application stage) and the workshops in London come almost after the 21 Jan 2011 deadline. Though anyone in London will do well to secure these funds and even the weight of a potential London-wide Local Enterprise Partnership (LEP) may not help much. However the RGF suggests there is a clear desire to stimulate the private sector in areas of high public sector employment dependency and this extends to aspirations for high levels of cash support from the private sector and social enterprise in bids to the RGF (60% is suggested as being achieved in Wales). The assessment criteria are drawn from the Treasury's Green Book on value for money so the first round bids will have to be at a well developed stage and have this detailed financial information easily available. The fund seems to be flexible and include capital and revenue elements but bids from the public sector alone are not permitted. However a number of questions emerge:

• Will this approach actually bring forward the right and the right scale of projects rather than the projects that can meet the RGF criteria? Theoretically middle ranking (and urban?) areas in the regions where there is more private funding available may actually do better if this is a key metric. It may also favour those areas with well established public-private partnerships.
• It is not obvious how a sub-£1 million social enterprise project can genuinely be compared with all the other areas expected to be funded from the RGF including housing and infrastructure? And £325 million may not go very far if there are chunky capital projects.
• Projects with less evidence of tangible financial benefits may suffer from this approach (e.g. social inclusion, sustainability)?
• Is any existing strategy being used to co-ordinate these "competitively assessed" projects?

And the RGF is not to be confused with the Business Growth Fund.  In parallel the £1.5 billion Business Growth Fund (relatively small considering the Goldman Sachs bonus pot is £8.3 billion this year!) that has been pulled together by the six largest banks is providing equity finance (£2m-£10m) to firms with turnovers of £10m-£100m though a programme of free mentoring from former bank employees is being offered.

Getting the big picture right: A guide to large scale urban design by CABE

Andy Rumfitt was a member of CABE's Strategic Urban Design Panel and the summary guide for large scale development and extensive online resources have now been published. 'Getting the big picture right' outlines a new approach to large scale urban design that allows people to shape the places they live or work in, and improve their distinctiveness and quality. It will help those organisations and partnerships – often with a mix of public and private partners – tasked with working with local people to prioritise actions and investment. The new guide is supported by a step-by-step guide to the large scale urban design process.

The CABE summary guide can be downloaded from here: http://www.cabe.org.uk/publications/getting-the-big-picture-right

For the extensive CABE web resource please go to: http://www.cabe.org.uk/strud

Office Hubs in London? Innovacion advise TfL

Despite the current recession the future of work and the workplace continues to change rapidly. Following on from our work for the Outer London Commission Innovacion have been commissioned by Transport for London to look at the feasibility of office hub concepts across various locations in London and to consider their high level viability and likely impact on travel demand and carbon emissions.  Implementation roles for the public and private sectors will also be considered.

Innovacion look at funding sources for Croydon Council

Innovacion have been appointed to review traditional and non-traditional external sources for a range of projects in the areas of transport, economic development and sustainability for Croydon Council.