In September, the outcome of the referendum on Scotland's independence from the rest of the UK was closer than initially predicted, with the ‘No’ votes winning in by a margin of about 55% to 45%. However, many are claiming that the ‘No’ vote was won at too high a price. In its final days, the 'Better Together' campaign assured Scots that ‘no thanks’ does not mean ‘no change’, and draft legislation due in January 2015 will put Scotland on the road to autonomy similar to that of a US state.

This led to MPs from some English constituencies reviving the so-called 'West Lothian question': why Scottish MPs could vote on legislation that only affects England, Wales or Northern Ireland. As UK prime minister David Cameron tries to resolve this question, further devolved powers are indeed being offered to England – which is being welcomed by the cities and local enterprise partnerships (LEPs) around the country.

Manchester united?

The UK parliament has already begun giving more power to English cities as part of Mr Cameron’s desire to "empower our great cities". Indeed, it was announced in early November that the north-west city of Manchester will get its own directly elected mayor who will have powers over transport, housing, planning and policing in a devolution deal worth more than £1bn ($1.57bn). Dubbed ‘Devo Manc’ it is the latest initiative from chancellor of the exchequer George Osborne to create a ‘northern powerhouse’ to rival London.

So how will this impact on attracting FDI to the city?

Sir Howard Bernstein, chief executive of Manchester City Council, says: “Manchester, and Greater Manchester as a whole, is seen as a place which has 'got its act together' with a clear understanding of its own strengths and areas for improvements and a firm focus on creating the conditions for growth. We believe the devolution agreement with the central UK government will be seen as further evidence of this – a mature and innovative arrangement.

"It will further enhance Greater Manchester's ability to plan at scale – for example, for through a single spatial strategy guiding investment – to deliver the connectivity and other infrastructure improvements required for growth and to ensure that we have a skills base which matches the needs of employers. In other words, devolution has the scope to make this an even more attractive place to do business.”

A new York?

Eastwards of Manchester in the city of York, Kersten England, chief executive of City of York Council, says of the possible devolution of the English regions: "We are pretty strong lobbyists for devolution. [The council leader] is on record as saying that he is personally in favour of city-regions, and is prepared to consider an elected city-region mayor, so we are very taken by the analysis that suggests a relatively modest increase in fiscal power to city-regions could deliver a quite significant uplift in terms of growth for UK plc."

When it comes to the question of whether such devolution would be better for business in those regions, Ms England says: "I do think it would be quicker and more responsive. Inevitably we would be more agile, and closer to those business interests, with the same interests… We are lobbying hard with our city-region colleagues on levels of devolution.”

In July 2014, the UK government announced a series of 'Growth Deals' to provide funds to LEPs for projects that benefit their local areas and their economies. There are currently 39 LEPs in England.

Feeling stoked

David Frost, chairman of the Stoke-on-Trent and Staffordshire LEP, welcomes the idea that giving more power to cities to create their own investment environments can help deliver success for his region in England's central Black Country region.

“Being able to take more control of our own affairs is a very positive step. We have seen this with the LEP Growth Deal. We worked out our priorities locally and then went to the government and were able to have a mature discussion about what is important for our region,” he says. “When we are talking to overseas investors, such as from the US, they don’t recognise county boundaries – for them there is London and the rest. In the past, Scotland and Wales had the advantage and scale to promote brand Scotland and brand Wales.

“At Stoke/Staffs LEP we have negotiated a sister Growth Deal which will kick in in April 2015. We bid for an investment in infrastructure to open up sites that had become landlocked – and a new major steelworks will open for development in the Etrurian Valley – with more than £40m of public and private money. We expect the Growth Deal to lead to the creation of more than 2000 jobs.”

Mr Frost adds that the devolution debate in the UK has been instrumental in bringing together the business communities to identify their priorities with regards to the investment they are looking to attract.

At Stoke-on-Trent City Council, John Betty, executive director of place, welcomes the prospect of more devolution to the English regions, and with his head of inward investment, Kevin Bell, aims to create a stronger identity for Stoke-on-Trent to help attract FDI.

“We would welcome more devolution on tax-raising powers or more say over the distribution of government monies which would allow us to back up the quantitative offer with quality. In the short term, having an LEP is working, but we would like more powers in the longer term. There is a distinction between the devolution of function and devolution of finance, but more fiscal devolution would be of enormous benefit, for example, power over fixing local business rates,” says Mr Betty.

“For now, our immediate concern is to see how we can align ourselves alongside [the likes of] Manchester and Birmingham, while creating our own city-region.”

Levelling the playing field

At Hampshire County Council on England's south coast, assistant director for economic development David Fletcher also believes that English regions have lost out when compared with the rest of the UK and sees the prospect of further devolution as an opportunity to review how English regions are branded and promoted to an international audience, who often struggle to think beyond London. 

“‘The good thing about the Scottish [referendum] is that it has highlighted an issue that has been there for some time – how does England fit into all this?” says Mr Fletcher. “Scotland and Wales have always had a strong national identity with well-focused and proactive teams working from Scottish Enterprise and the former Welsh Development Authority. But England never had the equivalent – we had the UK Trade & Investment [UKTI] department for the whole of the UK – but there was no specific focus on England as there was for Scotland and Wales. Scotland had incentive mechanisms, but in England we didn’t have the equivalent, so it was not an equal playing field.”

Since the abolition of the regional development agencies (RDAs) in 2012 and the creation of LEPs, many regions are reassessing everything in terms of FDI attraction and investment promotion. A common problem, however, is getting international investors to differentiate between London and England.

On this point, Mr Fletcher says: “Major cities can brand their city. For the south-east [of England] there is a bigger challenge – how do we brand ourselves? In Hampshire, the county embraces two important city brands, so at the Mipim [real estate conference] we took the Portsmouth and Southampton city brands – which also helped us to escape the rural image. Portsmouth and Southampton are well associated with the marine sector, and we also have Farnborough in Hampshire, which is strongly associated with aerospace.”

When Mr Fletcher arrived in Hampshire he put managers in charge of specific sectors to help operate a focused FDI campaign. “Some of the former RDAs had the problem of being too big, with not enough brand recognition. For example, East Midlands had no specific identity, where Yorkshire, though big, did work as it has a strong brand identity," he says.

“With further devolved powers, regions can make sure the offer is tailored to the region. For FDI we would welcome more leverage on incentives we can offer – Scotland and Wales always had this flexibility which was a big advantage for them – and if we had the same degree of flexibility, even on softer issues such as business rates and training, it would help secure deals. To a degree, this is already happening. The Solent LEP [in Hampshire] has already applied for a regional Growth Fund and might use it for individual offers.”

Worcestershire's source of FDI

At Worcestershire LEP, executive director Gary Woodman agrees that most LEPs are focusing on the Growth Deal and aiming to show that they can deliver success on the ground. “Policy changes will flex and change after the general election in May 2015, and it will be important for whoever is in power to see which areas are delivering and only devolve power to areas which are working,” he says.

“From an England-wide basis, if powers are going to the Celtic regions, then we do want similar powers. So far the focus has been on the core cities – with deals such as the ‘Devo Manc’ announcement. In Worcester, we need a relationship with nearby Birmingham and the Black Country region. The success of the LEPs will inevitably be compared to the RDAs. We feel it will be important to work with a different partner within the LEP according to the priority or sector in hand.

“The RDAs did a good job and so the LEPs have picked up on the pipeline left behind which we are now in the process of delivering – and the challenge for the LEPs now is to develop their own pipelines.”

Mr Woodman echoes the views of others in the industry in calling for local flexibility in setting business rates. “This kind of local decision-making can help us grow business in our locality,” he says.

Beyond local issues, Mr Woodman feels that with FDI it is also important to be flexible in any structure, so as to attract investors to the West Midlands as a whole, not just to Worcester, and he echoes the thoughts of other English LEP leaders when he says: “To American and Chinese investors, we all look the same outside London, so we have to sell the locality in FDI terms by specific sector.

“For cyber and defence we work with Herefordshire and Gloucestershire – with companies such as Kinetic and SAS. We feel it is important to work out how to put capacity into the system and not to follow the RDA route of being in every sector. There are 39 LEPs in England and not all 39 can go to every event – we have to think through which we attend very carefully.” UKTI has been helpful in facilitating these decisions – for example, it recently recommended that six West Midlands LEPs should attend the Advanced Manufacturing Exhibition in Birmingham in 2015.

Working together

According to Nigel Driffield, who worked with the Greater Birmingham and Solihull LEP when he was professor of international business at Aston University, devolution works because it promotes success, which in turn breeds success.

“I would remain cautious about the advantages if cities form super-LEPs," he says. "When RDAs were first set up they competed jealously to attract FDI and the creation of super-LEPs raises the prospect of English regions competing for the same pool of resources, but this time around there is not so much money available. Regions and cities are going to have to be very good and focused to attract FDI successfully.

“The big winner looks to be Manchester. Its nine councils have worked together historically and are used to promoting Manchester city as a region. Other cities are still working out how to do that. The challenge for them all, devolved powers or not, is to work out to which sectors they can genuinely put a value proposition.”