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Inward investment and business retention review The research for

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					Inward investment and
business retention review




         Inward investment and business retention review
The research for this project was carried out on behalf of the London
Development Agency by:

The Centre for Strategy & Evaluation Services (CSES)
(Lead consultants Barry Bright (bbright@cses.co.uk) and Jan Smit
(jsmit@cses.co.uk))

P O Box 159, Sevenoaks, Kent TN14 5RJ, United Kingdom
Website: www.cses.co.uk

                   Inward investment and business retention review
Contents


Executive summary of key recommendations

Introduction and aims

Context

Current state findings

Key challenges

Options

Recommendations - The preferred option

GLOSSARY
 BR         Business Retention
 CLP        Central London Partnership
 DTI        Department of Trade and Industry
EDS         Economic Development Strategy
FDI         Foreign Direct Investment
FTSE        Financial Times Stock Exchange
GTL         Gateway to London
II          Inward Investment
IPA         Investment Promotion Agency
LDA         London Development Agency
NLB         North London Business
PSA         Public Sector Agreement
RDA         Regional Development Agency
SAV         Strategic Added Value
SLB         South London Business
SRP         Sub-Regional Partnership
TL          Think London
UKTI        UK Trade and Investment
UKTI IIG3   Document recording a successful inward investment at UKTI
VOIP        Voice over Internet Protocol
WLB         West London Business




              Inward investment and business retention review
Executive summary of key recommendations

1. Strategy and management

     1.1.    • The London Development Agency (LDA) should develop the
               overall Inward Investment (II) and Business Retention (BR)
               strategy with partner/service provider alignment.
     1.2.    • Improve pan-London institutional integration between Think
               London (TL), Sub-Regional Partnerships (SRPs), the LDA and
               others, (UKTI Trade, Internationalisation agenda, the City).
     1.3.    • More strategic integration is needed between BR and II
               including segmenting and targeting companies appropriately.

2. Markets
     2.1     • Proactive targeting of specific sectors and geographic sub-
               regions for investment to address the needs of London and the
               Economic Development Strategy (EDS).

3. Performance
     3.1     • Closer performance monitoring of agreed strategy (between
               LDA and TL/SRPs): e.g. targets aligned to LDA priorities and
               clearer definition and sharing of outputs.
     3.2     • Consistent and appropriate measurement (note underlying
               deadweight issue), transparency in expenditure of LDA funds.

4. Value for money
     4.1     • Aim to reduce deadweight, (that which would have occurred
               without any intervention) through for example, development
               of low resource- intensive solutions for non-contested projects
               and focus on value-added activities post-investment.
     4.2     • Engage in proactive, structured, strategic dialogue with target
               firms to build relationships allowing understanding of
               opportunities and challenges faced by the client that the LDA
               and its network can maximise/mitigate as appropriate.

5. Customer
     5.1     • Improved alignment of parties to ensure interactions with the
               client are aligned and well managed (and not duplicated).

6. Knowledge management and infrastructure
     6.1     • Knowledge sharing and building of integrated datasets.
     6.3     • Shared operational links (e.g. sharing of best practice).
     6.3     • Shared service provision (e.g. sharing of recruitment, training,
               legal, functions etc).




                  Inward investment and business retention review
Introduction and aims

Introduction
During the summer of 2006, the London Development Agency (LDA)
commissioned the Centre for Strategy & Evaluation Services LLP (CSES) to
undertake a review of its Inward Investment (II) and Business Retention (BR)
activities. This is a report of the findings and recommendations. The LDA is now
taking these forward through discussion and consultation with its partners to
establish a new way forward for II and BR in London.

Aims
The principal aims of the review were to:

      inform the LDA regarding its future role in II and BR
      establish priorities to be addressed in future strategy
      understand delivery options for future activity

This report is set out as follows:

      summary of key recommendations
      context
      current state findings
      key challenges
      options
      recommendations – the preferred option




                    Inward investment and business retention review
Context
The LDA has been active in Inward Investment (II) and Business Retention
(BR) for some five years. As a Regional Development Agency (RDA) it has a
statutory responsibility to promote business efficiency, investment and
competitiveness in London. The LDA outsources delivery of these services as
follows:

      II promotion of London to Think London (TL)
      BR to the five Sub-Regional Partnerships (SRPs)

All inward investment activity in the UK takes place within the context of the
national strategy. National strategy is largely determined by UK Trade and
Investment (UKTI) in consultation with others (e.g. The Treasury). National
delivery is UKTI’s responsibility and in this it works closely with all the RDAs
and the devolved administrations. UKTI is a principal source of investment
project leads for RDAs.




                   Inward investment and business retention review
      Current state findings
      At present Inward Investment (II) and Business Retention (BR) activities are
      outsourced to Think London (TL) and the five Sub-Regional Partnerships
      (SRPs). The LDA undertakes some limited direct activity, for example when
      there has been a need to address large and critical projects through
      employment of an escalation mechanism.

      Funding

      II and BR are substantive programmes. The LDA spent £5,937,039 in
      the year ended March 2007; with an expenditure of £6,322,890 planned
      for 2007/2008. Total funding has grown from £3,298,000 in 2003/4 to
      £6,322,890 for 2007/2008.

      LDA support for II is greater than that for BR. TL has recently obtained
      additional funding to expand its service offering into BR in London.

      TL and Gateway to London (GTL) account for about three quarters of total
      expenditure. TL are primarily focused on pan-London Foreign Direct Investment
      (FDI). GTL are primarily involved in business retention and the promotion of the
      London Thames Gateway area.

      The four other SRPs are Central London Partnership (CLP), North London
      Business (NLB), South London Business (SLB) and West London Business
      (WLB). Each has its own history and focus and undertakes wider activities than
      II and BR. Generally they receive something in excess of £200,000 per annum
      for BR.

      LDA funding of TL and the SRPs for the period 2003/2004 to 2007/2008 is set
      out below1.

      LDA Funding of Investment and business retention activities 2003/4 to
      2007/8

Organisation 2003-4     2004-5    2005-6    2006-7    2007-8     Totals
TL           1,763,000 1,604,000 3,627,225 4,192,039 4,577,890 15,764,154
GTL          700,000   800,000   850,000   850,000   850,000   4,050,000
SLB                    300,000            300,000   300,000   260,000   260,000    1,420,000
CLP                    235,000            235,000   235,000   235,000   235,000    1,175,000
WLB                    200,000            200,000   200,000   200,000   200,000    1,000,000
NLL                    100,000   200,000   200,000   200,000   200,000   900,000
Totals                 3,298,000 3,339,000 5,412,225 5,937,039 6,322,890 24,309,154



      1 Correct as at 30th October 2006

                                 Inward investment and business retention review
Markets

There have been enormous changes in the Foreign Direct Investment
(FDI) marketplace over the last five years.

In addition, the nature of corporate strategies constantly evolves and places
new challenges on investment promotion agencies seeking increased
investment from companies to secure the future of their economies. There has
recently been a major recovery in FDI inflows, after the collapse of 2001.

The historic pattern of major project flows largely being confined to the
developed world’s trading blocs is changing.

Emerging growth markets such as China and India are increasingly becoming a
source of FDI projects (not just a destination).

For the UK, India is now a top inward investor in terms of the number of
projects, although employment per project tends to be low.

India is TL’s second largest inward investor into London in terms of project
numbers. Other developed economies remain important, especially the USA,
but the pattern has changed.

     FDI projects into western Europe are becoming smaller in scale, but
      higher in terms of the value of individual jobs. Many firms now
      internationalise earlier in their lifecycle as markets open, technology
      becomes more ubiquitous and strategy and finance require an early
      global footprint
     Larger projects are locating further eastwards either to eastern and
      central Europe or further to India and China. This move eastwards is
      driven by many factors, but particularly market access and relative costs
     The FDI projects coming into western Europe often have lower
      contestability than previously. The offer of western Europe and its key
      locations is better known and understood. Many projects follow their
      customers and as such have a requirement for a particular, defined
      European operational footprint. They need certain activities in certain
      markets and competition between locations is thereby diminished. In
      particular, this is true for companies from Anglo Saxon (outside Europe)
      and Commonwealth countries wishing to establish a first, or even
      subsequent base in Europe
     There is a blurring of the traditional distinction between II and BR. A
      foreign firm with a new internal project where London is competing with
      other locations provides an example. The end project could be an
      expansion (BR) or a new Greenfield project (II)

London is a successful economy with strong economic growth and a
large stock of important indigenous and foreign firms, often including
their headquarters and key support functions.



                   Inward investment and business retention review
This critical mass of value is itself attractive to foreign inward investment
agencies, and indeed some UK regional and city based agencies. They try to
attract firms and activities away from London.

These new dynamics have important implications for future II and BR
activities in London.

      Smaller projects often have more demanding service requirements than
       larger projects. Firms have less specialists, have more limited
       international experience and value a “trusted advisor”. This advice can be
       wide ranging in nature from understanding property options through to
       identifying business partners
      London is itself an attractive market, as well as being a prime source of
       expertise with excellent international connectivity. II promotion activities
       should more fully embrace the local economic needs of London (e.g.
       deprivation, regeneration, unemployment) through exploring new target
       sectors
       Possibilities include more proactive marketing in sectors such as Food and
       Drink, Environmental Technology, Distribution and Science and
       Technology. The net needs to be cast wider. At present these sectors and
       activities - and others - are not well represented in London’s inward
       investment successes. Most successes have been, for the period
       2003/2004 to 2005/2006, in ICT (29%), Business Services (12%),
       Financial Services (12%) and Retail (10%)
      There needs to be closer integration of II and BR activities as BR now
       increasingly has a location element that could be UK based, outside
       London or internationally, and II increasingly involves expansion or
       restructuring of foreign firms already based within London
      The large stock of firms in London (National Statistics Office: UK
       Business: Activity, Size and Location 2006) and the growing importance
       of ‘network organisations’, where internal projects emerge among
       subsidiaries rather than from corporate headquarters, means there is an
       increased importance for BR activities. At the same time, there is a need
       to segment the base of firms in London, understand who engages with
       whom and better co-ordinate their activities.


The 2012 Olympic Games and Paralympic Games
The London Games present an opportunity for London, and it is the intention to
use the visibility secured by the 2012 Games to promote London further in the
international business marketplace. However, it is often difficult to identify a
clear linkage between attracting and retaining incremental new investors with
events of this type. The LDA has committed additional funding to develop and
support this activity.




                    Inward investment and business retention review
Performance
It is important to understand how London has performed in both a UK and
European context. Our conclusion is that:

London’s performance in FDI has been satisfactory - not exceptional; it
occupies the middle ground in terms of performance.

The reasoning behind this is as follows.

Using Ernst & Young’s European Investment Monitor (EIM) data for the period
2001-2005, it appears that London leads Europe as the destination of some
5.6% of inward investment projects coming into Europe, followed by the Ile de
France with 4.3%, and then Catalonia and West Flanders with 2.9% each.

However, when factored by regional GDP (comparing the number of projects to
the GDP), London no longer leads the field; it is in the middle ground of the
major European regions.

Also, when looking at inward investment projects coming into the UK as
recorded by UKTI’s IIG3 returns, London leads the field in terms of actual
numbers. However, in terms of numbers of jobs created, London’s performance
is similar to that of other regions – the north west, the north east, the south
east and the west Midlands – and London’s records the lowest average number
of jobs per inward investment project of all regions.

One key issue that emerges when performance is assessed is that it is
clear that there are not consistent standards applied to measuring or
evaluating outputs throughout London.

TL records employment outputs in terms of jobs forecast for the next three
years while the LDA and the SRPs record actual jobs in the year in question.
There are also some issues as regards the extent and basis of claims for
outputs, particularly regarding safeguarded jobs as in the case of, for example,
major Merger and Acquisition projects, or where SRPS ‘safeguard’ jobs for their
region that would have migrated to other regions within London. Nor,
importantly, are outputs monitored or audited independently.

Value for money
The preceding point as regards to measurement creates major challenges in
evaluating the value for money received from the LDA’s investment in II and
BR. For this project the approach set out in ‘Evaluating the Impact of England’s
Regional Development Agencies: Developing a Methodology and an Evaluation
Framework’ (Department of Trade and Industry, February 2006), was applied.

The LDA does provide positive “Strategic Added Value” (SAV) through strategic
leadership, acting as a catalyst, strategic influence, leveraging synergy and
engagement. However, as is set out below, much can be done to improve the
LDA’s SAV.



                   Inward investment and business retention review
The major finding as regards TL is that, based on TL surveys, and
consideration of the sources and contestability of TL projects, the issue
of ‘deadweight’ (that is, what would have happened in the absence of
intervention by TL) needs urgent and serious attention.

For example, in a survey carried out over the period 2003/2004 to 2005/2006
with investors into London where TL claimed involvement, when asked if TL’s
influence was not at all important/ helped sway the decision/or was the critical
factor in choosing London as the location for their project, 7% of respondents
(in terms of project numbers) indicated TL’s contribution was the critical factor,
and 62% indicated that they would have established in London regardless of
TL’s existence. Also, over the same period, 58% of TL’s successful projects
came through UKTI, and TL generated 16% itself. In a survey of 20 TL clients,
none indicated that their projects had been contestable between London and
other locations.

Our estimates suggest that ‘deadweight’ could be in the region of 70-95% in
terms of TL new jobs created. This raises major questions such as: How much
resource should be devoted to supporting firms that would have come to
London anyway? What type of support should be provided, and to what type of
firm, to ensure most value for public money?

As has been made clear earlier:

The SRPs are very different from each other, but overall there is a
major challenge to be faced as regards monitoring and evaluation of
their outputs.

Jobs claimed as created and safeguarded are not always easy to substantiate
(as for example in the case of merger and acquisition activities mentioned
above), which means it is not possible to make unqualified statements as
regards value for money for the SRPs as a group. Also, it may be questionable
as to what the value to London is if one SRP devotes resources to preventing a
firm from moving from their region of London to another SRP’s part of London.

For the LDA the implication is that results claimed for II and BR towards
meeting PSA targets are overstated because the findings indicate that many
jobs that have been claimed as having been created would have come about
without LDA intervention (“deadweight”). Jobs claimed as being safeguarded
have in fact not always been safeguarded, as they were not always under
threat, and if so, there have been organisations other than TL or SRPs involved
in safeguarding them.

Our overall conclusion is that while net outputs are less than claimed,
the investment of public funds in II and BR still represents value for
money.

This is because the service does lead to and contribute to, job creation and
safeguarding of jobs, and there is scope for increasing its effectiveness and
efficiency in this respect. There are also intangibles that are of value, for
example in presenting London as a successful business location (“image”), and
                     Inward investment and business retention review
hard to measure longer term effects of having companies locating in London
that use leading technologies and increase overall competitiveness of the sector
in London, or the effect of contributing to or driving other economic
development initiatives (e.g. business improvement districts).


Overview of strengths of LDA, Think London and the SRP’s
The main strengths of these organisations have been:

LDA

Creation of an overall framework for economic development for the
region through the Economic Development Strategy.

     Provision of funding for TL and the SRPs
     Provision of an escalation mechanism for TL and the SRPs when needed
      to support large and/ or complex products

Think London

TL is recognised by its peer groups as being a successful (and in some
instances a role model) Inward Investment Agency to which others
compare themselves.

     Its contribution to a successful image for London in international markets
     It delivers valued services to firms establishing in London for the first
      time
     TL provides trusted links to others in the London business community
     It has excellent information recording systems
     It has rich knowledge of firms and inward investment markets
     The networking activities and events it delivers are valued by participants

The SRPs

Good relationships with the public sector which provides a public-
private sector interface that many firms value.

     Depth of local knowledge
     Understanding of the local offer
     Developing II & BR agenda in sub-regions
     Networking




                   Inward investment and business retention review
Areas for improvement

Strategy and Management
Much of the overall shape of the current activities within II and BR are the
result of an earlier review by Price Waterhouse Coopers (PWC: London
Development Agency: Inward Investment Review 2001). While many of their
recommendations were implemented, others were not. Recommendations not
implemented include importantly, preparation of an overall inward investment
strategy for London, creation of a pan-London inward investment team led by
LDA, and a change in focus of TL to strengthen its value added and contribution
to economic development of London. There has also been a reduction of staff
working on II and BR at the LDA over the last few years as a result of other
pressing priorities.

This has led to the lack of an explicit strategy for II and BR within the
LDA itself, and at a pan-London level. Other organisations have
partially filled this void with their own remit, but these approaches are
not always co-ordinated and integrated. A gap remains at pan-London
level.

Other organisations that influence II and BR in London

One crucial recent development in the II and BR landscape is the
emergence of a new UK national strategy by UKTI.
(UKTI Strategy: Prosperity in a Changing World July 2006)

This is concerned with promoting the benefits of investing in, doing business
with, and growing business globally from the UK. It integrates investment and
trade activities, and has greater focus on selected value adding firms and
sectors including:

      selected sectors and specific propositions
      the City of London and the UK’s Financial Services sector
      an R&D programme
      emerging growth markets
      FTSE 100 companies

This is a challenging agenda and it is important that LDA secures increased
alignment with this exciting new national strategy.

The City of London also engages in important II, business support and growth
activities, naturally focussed on the Financial Services sector and London’s
unique place on the global stage. There has been little connection and
integration between LDA and the City of London’s activities. However, we see
that the new initiative sponsored by the Chancellor to promote the Financial
Services sector will draw these important parties closer together.

Within the LDA, II and BR have lacked leadership, consistency and effective
communication and engagement with its partners. It needs greater control and


                   Inward investment and business retention review
engagement with delivery of strategy and the specific activities and outputs
required. Finally there is little development of an II and BR infrastructure (this
includes ‘hard’ infrastructure such as networked computer systems for tracking
firms, Voice Over Internet Protocol (VOIP), sharing of reports and research
results; and, ‘soft’ infrastructure such as sharing of best practice, contextual
knowledge, training, and recruitment for London as a whole and the different
players involved).

This means closer alignment is required between LDA strategy and
objectives and those of its service providers.

In particular:

      greater transparency regarding the activities of the SRPs and how II and
       BR funds are spent. They also should engage in more proactive and
       strategic (as opposed to ad hoc) interventions with critical companies
       and firms
      there have been moves to achieve improved alignment between the
       SRPs and TL, importantly the location of TL secondees within the SRPs.
       However, much remains to be done and increased alignment would be
       beneficial especially as II and BR activities become more integrated – the
       memorandum of agreement between TL and the SRPs on BR needs to be
       finalised and implemented
      inward investment promotion of London and the projects flowing into
       London are at present mostly concerned with headquarters (more than
       50% over the period 2003/2004) and service activities (36% over
       2003/2004 and 2005/2006). 28% of projects have located in
       Westminster and 16% in the City of London. Hammersmith and Fulham
       (6%), Kensington and Chelsea (5%), Hounslow (5%) and Tower Hamlets
       (4%) follow. The LDA has its own target sectors for intervention and
       there is a need for increased alignment of these various efforts
      there needs to be improved co-ordination within LDA to ensure that the
       various linkages of policies and initiatives is better understood and
       anticipated
      more explicit definition of the roles and responsibilities of all those
       delivering II and BR in London is necessary

Customers
The customers for II and BR activities are firms already operating in London,
those in the process of establishing in London and those considering investing.

This is a complex population of firms and it is important that careful
consideration is given to the allocation of resources to different parts
(segments) of the population.

For inward investment promotion activities there should be a clearer
relationship between the resources applied and the degree of influence
exerted.



                   Inward investment and business retention review
Where contestability is low, (i.e. the firm has already decided to establish in
London) less effort should be applied than in those circumstances where
competition with other locations is known and active.

The SRPs are at different stages of development and clearly have different
resource provisions. Generally they are striving to move towards a more pro-
active engagement with firms within their sub-regions. However there is no
common methodology to identify the firms with whom they engage, the
circumstances under which this should happen and how the relationship is
subsequently developed. This arises from an absence of an overarching LDA II
and BR strategy, resource constraints and capacity limitations.

Within London there are many public sector organisations that can potentially
interface with companies. They range from central government through to sub-
regional service providers. This is not well understood and represents a risk
that companies and indeed the public sector can become confused regarding
the role of the different bodies and how the relationships operate to best effect.

There should be clear alignment of the public sector organisations engaging
with firms in London.

Knowledge management
The LDA, TL, the SRPs and indeed other bodies such as the local authorities and
City of London are rich repositories of information on firms and trends
throughout London. This knowledge is mostly collected and codified separately,
and there is little sharing of results.

Similarly experience regarding best practice and a working understanding of
trends and issues is not sufficiently shared.

Improved knowledge sharing is needed to maximise the return from
investment in its capture and to contribute towards the development of
a Pan-London perspective. The LDA should lead in this area.




                   Inward investment and business retention review
Key challenges
The findings from the current state assessment, including the important
changes in the environment, constitute a series of key challenges for the LDA.
These are summarised as follows.

Strategy

The LDA needs to create and lead its own strategy, which includes
responding to the challenge of providing a Pan-London view.

There are a number of critical requirements of such a strategy including:

Recognising the changed environment
The Foreign Direct Investment (FDI) marketplace has changed. Emerging
growth markets are more important, and many firms require a different range
of services than provided by the traditional activities of inward investment
promotion agencies.

This requires a reorientation of service delivery to support business growth and
development (including for example trade and innovation), focussing on
activities that are sustainable – and providing an environment that will sustain
such activities.

The new UK Trade and Investment (UKTI) strategy recognises the new market
complexities and is more pro-active and focussed. It integrates trade with
inward investment and is concerned with the international growth of firms. It
places increased emphasis on relationship management. The City of London will
become more integrated with the total UK effort, especially given that one of
the focus areas for UKTI delivery is Financial Services.

Addressing management challenges

The LDA needs to re-invigorate its activities in II and BR.

This includes addressing the shortcomings identified in its management of the
process, which involves others than those directly engaged in Inward
Investment (II) and Business Retention (BR), as for example in ensuring high-
level sponsorship for II and BR in the LDA management structure.

Strong leadership is also required to deal with the complex issues and
relationships endemic in such a set of strategic and high profile activities.

The LDA needs to improve the way it communicates with its partners and
provide more consistency in its approach. This includes ensuring a more
consistent measurement of outputs with some greater scrutiny and audit of
results. Part of this is to adopt a closer involvement with its partners, and move
away from the current ”light touch” or “arm’s length” approach.


                   Inward investment and business retention review
Improving co-ordination
Improvements are required in the coordination of efforts and activities with
both external partners and internally with LDA.

Efforts should be made to integrate II and BR with other departments within
the LDA to ensure improved consistency of approach.

The roles and responsibilities of LDA’s partners need to be clarified and a
common and shared understanding developed.

The LDA needs to lead in improving knowledge management throughout the
network of organizations active in II and BR in London. This includes sharing of
information between the partners.

Efforts need to be made to align the objectives of the LDA, its partners and
other important organizations such as UKTI and the City of London.

Refocusing

Overall activities and the new II and BR strategy need to be refocused.
This re-focusing must be directed towards achieving improved linkage
to London’s economic needs as expressed in its Economic Development
Strategy (EDS).

Specifically this means ensuring focus on sectors and sub-regional areas
specified in the EDS.

Services delivered need to be those that provide most value to firms. This
includes moving towards acting as a ‘trusted advisor’ to firms establishing in
London and positive engagement with contestable projects.

There is scope for greater customisation of services, as for example in services
offered to firms where there is little contestability in the location decision. This
should lead to more streamlined client interactions and greater value added for
the LDA.

Business Retention (BR)

BR activities need to receive greater priority and resources as this
better corresponds to how new projects and decisions emerge.

The stock of firms in London is one of its greatest assets: investment is the
result of reinvestment or new investment by established firms. With there being
so many firms in London, both UK and foreign owned, there is a huge
population of firms that can be contacted and influenced to remain in or expand
from London. This can only be done in a structured, systematic manner, guided
by an overall strategy.

All these challenges should to be met while the LDA manages its engagement
with its service providers and the other key players in the II and BR landscape,
both locally and nationally.
                    Inward investment and business retention review
Options
A range of delivery options was developed to address the current state findings
and challenges. The status quo and discontinue options were discarded
because:

      the status quo option ignores important changes in the environment and
       the potential for new opportunity areas. It would also not address the
       management challenges identified
      the discontinue option ignores the value creating opportunities associated
       with job creation and safeguarding, and the need to have an agency
       operating internationally promoting London

The issue of whether services should be provided as at present through
an outsource model or moved to In-source provision by the LDA was
considered.

It was concluded that the critical factors in ensuring a successful Inward
Investment (II)/ Business Retention (BR) programme for the LDA in the future
are:

      focus in II/ BR as specific functions (rather than as adjunct to other
       activities such as sector/ cluster development or regeneration)
      sufficient and appropriate resources (both financial and human)
      commitment and support from senior management within the LDA

The view was thus taken that if these conditions were met; there was no
particular reason for selecting either an in-house or an outsourced model of
provision. Potentially either route could be successful.

A description of the range of preferred services is described in the next section,
the ‘Preferred option’.




                    Inward investment and business retention review
Recommendations – the preferred options
The principal components of the preferred options are explained below.

Strategy
     The LDA needs to develop an explicit strategy for Inward Investment (II)
      and Business Retention (BR) activities in London. It should strive to
      achieve a leadership role and co-ordinate and connect the various players
      active in London
     This includes creating a Pan-London view of important issues such as
      movement of firms within London, and understanding of the relevant
      drivers, and the successes of, or challenges faced by, specific parts of
      London. It could also lead to joined-up Pan-London approaches to dealing
      with challenges
     The strategy needs to address the spatial and economic needs of London,
      as well as exploiting its many resource strengths. This means exploring
      new Foreign Direct Investment (FDI) target areas for example Food and
      Drink, Environmental Technology, Distribution and Science and
      Technology; and developing strategies to target more challenging areas
      outside, for example, Westminster/City/Hammersmith & Fulham/
      Kensington & Chelsea boundaries
     The LDA must seek to achieve a close alignment with the new UK Trade
      and Investment (UKTI) strategy. This includes the services offered (e.g.
      the closer integration of trade and inward investment) and how it relates
      to UKTI’s strategy in emerging growth markets

Activities: Inward Investment (II)

Services need to be re-focused towards light-touch more packaged
solutions for projects that have low-contestability.

This includes smaller HQ’s and Sales and Marketing operations. Support needs
to be concerned with establishment services and providing connections to other
providers

     The services provided should include integration of trade activities with
      those of II and BR. This aligns better with the internationalisation needs
      of firms and the UKTI agenda

Activities: Business Retention (BR)
     The emphasis within this activity should shift more towards engaging in a
      strategic dialogue with “critical” firms. (It is probably preferable to
      rename Business Retention as Business Growth to reflect this new focus).
      The Big Business Engagement programme that the LDA is currently
      working on represents a move in this direction
     The stock of companies in London needs to be segmented to understand
      the characteristics of firms and sectors. Target segments need to be
      defined and identified. The services to be provided need to be mapped to
      establish a service delivery model

                   Inward investment and business retention review
Infrastructure

The LDA needs to develop and build a Pan-London infrastructure to
support inward investment and business growth activities and people.

This can be co-developed with LDA partners and include knowledge sharing,
directories/ contact lists, points of engagement, training, and the potential
provision of common support services (e.g. Legal and HR)

LDA management of II and BR (Growth)
      These activities need to receive substantive, consistent sponsorship and
       visibility within the LDA. Resources and focus should not be diminished
      Operational management should move away from the current light
       touch/arm’s length approach to deeper engagement with its service
       providers and other partners
      The LDA needs to develop and commit to operating principles with its
       partners including protocols regarding company contacts and services
       provided
      LDA management must ensure consistent application of output measures
       by Think London, the SRPs and itself. These should be monitored,
       scrutinised and subject to auditing

Advantages of the recommended approach
This approach has a number of compelling advantages including:

      recognition of the changed inward investment marketplace, the threat to
       the stock of firms in London, as well as new opportunity areas
      it is more selective in its approach and recognises the important findings
       from the Value for Money analysis - it focuses activities on the sources of
       greatest additionality
      it explicitly addresses the key strategic, operational and management
       issues and changes required within the LDA and in its relationships with
       its partners
      it includes areas of new opportunity for the organisations concerned
       (including the LDA itself ); it is more than a correction, it is a redirection
      it achieves closer alignment with the new UKTI strategy
      it provides a strategic envelope to guide future LDA activities and
       initiatives; what are the priorities and where value arises
      it contributes towards a more stable and transparent relationship with
       service providers, and a platform for wider LDA activities with them

Disadvantages of the recommended approach
However, the approach naturally presents some disadvantages:

      most importantly it is challenging for all stakeholders and service
       providers and represents a significant degree of change
      there is an urgent need to build capacity and capability for engaging in a
       more strategic dialogue with critical firms: few IPAs currently have this
       capability
      it may create uncertainty, as the new approach pushes the envelope
                     Inward investment and business retention review
Other languages and formats:
A summarised version of this document is also available in large print, braille,
on disk, audio cassette and in the languages listed below.
For a copy, please contact the LDA Communications Team: London
Development Agency Palestra 197 Blackfriars Road London SE1 8AA
Tel: 020 7593 8000 Email: communications@lda.gov.uk

                   Inward investment and business retention review
London Development Agency Palestra 197 Blackfriars Road London SE1 8AA
T 020 7593 8000
F 020 7593 8002

www.lda.gov.uk
Textphone 020 7593 8001

                 Inward investment and business retention review

				
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