Industry Leadership Groups review

Executive Summary

Context

A range of Industry Leadership Groups (ILGs) have been established over time, with different governance, structures, and funding but intended to deliver a common set of aims which include to:

• Increase competitiveness in Scotland's key industries.
• Align engagement to reduce fragmentation of interaction between the public sector and industry; helping to reinforce industry cohesion and alignment.
• Build a strategic partnership around shared priorities focused on growth;.
• Support opportunities through advising and facilitating industry engagement or action.
• Provide leadership and a collective voice of the industry or sector.
• Prioritise and mobilise public and private sector resource to address barriers to growth.

While activity and impact has been variable, those high-level aims remain valid in the context of the rationale for Government engagement with all industry groups and bodies, including ILGs, particularly in the recovery period post COVID -19 and in response to climate change and the move to net zero.

Since the establishment of the ILGs, there have been a number of changes in the wider environment and leaderships have changed, so there is merit in reviewing the ILGs. One of those changes was the creation of the Enterprise and Skills Strategic Board which aims to deliver improved system-wide effectiveness and impact.

This review was therefore initiated to understand the activities of each ILG, their key outputs and how they can increase their impact, particularly working with companies 'outside' the system. This review was also designed to explore ways to more effectively optimise: available UK Government funding; the impact and return on investment associated with finite public and private resource; the strategic impact on policy delivery, business competitiveness and sustainable, inclusive growth; and, private sector leadership and collaborative action. This was intended to be a short review - running October 2019 to March 2020 and led by Nora Senior (Chair, Enterprise and Skills Strategic Board), but it was delayed by the COVID-19 lockdown and the need to address the immediate and unprecedented economic challenges associated with the pandemic. Now, as collectively we focus on restart and recovery, the value of optimising the impact of ILGs in a transformed environment, becomes even more compelling. Indeed that important point featured in the recommendations of the report of the Advisory Group on Economic Recovery

This review was predicated on dialogue with ILGs, other business and trade bodies, and their public sector partners (essentially the enterprise and skills system) about their experience and ambition for the future. It confirmed a high-level shared commitment to an evolution of ILGs, set in the context of partnership working to deliver impact and value as we face the challenges of the coming months and years.

It is clear that ILGs want and enable regular strategic discussion about challenges and opportunities facing sectors, especially in areas where individual businesses, or government and agencies acting alone could not fully assess the challenge or grasp the opportunity. From discussions with ILGs and businesses we heard about the importance of contact with Ministers, the role of ILGs as a facilitator for collaboration, and about the value of clarity of the ask and offer from Government. From government and agencies, we heard about the importance of attaining deep sectoral knowledge to really understand how mega-trends and policy decisions play out in sectors in Scotland. There was a shared sense that together we should build on current best practice to evolve, foster collaborative partnerships, and transform Scotland's COVID-ravaged economy.

Key Findings

• ILGs currently operate very differently, and that nuanced, differentiated approaches have merit going forward.
• There has been no guidance in recent years on the role of ILGs which has led to inconsistent performance.
• Capacity and knowledge may have been eroded at government and agency level in some ILG sectors.
• There is a lack of evidence for the direct impact of ILGs, but plenty of anecdotal examples of added-value; ILGs appear to have worked best in industries with significant critical mass - food and drink, tourism, financial services.
• It was not clear what happened to the strategies created by some ILGs with no identified sponsor from the government side.
• To secure industry buy-in and commitment, government and agencies must be clear on the value placed on engagement and/or co-production and how that will evolve in partnership.
• Shared plan creation is key and should support economic development priorities.
• Performance measurement is not consistent across the ILG landscape
• The number of Government bodies seeking representation on ILGs was very large, sometimes outnumbering industry representatives.
• ILG relationships with Governments should be structured by a new, high-level and consistent yet flexible framework.
• While the enterprise landscape is busy, ILGs have the potential to evolve in order to continue to play a distinct and valuable role.

Recommendations

This report sets out the rationale for the key features of ILGs in the future:

Governance

• The right balance of membership is crucial, we need to see decision makers and leaders from industry, with proven experience and influence, engaging directly with Ministers and the public sector, including UK Government, to deliver impact in Scotland. It is incumbent on government bodies to work together to find representatives with the right skills and experience, who can cover the brief.
• Optimally, ILGs should leverage trade bodies/membership organisations to increase reach.
• Scottish Ministers are right to note that an ILG should have senior representation from UK Government departments, this should be at a level capable of responding to sectoral concerns unique to Scotland and able to deliver action on matters presently reserved such as the UK Industrial Strategy Fund.
• A clear process should be developed between ILGs, agencies and Scottish Government, where recommendations from strategies are developed, debated, approved and implemented or rejected as being out of line with policy or cost-prohibitive.
• Co-ordination and communication functions should ideally be led by industry sectors themselves (working closely with Scottish Government and agencies in an enabling role).

Performance and Measurement

• The evidence for achievement is anecdotal or focussed on Gross Value Added (GVA). In the future all ILG activities should be aligned to, and measured by, the National Performance Framework (NPF), focused on impact rather than activity. It would be important to recognise and acknowledge achievements 'beyond figures'.
• The purpose, impact, effectiveness and future of individual ILGs should be reviewed every 3-5 years, with decisions taken on their continuance based on results.

Communications and Engagement

• To be considered an ILG, any group should prioritise their reach into their sector and have capacity to act as a focal point or lead for sector ambition and purposeful activity, and be the conduit for government priorities (recognising of course that government is open to working with a range of other business bodies/trade associations, based on reach or representation and capacity to deliver and that this review is focused on efficiency, effectiveness and avoiding duplication).
• There should be clarity on channels of communication and interaction with government and government bodies.
• There is merit in bringing ILGs together (annually or more regularly) around cross-cutting issues, sharing practices and learnings particularly in relation to COVID-19 recovery activities and the move to net-zero.

Challenge and Opportunity

• ILGs should focus on their sectors and their contribution to major cross-cutting challenges and opportunities. Government and agencies should develop a core set of challenges/asks for ILGs with a focus on delivery, and measures which demonstrate progress and success.
• Sector understanding and knowledge at government (UK and Scottish) and agency level is key in co-development of plans and implementation. It is incumbent on government bodies to work together to find representatives with the right skills and experience, who can cover the brief.
• A partnership approach and ways of working need to be reviewed, including scope for shared financial input to delivery of industry innovations and projects where a clear business case exists towards national priorities, creating shared responsibility for risk and reward.
• Where it does not exist currently, ILGs should create and update a sector asset register identifying key areas of skills and competences, to enable faster, more informed response to opportunities for inward investment and to collective national challenges e.g. climate change.
• ILGs should work across the system to widen their 'scope of work' to embrace:
• Becoming a repository of robust labour market demand information for the sector. Given the expected levels of unemployment effected by the COVID pandemic, this information and data will be critical in skills planning and identifying employment vacancies.
• Promoting training opportunities for upskilling and reskilling, particularly Business Models and Workplace Innovation in the context of COVID-19 impacts; this should include the co-creation of course content, and shared digital learning resources.
• Developing and promoting shared apprenticeship opportunities particularly among Small and Medium Enterprises (SMEs).
• Becoming an 'innovation gateway', signposting companies to innovation and R & D resources, creating stronger ties to colleges and universities and various funding support opportunities.
• Communicating and promoting understanding of the benefits of Fair Work practices.
• Developing a database of cross-sector mentoring and partnership opportunities and facilitate introductions.
• Supporting Business Creation and Growth through referral at the right time, to appropriate parts of the system, eg Scottish National Investment Bank, SE , HIE and the new South of Scotland Enterprise Agency, private sector funders, to ensure key opportunities are not lost.
• Work with sectors to develop collaborative routes to exporting: facilitating distribution partnerships, mentors, overseas contacts (particularly making greater use of the Global Scots network).
• Provision of sector specific careers advice to inspire and attract young people including the design of worthwhile work placements and shared trainee placements.
• Inputting to policy decisions affecting the sector.
• Liaising with enterprise agencies to co-ordinate national and international funding bids and procurement tenders; and in a local context encouraging businesses to buy locally.

Sector Differentiators

ILGs should stimulate and encourage increased business and sector activity. However, sectoral engagement should be differentiated and nuanced within a broad framework that is appropriate to different sectors and their different 'asks' and 'offers':

• Established sectors - which can lead and deliver ILG ambitions independently.
• Emerging sectors - where scale of opportunity merits transitional support leading to the evolution of an established ILG.
• Underpinning sectors - sectors with a broader impact on national resilience which are less exclusively focussed on sector opportunities. The relationship with Government and agencies will be different for an ILG with this broader remit, focused on societal and economic resilience as well as the future performance of the sector.

Funding

In future, established sector ILGs should be independent, industry-led and funded or co-funded, working in partnership with government and agencies to deliver sustainable and inclusive growth. ILGs should be able to co-ordinate their core functions including national strategy development and two-way communication, to what might be considered a 'base-level'. Naturally, industry must be in the lead in realising such functions and furthering it to their specific needs, but it is right that economic agencies contribute too - consistent with the partnership approach commended by the Advisory Group on Economic Recovery - as a committed partner and valued contributor to the development of strategies that meet the interests of all parties

Emerging sectors will have similar features but be supported by government until a transition to established status is achieved.

Next Steps

This report recommends a range of substantive changes to Scottish Ministers, to ILGs and other business leaders.

They have to work together to further develop and implement this new approach, and agree the timeframe and mechanisms for transitions: ensuring that ILGs have the skills and people to deliver; that support and evaluation structures are developed; that funding issues are considered and addressed.

Subject to approval by Ministers, and a positive response from ILGs, that work should be progressed at pace on a sector by sector basis, and concluded by the end of 2020.