How to grow a regional economy and the role of ProfTech
Growth: the increasingly ‘holy grail’ pursuit of UK leaders, be that in politics, public sector and business.
With the release of the West Midlands Futures Green Paper, questions on how to grow the West Midlands – in an inclusive and transformative way benefiting all citizens – are out for consultation from the Mayor Richard Parker and West Midlands Combined Authority. Over the coming weeks and months, the Green Paper will become the West Midlands Growth Plan setting the direction of travel, as well as providing the basis for negotiations with central government.
It's not that there hasn’t been an economic plan before; but this short article outlines the evolution from previous iterations, explores what this might mean for the proftech (incorporating fintech, legaltech, Insurtech, proptech etc) and wider business professional and financial services sector (BPFS) and indicates SuperTech’s position on some aspects of the consultation.
The size of the prize
“If our regional productivity was on a par with the national average, our regional economy would be £12 billion bigger than it is”
A compelling claim set out in the Futures Green Paper, meaning that whilst this is fundamentally a discussion for the West Midlands, the stakeholders in this work reach far beyond and are a matter of UK concern.
The economic opportunity is based on the region’s scale, demography and connectivity, alongside its investment and innovation records.
Prioritising Modern Professional and Financial Services as a High Growth Cluster
Is it sectors or clusters? In the draft National Industrial Strategy, the focus is sectors. For the West Midlands, it’s clusters because “in the West Midlands many of our global strengths sit at the interface between traditional industrial sectors like manufacturing and logistics and emerging new technologies and tradable services”
We don’t really need to debate here whether fintech is its own sector, a sub-sector of financial services or part of a broader cluster, because the critical point is that in the current thinking, “Modern professional and financial services” is in; it is one of five clearly identified high-growth priority clusters.
Although we prefer to talk of Next Generation Services, as something more forward looking, rather than using the label “modern”, with its feeling a little out of date, the key point is being on that list of priorities which must not be taken for granted.
This both recognises the contribution as the largest of the clusters, the value of its high-quality jobs and good employment and critically aligns us with national industrial strategy pursuits. Growing the cluster in isolation is far harder than an approach which also considers how we contribute to the UK effort. Helping to ‘grow the pie to have a bigger slice’ – for want of a better phrase – must be part of the approach.
The Role of Innovation
“Innovation is the driving force underpinning all of our cluster potential”.
We couldn’t agree more. Yes, there are other needs, but as outlined in previous posts, innovation is the dominant one that can be influenced through private-public partnership from which many other factors and drivers flow.
In services, innovation is increasingly ubiquitous with technology-led change. New businesses, new services, new business models are, at their core, enabled by technology. This recognition then shifts thinking around inward investment propositions, talent pipelines and skills needs, space/ premise requirements and business footprints all of which directly influence the opportunities for citizens, the flavour of our cities and towns and ergo the quality of life on offer in the West Midlands.
SuperTech’s Response
1. Productivity in services sectors is quite a difficult concept to translate for businesses. How many widgets produced per hour is simple enough, but the business audience in services is lost quite quickly with this language in terms of the change being sought. For example, the evidence often defaults to manufacturing examples as in the argument put forward about the need for leadership and management which talks of “Tier 3, 4 and 5 firms” which is just not relevant to the structure of the services sector. There is a language point here as a starter that could be improved to engage more BPFS firms in the necessary activities.
But deeper than this are difficult issues that BPFS firms are grappling with that also challenge policy thinking. The billable hour and utilisation rates are key components of how a professional services firm monitors productivity. When there is technology helping to deliver the value-driven parts of the business e.g. document review in legal services, many firms are uncertain as to how to value this. If something is done in minutes that would have been many billable hours this has an immediate impact on the whole business model.
Given the size of the BPFS services sector – as well as other broader services in the economy– a more oriented dialogue would help business leaders and stakeholders like cluster bodies engage industry in action.
2. Understanding economic impact from innovation in services is also still a bit fuzzy. We note that there is concern that impacts of technology adoption may “mute jobs” but there are also new jobs created from the shifting patterns, increased profitability plus other tangible benefits such as better access to services for underserved consumers and SMEs. These are valuable economic prizes to be won, but it is less clear that they are valued in the Paper. A modern economy requires modern measures of its performance.
3. The Innovation/ R&D ecosystem in the West Midlands is not very mature, both in terms of alignment and energy behind the opportunity of Modern professional and financial services support. SuperTech values highly the partnership working with WMCA to stimulate this through the creation of the ProfTech HEI Forum and asks that once the Growth Plan is live, that more weight is put behind this in the form of influence to accelerate progress.
4. SuperTech has evolved from a starting point of close working with the West Midlands Growth Company to one that is strategically important for both parties. As both a visible gateway and accessible community for inward investors, SuperTech is both a delivery vehicle and key asset. We expect to be able to look forward to continuing this as a baseline minimum in the transition to a new regional economic development vehicle in the best interests of the growth plan.
5. Public services reform should not be a standalone agenda. Many of the businesses SuperTech works with are powered by purpose; to make a difference to society and there should be a structured programme to bring them in, to support delivery of this agenda. For example, this week we have met with a business that can enable seamless secure payments outside of the payments system. This is cheaper for operators e.g. transport systems aligning with the Mayoral mission of “journeys for everyone”. Another service from academic endeavour can provide economic insights of citizens based on current account data as supplements to other data indicators of households in need, enabling the better targeting of financial support.
6. There are other examples where proftech can support Mayoral priorities with the right engagement, which we as SuperTech could support and facilitate. E.g. with houses for everyone – we will soon be hosting a proptech roadshow specifically aimed at how proptech businesses can help the UK better achieve its housing targets.
7. SuperTech would be willing to work with partners to access different regional stakeholders in the pursuit of public sector innovation and Mayoral ambitions. At present, programmes and incentives are typically only oriented towards business impacts which is a barrier to deeper collaboration. A dialogue on how to better join up these activities and help with the overall goals would be much appreciated.
These are just some of the key points going into our submission as part of the consultation. If you have anything else that you think SuperTech should include, please do not hesitate to contact us: hello@supertechwm.com