With the debate over scrapping Regional Development Agencies (RDA’S) continuing inside the Conservative/Liberal Democrats Coalition, last week’s Economist had an excellent article looking at what sort of impact the RDA’s in England and Scotland had on attracting foreign investment before the recession.
And here’s what they had to say ‘Hitting on the right solution would be simpler if it were clear just what value RDAs add. Critics point out that the gap between rich and poor English regions, which RDAs were supposed to help close when they were set up in 1999, has in fact widened. True, regional economic activity may have been boosted: a report by the National Audit Office in March said that, for every £1 spent on physical regeneration projects, £3.30 had been added to output. But the NAO went on to question whether the cost, at £60,000 per job created, represented value for money.
Scottish Enterprise, the main development agency north of the border, has been trying to measure its own contribution. It asked SQW Consulting to use a novel technique to test its performance in two areas: securing inward investment by foreign firms, and helping Scottish companies export more. For each activity, the economics consultancy compared the performance of two matching sets of firms: those that were assisted by the agency, and another group that were not. This in theory provides the counter-factual comparison missing from earlier attempts to assess success.
Between 2001 and 2008, about £35m a year was spent on subsidising inward investors. The study found that, even after subtracting the inflows that unsubsidised deals suggested were possible, the activities of Scottish Enterprise added 18,000 jobs over the period, at a net cost of £14,000 per job, and £11 to Scotland’s economic output for every £1 spent. The exports campaign cost about £20m in the four years to mid-2009 and produced an extra £174m of exports, adding £75m to the Scottish economy and creating 1,100 jobs at a net cost each of £11,000.
Other analysts too rate Scotland’s performance in attracting job-creating FDI. Over the long run it has done better than any other region, with a 15.3% share of total FDI-related employment since 1997, says Ernst & Young. (London, the next most successful region, secured just 10.6%.) It did less well in 2009, however, with only 7.7% of the new jobs, whereas London more than doubled its share.
It is hard to know how much success or failure falls to the efforts of RDAs, and how much simply reflects the compatibility of local skills and infrastructure with investors’ newest notions of how to make money. John Tomaney, of Newcastle University’s centre for urban and regional development, is clear that the renewable-energy centre at Blyth, in Northumberland, would probably not have been built without the help of local RDA, OneNorthEast, enticing firms such as Clipper Windpower of California to set up a manufacturing base there. He worries that “the gain in local accountability” from the switch to local partnerships may be “offset by rivalries amongst different local authorities”.
There is certainly plenty there to for Wales’s economic policy makers to mull over as we move out of recession and try to start repairing the damage to our economy that the recession caused.