Rationale for Business Incubation by Local Government - Rotherham's Example Abstract: Topic: A fuller description of the topic is: The Rationale for Local Government Operated Business Incubation - the Rotherham MBC Example The paper is a case study - that begins with a description of the background events that led to the local authority, that is Rotherham MBC, first becoming involved in 'business incubation' The case study then moves into the establishment of the first 'business incubation centre' and then the on-going development, in Rotherham, of the 'incubation' model - before finally ending with the addition of 'business acceleration' to the portfolio Applicability: The applicability to the theme of the Conference is because properly operated 'business incubation' provides significant benefits to new and early stage small businesses - i.e enterprises Furthermore, the providers of support at good 'incubators' will have full awareness of the need for business owners to be genuinely enterprising and will communicate that ethos to their clients Aim: The aim of the case study is to demonstrate how a local authority operate a successful business incubation operation that can:  'kick-start' business development in a 'run-down' area and/or  increase the speed of development in a developing area  provide genuine benefits to its client businesses and thus to the local economy  assist local businesses that are not actually 'on-site' clients  generate local awareness of 'enterprise' and 'enterprise' opportunities  not be a 'drain' on public finances Methodology: As part of the introduction, the case study defines 'business incubation' & 'local government', then it is a chronological review of the operation of 'business incubation' by Rotherham MBC - commencing with the local economic scenario of the 1990s (the catalyst for the project) Then the review moves through the design and instigation phases before covering the support aspects of the process from 2000 to 2018 The initial 'business incubation centre' was, after evaluation, followed by further units and that development process is detailed The case study also recounts policy decisions made before and during the 2000 - 2018 period plus provides information about other aspects of the business support policy and practice in South Yorkshire from the 1980s until 2018 Contribution: Local authority operated 'business incubators' are comparatively rare operations in the UK and commercial operators [naturally] guard details of their operations very closely That means that the amount of information available to local authorities considering setting up 'incubators' or considering taking over [failing] 'incubators' is limited and not readily accessible Whilst this case study deliberately does not (for reasons of sensitivity) cover the day to day operations of incubation centres or the local government financial regimes, it should provide potential local authority entrants to the sector, Government and academia with very useful information Implications for Policy & Practice: The implications for policy arguably fall into two categories:  those for local and central Government In recent years, local government in the UK has faced increasing budget constraints and reduced EU sourced funding but as demonstrated by RiDO, 'incubators' can act as 'kickstarters' for economic development or faster economic development Local authorities wishing to become involved in 'business incubation' will, therefore, need to provide even greater justification for investment in 'incubators' and examples of successful 'incubation' operations will need to be part of submissions to elected members, Government departments (e.g BEIS and DCLG) and other 'funders' Should the UK leave the European Union in 2019 (or even 2020) then EU sourced funding will obviously become totally unavailable to local authorities It is too early to know which political party will be in power in the UK in 2021 However, whatever is the the political scenario then; The 'funding packages' used to initiate and provide 'early days' support will need to be re-thought and again as much positive supporting information as possible will be needed in business cases for investment  those for commercial operators of 'incubators' Commercial operators of 'incubators' naturally have a profit motive That can mean that in areas where it is difficult to achieve rent levels that provide what is felt to be an adequate level of profit, they will choose not to provide incubation If they choose not to accept lower revenues (but still generating profits), in locations where local government operations can successfully cover costs and have an adequate positive margin, then that is their policy decision The implications for practice: The case study does not show that everything in the 'business incubation' operations of Rotherham MBC was totally successful Changes in Government policies at national and regional levels gave rise to difficulties that might have been mitigated or avoided by even greater use of a 'what if' style of project planning Similarly, but not really the fault of the local authority, expectations of the demand for export support from clients was initially overoptimistic after the project's original scope was reduced by outside interference However, the case study does reflect the major successes - over an 18 years period - of what can be achieved by a well conceived and well run 'business incubation' operation The way in which the project was successful - in terms of outputs and financial probity over the period can be argued to be an example of 'best practice' and one that other local authorities could potentially view as an exemplar Paper: Rationale for Business Incubation by Local Government - Rotherham's Example Introduction: A fuller title for this case study is: 'The Rationale for Local Government Operated Business Incubation - the Rotherham MBC Example.' Rotherham is a metropolitan borough in South Yorkshire - whose economy was badly affected by the cut-backs in the local steel industry in both the 1970s and the 1980s as well as by the subsequent run-down and closure of the local coal-mining industry in the 1980s The final decimation of coal mining and the further decline of the local steel industry in the late 1980’s and the 1990’s saw the loss in Rotherham of 14,000+ jobs in those and related industries areas of the borough were especially badly hit - e.g with 10,000+ jobs lost and the local unemployment rate peaking at 45+% in the Dearne Valley area – part of which is in the North of Rotherham RiDO - currently the sole operator of 'business incubation' in Rotherham began as the business development, inward investment and regeneration arm of Rotherham Council's Economic Development Services department (EDS) The prime function of EDS was exactly in line with it's title and its senior staff focused on strategies for economic regeneration This case study documents the highly successful history and impact of the RiDO 'business incubation' activities up to 2018 and shows how, in the case of Rotherham, the political and operational decisions made in the 1990s and early in the 21st Century were well-judged - in that they had beneficial and cost effective impacts on the local economy Methodology: The case study begins by clearly defining 'Business Incubation' and then Local Government It then follows the chronology of 'business incubation' and closely related business support in Rotherham between 1982 and 2018 The authors then set out their views on the activities and their benefits to businesses and to the community, following up with the apparent implications for policy and practice Prior research: It should be noted that the lead author was the first specialist business adviser to be employed by RiDO He was its senior business incubation adviser for the period 2000 to 2018 - so much of the information in the case study is from his own direct practitioner experience The case study did require other research - hence the comment below In view of the case study approach; the prior research is detailed at the appropriate points in the case study Important definitions: 'Business Incubation' 'Business incubation' is not simply the provision of buildings earmarked for use by ‘start-up’ businesses – that is simply providing premises Indeed it can be dangerous, both financially and in terms of lower than expected outcomes in job creation and GDP, to concentrate solely on building premises (comprising small units for new businesses) without considering the total needs of new businesses Instead; "successful ‘business incubation’ is a support process that involves many stages and requires a holistic approach"1 Business Incubation was defined by UKBI (UK Business Incubation 2) as: “A unique and highly flexible combination of business development processes, infrastructure and people designed to nurture new and small businesses by helping them to survive and grow through the difficult and vulnerable early stages of development.” (© UK Business Incubation Limited 2006) Alternatively, it is defined by NESTA (National Endowment for Science, Technology and the Arts, UK) as “A technique whereby promising new firms are provided with a managed and structured environment in which they can grow to their potential” "Incubators’ are, therefore, the premises or environments in which the ‘business incubation’ process is conducted." Local Government - the organisations responsible for carrying out aspects of policy devolved from national government and policies decided locally by elected representatives Using England as an example: England has, since 1994 been subdivided into nine regions (including London) Within the eight regions excluding London, power (government) over local issues is devolved to a combination of organisations Combined authorities cover areas larger than single local authorities but smaller than the regions Below the region level and excluding London, England has two different versions of local government In some areas there is a county council responsible for services such as education, waste management and strategic planning within a county, with several non-metropolitan district councils responsible for services such as housing, waste collection and local planning Both are classed as principal councils and are elected in separate elections Some areas have only one level of local government These are unitary authorities, which are also principal councils Most of Greater London is governed by London borough councils There are 125 'single tier' authorities, comprising:  55 unitary authorities  36 metropolitan boroughs - e.g Rotherham  32 London boroughs  The City of London Council and the Scilly Isles There are 33 'upper tier' authorities, comprising:  27 non-metropolitan counties  metropolitan counties Benson, Martyn - Business Incubation in the UK 2007 – 2008 (A Practitioner's View) 2009 An initially Government sponsored organisation set up to promote Business Incubation and to act as a members’ organisation for the sector There are 201 'lower tier' authorities So, in England, in 2018, there were in total 353 principal councils (i.e local government bodies) - not including the Corporation of London and the Council of the Isles of Scilly The history of Business Incubation in Rotherham: In 1982 the Council assisted the newly formed Rotherham Enterprise Agency (REAL) to set up its operations When, in 1985, the Enterprise Agency acquired premises at two sites for workspace the Council assisted in the two developments Changing economic conditions and the growing realisation that small businesses would play an increasing role in the economic future of the Borough, led to the Council sponsoring a project of the Yorkshire and Humberside Industrial Association This was to convert a former school at Swinton into 12 work-space units The experience with this and some other smaller conversions led the Council to decide that it should take a direct role in the development and management of small workspace units – with Business Centres proposed This meant that the precursors of [local government] business incubation by RiDO in Rotherham were its early, managed by EDS, workspace Business Centres - especially the one at Brampton Bierlow (in the Dearne Valley) Following an early small-scale operation at Maltby, and the decimation of coal mining in the Dearne Valley; in 1986 EDS leased, from a local trust, part of the former grammar school site at Brampton Bierlow, adjacent to Wath upon Dearne, and – with additional funding from British Coal Enterprise (BCE) and European Funding (ERDF) - converted it to work-space (40 units) - primarily for 'start-ups' by people made redundant from the mining sector (or affected by the closures) but also for other small businesses (typically those moving on from initially being home based) Demand from businesses for space was such that when more of the site, giving potential for some larger units, became available, in 1996, it was added to the portfolio and thus providing total 25,000+ sq ft of floor-space As the site at Brampton was purely classed as managed work-space; there was no official onsite business advice or development regime - although in the early days a helpful local bank manager provided support in addition to that given by the first Centre Manager and then his successor There was also the significant consideration that, due to the previous ready availability of employment in the mining and steel sectors, levels of self-employment in the area were well below the national average Also, 'Start-ups' were able to access training courses and support through the Rotherham Enterprise Agency (REAL) plus, at least in theory, from Business Link South Yorkshire (BLSY) Business Link had originally been Business Link Rotherham but then was merged into the larger unit in 1995 As the initial focus of BLSY was on small and medium businesses, with 'high growth' potential, then the 'micros' (those with less than 10 employees) - which formed the majority of new businesses were apparently largely ignored This situation was one of the reasons why Rotherham Council began actively considering a more extensive new support regime for new small businesses Because of the timing; it seems unlikely that the decisions in Rotherham Council were influenced by the 1998 paper by Sherman & Chappell - Methodological Challenges in Evaluation Business Incubator Outcomes - (in collaboration with the NBIA 3, University of Michigan Business School and the Southern Technology Council on behalf of the Economic Development Administration - the EDA4) The purpose of that paper was to determine the best methodologies for individual 'incubators' to assess the impacts of their programmes on local communities Prior to that paper, there had only been very limited public comment, in the USA or elsewhere, about ‘business incubation’ Similarly, as UKBI had only been founded in 1998, it was yet to have a significant impact on thinking in Rotherham MBC However, there was over a decade of experience in Rotherham’s operation of managed work-space, its impact on economic development and the needs of client businesses, plus knowledge gained from a neighbouring authority about its operating methods with managed workspace Also in South Yorkshire there was the example of the Barnsley Business and Innovation Centre (a ‘not for profit’ organisation) – which had been operating since 1988 and could call on locally based business advisers to support client businesses Finally; there was also knowledge of the Sheffield Technology Parks operation in Sheffield – where a not for profit Limited by Guarantee organisation, also established in the 1980s was, in the 1990s, (due to the presence of an on-site business adviser) operating as a ‘quasi-incubator’ at its Surrey Street premises Sheffield Technology Parks was however effectively a 'science park' type of operation (with very limited vehicle access) - which was ruled out as a route for Rotherham MBC Thus, moving forward from intensive internal discussions and consideration of funding options, the instigation of a Council operated 'business incubation' process began to be planned It is not now known to what extent, if any, the 'business incubation' early policy was influenced by the NBIA - as the USA was seen as the birthplace of 'business incubation' Certainly in the 1990s there was no direct contact between Rotherham MBC personnel and NBIA Policy seems rather to have been based on a combination of experience gleaned from operating 'managed workspace' and instinctive decisions by experienced staff in the EDS department Being adaptations of former school premises, the buildings at Brampton were not ideal for business use (i.e very few had convenient access for moving items to\from vehicles) but units there were nevertheless in high demand Indeed, research, for EDS, in the late 1990s, established that there was demand in the Dearne Valley for a mixed use business incubation centre with full support facilities Also, there was a need to 'pump prime' development in that part of the Manvers area not forming part of the Dearne Valley Enterprise Zone (that had been inaugurated in 1995) The new project – which became the Century Business Centre – was funded by a partnership between: Rotherham MBC, English Partnerships and European Funds (ERDF and CERB) Total funding of £2.4m enabled the planning of 30,000 sq ft of mixed use ‘managed workspace’ with 24 small workshop units (suitable for ‘clean’ manufacturing) and 41 offices with space for between and people plus meeting rooms The NBIA is the National Business Incubation Association - the sector organisation for business incubation in the USA and main world body for the sector The US Government's economic development organisation The building was a specialist design (by Rotherham Council Architect's Dept.) and on a former colliery site in nearby Wath on Dearne Following the success of the Rotherham Youth Enterprise (RYE) wing at Brampton, the planned new accommodation included a wing of workshops and offices for RYE – again on a subsidised rental basis The new building opened in November 2000 The business incubation support model at 'Century' comprised having, from the outset, clerical staff and a full-time, on-site, business adviser - with a remit to link with all relevant support agencies and organisations That involved directing 'start-ups' to the REAL training and where relevant involving, amongst other organisations, Business Link, DonBAC and British Steel Industry (re funding - as the EDS 'package' did not include funding nor equipment\furniture) plus the two universities in nearby Sheffield Comprising 'workshop' units ranging in size from 29 sq m to 47 sq m and offices ranging from 12 sq m to 34 sq m Century' - thus being a 'hybrid' centre, totalling 27,000+ sq ft., had a focus on knowledge based businesses (that it was anticipated would achieve the greatest economic impact) The layout was such that all the workshops had roller shutter door access to an inner vehicle courtyard - for collections\deliveries, plus individual access to the personnel corridors of the main section of the building Those corridors included small 'breakout' seating areas - useful for business discussions out of the workshops or for 'networking' If workshop occupiers also wanted an office, they could potentially (subject to availability) have one in the building In its first years, 'Century' created 450+ jobs in 100 businesses Like 'Brampton'; occupation was by way of licence - with 'easy in, easy out' monthly terms - giving new businesses total flexibility (as that was felt to be very important) Despite the opening of 'Century', there remained strong demand for units at 'Brampton' (which remained open) and as located only a mile away, businesses there were provided with a similar support regime as at 'Century' (with the business adviser visiting on regular basis and also available 'on call') 'Century' had been built as a 'pilot' - with significant public UK and EU funding - so its early operation was subject to detailed reporting and then to an external review, in 2003, by independent consultants The possibility of Rotherham MBC developing further business incubation centres was dependent on that review - which, if appropriate, was also to suggest an up-dated strategy for developing business incubation support by RiDO The report - by Zernike UK - made the following significant points: Since the 14,000 job losses of the late 1980’s and 1990’s, Rotherham MBC had worked hard to regenerate its economic base and had succeeded in attracting and generating 10,000 new jobs The progress with self-employment 'start-ups' had led to Rotherham being designated a Beacon Council in 2002 for its work in creating new businesses However, the recovery still left the Borough at only two thirds of the UK national average per capita income A significant proportion of Rotherham’s new economy was based on new businesses that have been helped into existence by the range of properties, facilities and services now provided RMBC’s particular offering was geared to new companies and offered business support on site in addition to the central office services that were found in some of the other small SME units Both 'Century' and 'Brampton' were managed together by the same team The sharing of management and advisory resources allowed economies to be made and the two premises to be operated at just better than break-even - despite increasing lease and maintenance costs of the older building Also significant; the broadly neutral operating cost call on RMBC 'core' budget from operating the two centres A combination of the Council's own existing plans and those suggested by the consultants led to the following strategy, based on the two fundamental objectives of 'business incubation' in Rotherham, being identified as to: accelerate the formation rate of new businesses in line with the Government's birth rate strategy for Yorkshire and Humberside, and to  improve the rate of survival of those businesses successfully created and to enhance their rate of growth  The objectives to be achieved by the following actions: Century: priority to provide 'grow-on' space - so enabling more explicit 'business incubation' Brampton: secure the long term position by moving from lease to ownership Moorgate Crofts: re-focus the planned new build provision into a formal 'incubator' focussed on CDI businesses - to increase sustainability and prove the market in the town centre for new offices 'Magna': provide a new, purpose built, 'incubator' focussed primarily on AMM with a sub-regional emphasis and co-located with an envisioning centre to stimulate innovation On-site business advice to be automatically provided at the BICs The ultimate long-term objective was for business incubation in Rotherham to provide as many as possible of the aspects of the ideal business support model - this was agreed to be seen as: Advanced Metals & Manufacturing Figure 2.1: Sustaining new businesses • • • • • • Investment credits Second exchange Business angels Equity Third Party Financing International investment • Local presence • Regional programmes • National and international programmes • Banking efficiency & new technology • Targeted grants • Retained income • Treasury management Longer duration Lower cost • • • • • Factoring Information Asset registers Leasing Working capital Wider access Aid programmes Physical • Fairs & exhibitions • Communications • Special property • Transport • Incubators Capital • Regulations & procedures • Requirements/ access • Channels • Intermediaries • Networks Markets Inf or ma tio n WHAT BUSINESS NEEDS En vir on me nt Policy • Fiscal • Trade • Legal Know-How Business Technology • Product performance Professional • Process specialists improvement • Energy efficient • Environmental • Innovation • Standards • TQM • Networks • Registers & regulation • Training & standards • Consultancy Initiative Training for skills • • • • Entrepreneurship Financial Productivity Marketing Corporate operations • • • • • C of C • Professional promotion • Entrepreneurs’ clubs Managing transition Business growth Investors in People Communications Diagram by Zernike UK Ltd That strategy also meant potential development of incubation support at the nascent Advanced Manufacturing Park on the Rotherham\Sheffield boundary - although in that case the prime mover would be Yorkshire Forward6 Moving forward after the Review: In 2003 'Century' remained the only bespoke development in Rotherham for supported business 'start-ups' - meaning that it was essential that Rotherham Council was pro-active with further provision This was further evidenced by the Audit Commission's 2004 review of 'Regeneration' confirming that:  the small business sector was under-developed in the borough  it was also imperative to understand the importance of business support in the lifecycle of a company’s development and the role of other organisations The Regional Development Agency for Yorkshire Although the review suggested greater formalisation of business incubation in Rotherham, it was very largely in agreement with the work undertaken so far The Council, therefore, agreed to go ahead with the further building projects and, in 2004, to recruit two further business advisers, to initially be based at Brampton - supporting its businesses and to be ready for when the new 'incubators' were about to come into use Also a new 'pre-start' support team was created - to inform enquirers about self-employment, then to direct potential 'start-ups' to training and where relevant, on into the RiDO 'incubation' process Because of the focus on 'incubation'; a Development Manager with responsibility for both teams was also appointed in 2004 As originally built; 'Century' had included a catering kitchen and a cafe seating area The latter was serviced, in 'office hours', by an on-site business (using the kitchen) plus with vending machines that were also accessible during evenings and week-ends The activity was successful but the operator encountered problems with a separate division of the business and gave up the licence The subsequent operator of the cafe/kitchen was not successful and the cafe space was converted into a variation of 'hot desking' space Rather than have desks - that had to be cleared when not in use - the space was fitted out with 'pods' The 'pods' were mobile, oval shaped, lockable tall cabinets that - when fully opened up - provided a desk and chair plus space for 'tower' or 'lap-top' PC and filing/storage space There were, of course, telephone and internet connections The 'pods' were rented on the same monthly 'licence' basis as an office but obviously at much lower cost for a 'pre-start' or new business Typically only two 'pods' were in use at any one but the space could cope with full utilisation After a promising start, the 'pods' fell out of favour so were removed (and sold) after three years - with, due to demand, the space reverting to usage by a single business (rather than 'hot desking') Further 'incubators': The next 'incubator' to come into operation (in 2005) was that at 'Moorgate Crofts' (on South Grove) and it followed the anticipated model for that location of being 'offices only' although in addition to a focus on the CDI sector there was also significant occupation by new businesses from the financial services sector That was as a result of the location (in the professional services quarter of the town centre) A business adviser re-located from Brampton to be permanently based at 'Moorgate' By 2006 the occupancy levels (effectively full occupancy when 'churn' time' included) at the BICs confirmed the success of the business incubation programme In its first years ‘Century’ had seen 100 new businesses and 400+ jobs created (excluding those in the RYE wing) Financial investment by clients at Century was, by 2006, fairly estimated at over £4m Also, a contemporaneous Barclays Bank survey showed Rotherham with a 15% p.a increase in business 'start-ups' against a national downward trend of 13% The total provision resulted in Rotherham receiving a further 'Beacon Council' Award in 2005-2006 for 'Supporting New Businesses' It was noted that the 'incubation' programme was not solely a 'local government' scenario - as it involved partnerships with: DTI, English Partnerships, European Funds (ERDF & SRB) and the other organisations mentioned earlier 10 The next 'incubator' - known as 'Fusion at Magna' (adjacent to the Magna site and thus close to Jn 34 of the M1 motorway) was, like 'Century', a hybrid - with a combination of offices and workshop type units It opened in 2008 and the remaining business adviser at Brampton moved to 'Fusion' By then, partly due to the increased size of the team and for PR reasons, the business incubation support and other business support had fully moved to being under the RiDO 'badging' - rather than the mainstream Council image The final 'incubator' to be constructed for RiDO was 'Matrix' at Dinnington (South East of the centre of Rotherham but part of the Borough) - another former mining area and one undergoing regeneration with the support of Yorkshire Forward 'Matrix' opened in 2009 but with the financial constraints that were beginning to appear, the business advice provision was shared between the three existing advisers Questioning of the role of local government in business support and 'incubation': Notwithstanding the success of RiDO and other local government bodies in delivering viable economic regeneration projects involving managed workspace and business 'incubation', such operations were the target of critical comments These were mainly from commercial organisations - e.g.:    In 2005, Walter Herriot – the MD of St John’s Innovation Centre, Cambridge said that “publicly funded small business incubation centres are being constructed without any real understanding of what they will achieve” He wanted the RDA’s (Regional Development Agencies) to re-think their strategy – which he felt was providing a physical infrastructure without the ‘networking’ that needed to be in place Similarly John Moulton of Alchemy Partners commented that “funding linked to volume targets was relatively unlikely to generate good companies We need to aim for quality not quantity” He apparently felt that government help, particularly financial, could be taken too far Also there were comments about "public sector intervention distorting the commercial property market" in the 'Provision of property for new and growing businesses' paper presented by Tom Stokes (the then Managing Director of Evans Easy-space) at the 2007 ISBE Conference What the critics apparently did not correctly evaluate was that, without the local government intervention, many business 'incubation' projects would not otherwise have existed (because, without a generous profit margin, commercial operators were not interested and in Rotherham REAL was not in a position to increase its portfolio at Manvers) In Rotherham's case, despite the 100% occupancy at 'Brampton', it had been left (in 1996) to the Council to significantly increase the volume of managed workspace in the Dearne Valley and even when that extension was successful, to then provide business 'incubation' (4 years later') The wider picture: By the time that 'Century' was operational, Rotherham Council had already joined the Business Centres Association (BCA) and in 2002 satisfied client businesses nominated it for the Business Centre of the Year Award Unfortunately it was only a 'runner-up' scenario - as 'Century' was in competition with many very well established 'private' centres However, 'Century', plus the adjacent 'grow on space' that was later created by a private developer, did 11 serve as a catalyst for further development at the North end of the Manvers area - a section of land that had previously remained commercially undeveloped since colliery closures With the affirmative Zernike review behind it and the focus on business incubation, Rotherham Council had (using the RiDO 'badging') joined UK Business Incubation (UKBI) and an EDS Assistant Director was to go on to be a member of the UKBI Board RiDO won the UKBI 'Incubator of the Year Award' in 2005 (and went on to win again in 2010) A RiDO client business - Martek Marine Ltd - was UKBI 'Business Incubatee of the Year', 2005 The initial owners' investment (in 2000) was £6,000 and in January 2019 the company was sold for £10m By 2005, being able to have individual business advisors to link with the two Universities in Sheffield meant that it was possible to form closer links with their respective 'Enterprise' sections - delivering coaching and training sessions for students and usefully promoting the 'incubation' facilities in Rotherham This resulted in graduates taking advantage of the Rotherham Youth Enterprise supported accommodation in the incubation centres Also RiDO clients were directed to the R & D and Knowledge Partnership sections of the Universities (in some cases gaining funded support) Internationalisation: In 2006 RiDO had presented a paper (which included references to its 'business incubation' activity) at the ISBE7 conference That paper led to staff meeting Russian consultants who, on behalf of its local government, were exploring the possibility of there being a business incubation centre at Yubileny8 a town (with popn 33k) in the Moscow oblast The senior RiDO business adviser was funded by the Yubileny Town Council to visit it, in 2007, and to discuss 'business incubation' - with the initial idea being an 'incubator' partly financed by the Yubileny Council and partly by a local industrial sponsor It was anticipated that RiDO would provide some consultancy support for the project However, two problems arose - the first being the difficulty of finding a suitable local business adviser (or advisers) - essential to provide the on-going primary support Secondly the main meeting had unexpectedly been joined by representatives from the local government for the nearby [larger] city of Korolyov as they were also keen on having a 'business incubation' project Korolyov had a potentially suitable person to be the initial adviser (a member of staff having attended business management and 'enterprise' courses in the UK) With funding available; the Korolyov council effectively 'hijacked' the project and set up their own 'incubator' - leaving insufficient demand for the Yubileny project and dispensing with RiDO support However, RiDO received a further approach from Russia in 2010 That was because staff at and graduates from the Medical Department of the Moscow State University were interested in the idea of business 'incubation' - for medical activities that could be commercialised (quite a novel concept in Russia at that time) As a result, the senior RiDO business adviser was invited to Moscow - to deliver a seminar session The session was deemed to be successful but the potential for future support on consultancy basis, from RiDO, for a 'medical sector business incubator', was prevented by the deteriorating relations between Russia and the UK - effectively becoming more difficult in 2011 and sharply deteriorating following the invasion of the Crimea in 2014 ISBE - Institute of Small Business and Entrepreneurship As the original centre of the Soviet space programme, it was a 'closed town' until the 1980s 12 The latter scenario meant that a potential new Rotherham based operation - for a UK unit of a Russian specialist coated pipe-work maker (making coated steel pipes for the oil industry) did not go ahead Similarly a proposal for a franchise style network of cosmetic surgery clinics, that had been worked up in some detail, was 'stillborn' The RiDO involvement with UKBI had in turn led to contact with NBIA (the US National Business Incubation Association) but which also serves as the over-arching world-wide body for business incubation One of the NBIA programmes is called 'Soft Landing Zone' - which recognises 'incubators' that are especially supportive of inward investing 'start-ups' from overseas In 2010, RiDO and its business centres were accredited with the prestigious 'Soft Landing Zone' (SLZ) status - at that time only one of 20+ 'SLZs' in the world and the handful in Europe As a result of the 'SLZ' status; RiDO was able to initiate its own specific 'SLZ' project initially funded until June 2013 (but subsequently extended until September 2015) Consequently RiDO became successfully involved with inward investment 'start-ups' from Europe, the Far East and USA and (in partnership with UKTI and Enterprise Europe10) with assisting Rotherham based businesses (primarily those based in the incubation centres) to become involved in exporting or to develop their exporting RiDO also set up a partnership with the fellow NBIA member, the Enterprise Development Center at the New Jersey Institute of Technology - in order to assist its clients considering operations in the UK and UK companies considering locating near New York The SLZ project programme supported 116 Rotherham SMEs towards becoming export ready or increasing their exporting, supported micro businesses new to the UK, created 78 jobs and entirely new businesses Other statistical results continued to be impressive, e.g.: 36 months business survival rates of 'incubated' clients - 84% as at March 2011 36 months business survival rates of 'incubated' clients - 85% as at January 2013 24 months business survival rates of 'incubated' clients - 93% as at January 2013 12 months business survival rates of 'incubated' clients - 98% as at January 2013 In November 2014, the Sheffield City Region LEP's Incubation Study reported that the RiDO Business Incubation Centres had a year client business survival rate of 80% compared to the City Region average survival rate at the same point of less than 60% Up-dating to 2017, the 36, 24 and 12 month survival rates were 87%, 94% and 98% respectively The average number of businesses assisted per quarter was 140, with an average 25.5 new jobs created per quarter The individual performances of 'incubated' clients saw major successes commencing within the first year of the programme and some businesses of note across the term of the programme are: Martek Marine Ltd., CoMap Systems Ltd., Wren Turbines Ltd., Castus Ltd., The Paperbox Ltd and the Lightning Box Ltd (last jointly with RYE) - all cases where there were UKTI - UK Trade & Investment Government body to support UK trading activity with the rest of the world Enterprise Europe - network providing advice & support to businesses looking to develop outside UK 10 13 significant degrees of innovation and growth - with the Directors each acknowledging the significant benefits of the 'incubation' support Further aspects of the RiDO 'incubation' support: Until 2013, the RiDO 'incubation' business advisers had added additional aspects to the 'startup' training provided by REAL but were only involved with the 'core' training on referral basis Changes in funding meant that REAL ceased its training activities in Spring 2013 and in order to support its 'incubatees' and other clients, RiDO was obliged to provide 'start-up' training This was initially done by becoming part of the 'Get Ready For Business' (RfB) programme - that was primarily sponsored by Barclays Bank and managed by the National Enterprise Network11 (in conjunction with the Cavendish Consortium 12) RfB became operational with RiDO in September 2013 - half-way through the national programme timetable (with two RiDO advisers delivering the training and associated support) It was a successful programme for RiDO - with targets (for business starts, jobs created, funding generated) either achieved or exceeded - thus generating 'success fee' income to partly defray the operational costs The RfB programme was less successful elsewhere in England and after Barclays Bank withdrew support in Spring 2015, it was not continued RfB had been seen as a way of quickly 'plugging a gap' in the 'incubation' support but because of its structure and lack of flexibility, had not been felt to fully meet the training needs of RiDO clients, nor to properly link with the needs of 'early days' businesses RiDO, therefore, immediately developed its own 'Business Lift-off' programme - to work with people in prestart scenarios (providing advice, counselling and training) before supporting 'start-ups' and then businesses up to 24 months old 'Business Lift-off' was fully funded for RiDO by Rotherham MBC Simultaneously with 'Business Lift-off' and again open to 'incubatees'; RiDO also operated the partly BEIS13 funded 'Start & Grow' (3 year) programme that was aimed at 'start-ups' with greater than average potential (incorporating eligibility and results criteria for job creation, investment, leverage and sustainability) Whilst RiDO's participation was successful - in terms of 'start-ups', job creation, business development and investment (once unrealistic targets set between BEIS and NEN were revised) that was not the case in other areas of England and the programme was ended in 2017 Business Incubation Centre based businesses that were not eligible for 'Lift-off' or 'Start & Grow' were supported under RiDO's own on-going processes - so there was a 'holistic' support regime for 'incubatees' It should be noted that for 2013/16 the advice/support processes for RiDO's 'incubatees were fully internally funded (from Business Centres' revenue) - with 'success fee' income from 'RfB' and 'Start & Grow' being a bonus 'Business Lift-off' ran very successfully from 2015 until 2016 - when it was subsumed into the Sheffield City Region's 'Launchpad' programme - although in Rotherham the programme retained the major elements from RiDO's 'Lift-off' - including the partnerships with local accountants and legal practices (the latter including 'legal clinics' alternating between two business incubation centre locations) Additionally new partnerships were formed - so that 11 National Enterprise Network - membership body representing the enterprise support sector in England 12 Cavendish Consortium - a group made up of six of the largest enterprise agencies in England and the National Enterprise Network 13 BEIS - Government department for: Business, Energy and Industrial Strategy 14 local specialists in marketing, social media and web-site development could deliver training 'workshops' on their specialisms to RiDO clients 'Acceleration': A 'spin-off' from the mainstream 'pre-start' and 'start-up' support was an 'Accelerator' programme begun by RiDO in 2015 - in conjunction with a local university and a South Korean trade organisation plus funders and 'professionals' Despite the name; in 2016 'Accelerator' provided a combination of 'virtual incubation' and 'acceleration' support to selected promising projects - with £30k prize money (from a sponsor organisation) for the best project The programme supported five South Korean teams of entrepreneurs looking to start ambitious businesses in the region - with three actually incorporating in the region Again in 2017 RiDO provided an 'incubation' and 'accelerator' programme for five start-up teams from South Korea whilst also delivering a 'SLZ' style programme for a further three South Korean 'start-ups' A Turkish entrepreneur was also supported in a 'start-up' at 'Moorgate' Following on from the success of the first South Korean project in 2015, there was a strong appetite for a similar programme for South Yorkshire For 2016-17, the RiDO Business Incubation Centres ran a Y-Accelerator programme across the Sheffield City Region aimed at aspirational pre-start or early stage local businesses A sponsor offered £25k as an investment prize and £35k for operational support was made available by the City Region Growth Hub Entry was on application basis - with 10 candidates selected to go forward on to the programme RiDO delivered a customised programme of support - culminating in a competition where in fact businesses were awarded a total of £55k investment by a 'funder' In 2017/18 the programme was formally operated on behalf of the Sheffield City Region LEP (as the Yorkshire Accelerator) NB the 'day to day' operations of the business 'incubation' centres are not covered in this review - as it is focused on the overall concept of business 'incubation' delivered by a local government organisation Also there are some financial sensitivities for RiDO, its staff and clients Conclusions: The information and summary performance data set out above clearly reflect the success of the 'business incubation' operations of Rotherham MBC - via its RiDO department Obviously there was what amounted to 'pump-priming' funding for the 'incubation' sites from national or EU funding and at times there were further beneficial funding exercises through ERDF and ESIF schemes (which would have been available to other applicants - had they been able to make satisfactory business cases) However, the business 'incubation' centres are now self-financing - in fact they contribute net revenue to Rotherham MBC Whilst it should be relatively easy to operate an economically viable 'business incubation' operation in a prosperous economic area, it is much more challenging to operate a successful 'incubator' in an area with economic problems That scenario is made even more challenging if the area (like South Yorkshire) also, for whatever reasons, has historic low levels of selfemployment - as people are more disinclined to take the risks involved in setting up a new business 15 The Rotherham 'business incubation' operation was initiated in response to a demand that had been clearly identified by careful research The further RiDO developments were again as a result of research and in each case - especially with 'Matrix' (which involved some borrowing) - there was a costs & benefits review exercise It would almost certainly have been better for businesses for the 'grow-on space' adjacent to 'Century' to have also been built for and controlled by RiDO but external political considerations unfortunately led to the 2003 recommendation being over-ridden It is vital to note that the 'incubation' operations were not a vanity project but always intended to generate at least adequate economic benefits Also the positive news that the business 'incubation' operation generated was a useful counter-point to other aspects of local government operations that generated bad publicity for Rotherham The success of the 'incubation' support was heavily influenced by having a largely stable team (with the same manager developing the operation since 1999) and who were 'hand-picked' for their experience and skills - with the mature (and suitably qualified) Advisers coming from the private sector and heavily using their advisory/coaching/counselling/mentoring /training knowledge plus their numerous commercial and funding contacts previously made in the region This was perhaps not a typical local government scenario The physical design of the business 'incubation' centres changed as the project matured importantly with lessons learnt from each centre's operation, from noting client comments, from energy saving considerations and from the 'pool' of knowledge created by the industry, all influencing designs In that sense and in the range of support services provided, there was a 'kaizen' (continuous improvement) philosophy that was one of the reasons for the successes Also, as can be seen by the involvements with the BCA, NBIA, Russia, South Korea and the USA, the existence of Rotherham's 'business incubation' activity - as an exemplar for other local government organisations - was realised and promoted outside South Yorkshire and indeed outside the UK In terms of new businesses created, 'early days' business supported, jobs created and resulting GVA, the positive economic impact for Rotherham of RiDOs' business 'incubation' activity is very significant Not every local authority would have been able to achieve what was done in Rotherham but RiDO proved that there can be a cost effective and economically effective over the long term, business 'incubation' process delivered by local government - making it very worthy of consideration in areas requiring a boost to the local economy Implications for Policy & Practice: The implications for policy arguably fall into two categories:  those for local and central Government In recent years, local government in the UK has faced increasing budget constraints and reduced EU sourced funding but as demonstrated by RiDO, 'incubators' can act as 'kickstarters' for economic development or faster economic development Local authorities wishing to become involved in 'business incubation' will, therefore, need to provide even greater justification for investment in 'incubators' and examples of successful 'incubation' operations will need to be part of submissions to elected members, Government departments (e.g BEIS and DCLG) and other 'funders' 16 Should the UK leave the European Union in 2019 (or even 2020) then EU sourced funding will obviously become totally unavailable to local authorities It is too early to know which political party will be in power in the UK in 2021 However, whatever is the the political scenario then; The 'funding packages' used to initiate and provide 'early days' support, including 'business incubation', will need to be re-thought and again as much positive supporting information as possible will be needed in business cases for investment  those for commercial operators of 'incubators' Commercial operators of 'incubators' naturally have a profit motive That can mean that in areas where it is difficult to achieve rent levels that provide what is felt to be a normal adequate level of profit, they will choose not to provide ' business incubation' If they choose not to accept lower revenues (but still generating profits), in locations where local government operations can successfully cover costs and have a positive margin, then that is their [commercial] policy decision The implications for practice: The case study does not show that everything in the 'business incubation' operations of Rotherham MBC was totally successful Changes in Government policies at national and regional levels gave rise to difficulties that might have been mitigated or avoided by even greater use of a 'what if' style of project planning Similarly, but not really the fault of the local authority, expectations of the demand for export support from clients was initially overoptimistic - albeit only after the project's original scope was reduced by outside interference However, the case study does reflect the major successes - over an 18 years period - of what can be achieved by a well conceived and well run 'business incubation' operation The way in which the project was successful - in terms of outputs and financial probity over the period can be argued to be an example of 'best practice' and one that other local authorities could potentially view as an exemplar 7,761 words (incl abstract) References:  Audit Commission ' 'Review of Regeneration in Rotherham' (2004)  Barclays Bank plc., Local Business Survey (Spring 2007)  Benson, M - Business Incubation in the UK 2007 - 2008 (2009)  Herriot, Walter – St John’s Innovation Centre, Cambridge (2005)  Moulton, John - Alchemy Partners Ltd (2005)  NESTA Policy Briefing – 'Business Incubators', (November 2008)  Sherman, H and Chappell, David - Methodological Challenges in Evaluation Business Incubator Outcomes (1998)  Stokes, Tom - 'Provision of property for new and growing businesses' (2007)  UKBI, Definition of Business Incubation (2006)  Zernike UK Ltd - Sustaining New Businesses in Rotherham (2003) 17 18 ... businesses' paper presented by Tom Stokes (the then Managing Director of Evans Easy-space) at the 2007 ISBE Conference What the critics apparently did not correctly evaluate was that, without the local... had presented a paper (which included references to its 'business incubation' activity) at the ISBE7 conference That paper led to staff meeting Russian consultants who, on behalf of its local... becoming more difficult in 2011 and sharply deteriorating following the invasion of the Crimea in 2014 ISBE - Institute of Small Business and Entrepreneurship As the original centre of the Soviet space