Commercialism of regulatory services in Mid Devon

The project saw an LGA Advisor work with the HotSW BBfA (Heart of the South West Better Business for All) regulatory services group to explore opportunities to develop commercial activities within a regulatory environment. The aim was to find ways for regulators to generate additional income through the added value of services they provide on top of their statutory activities.

Efficiency and income generation

This would help to make them more sustainable services in an economy where budgets are ever becoming tighter. It would also help regulatory services to become better integrated with wider economic development activities and make an even stronger contribution towards business growth.

Local government is going through a sustained period of funding reductions, and these cuts are having a detrimental impact on the ability of services to operate as effectively as they have in the past. The result of this is an increasing necessity for local authorities to develop innovative solutions to generate income, and for them to function with more of a business-like approach.

Many regulatory services deliver support to businesses which goes above and beyond the statutory requirements of their service, including general business advice, signposting, and other help. At present these services are not harnessed in any way, and are delivered as a regular part of the support on offer. However, there is a recognised value to these services, with a recent survey of HotSW businesses showing that almost 4/5 of businesses see value in the extra services they were being provided and 2/5 of businesses willing to pay for the extra support they receive.

The solution

Through working with the LGA Advisor, the HotSW BBfA group has developed an outline business case that demonstrates that there is a viable business model which could be further developed by local authorities to deliver added value services to their customers. One key aspect to have been teased out of this process is the fact that economic development services are existing non-statutory services which don’t tend to charge for the support and advice that they provide to the business community. This is despite much of the work that they deliver having a significant positive impact on businesses, even more so than the added value services provided by regulatory services. They are often involved in helping to access funding for businesses, in support to bring inward investment opportunities to fruition, and a host of other activities which can fundamentally accelerate the growth of a business.

The project also explored the nature of the delivery vehicle that would be best suited to bring forward added value services in a manner that would avoid conflicts of interest between statutory and non-statutory services. The conclusion of this element is that an arm’s length delivery body would be the preferred option, which would have access to the expertise within various regulatory services, but which would have a strong enough degree of separation so as not to be seen as profiting from work undertaken directly by a regulator.

Another element to emerge from the project is the model of a sliding scale subscription service as part of the delivery vehicle. This would ensure that businesses paid for services on a regular basis, providing the perceived or realised value of what they receive is greater than the cost of the subscription. The scale could be applied on the basis of the size of the business, as with some business forums and organisations. Alternatively it could be applied on the basis of varying levels of service provided to the business, e.g. at the lower end of the scale a business would have access to a support library, and at the upper end of the scale they could have direct one to one support on a monthly basis.

The business case will need to be built upon by interested local authorities to create pilot schemes to deliver added value services to the business community and to prove the model viable in a real world setting. This is now being explored by some local authorities in the HotSW and by groups of local authorities across the UK who have expressed an interest in the work being undertaken through HotSW BBfA.

The impact 

Though the impact of the project is yet to be realised, there is a great potential for this model of service delivery to generate significant income for regulators and economic development teams, within and beyond the HotSW LEP area. The regulators in the HotSW LEP area get in front of over 60,000 businesses face to face per year. If for example 5% of these businesses were to subscribe to a monthly service at £25 per month, this would generate £900,000 of income. This would help to offset the future impact of funding cuts and help to ensure that local government services become more financially sustainable. If the project were to reach fruition, it would be expected to show a significant economic impact on the business community, delivering economic growth and a boost to productivity. It has also started to change mind-sets to get local authority staff thinking about the value of the services they deliver above and beyond their statutory duties, and to consider how this value could be monetised.

How is the new approach being sustained?

Interested local authorities are using the work undertaken through this project to explore commercial opportunities off their own bat. The opportunity to make a step change in the way services operate highlighted through this project has given some, though not all, local authorities a renewed vigour to explore and develop commercial opportunities that are currently not being tapped into. The very nature of these opportunities means that they should be self-sustaining and even profitable through the income they generate. Discussion is moving forward slowly around the creation of a delivery vehicle to test the business model and prove the concept and its viability.

Lessons learned

As stated above, there has been a significant learning curve resulting from this project that local authorities have been going through. One of the biggest difficulties has been getting buy-in from the large number of local authorities which make up the HotSW area (19), and as a result, the project is being broken down to be driven forward in smaller pilot areas.

Another learning point which has been highlighted through this project is that while many authorities have a desire to become more commercially minded, there is still a resistance / nervousness within many local authorities on the risk of blurring the line between statutory services and commercial services. It is necessary to work closely with individuals to as far as possible allay these concerns, and the proposed “best delivery method” of an arm’s length organisation was in part to address this issue.

The third major learning point was that economic development teams are a significantly under-monetised service that every local authority in the HotSW area delivers. This was quite a surprising learning point, as many regulators expect their economic development teams to be the most commercially knowledgeable and the teams most likely to be functioning in a business-like manner.  If this is a similar story across the UK, there could be a fruitful piece of work by local authorities focusing on how to commercialise their Economic Development functions and using them as the spear point for delivering other subscription services to the business community.

Contact

Chris Shears
Economic Development Officer
Mid Devon District Council
Phoenix House
Phoenix Lane
Tiverton EX16 6PP
cshears@middevon.gov.uk
01884 244 646