W&b inward investment sector research redacted appendix by East Hampshire District Council

Whitehill & Bordon Eco-Town Inward Investment Strategy & Action Plan

Prepared for: Susan Robbins Economic Development Theme Lead Whitehill & Bordon Eco-Town C/o East Hampshire District Council Penns Place Petersfield Hampshire GU31 4EX

By Mike Campbell Campbell Ventures Limited

7th September 2012

Contents Section

Page

1. Executive Summary

2. Introduction, Background and Objectives

3. Open Innovation and Clusters

4. The Need to Differentiate Whitehill & Bordonâ&#x20AC;&#x2122;s Inward Investment Offer

5. High Growth Companies and Start-Ups

6. Recommended Inward Investment Strategy and Target Sectors

7. Accommodation and Infrastructure Needs

8. Managing and Monitoring the Inward Investment Process

9. Inward Investment Action Plan Framework

1. Executive Summary 1. Industry sector clusters can achieve world supremacy in their field e.g. Silicon Valley and Hollywood. Industry clusters are important in economic development terms as the businesses within a cluster tend to be more innovative and out perform similar isolated businesses. Clusters can be marketed and promoted to attract foreign investors. 2. It is important to identify the clusters close to the Whitehill & Bordon area. They include Farnborough (aerospace industry) and Basingstoke (IT and software industry.) As part of the FDI (Foreign Direct Investment) proposition development process determine who the companies are and how they collaborate and interact? How do they work with Higher Education Institutes (HEIs?) Map out and understand the clusters’ supply chains. Indentify any weaknesses in the supply chains that could be filled by a potential foreign investor(s). This can be extremely compelling to a potential foreign investors. 3. The Whitehill & Bordon inward investment/ FDI proposition must provide information that clearly states how the assets/ capabilities/ business critical infrastructure/ clusters around the area will have a direct positive benefit on the investor’s business. This needs to be presented from an industry sector perspective and will require separate FDI propositions for each of the growth sectors targeted. General and vague statements about the area will greatly reduce the attractiveness to a foreign investor. 4. It will be important to position and clearly differentiate Whitehill & Bordon from the other eco-towns in the UK. This should be part of the Whitehill & Bordon inward investment propositions. 5. The key elements of the recommended Whitehill & Bordon area inward investment/ FDI strategy are to attract foreign businesses that exhibit the following ideal criteria: -

High growth potential – foreign companies preferably with a track record of high growth and successful international expansion.

Knowledge based industry – knowledge based businesses are less sensitive to high cost countries like the UK and see opportunities to collaborate with HEIs to develop intellectual property.

Sectors that strengthen the ‘eco-town’ brand – businesses that are operating in environmentally friendly and low carbon industry sectors to complement and strengthen Whitehill & Bordon’s eco-town brand. Also, evidence indicates that businesses are attracted to Whitehill & Bordon to strengthen their ‘green credentials.’

Building upon existing local clusters – foreign companies that could complement existing local clusters and associated supply chains but be located in the Whitehill & Bordon area. These could include businesses involved in ICT, software, digital media and aerospace products and services in line with local clusters in Farnborough and Basingstoke.

Open innovation – foreign companies that are committed to an open innovation strategy and who see value in establishing a subsidiary in the Whitehill & Bordon area to support their R&D activities. Open innovation is now being adopted by many knowledge based idustries as they realise traditional in-house R&D can often be ineffective and costly.

Local market demand – focus a proportion of resources on attracting businesses that see a market opportunity in the local area. For example as a new town centre is to be developed in the Whitehill & Bordon area, opportunities to attract retail and hospitality businesses into the area will exist. Also, with the area’s residential and commercial property plans, opportunities to attract construction supply chain businesses will exist because of local market demand. This could include businesses involved in the production and development of environmentally friendly buildings, materials and services e.g. manufacturers of leading edge low carbon residential and commercial boiler systems.

HEI collaboration with businesses – increasingly foreign companies are investing into countries to access knowledge, experience and human talent. HEIs are a major source of such assets and should be promoted within an inward investment/ FDI proposition. It is essential to understand in depth the expertise and research capability of all local HEIs and to highlight the expertise linked to the target FDI growth sectors. For example if cleantech companies are targeted what expertise exists in HEIs local to the Whitehill & Bordon area that such companies would find valuable? Also what business critical infrastructure exists to support these businesses e.g. high speed broadband, new product testing/ calibration facilities? 4

6. It is recommended that the inward investment strategy should focus on the following industry sectors: - Cleantech technologies. - Tourism, leisure and retail. - IT systems, software and digital media. 7. Evidence from a study produced by the National Endowment for Science, Technology and the Arts (NESTA) indicates that Whitehill & Bordon should focus upon attracting and developing high growth companies. 

The NESTA study shows that encouraging start-ups is unlikely to lead to dramatic economic growth if they fail to expand. Most start-ups do not have the ambition to grow. Start-ups are not a major contributor to the growth of new jobs over the last ten years.

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The minority of firms experiencing high growth are responsible for half the increase in employment in existing businesses (10 employees and greater.) Therefore, interventions that target firms with higher growth potential are likely to be far more efficient than general business support policy for all SMEs.

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If the objective is to develop the economy in a sustainable long term approach with the greatest impact and ROI, high growth businesses cannot be ignored. This means that any FDI campaign launched to promote Whitehill & Bordon must focus upon and attract high growth foreign investors to achieve the greatest impact.

8. Highly industry sector focused propositions for each of the above target growth sectors are required. Each proposition should include – HEI activities and research projects in the sector, area development plans and vision, relevant business critical infrastructure, information on the local market, details of supply chains, networks, consortia, trade associations, public bodies providing support and details of similar companies located in the area. 9. The development of “ideal foreign company” templates listing the ideal characteristics of a FDI company is needed. This will include how the company is positioned in terms of the target growth sectors, size of company, number of jobs created, financial strength, historical growth rate, track record in international expansion, knowledge based business, R&D intensity, requirement to collaborate 5

with HEIs etc. Ideal foreign company templates are essential to drive foreign investment in line with the area’s FDI strategy. Unless this is done the old adage “if you don’t know what you are looking for you won’t find it!” 10. It is recommended that proactive research is conducted to identify “ideal foreign businesses” that possess all of the above criteria and that could strengthen the existing supply chains of the strategic growth sectors in the area. 11. It is critical that all FDI leads are assessed and “score carded” to monitor the quality and “fit” against the ideal foreign company templates developed. This will allow the FDI manager to focus his limited resources on opportunities where the quality of the FDI lead is “high” and well matched against the target templates, and the probability of “landing” the investor in the area is also high. This will ensure that resources are devoted to FDI opportunities where the economic impact is the greatest. 12. An action plan framework is proposed to establish an FDI business function for the Whitehill & Bordon area. The key elements of the framework include: 

Assessment of resources and develop a three year plan.

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Appointment/ recruitment of FDI staff.

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Ideal FDI target companies templates and the creation of a FDI lead quality monitoring reporting system.

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Creation of FDI propositions.

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Proactive investor targeting.

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Creation of a strategic site business accommodation database.

13. It is recommended that an inward investment/ FDI business function is created and started as soon as possible if the challenging target of creating 5500 jobs by 2028 is to be achieved. This should be seen as a long term project and time will be required to establish and build the Whitehill & Bordon brand internationally to attract foreign investors.

2. Introduction, Background and Objectives This report presents the final conclusions of a project to develop a high impact UK domestic and foreign direct investment (FDI) strategy for the Whitehill & Bordon ecotown. The Whitehill & Bordon eco-town is an exciting project that aims to regenerate and economically develop the area in line with its low carbon, environmentally friendly and sustainable eco-town status. Key to this project is the development of a complimentary inward investment strategy that attracts both UK and foreign businesses into the area. The primary focus of the strategy is to generate long term and sustainable high quality jobs within the Whitehill & Bordon area. The proposed action plan will form the foundation to achieve the target of creating 5500 jobs by 2028. Project Objectives The projectâ&#x20AC;&#x2122;s core objective and mission is: To develop a robust and high impact inward investment strategy focused on creating jobs for the Whitehill & Bordon eco-town area that is complimentary to the townâ&#x20AC;&#x2122;s environmentally friendly status. A key aspect of this strategy will be to create 5500 jobs by 2028. This objective involved completing the following specific activities and investigations: 1. Engagement with all relevant key partners and businesses to identify potential inward investment growth sectors and business critical infrastructure (BCI) in the wider area that could be promoted to attract businesses into the Whitehill & Bordon area. Examples of existing business critical infrastructure includes: -

High speed broadband communications. Industry sector specific test facilities/ laboratories. Industry sector specific standards and calibration organisations. Commercial property. Science and innovation parks. Shared design and product development/ incubator resources. Higher Education Institutes (HEIs) involved in collaborative R&D with businesses.

2. To inform and educate partners on inward and foreign direct investment strategies, marketing and promotional activities and the key emerging industry sectors that could be attracted into the area. A presentation was made on 31st May 2012 at the Standing Conference in Bordon on inward investment

strategies, how to attract businesses and the details of suitable target industry sectors that could provide long term job creation and GVA economic growth. 3. A detailed assessment of the industry sectors that could be attracted and developed in the area. 4. Specific investigations have been conducted to determine what could be retained or created from the planned closure of the Ministry of Defence (MOD) School of Mechanical & Electrical Engineering to stimulate the local economy. 5. The creation of a practical action plan linked to the phasing of the town’s development plans to attract UK domestic and foreign direct investment into the Whitehill & Bordon eco-town area. The action plan will contain:   

The type and details of each specific inward investment activity or task. The recommended process to attract foreign and domestic companies into the area. The most effective marketing methods and publicity materials required to deliver an effective inward investment campaign.

Methodology and Approach The project methodology was based upon three key stages. The details of each stage are as follows: 

Stage 1 – Partner engagement via presentations at the Standing Conference event on 31st May, and at the interim project presentation on 17th July 2012.

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Stage 2 – Analysis, research and investigation into the key industry sectors that could be developed or attracted into the Whitehill & Bordon area. This also included a review of business critical infrastructure and strategically important industry clusters in the Enterprise M3 and surrounding areas.

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Stage 3 – The development of the inward investment and business strategy and action plan based on experience and best practice. The conclusions of this stage are included in this report.

3. Open Innovation and Clusters In Western economies many industries are now experiencing a declining level of innovation in large companies as they shed their central R&D facilities because of cost and return on investment (ROI) concerns. The pharmaceuticals industry is a very good example of this with leading players like Pfizer and Astra Zenica recently closing central R&D facilities in the UK. These companies now concentrate their R&D in business units, where it quickly devolves into straight forward product or process development. This greatly reduces the amount of “blue-skies” thinking that can create entirely new markets. Most companies who have shed or reduced their central R&D know what they have lost by giving up on fundamental R&D, and try to compensate by adopting “open innovation” strategies and models. Open innovation is about companies working with universities, start-ups and SMEs to stimulate innovation. “Open Innovation” strategy was first identified as an R&D strategy by Henry Chesbrough, an adjunct professor at the University of California, Berkeley, USA. It is based on companies collaborating to source and develop technology and product concepts to take to market. If implemented well, open innovation means an evolving relationship between multiple partners that offers them steadily increasing benefits as they grow and understand each other’s needs more fully. Companies like Procter & Gamble’s Technical Centre in Egham, Surrey are an excellent example of a major blue chip corporate who has embraced open innovation to fuel the development of new innovative consumer and healthcare products. The fit between open-innovation strategies and clustering is obvious: gather together companies and researchers with shared interests and they can form tightly coupled networks of experts that can share technical knowledge, market insights and specialist facilities easily. This will enable them to coalesce into focused collaborations when an opportunity arises. Such networks are very attractive to foreign investors. Another key benefit of open innovation is that it enables companies to gather insights from unfamiliar or “extreme” disciplines. This is becoming an increasingly important stimulus as the most valuable innovations begin to happen at the “boundaries” between disciplines. Good examples of this include medical devices and smart power. In the case of medical devices, highly innovative products have been developed by bringing together biological, electronics, photonic and software/ ICT disciplines. The most innovative companies in the world understand the need to build teams and partnerships (both internally and externally) to facilitate this cross discipline innovation.

Industry Clusters Silicon Valley in Northern California is the text book example of a successful cluster. It is why so many other clusters - Cambridge (Silicon Fen) to Scotland (Silicon Glen) to Shoreditch (Silicon Roundabout) have been given the “Silicon” prefix. Silicon Valley has become home to many of the world’s most successful technology companies including Apple, Google and Intel. Silicon Valley has become the ultimate technology incubator by bringing together entrepreneurial people with strong personal networks, technical universities, industrial research centres such as Xerox Palo Alto Research Centre, venture capitalists and market access. Interestingly however, although all the above factors were very important in the initial success of Silicon Valley, the benign Californian weather and Californian life style attracted the type of people who wanted to change the world and didn’t mind taking a few risks on the way. When they became successful they reinvested their money, resources and experience into new start-up companies. In doing so they became role models of entrepreneurial success that others could emulate. In Europe Cambridge, UK is the most cited cluster which first emerged over 50 years ago. Two local entrepreneurs started a technology consultancy called Cambridge Consultants to make available the intellectual horsepower of the University at the disposal of British industry. This created the foundations for what became the “Cambridge Phenomenon” a culture of entrepreneurial collaboration with industry and academia which has created some very successful IT and biotech companies. This was strengthened by the creation of the Cambridge Science Park in 1970 and the launch of the St John’s Innovation Centre to host early stage companies. Cambridge now has a cluster of 1500 high tech and service companies, several of which have become billion dollar global businesses. ARM Holdings for example who designs microprocessors started in Cambridge along with the $6Bn software company Autonomy. Other key clusters exist globally including ones based in Israel (electronics, security and communications) and Massachusetts (health tech and biotech.) In Edinburgh a biotech cluster has been formed by creating links with high growth biotech businesses, the local teaching hospital and University. One of the most important clusters in Hampshire is Farnborough which is home to the global leading aerospace cluster. Other important clusters in the ICT and software industry sectors are present in the Thames Valley and Basingstoke areas.

Why Are Clusters So Important? From an economic development perspective industry clusters are very important for the following reasons: 

Companies in true collaborative clusters tend to out perform companies in isolation. They are more successful, attract the best talent and are financially successful. Companies in clusters tend to be highly international.

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Companies in clusters tend to be more innovative than companies working in isolation. The close location and collaboration with supply chain companies, academia, professional service firms and the healthy competitive nature of clusters are some of the factors that drive higher levels of innovation in clusters.

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Clusters by their very nature are located in relatively small defined geographic areas. This means that effective, high impact public sector interventions can be targeted at a cluster to benefit the performance of all companies in that cluster. An example of such an intervention would be collaborative R&D grants for foreign and indigenous companies in the cluster. Another example could be investment in start-up incubator accommodation or capital investment into a piece of business critical infrastructure specific to that cluster that all companies could utilise e.g. test facilities, laboratories, clean rooms.

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True clusters collaborate closely with local academic and Higher Education Institutes (HEIs) to provide a pool of educated talent and the raw material of new ideas.

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Venture capital and angel investors will often invest in serial entrepreneurs who have a successful track record within a supportive cluster. Several venture capital companies set up in Cambridge to exploit the “Cambridge Phenomenon” and the creation of highly successful start-ups.

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Clusters can be promoted and marketed worldwide to attract foreign direct investment. The reasons for a foreign company to establish a subsidiary in a high performing cluster are very compelling. Can you imagine why any microelectronics or software company would not want to establish a subsidiary office in Silicon Valley?

Key actions points for Whitehill & Bordon are: 1. The true clusters that exist close to Whitehill & Bordon i.e. not concentrations of businesses that do not collaborate or engage with academia, include Basingstoke (ICT and software) and Farnborough (aerospace.) Determine who the companies are in the clusters and how they collaborate and interact. How do they work with HEIs? Which HEIs? What opportunities exist to attract such businesses in the Whitehill & Bordon area with the relative closeness of the clusters? 2. Map out the clusters’ supply chains. Indentify any weaknesses in the supply chains that could be filled by a potential foreign investor(s) located in the Whitehill & Bordon area. This can be an extremely compelling reason for a foreign company to invest in the area.

What Makes Clusters Work? Cluster theory is not new and academics like Michael Porter published several books on the subject in the 1990’s. A key question that often comes up when looking at the economic development potential of clusters is – can they be created? David Cameron has considered the same question. In his November 2010 speech he said: “We understand where previous governments have gone wrong. They believed that they could design and create a technology cluster from on high. But the lessons from Silicon Valley are instructive. There was no grand centralised plan. Yes, the US government and particularly its investment in defence industries gave it a head start. And new firms were attracted by the cheap rents, the venture capital and the pool of talent at Stanford University. But so much of Silicon Valley’s growth was organic. This teaches government some simple things. Go with the grain of what is already there. Don’t interfere so much that you smother. But do help out wherever you can. Help to create the right framework, so its easier for new companies to start up, for venture capital firms to invest, for innovations to flourish, for businesses to grow.” It would appear that David Cameron was briefed well. There are many examples worldwide where governments have tried to create clusters but have failed. In most 12

cases the public funds invested in these projects were considerable and resulted in limited sustainable economic growth. Other views from various experts on what makes clusters work include: Sir Leszek Borysiewicz, Vice Chancellor of Cambridge University “one of the keys to Cambridge’s commercial success was early and direct interaction across the industrial/ academic divide. The boundary between industry and academia is like the boundary between East and West: it’s important that the landscape is different on either side, but ultimately people can pass across without noticing.” Mike Lynch, Founder of Autonomy: “the main thing was the cross section of people we could get hold of.” Andrew Herbert, MD of Microsoft Research Cambridge: “the Cambridge brand helped me recruit internationally.” Herman Hauser, Co-Founder of Acorn Computer: “Cambridge has become a low risk environment in which to do high risk things.”

Key Factors for a Successful Cluster The following six factors have been found from experience and historical analysis to contribute to the success of a cluster. These factors come from various sources but are recognised by economic development executives to have a positive impact on the development of a cluster: 1. Strong technical infrastructure – phone, broadband internet and transport links. 2. Strong educational infrastructure to provide both skilled workers and the core academic organisations around which the cluster can nucleate. 3. Local financial engineering skills to find appropriate funding to match a company’s stage of development and technology. 4. Social acceptance with a local culture that puts a high value on creativity, imagination and entrepreneurship.

5. A good legal infrastructure in which you can enforce contracts and protect intellectual property, with stable tax laws to aid planning. 6. A strong network of contacts to enable access to key end markets.

Top Five Clustering Myths Experience and historical analysis highlights a number of “myths” about developing clusters. These myths come from a range of academic and economic development agency sources. They serve as a useful check when designing and delivering cluster based economic development interventions: 1. “If you build it, they will come.” Building an office and announcing it as a business incubator is not enough; people need a reason to choose your incubator over others. 2. “Clustering companies will lead to synergies.” Not necessarily. Companies need to trust and understand each other before collaboration to occur. Also, each party must benefit for the collaboration to be sustainable. Unless steps are taken to ensure this, businesses are likely to find partners on the other side of the world. 3. “Building a science park will lead to collaboration.” No, industry and academia have different skills and approaches, goals and timescales. Creating successful long term collaborations between the two is a complex and difficult task. 4. “Start-ups will overcome barriers that hold back large companies.” Not correct. If the business environment presents a challenge to large, well funded companies, small companies have not got a chance. 5. “We can train people to be creative/ take risks/ become entrepreneurs.” Not if you have a national culture that punishes failure, you can’t.

4. The Need to Differentiate Whitehill & Bordon’s Inward Investment Offer Clear differentiation in Whitehill & Bordon’s inward investment proposition is essential to achieve a successful and sustainable FDI campaign. Too often FDI propositions completely fail to adequately sell the unique qualities and assets of a region. Instead the propositions are structured using general and vague statements including: “Excellent road and rail links” “Highly trained work force” “Excellent Universities and colleges” “Pleasant surroundings and excellent quality of life” “Strong existing clusters and business community” The problems with using such statements are they do not link the specific needs of a foreign business to the resources/ assets/ capabilities within the area or region that would directly benefit that business. For example an R&D intensive company involved in the development of products using nanotechnology, is likely to see real value in the proposition if a University in the area had a leading research capability in this area of technology. To only state within the FDI proposition that the county has “excellent Universities and colleges” is often meaningless to a foreign investor. It is even worse to promote say the research strengths of a University that are irrelevant to that investor’s business. However, too often FDI propositions take this approach and use the “any size fits all” approach. Statements like “excellent road and rail links” and “highly trained work force” are again general and vague. It is important to try and quantify the needs of the foreign investor by asking questions like: what is your business’s commercial transport and staff travel patterns likely to be? How important is a close location to an international airport and links to freight ports? Where are your supply chain partners located? What specific skills are you looking to recruit for your business? With answers to these questions quantified and practical information can be provided to the investor that will be directly useful for his business. Selling points like “pleasant surroundings and excellent quality of life” are commonly used in propositions and are rarely quantified. For owner/ managers of foreign businesses where the decision to locate a subsidiary could be made solely by the owner, the quality of life aspect within the proposition can be important. Particularly if

the owner has the responsibility to initially set up the subsidiary’s operations by himself. However, these types of FDI opportunities are limited and increasingly rare. Statements like “strong existing clusters and business community” are again vague and only of value if the clusters are aligned to the foreign investor’s specific industry sector. In most cases the decision to invest in a location is based on a Board decision involving several executives and based upon hard quantifiable business requirements including: 

Size of the local market to sell the company’s products and services.

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The strength and structure of critical supply chains.

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Location of key partners who could be businesses and/ or academia.

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Logistical, geographical and time zone reasons specific to the business.

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Opportunities to tap into the local knowledge base via clusters and HEI research capability.

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Availability of business critical infrastructure e.g. super high bandwidth broadband.

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A skilled workforce that is directly applicable to the foreign investor’s business.

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Availability of local financial incentives and support.

Vague statements are often used by other competing counties and regions in their FDI propositions, which can make it difficult for an investor to differentiate between the individual counties and regions shortlisted. This is particularly the case when such statements are not quantified. A good example of this was two years ago all eight Regional Development Agencies stated in their FDI propositions that their regions’ all had “world class capability in environmental technologies.” Clearly this could not be the case. However, it caused much confusion to foreign investors in the environmental technologies sector, not only because every region claimed “world class capability” but because few of the propositions substantiated or provided evidence of their world class ranking.

The key conclusions for Whitehill & Bordon from this are: 1.

Clear communication explaining how Whitehill & Bordon is positioned and differentiated from other eco-towns in the UK from a business perspective is critical. These differentiation messages must focus on the key quantifiable strengths, assets and capabilities of Whitehill & Bordon that will attract the target domestic and foreign investors who seek such capabilities.

The inward investment/ FDI propositions must provide information that clearly states how the assets/ capabilities/ business critical infrastructure/ clusters within the Whitehill & Bordon area will have a direct positive benefit on the investorâ&#x20AC;&#x2122;s business. This needs to be presented from an industry sector perspective and will require separate propositions for each of the industry sectors targeted.

General and vague statements about an areaâ&#x20AC;&#x2122;s capabilities greatly reduces its differentiation and hence its attractiveness to a foreign investor. This approach also makes it difficult to translate the areaâ&#x20AC;&#x2122;s current and future planned industry sector specific benefits to a target foreign investor.

5. High Growth Companies and Start-Ups The National Endowment for Science, Technology and the Arts (NESTA) produced a research report in October 2009 entitled “Measuring Business Growth – High Growth Firms and their contribution to Employment in the UK.” This investigated the impact of high growth businesses on the UK economy. It concluded that high growth companies only represent 6 percent of all UK firms employing ten or more people, but accounted for more than half of the jobs growth. Specifically, 11,530 high growth firms were responsible for creating 1.3 million out of the increase in 2.4 million new jobs in established businesses employing ten or more people between 2005 and 2008 (54%.) NESTA defined high growth firms as any firm with a minimum of ten employees at the beginning of a three year period that achieves an average annualised employment growth greater than 20 percent over that period. UK high growth firms, on average, tripled their employment over a three year period. In 2005-2008 the average high growth firm started with around 60 employees in 2005 but had over 170 employees in 2008. High growth firms are not concentrated in “high-tech” or “growth sectors”: all major UK sectors contained between 4 and 10 percent of high growth firms. Interestingly half of the high growth firms in the UK are in business services or the wholesale and retail sector. The balance between different sectors does appear to reflect trends in the economy in the period: the sectors with the highest proportion of high growth firms were financial services (over 9 percent) and real estate and business services (around 8 percent), while the lowest share was found in manufacturing (around 4 percent.) High growth firms can be found in every part of the UK. Like the general business population they are particularly abundant in the South East and London. Young firms are more likely to be high growth, but the majority of high growth firms (70 percent) are at least five years old. Still, young firms are responsible for a fifth of the increase in employment in all high growth firms. Interestingly a detailed examination of the evolution over a decade of almost quarter of a million start-ups founded in 1998 provides some surprising insights including: 

Most new businesses start small and stay small.

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Approximately one third survived to 2008, only 10% of the survivors had ten or more employees ten years later.

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Fewer than 5% had more than 20 employees in 2008.

The key points from this for Whitehill & Bordon are: 

Evidence shows that encouraging start-ups is unlikely to lead to dramatic economic growth if they fail to expand. Most start-ups do not have the ambition to grow. Start-ups are not a major contributor to the growth of new jobs in the UK over the last ten years. For Whitehill & Bordon to achieve its challenging target of creating 5500 jobs by 2028, the focus must be on attracting large foreign multinational businesses that have the financial strength to invest and create significant numbers of jobs (hundreds of jobs per investment) and high growth businesses. Investment into interventions to support start-ups e.g. business incubators, is likely to have a minimal impact on achieving Whitehill & Bordon’s job creation target.

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If the objective for the Whitehill & Bordon area is to develop the economy in a sustainable long term approach with the greatest impact and ROI, high growth businesses cannot be ignored. This means that any FDI campaign must focus upon attracting high growth foreign investors to achieve the greatest job creation impact.

6. Recommended Inward Investment Strategy and Target Industry Sectors It is important that when selecting target industry sectors to build an inward investment/ FDI campaign that the sectors support the key elements of the high level strategy. For example a key element of the strategy is to attract a proportion of foreign businesses that are in “knowledge based” industries. This would therefore eliminate sectors like low cost commodity product manufacturing, distribution and call centres. Inward Investment Strategy – Key Elements The key elements of the recommended Whitehill & Bordon area inward investment/ FDI strategy are to attract foreign businesses that exhibit the following ideal criteria: -

High growth potential – foreign companies preferably with a track record of high growth and successful international expansion.

Knowledge based industry – knowledge based businesses are less sensitive to high cost countries like the UK and see opportunities to collaborate with HEIs to develop intellectual property.

Building upon existing local clusters – foreign companies that could complement existing local clusters and associated supply chains but be located in the Whitehill & Bordon area. These could be foreign businesses involved in ICT, software and aerospace products and services.

Open innovation – foreign companies who are committed to an open innovation strategy and who see value in establishing a subsidiary in the Whitehill & Bordon area to support their R&D activities. Open innovation is now being adopted by many knowledge based companies as they realise traditional in-house R&D can often be ineffective and costly.

Local market demand – focus a proportion of resources on attracting businesses who see a market opportunity in the local area. For example as a new town centre is to be developed in the Whitehill & Bordon area, opportunities to attract retail and hospitality businesses into the area will exist. Also, with the area’s residential and commercial property plans, 20

opportunities to attract construction supply chain businesses will exist because local market demand. This could include businesses involved in the production and development of environmentally friendly buildings, materials and services e.g. manufacturers of leading edge low carbon residential and commercial boiler systems. -

Target Industry Sectors The following broad industry sector classifications all exhibit characteristics that fit the key elements of the recommended inward investment strategy detailed above. 

Cleantech technologies.

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Tourism, leisure and retail.

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ICT software and digital media.

Within each of the three broad industry sectors, sub-sectors have been identified to help focus the Whitehill & Bordon inward investment strategy and action plan. The selected sub-sectors all have the following characteristics  Growth market in S.E. England.  Strong track record of foreign investment in UK.  Significant local market potential in the Whitehill & Bordon area to attract investors.  Potential to develop the required business critical infrastructure over time.

 Local HEI expertise.  Sectors where the UK is strong.  Existing local clusters.  Alignment to UKTI’s nationally important FDI sector plan.

Cleantech Technologies Cleantech technologies can be defined as: ‘A diverse range of products, services and processes that harness renewable materials and energy sources, dramatically reducing the use of natural resources, and cut or eliminate emissions and wastes.’ Cleantech is an ideal sector to strengthen the environmentally friendly and low carbon profile of the Whitehill & Bordon area. By attracting businesses from this sector the Whitehill & Bordon brand will be enhanced and strengthened. This study has highlighted that businesses have an attraction to location in the Whitehill & Bordon area to enhance their ‘green credentials.’ Most of these companies were in the cleantech sector. The attraction of a future potential market for cleantech products and services in the local area was also a strong factor for their interest in the Whitehill & Bordon area.

The cleantech technologies industry is also strategically important for the Whitehill & Bordon area because: 

The demand for cleantech products and services will not reduce.

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Many of the companies in this sector are highly international and are looking to set up operations worldwide.

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The technology is based on intellectual property.

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It is a ‘knowledge economy’ industry.

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It produces high quality jobs and is strong in R&D.

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Many fast growing venture capital funded companies exist in this sector.

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The sector has close links to advanced engineering and aerospace industries where Whitehill & Bordon has an existing workforce and skill set.

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Local demand for cleantech products and services as the Whitehill & Bordon residential and commercial areas are developed e.g. low carbon house construction, renewable energy systems, low carbon boilers, smart grid, energy storage.

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There are opportunities in the clean transportation sub-sector and the relatively close location of the Farnborough aerospace cluster e.g. attraction of companies involved in the development of low carbon aero engines, components, services and supply chain companies.

Tourism, Leisure & Retail Currently the UK tourism industry employs 2.9 million people and has a national GVA contribution which is increasing by 3.5% per year. Over 30 million foreign visitors come to Britain each year and spend over £16 billion per annum. It is forecasted that a further 250,000 jobs will be created in the UK by 2020 because of the growth in tourism and leisure. The Whitehill & Bordon area is well placed to take advantage of the tourism and leisure industry with its open and beautiful countryside and rural environment. Also, the development of a new town centre for the area creates an opportunity to attract suitable and high quality retail and hospitality based businesses. 23

IT Systems, Software & Digital Media The concentration of IT businesses in the S.E. region is 25% above the national average. However, employment in this sector within the S.E. region is 40% above the national average. In addition to this there are heavy concentrations of IT, software and digital media businesses in the Thames Valley and parts of Hampshire particularly Basingstoke and Hart. The quality of jobs in the IT systems, software and digital media sector is very high. The sector is another example of an intellectual property driven, knowledge economy industry which is positioned for sustainable growth within the S.E. England. Opportunities for investors to collaborate with HEIs in this sector is very high. For example the University of Surrey is a leading research institute for mobile electronics and computing technologies. The University of Southampton also has a specialist research unit in the field of next generation internet technologies. The UK has international strength in digital media content, gaming, software security and secure online financial transaction systems. This is another attraction of this sector for the Whitehill & Bordon area. From experience the most successful FDI campaigns are driven by developing highly industry sector focused propositions for each of the above target sectors. Each proposition should include what Whitehill & Bordon has to offer foreign companies in these growth sectors – HEI activities and research projects in the sector, relevant business critical infrastructure, future town development projects, commercial property development plans, information on the local market, details of supply chains, networks, consortia, trade associations, public bodies providing support and details of similar companies located in Hampshire. Another critical success factor is the development of “Ideal foreign company” templates listing the ideal characteristics of an FDI opportunity. This will include how the company is positioned in terms of its industry sector, size of company, number of jobs created, financial strength, historical growth rate, commitment to business sustainability, track record in international expansion, knowledge based business, R&D intensity, requirement to collaborate with HEIs etc. Ideal foreign company templates are essential to drive foreign investment in line with Whitehill & Bordon’s FDI strategy. Unless this is done the old adage “if you don’t know what you are looking for you won’t find it,” will apply. Proactive research and approaches to companies (via UKTI) is also another critical success factor in successful FDI campaigns. This involves identifying “ideal foreign 24

businesses” that possess all of the above criteria – high growth potential, fit within the target growth sectors, knowledge based industry and commitment to business sustainability etc. Also, proactively identify companies that could strengthen the existing supply chains of the strategic industry sectors in the Whitehill & Bordon area. It is important that UKTI are made aware of the identified target businesses that match Whitehill & Bordon’s “ideal foreign company” templates, and that compelling and bespoke FDI propositions for these target companies are provided. From experience UKTI is very responsive to such proactive approaches and will arrange for their foreign representatives to approach the targets and sell them the proposition. UKTI are often looking for ways to engage with the senior management teams of high value foreign businesses and this approach provides them with a perfect reason to contact such companies. To start the process it will be necessary for East Hampshire District Council to sign a Memorandum of Understanding (MOU) with UKTI so that the two organisations can engage on FDI activities and promote the Whitehill & Bordon propositions. It is strongly recommended that meetings with UKTI are arranged every three to six months to: -

Update UKTI on Whitehill & Bordon’s FDI sector propositions and remind them of the key messages and focused strategy. Get their feedback on how these messages are being received by potential foreign investors. Discuss how the propositions can be improved.

Review progress on the current pipeline of FDI opportunities with UKTI. Review FDI successes and failures. What can be improved to increase the success rate?

Request early visibility on new FDI opportunities that could be matched to Whitehill & Bordon’s propositions and what the area has to offer.

Investigate any opportunities to support or attend any UKTI FDI promotional events and delegation visits from abroad.

Proactively suggest foreign businesses to UKTI to pursue with a compelling Whitehill & Bordon area FDI proposition.

7. Accommodation and Infrastructure Needs From research conducted in this study Whitehill & Bordon does not have any sector specific business critical infrastructure or assets that would clearly differentiate it from 25

other nearby competing areas and towns. An example of sector specific business critical infrastructure would be testing laboratory offering calibration and standards testing for sub-sectors of the cleantech industry. Another example would be the existence of an HEI in the local area that provides education and industry collaborative research to businesses in the ICT and software sectors. It is possibly not surprising that Whitehill & Bordon lacks any significant business critical infrastructure as the area is relatively small and surrounded by rural communities and countryside. Also, Whitehill & Bordon is not an area with a high density of existing businesses and as such the greatest opportunity for the town is to develop the land and existing buildings previously used by the MOD in a way to attract businesses in the target sectors. The other major opportunity to differentiate Whitehill & Bordon’s FDI offer is its eco-town status and the opportunity to develop its own brand. This study has confirmed that businesses will consider locating and investing in Whitehill & Bordon for currently two main reasons: 

To enhance their “green credentials” by locating to an eco-town.



To exploit potential future market opportunities linked to the development of the area. For example cleantech businesses who manufacture and sell low carbon, environmentally friendly and efficient heating systems for residential and commercial property or renewable energy systems.

The opportunities outlined above are not available to the surrounding and competing towns. If the area is developed in line with the requirements of the target industry sectors highlighted in this report Whitehill & Bordon will be able to create the business critical infrastructure and branding that will help to attract foreign and indigenous investors. Business Critical Infrastructure and Accommodation Needs by Target Sector Existing research indicates that the availability of high speed broadband can have a direct impact on the creation of new jobs, foreign investment and the GVA output of an area. This is the main reason why countries like Australia, Korea and Singapore have all invested heavily into high speed broadband and internet access technologies. Not only is high speed broadband now seen as a critical business infrastructure by many industries e.g. financial dealing and transaction companies and digital media businesses, but the availability of high speed broadband enables companies to be more innovative and develop new products and internal processes that are only possible with such technology. It also helps businesses to offer home working and remote working 26

policies to their staff that can help reduce the amount of property business development required in a specific area. So what is high speed broadband? The average broadband speed in the UK is 9 Mbps, high speed broadband is in the range of 80-100 Mbps and is available in some parts of the country. High speed broadband is increasingly seen as essential by many businesses in subsectors of the cleantech industry, particularly where computer modelling of engineered products is required e.g. wind turbines. It is also becoming more of a critical requirement for companies in the ICT, software and digital media sectors. High speed broadband is less of a requirement for retail tourism, leisure and retail. With regards to business accommodation experience shows that the majority foreign investors require business premises to establish a small sales office or a European HQ. Over 80% of all foreign businesses investing in the S.E. England region (2011) set up either a sales office or combined European HQ. The majority of these companies decided to set up a sales function in the region and initially employed typically less than ten employees. The fast growing companies expanded rapidly and within three to five years typically employed 40 to 50 staff. This supports the reason why Campbell Venturesâ&#x20AC;&#x2122; recommends that Whitehill & Bordon need to target large multi-internationals and smaller high growth companies to achieve the ambitious job creation target of 5500 jobs by 2028. Opportunities exist to attract larger multi-international companies who would employ typically 50 to 250 employees over a three year period but these opportunities have significantly reduced over the past three years. The bulk of foreign and indigenous investors will make relatively small investments employing initially less than ten people. Whitehill & Bordon need to provide flexible business accommodation that will allow the smaller fast growing businesses to expand and retain them in the local area. At the same time Whitehill & Bordon should also attract larger investors which could create hundreds of jobs and provisions to locate such businesses must be considered and provided for.

A summary of the business critical infrastructure and accommodation needs for each of the three target categories are outlined below: Cleantech Sector



High speed broadband.



Sales office – 500 to 1500 sq. ft. modern air conditioned offices with car parking for up to 15 staff.

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Warehousing/ storage – 1000 to 2000 sq. ft. depending on company’s products and services.

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European HQ – 4000 to 6000 sq. ft. modern air conditioned offices with car parking for up to 60 staff.

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Light engineering/ assembly workshops and R&D facilities – 2000 to 4000 sq. ft. for up to 40 staff.



Opportunity to create a possible “Cleantech Business Park” and to provide shared resources and to attract the interest of local HEIs to provide skills training and collaborative industry R&D.

ICT, Software and Digital Media Sector 

High speed broadband.



Sales office – 500 to 1500 sq. ft. modern air conditioned offices with car parking for up to 15 staff.



Warehousing/ storage – 1000 to 2000 sq. ft. depending on company’s products and services.



European HQ – 4000 to 6000 sq. ft. modern air conditioned offices with car parking for up to 60 staff. Air conditioning is an essential requirement to ensure offices are cool enough to accommodate banks of computer servers required by businesses in this sector.



Software development and R&D facilities – 2000 to 4000 sq. ft. for up to 40 staff.

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Computer server rooms and possibly the requirement for a local data centre in the Whitehill & Bordon area.

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Opportunity to create a possible “ICT and Digital Media Business Park” and to provide shared resources and to attract the interest of local HEIs to provide skills training and collaborative industry R&D.

Retail 28



Modern shopping mall or town centre precinct to attract local shoppers or an edge of town retail complex with car parking. Variety of retail property sizes to attract large anchor tenants and smaller businesses.

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Public transport links.

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Warehousing and distribution centres.

Leisure and Tourism 

Sports centres/ sports facilities suitable locations.

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Suitable hotel property locations.

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Commercial property suitable for restaurants, cafes and bars.

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Public transport and car parking facilities.

8. Managing and Monitoring the Inward Investment Process It is critical that all FDI leads are assessed and “score carded” to monitor the quality and “fit” against the ideal foreign company templates developed. This will allow the FDI manager to focus his limited resources on opportunities where the quality of the FDI lead is “high” and well matched against the target templates, and the probability of “landing” the investor in the Whitehill & Bordon area is also high. This will ensure that resources are devoted to FDI opportunities where the economic impact on the area is the greatest. The quality of a FDI lead can be quantified by ranking the business characteristics and attributes against the ideal target template criteria (these factors can also be weighted.) An overall score can then be calculated. With regards to “probability” this is really down to the judgement of the FDI manager after assessing how many other locations the foreign company is evaluating and how strong their propositions are. Much of this information will often be provided openly by the company. It is then possible to “plot” the FDI opportunity on a chart with axes of “quality” against “probability.” 9. Inward Investment Action Plan Framework The following section details the key tasks that need to be completed to create an FDI case handling and promotion function for the Whitehill & Bordon area. The timing and

sequence of these tasks in an actual project plan will be dependent on the resources available. Assessment of Resources Determine what resources are available over the next three years in terms of finance and staff. Could partners provide human resource for this project? From this determine where the resources should be deployed. The three main areas are: 1. FDI management function (strategy development, creation and continuous development of FDI propositions, collation of industry sector intelligence, pipeline quality monitoring, reporting, interface with UKTI.) 2. FDI case handling (client visits, meetings, presentations, Q&A, general client support, promotional events.) 3. Aftercare (business support for foreign investors in the area.) In some cases work relating to the creation of FDI propositions, strategy development, industry sector intelligence etc could be subcontracted to an external consultant such as Campbell Ventures when required. However, it is recommended that the reporting, quality monitoring and interface with UKTI is retained internally. From this a three year budget and resource plan should then be created. Appointment/ Recruitment of FDI Staff. The appointment/ recruitment process will require the creation of job descriptions and service agreements. Following this how the recruitment process will be structured will need to be agreed. This could involve outsourcing the recruitment to an external agency or managing the process internally with external advertising. Ideal FDI Target Templates and a Quality Monitoring Reporting System. Develop ideal FDI target templates containing the criteria as recommended in this report with the criteria weighted. This will also form the basis of a quality monitoring and reporting system to track progress. Each FDI lead can then be monitored in terms of its quality and probability of landing. This report can then be discussed with UKTI on a regular basis. Creation of FDI Propositions As mentioned earlier in this report highly industry focused FDI propositions are key to successful FDI campaigns. This will require significant research into the target sectors, 30

clusters and business critical infrastructure in the Whitehill & Bordon area. The structure and content for each of the propositions must include industry sector details on: -

Supply chains

Existing players and competitors in Surrey.

The local market (UK and Europe) for that industry.

Networks, consortia and trade associations.

Business critical infrastructure (inside and outside of Surrey.)

Potential business partners and opportunities.

HEI offerings â&#x20AC;&#x201C; relevant research capability and key members of staff.

In addition to the above information must also be provided on: -

Available and planned office accommodation (client specific.)

Road, rail and airline transport infrastructure.

Schools and residential housing options (client specific.)

Financial incentives/ business support/ training/ export support etc.

FDI propositions for all three growth sectors will need to be created using the structure shown above. Proactive Targeting This will involve researching potential foreign investors that are aligned to the ideal FDI templates. Databases are available that monitor high growth companies and are regularly updated and produced by companies like Deloitte for example. Once these companies have been identified UKTIâ&#x20AC;&#x2122;s foreign network should be contacted to proactively approach these companies to promote the Whitehill & Bordon proposition. If the businesses are aligned to the ideal FDI template the proposition should be highly relevant to that company.

Creation of a Strategic Site Business Accommodation Database.

Develop a database to store the details and marketing literature for all strategically important business accommodation sites and property development zones that could be attractive to foreign investors. This could include details of the accommodation in strategic areas such as existing clusters, science and business parks. This could be developed further into “soft landing zones” where several potential private sector business partners could provide business accommodation at attractive rates with discounted professional services (accounting, legal, tax etc.) Such “soft landing zones” exist in various other locations in the South East region to attract foreign investors e.g. Kent.