Foreign Direct Investment and International Trade Evaluation

Final Report
Inward Investment and

International Trade Projects
Interim Evaluation (2004-
2009)
South West of England Regional
Development Agency
8 June 2010
WM ENTERPRISE
Final Report
Inward Investment and
International Trade
Projects
Interim Evaluation (2004-
2009)
South West of England Regional
Development Agency
8 June 2010
BIRMINGHAM OFFICE
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CONSULTING INPLACE
Inward Investment and International Trade Projects Interim Evaluation (2004-2009)
TABLE OF CONTENTS
1. Executive Summary – Inward Investment............................................ 4
1. Executive Summary - International Trade............................................ 6
2. Introduction ....................................................................................... 8
3. Why the South West RDA intervened................................................ 12
4. What the South West RDA was seeking to achieve ............................ 30
5. How the South West RDA invested.................................................... 33
6. Inputs and outputs of the programmes ............................................. 44
7. Outcomes for supported businesses.................................................. 51
8. Net impact of the South West RDA’s investments ............................. 65
9. Conclusions and recommendations ................................................... 83
FDI Beneficiary Survey.............................................................................. 95
FDI Non-beneficiary survey..................................................................... 104
International Trade Beneficiary Survey ................................................... 108
Final International Trade: Non-beneficiary survey................................... 113
Technical Annex ..................................................................................... 119
LIST OF FIGURES
Figure 2-1: Approach 10

Figure 3-1: Number of foreign owned firms by region 14
Figure 3-2: GVA contribution from foreign owned companies 15
Figure 3-3: Annual Average GVA per firm, 2007 (£) 15
Figure 3-4: Average GVA per employee, 2007 16
Figure 3-5: GVA of growth rates for firms, England and South West 17
Figure 3-6: Employment growth in foreign owned firms 18
Figure 3-7: Average gross wages and salaries per employee in 2007 19
Figure 3-8: Purchases of goods and services by firms (£000s), 2007 19
Consulting Inplace
Figure 3-9: Number of exporters (goods), 2006-08 22

Figure 3-10: Export value per exporter for goods, 2006-08 (£m) 23
Figure 3-11: Major exporting sectors by SIC code 24
Figure 3-12: Exports within the EU 25
Figure 3-13: destination of South West exports 25
Figure 3-14: the value of service exports 2007 26
Figure 3-15: service exports in 2004 & 2007 27
Figure 3-16: service exports by sector in 2004 & 2007 27
Figure 3-17: South West’s position versus other regions (2007). 28
Figure 5-1: South West RDA Overseas Representation 34
Figure 5-2: Activity Map (FDI) 34
Figure 6-1: Annual Expenditure on FDI 44
Figure 6-2: South West RDA Overseas offices Expenditure (2006-2009) 45
Figure 6-3: South West RDA Overseas offices Expenditure (2004-2009) 46
Figure 6-4: Number of FDI involved successes generated by the South West RDA 47
Figure 6-5: New and Safeguarded Jobs 47
Figure 6-6: Capital Expenditure of foreign owned firms 48
Figure 6-7: Programme expenditure profile, international trade 49
Figure 6-8: Gross output performance, international trade 50
Figure 7-1: Involved successes by industry sector (as recorded to UKTI) 52
Figure 7-2: Origin of FDI (Size denotes volume of distinct inward investments) 53
Figure 7-3: Nature of support received (from survey base 18) 54
Figure 7-4: Satisfaction with support received (from survey - base 18) 55
Figure 7-5: Satisfaction with elements of support (from survey – base 18) 55
Figure 7-6: Extent to which support was important in location decision 56
Figure 7-7: What action would you would have taken without RDA support? 56
Figure 7-8: Number of firms per year signing up/signing off the programme 58
Figure 7-9: Programme beneficiaries by sector 59
Figure 7-10: Beneficiary firms by sub-region 60
Figure 7-11: Comments on grant support from beneficiaries 60
Figure 7-12: Beneficiary comments on ITA support 61
Figure 7-13: Beneficiary suggestions for programme improvement 62
Figure 7-14: Export activity that would have occurred without the programme 62
Figure 7-15: Export turnover change in supported businesses (£000s) 63
Figure 7-16: Export activity at start of project 63
Figure 7-17: New markets cited, by global region 64
Figure 7-18: 50 most commonly cited new markets (size reflects frequency) 64
Figure 8-1: Additionality Logic Chain – Inward Investment 67
Figure 8-2: Adjusting sampled turnover changes for additionality factors 70
Figure 8-3: Calculating net additional GVA benefits 71
Figure 8-4: Adjusting sampled employment changes for additionality factors 71
Figure 8-5: Calculating net additional employment benefits 72
Figure 8-6: Strategic Added Value for FDI programme 74
Figure 8-7: Additionality Logic Chain – International Trade Promotion 77
Figure 8-8: Adjusting sampled turnover and export turnover changes for
additionality 79
Figure 8-9: Adjusting sampled turnover and export turnover changes for
additionality 80
Figure 8-10: Adjusting sampled employment changes for additionality factors 80
Figure 8-11: Calculating net additional employment benefits 81
Figure 0-1: Overall additionality calculation – Inward Investment 119
Consulting Inplace
Figure 0-2: Deriving GVA / turnover ratios 122

Figure 0-3: Overall additionality calculation – International Trade 123
Figure 0-4: Turnover and employment GVA figures 125
LIST OF APPENDICES
Appendix I: Interviewees
Appendix II: Data tables
Appendix III: Survey questionnaires
Appendix IV: Technical Annexe
Consulting Inplace
1. Executive Summary – Inward Investment

In October 2009 Consulting Inplace was commissioned to provide an IEF compliant
interim evaluation of the South West RDA’s Foreign Direct Investment (FDI) and
International Trade Projects, covering the period 2004-2009.
Two Executive Summaries have been produced for this report, one for Inward
Investment (this one), the other for International Trade.
At present, the South West RDA promotes itself to foreign firms through five
overseas representatives, based in Australia, China, and the United States, although
the composition and size of the overseas offices have changed in the period under
evaluation. Since 2004, the RDA has invested £4.15 million in these activities, with
annual expenditure remaining generally consistent. The RDA representatives have
annual targets for delivering foreign direct investment (FDI) in the South West
Region, with which they, UK based RDA colleagues, sub-regional partners or a
combination of all of the above, were significantly involved. The nature and
intensiveness of support provided to foreign owned companies (FOCs) is diverse,
but five core activities are undertaken: marketing, targeting (and managing) new
opportunities, investor relations and aftercare, promoting strategic collaborations
and briefing embassies and consulates.
There were – and still are – market failures which argue for public sector
intervention in promoting inward investment, improving the flow of business activity
through the production of information, and encouraging FDI for the wider economic
benefits it might bring the region. The element of ‘coordination’ failure, and the
generation of positive externalities connecting regional networks and linking
companies with market opportunities, generating improved economic outcomes in
UK owned firms, provides the particular rationale for the RDA, as opposed to
delivery at national or sub-regional level. The latest data on FOC performance since
2004 indicates that their number has grown at the fastest rate of any region, with
some 6,700 as of 2007. These companies typically have higher Gross Value Added
(GVA) per firm and per employee than UK owned firms based in the region, are
larger, pay higher wages and have higher value supply chains. A comparison of GVA
and employment growth between UK and FOC’s indicates that the latter are growing
substantially faster in the South West. Despite this, overall business performance in
the South West, still lags behind national averages. The role of FOCs in closing that
gap is clear.
On this basis, the objectives of the programme have been to maintain or increase
the contribution of FOC investment to the regional economy through awareness
raising of regional capability and location-specific attributes, particularly (but not
uniquely) within the RDA’s priority sectors. This activity is focused on specific
sectors, companies and individuals, academic institutions, and investment
intermediaries. Assessed against the rationale for investment, these objectives
remain appropriate and suitable.
Since 2004, there have been organisational changes at the RDA. There has been a
modest expansion of the operation in the US, the addition of new offices in India
and China and the migration of the RDA’s Japanese office into that of UK Trade and
Investments (UKT&I), with specific regional targets. Towards the end of the
CONSULTING INPLACE 4
evaluation period the FDI team has benefited from additional resources, both
financial and in terms of personnel, as the operation evolved in response to
additional funding to 2013. Improved communication between the RDA and sub-
region partners has enhanced programme effectiveness and maximised the
resources available. The degree of integration between the overseas
representatives, area and sector teams and those responsible for aftercare in the UK
has improved in the last eighteen months and is a strength of current delivery
arrangements.
Between these teams, 146 involved successes have been generated in the South
West since 2004. The number has fluctuated significantly from 12 (2004-2005) to 41
(2008/09), exceeding the target in 2008/09 only. The businesses themselves benefit
through the coordination and simplification of support, the receipt of logistical
support and specialist expertise in relation to operations and labour, and the
provision of advocacy. Of those supported the most common sectors were
aerospace, automotive, telecommunications and engineering, suggesting a
reasonable fit with the Agency’s priority sectors. Geographically, most of the
Agency’s success came from the United States, Australia and Japan, with China and
India emerging quite strongly.
Estimates of impact have been made, generated through a survey with supported
businesses. Our findings suggest that the work of the RDA in this area essentially has
a catalytic, rather than direct effect – the firms have invested more quickly, on a
larger scale, and/or with less expense, rather than not at all. We asked supported
businesses to identify what, if any, improvement to turnover and employment
numbers were specifically attributable to the support they received. This has been
converted into GVA. Overall we estimate the inward investment programme to have
generated some £57.6 million net additional GVA to the regional economy since
2004. In terms of its return on investment, the investment generated some £2 for
every £1 invested by the RDA. When we include persistence effects, the figure rises
to £14 for every £1 invested.
1. Executive Summary - International Trade

In October 2009 Consulting Inplace was commissioned to provide an interim
evaluation of the South West RDA’s Foreign Direct Investment (FDI) and
International Trade Projects covering the period 2004-2009.
Two Executive Summaries have been produced for this report, one for Inward
Investment, the other for International Trade (this one).
The South West RDA’s investment in increasing exports from the region intends to
enhance the activities of UK Trade and Investment (UKTI). During the period under
evaluation, this has been through an extension to the existing UKTI ‘Passport to
Export’ programme to encourage and develop the skills of businesses in key regional
sectors who were new to exporting. Support has included business mentoring,
training in areas such as website optimisation, as well as financial support for
overseas market research.
The market failures that provide the rationale for international trade support are the
public good characteristics of information on overseas markets that is required for a
firm to export, underestimation of benefits of international trade and the restricted
access domestic firms may have to foreign networks and trade partnerships.
An analysis of regional goods export data covering the evaluation period shows that
the South West has a low number of exporters compared to other English regions,
with only Yorkshire and Humberside and the North East having fewer. Moreover, the
South West has the lowest average value of exports per exporter of all regions. A
report by UWE shows that the South West’s poor export performance comes not
from having high concentrations of low-exporting industries, but because a lower
proportion of firms export in each of the South West’s industries. Possible
explanations for this trend include the absence of agglomeration effects; low
productivity, which fails to provide the competitive edge required to export; and
locational factors, such as the relative remoteness of the region to large ports. The
South West performs better when it comes to service exports, ranking sixth out of
the nine English regions for service export value in 2007.
There do not appear to have been any specific objectives set for the international
trade support programme, although the aims of the programme can be inferred, as
the programme is an extension of a long running UKTI programme. Consulting
Inplace therefore drafted objectives in order to frame the evaluation, which include
extending the provision of the regional Passport to Export programme and to
support 365 SMEs, new to international trade, in developing their export markets.
Providing international trade support through the Passport to Export programme

meant that, having assessed a firm’s suitability for the programme, supported firms
would be provided with a free two day workshop, an international business review
of potential clients, help to develop a business action plan, as well as providing
ongoing support for twelve months. A survey of beneficiaries receiving RDA-funded
support suggests that the programme was very well delivered.
The South West RDA approved a total of £2.9m for investment in the international
trade support programme between 2004 and 2009. Given that there were no
specific objectives, It is hard to assess the sufficiency of this investment and the
success of the programme. However, the figure of 376 businesses supported by the
programme exceeds the 350 target. This target was itself viewed as challenging,
given the expansion of the programme into new, strategic sectors, and when
compared with the lower targets set for the UKTI-funded Passport to Export
programme.
Beneficiaries’ comments on the programme were generally positive; 92 per cent of

respondents to the beneficiary survey stated that the programme had met or
exceeded their expectations. In terms of outcomes, 70 per cent of firms stated that
the programme had helped them in some way, and export turnover of surveyed
beneficiaries increased by 18 per cent over the course of the programme. The
majority of the new export markets (over 70 per cent) were in Europe.
Overall we estimate the international trade programme to have generated some £61
million net additional GVA to the regional economy since 2004. In terms of its return
on investment, the investment generated some £5 of GVA for every £1 invested by
the RDA. When we include persistence effects, the figure rises to £21 for every £1
invested.
2. Introduction
2.1 Evaluation Scope
In October 2009 Consulting Inplace was commissioned to provide an interim

evaluation of the South West Regional Development Agency’s Foreign Direct
Investment (FDI) and International Trade Projects between 2004/05 and 2008/09.
The purpose of the commission was to:
§ Evaluate the effectiveness, efficiency and economy of the South West RDA’s historic
investment in attracting inward investment opportunities and expanding
international trade, using a metholdogy which his fully and demonstrably consistent
with the RDA Impact Evaluation Framework (IEF);
§ Quantify gross and net outputs and net additional Gross Value Added (GVA) impact
(direct and indirect), considering each additionality factor and separately,
quantifying it through robust defensive techniques as outlined in IEF guidance;
§ Assess the extent to which the project has met its objectives and judge the value for
money of the project;
§ On the basis of this evidence create a suite of additionality ratios that can be applied
to similar interventions and activity types;
§ Identify key policy and process learning points.
Alongside this interim evaluation we are developing a monitoring and evaluation
(M&E) plan for subsequent South West RDA and European Regional Development
Fund (ERDF) programmes. The plan is being designed by Consulting Inplace, who
will provide ongoing M&E support to the South West RDA over the next three years.
At this point a final evaluation will be undertaken, using the data collected through
the M&E plan. This report sets out the findings from our interim evaluation.
For further details, please contact either:

Name: Matthew Terry Name: David Tyrer
Position: Project Director Position: Project Manager
Tel: 07793 441356 Tel: 07969 460813
Email: matthewt@consultinginplace.com Email: davidt@consultinginplace.com
2.1.1 Foreign Direct Investment (FDI)
The South West RDA promotes itself to foreign firms through overseas
representatives in North America and Asia Pacific, key markets for FDI. These
representatives, supported by colleagues in the UK, have annual targets for
delivering ‘involved’ inward investment successes. These involved successes include
first-time investment and re-investment/expansions as well as University
collaborations and some research and development activity. UKTI provide guidance
and a set of standards definitions to RDA’s, to ensure reporting on a consistent
basis.1 This states:
1
International Business Development Forum (IBDF). Inward Investment, R7D Programme 9Inward) and partnerships Output
measures – revised definitions. UK Trade and Investment.
Significant involvement in a ‘success’ may be claimed by a Development Agency

(including involvement by a sub-regional partner funded by their RDA)…when they
have undertaken two or more of the following activities in dealing with the specific
project:
§ Arranged a regional tour

§ Arranged a location search
§ Provided other significant information
§ Provided in-depth client specific R&D information which influenced target company
decision;
§ Provided client with access to UK based technology sources of R&D expertise and
facilities;
§ Provided client with access to UK technology sources
§ Provided public sector financial assistance
§ Prepared a tailor made presentation
§ Significant contact with a company and provided them with preliminary information
and passed resulting lead to another agency in the network
§ Generated lead as a result of promotional event/activity
§ Supported the R&D programme, including virtual team participation, in securing an
R&D orientated inward investment.2
2.1.2 International Trade Promotion
The South West RDA’s investment in increasing exports from the region intends to
enhance the activities of UK Trade and Investment (UKTI) and Business Link in this
area. During the period under evaluation, this has been through an extension to the
existing UKTI ‘Passport to Export’ programme to encourage and develop the skills of
businesses in key regional sectors who were new to exporting. Support has included
business mentoring, training in areas such as website optimisation, as well as
financial support for overseas market research.
2.2 Evaluation approach
2.2.1 The Impact Evaluation Framework and ‘IEF Plus’
All evaluations undertaken for Regional Development Agencies (RDAs) are expected
to be undertaken in line with the Impact Evaluation Framework (IEF), and this
evaluation is no exception. IEF provides a framework for evaluation consistency and
rigour in determining the net outputs, outcomes and impacts of RDA activity. In
practice, this has meant quantifying gross and net outputs and net additional GVA
impact, and assessing the extent to which the programmes have met their
objectives.
The lessons from the national evaluation of RDA spending published in mid-2009
have recently been drawn together into updated guidance for evaluators. This was
2
(Page 6 – paragraph 22).
published in December 2009 by the Department for Business, Innovation and Skills
(BIS) and is known as ‘IEF Plus’. Where possible and appropriate, we have reflected
methodological changes recommended in IEF Plus within this evaluation, particularly
in relation to the use of standard additionality questions in the design of beneficiary
and non-beneficiary questionnaires. These are attached in Appendix II.
2.2.2 Methodology
Using an approach consistent with the IEF guidance, figure 2.1 gives an overview of
the methodology we have used.
Figure 2-1: Approach
After finalising our methodology at the inception meeting we undertook desk-based

research, examining project appraisal documents, project files and other strategy
documents; performance data from the South West RDA’s management information
systems; contextual data on South West economic performance; and broader
contextual information such as relevant government and regional strategies. We
subsequently conducted a series of consultations with stakeholders throughout the
region and beyond. These stakeholders included sub-regional partners, including
the members of the FDI operational group. We also consulted with United Kingdom
Trade and Investment (UKTI).
To understand more about the management and delivery of the projects, we also
conducted an activity review with South West RDA staff. This involved face-to-face
interviews with a range of staff, from strategic to delivery level, including overseas
and sector representatives.
To identify the benefits to supported businesses and the net economic impact of the
interventions, a business survey of both beneficiaries and non-beneficiaries of South
West RDA assistance was undertaken:
§ For the FDI programme, 21 ‘involved successes’ (beneficiaries) and 11 foreign owned
non-beneficiaries were surveyed. Of a population of 121 distinct foreign owned
companies that have received support from the RDA since 2004, this provides a 95%
confidence interval of +/-19.52 at the 50% level. We discuss the implications of this
and the methodological considerations later in the report.
§ For the international trade programme, 73 supported businesses were surveyed,
from a total population of 366 and a further nine non-beneficiaries. This provides a
95% confidence interval for business beneficiaries of +/-10% at the 50% level.
Finally, in order to more fully explore the impact and outcomes for businesses we
conducted a further round of interviews with supported companies from both
programmes to learn more about additionality factors, particularly persistence and

substitution impacts and gain a greater understanding of the impact of the South
West RDA interventions on business and investment performance. Stakeholders
struggled to quantify the likely persistence of benefits. On this basis, we have used
assumptions consistent with those in the national evaluation of RDA spending. This
is discussed in more detail in section eight of this report.
2.3 Report structure
The remainder of the report is structured as follows:
§ Section three evaluates the case for RDA involvement in FDI and international trade
support and the nature of market failure in these instances (rationale);
§ Section four evaluates what the RDA was seeking to achieve with these investments
and their appropriateness (objectives);
§ Section five evaluates how the projects were delivered (activities);
§ Section six examines the timing and scale of investment and the gross outputs
generated (inputs and outputs);
§ Section seven explores the extent to which supported businesses benefited
(outcomes);
§ Section eight sets out what the RDA has achieved in economic terms (impact); and
§ We conclude and reflect on the lessons in section nine.
3. Why the South West RDA intervened

In this section, we consider the rationale for public sector intervention in the areas
of inward investment and international trade support, including market failures and
reasons why the South West RDA specifically might be expected to intervene.
3.1 The case for inward investment (FDI) support
3.1.1 Market Failure
There is a role for public sector intervention where markets are not operating
efficiently, or at all, despite underlying demand. There are three issues relating to
market failure in the context of FDI:
§ Under-provision of information: because information is non-rivalrous – use of it by

one firm does not prevent another from using it – it is inefficient for many firms to
each use resources finding information on overseas investment opportunities, as
this wastes firms’ resources. Because information is non-excludable – once
information is found, it will be hard to prevent others from using it – it is optimal
behaviour for firms to wait for others to find information on possible overseas
investment opportunities; ‘free-riding’ on the efforts of other firms to collect
information. Both of these characteristics of information can lead to its under
provision in the absence of intervention.
§ Coordination failures: by having overseas representatives and UK colleagues that
promote strategic collaborations and manage investor relations, a public body may
be able to create productive opportunities that aren’t otherwise provided by the
market. The public sector may be better placed to ‘connect’ networks of firms, as if
left up to the private sector, there could be a tendency for these networks to
operate to benefit only incumbents rather than newcomers to the market.
§ Positive externalities: firms will generally not take in to account the benefits which
they do not experience. Knowledge and technology spillovers could improve the
productivity of firms and increase their access to research and development and
complementary products/services, for example. In some cases, the private benefit
(profit) to the firm may be lower than the costs of investing, but the total social
benefit, including the positive externalities, may be greater. This essentially relates
to the wider economic benefits that derive to ‘host’ economies through the
integration of foreign owned companies. These typically have higher productivity,
spend a greater proportion of their turnover of research and development and can
apply productivity gains along supply chains.
The national case for addressing these market failures was made by the government
in its Business Support Simplification Programme (BSSP) in 2008.3
3.1.2 National strategy
UKTI’s five year strategy, published in 2006, was developed on the premise that
‘Government has a role to play in facilitating access to world markets so that UK
businesses can achieve the full potential benefits of international opportunities’.4
3
The economic drivers of government-funded business support, BERR October 2008
4
UKTI ‘prosperity in a changing world’. July 2006.
The strategy goes on to outline a specific role for RDAs in promoting international
business activity: ‘The responsibility for facilitating international business growth
and investment is shared among several government departments, the devolved
administrations and the Regional Development Agencies. We will ensure that all
work together to avoid duplication or fragmentation and to get the best value for
business’.
The strategy sets out two core activities, namely marketing the UK’s economic
strengths, both as a trading partner and a place to invest, and supporting UK
businesses competing in the global economy. The strategy is focused on key sectors
and emerging markets and aims to further integrate FDI and international trade.
3.1.3 Regional strategy
In the 2003-2012 South West Regional Economic Strategy (RES), the vision was to
provide sustainable prosperity through combining the skills and aspirations of the
population, with the region’s high environmental quality. There is an explicit priority
in the RES under the Raise Business Productivity objective to ‘attract and retain
foreign and domestic investment into the region’, and an associated target to
‘secure more inward investments’.5
The 2003-2006 corporate plan recognises the importance of inward investment in

raising business productivity and provides more detail on the agency’s aspirations in
this area. In addition to the RES priority of attracting and retaining FDI in the region,
the plan specifies a focus on key sectors, and sets a target of creating 4,800 job
opportunities from FDI between 2003/4 and 2005/06.6
This theme is carried into the 2006-2015 RES, under a priority to ’compete in the
global economy’. It identifies FDI as an important component in regional economic
growth, and notes the South West’s improved international performance over the
last nine years, although foreign direct investment in the region remains low by
national standards. The objective to ‘attract and retain domestic and foreign direct
investment’ remains.7
3.1.4 The performance of foreign owned companies in the South West
This section analyses the performance of foreign owned companies in the region,
compared to national averages. It seeks to examine what potential added value to
the South West economy may be derived from increasing inward investment. The
data comes from the Annual Business Inquiry.8
Figure 3-1 overleaf shows the number of foreign owned companies in each region of
England in 2007 (the last date for which data was available), as well as the
percentage change between 2004 and 2007. Although this is the most up to date
information available, it predates the economic downturn and should be read in that
context. It highlights the dominance of London and the South East as locations for
5
South West Regional Development Agency (2003), Regional Economic Strategy for the South West 2003-2012, page 43
6
South West Regional Development Agency (2003), South West RDA Corporate Plan 2003-2006, page 15
7
South West Regional Development Agency (2006), Regional Economic Strategy for the South West 2006-20015, page 25
8
This data excludes very small firms that are below the VAT registration threshold or without PAYE schemes. In the case of
foreign owned firms, we consider this number to be negligible.
foreign owned firms, accounting for some 40 per cent of all foreign owned
companies in England. The South West had the fifth largest number of foreign
owned companies out of the nine English regions in 2007. Since 2004, this number
has increased strongly; at 56 per cent, it was the highest percentage increase of all
regions, and considerably higher than the average (34 per cent).
Figure 3-1: Number of foreign owned firms by region

Region Number of foreign Percentage change,
owned companies, 2004-2007
2007
South West 6,656 56.2
North East 2,705 51.0
East Midlands 4,699 49.7
East of England 7,101 47.3
West Midlands 6,907 40.4
Yorkshire & Humber 5,776 38.3
South East 13,140 34.3
North West 8,389 32.0
London 14,821 29.1
England 71,185 34.0
Source: Annual Business Enquiry
Research from OECD9 suggests the most important factors that attract foreign
companies to invest are:
§ market size;
§ skill levels;
§ the availability of infrastructure and other resources that facilitates efficient
specialisation of production;
§ trade policies; and
§ political and macroeconomic stability.
Figure 3-2 shows the proportion of total Gross Value Added (GVA) accounted for by
UK and foreign owned companies in England and the South West. In this section, we
have assessed the data, both including and excluding London and the South East, to
enable more detailed comparison. Notwithstanding the number of foreign owned
firms in the region, their contribution to the economy lags the national average.
These firms produce 16 per cent of the South West’s GVA, compared with 24 per
cent for the whole of England, 22% when London/the South East are excluded.
Similarly, in employment terms, the proportion of employment by foreign owned
firms in the South West lags behind the average for all English regions (12 per cent
and 15 per cent, respectively). Foreign owned firms make up 3.2% of all businesses
in the region, compared to a national average of 3.6 (3.5% excluding London and the
South East). So foreign firms make up a slightly smaller proportion of regional
businesses, and the foreign firms in the region generate less value added relative to
domestic firms than they do nationally.
9
The Economics of International Investment Incentives. OECD (2002)
Figure 3-2: GVA contribution from foreign owned companies
GVA c ontr i buti on, 2 0 0 7
100%
16%
90% 22%
24%
80%
70%
60%
50%
84%
40% 76% 78%
30%
20%
10%
0%
England South West Eng less London & SE
UK owned Foreign owned
Source: Annual Business Inquiry
Figure 3-3 shows GVA per firm by ownership in England and the South West. Overall,
GVA per firm in the South West lags behind England, even when London and the
South East are discounted. Despite this, GVA per firm is much higher for foreign-
owned firms than UK-owned firms, in both the South West and England. The
difference is less dramatic in the South West; foreign-owned GVA per firm is around
5.6 times that of UK-owned firms in the region, compared to 8.1 times for England.
Figure 3-3: Annual Average GVA per firm, 2007 (£)

England South England less Difference Difference (SW -
West London & (SW - England) Eng less Lon &
SE SE)
UK-owned 301,106 220,119 282,913 -80,987 -62,794
Foreign- 2,453,571 1,251,794 2,172,526 -1,201,776 -920,732
owned
Difference 2,152,465 1,031,676 1,889,613
(foreign
owned-UK
owned)
Figure 3-4 shows average GVA per employee in England and the South West, which
can be used as a guide to productivity. On average, firms in the South West generate
lower GVA per employee than the national average, a result that still holds when
London and the South East are discounted. Moreover, there is a larger differential
for foreign owned firms than UK-owned firms, which, respectively, produce 52 per
cent and 29 per cent higher GVA per employee across England than the South West.
Although productivity explains part of the differential in Figure 3-4, differences in

firm size is also play a part. The average foreign-owned firm in the South West
employs 29 employees where as the average across England is 37. Differences in size
could in turn provide a reason for the difference in productivity, but there are likely
to be other explanations, a study in 200210 indicates that their greater access to
products and markets, management processes and technology and R&D intelligence
and capacity is part of the story.
Figure 3-4: Average GVA per employee, 2007

Firm type South West England England less Difference Difference (SW-
London & SE (South West- England less
England) London & SE)
UK owned £30,625 £39,003 £35,033 -£8,878 -£4,408
Foreign owned £43,315 £65,759 £55,231 -£22,444 -£11,916
Difference £12,690 £26,756 £20,198 - -
Despite this productivity gap between South West FOCs and those from the rest of
England, South West FOC’s are still significantly more productive on average than
the regions domestically owned firms. Figure 3-5 shows GVA growth for UK owned
and foreign owned companies in England and the South West between 2004 and
2007. GVA growth in South West FOCs was strong, outstripping the rest of the
country. The 52 per cent growth rate for foreign owned firms in the South West is in
line with the growth in firm numbers (Figure 3-1) so the scale of GVA growth
produced by foreign-owned firms appears to be driven by their increasing number,
rather than increasing individual productivity per-se. In contrast, the productivity
performance of UK owned firms in the region has increased, but remains poor in
comparison with national averages.
10
Pooter, Moore and Spires: the wider effects of inward FDI in manufacturing on UK industry. Journal of economic geography.
Figure 3-5: GVA of growth rates for firms, England and South West
GVA gr owth r a te, 2 0 0 4 -0 7
60%
52%
50%
39%
40%
29%
30%
20%
14% 13%
10%
10%
0%
UK owned Foreign owned
England SW Eng less London & SE
FOC performance: South West vs England
Nationally, the GVA produced by foreign-owned firms has increased by 39 per cent
between 2004 and 2007, whilst only requiring a 29 per cent increase in employment.
This suggests employee productivity increases nationally, although this has been
driven mainly by London and the South East. In the South West the 52 per cent
increase in GVA is almost entirely explained by the increase in the number of
employees (48 per cent). Thus although GVA produced by FOCs in the South West
has increased more in percentage terms than it has across England, employee
productivity in foreign-owned companies in the region has failed to keep up with the
increases seen nationally.
FOC performance vs UK-owned companies in the South West
GVA produced by foreign-owned companies in the South West increased by over 50

per cent between 2004 and 2007, compared with an increase of 10 per cent in GVA
produced by UK-owned firms. In terms of the contribution to the total increase the
South West’s GVA over this period, 43 per cent is derived from foreign-owned
companies, with the remaining 57 per cent from domestically-owned companies.
Employment growth was also substantially higher in foreign-owned firms, as shown
by Figure 3-6. FOCs accounted for almost three-quarters of the South West’s
increase in employees; a significant proportion considering foreign-owned
companies make up around 3 per cent of the total number of firms in the South
West. UK-owned firms improved their employee productivity at a greater rate than
foreign-owned companies, but employee productivity is still considerably higher in
foreign-owned firms.
Figure 3-6: Employment growth in foreign owned firms
Empl oyment gr owth ra te, 2 0 0 4 -0 7
60.0%
50.0% 48%
40.0%
33%
29%
30.0%
20.0%
10.0%
2%
0.0%
-0.5% UK owned -0.5% Foreign owned
-10.0%
England South West Eng less London & SE

The role of foreign owned companies driving up productivity and efficiency in host
economies is well established in academic literature. The principle mechanisms
through which this is achieved are:
§ Knowledge and technology transfer – foreign firms often have firm-specific

advantages (better management practice or more efficient technology, for example)
that allow them to compete in overseas markets. These can be transferred to
domestic firms, either through ‘demonstration effects’, or through collaboration
§ Competitive pressure – the presence of foreign firms will increase competition in
domestic markets which can lead to domestic incumbents increasing their efficiency
in attempts to avoid losing market share
§ Innovation – Foreign-owned companies generally have a higher propensity to invest
in R&D than UK-owned firms, and in 2004, overseas companies accounted for
approximately 20 per cent of Britain’s industrial R&D11
§ Labour force/skills – Labour productivity improves more quickly over time in foreign-
owned firms, which is partly the result of higher investment per employee in training
and technology
§ Supply chain development – by increasing demand for inputs, foreign firms can
allow domestic suppliers to achieve greater economies of scale
§ The impact of FDI on productivity in the host country also depends the exposure of
UK-owned firms to foreign-owned firms, and the ability of local businesses to absorb
new technologies, processes and practices. Studies demonstrate that total factor
11
Foreign Direct Investment in the South West, SWRDA, 2004
productivity is higher in firms that have collaborative agreements with foreign-

owned firms12.
Figure 3-7 compares the average salaries paid by UK owned firms with foreign
owned firms. Gross salaries in the South West lag behind the English average in
both categories, but foreign owned firms pay considerably higher salaries on
average than UK owned firms. In the South West the foreign/UK owned pay
differential is 44.2 per cent, slightly higher than the English average of 41.8 per cent.
Figure 3-7: Average gross wages and salaries per employee in 2007
South West England England Difference Difference (SW
less London (SW – - Eng less Lon
& SE England) & SE)
UK owned £15,475 £19,334 £17,190 £-3,858 £-1,714

Foreign £22,321 £27,420 £24,263 £-5,099 £-1,943
owned
Source: Annual Business Inquiry.
A pay differential between foreign and UK-owned firms is unsurprising given the
differences in employee productivity shown in figure 3-4. Foreign-owned firms in the
South West produce around 41 per cent more GVA per employee; the average for
England is 69 per cent. Relative to GVA produced, therefore, foreign-owned firms in
the South West pay high average wages.
A 2007 report13 shows that the South West has had the greatest success in attracting
FDI in the ICT and Advanced Engineering sectors, both of which require relatively
high levels of human capital. When pay is broken down by industry, the report finds
that foreign-owned firms pay employees 7 per cent above the industry average.
Therefore much of the pay differential shown in figure 3-7 is likely to be influenced
by FOCs operating in higher value industries.
In terms of expenditure, Figure 3-8 below shows the purchases of goods and services
per firm in the South West and England in 2007. Foreign-owned firms purchase
significantly more goods and services than UK-owned firms, in the South West and
across England. This will be due to their greater levels of production, as well as their
operation in predominantly high value industries meaning that they will generally
purchase higher value inputs than the average UK-owned firm. Per firm, regional
FOC purchases still lag behind the corresponding value nationally.
Figure 3-8: Purchases of goods and services by firms (£000s), 2007

Type of firm England South England less Difference Difference
West London (South (SW - Eng
and SE West - less Lon &
England) SE)
UK-owned 575.6 375.1 526.6 -200.4 -151.5
Foreign-owned 7688.8 3303.5 6129.6 -4385.3 -2826.1
Difference (foreign owned- 7113.3 2928.4 5603.0 - -
UK owned)
Source: Annual Business Inquiry.
12
Djankov and Hoekman, 1999, Foreign Investment and Productivity Growth
13
Neil Blakeman & Associates, 2007, SWRDA Inward Investment Review
3.2 The case for international trade support
3.2.1 Market failure
The market failures relating to international trade are similar to those that restrict
inward investment:
§ Information asymmetry: in order for a firm to start exporting, it will need

information about overseas markets – patterns of production, market demand and
incumbent producers, for example. This information is a public good, and firms may
not necessarily recognise the potential business benefits weighed against the costs
(time and money) involved in developing their international trade capability.
§ Networks: non-exporting firms are likely to have restricted access to foreign
networks and may have trouble in establishing trade partnerships. They may also
underestimate the benefits of such partnerships.
As with international investment promotion, the national case for addressing these
market failures was made by the government through BSSP in 2008.
3.2.2 National strategy
National policy has always been a strong element of economic strategy, a

recognition of the UK’s traditional trading heritage, and more recently an
understanding of the benefits potentially accruing from the globalisation of business
and the opening of previously closed national markets around the world (such as
China).
UKTI is the clearest representation of government commitment to the promotion

and encouragement of international trade, and the South West RDA’s work in the
field of internationalisation focuses on supporting and expanding existing UKTI
activity. UKTI’s 2006 strategy, Prosperity in a Changing World, sets out a clear case
for helping UK businesses to internationalise.
3.2.3 Regional Strategy
The relevant strategic aims for international trade are similar to those for inward
investment. Strategic Objective 1 in the 2003-2012 RES states the need to
‘encourage new businesses to start and existing businesses to diversify and grow in
to new markets, home and abroad’, and highlights the levels of regional exports as a
specific weakness.
The South West RDA’s 2003-2006 corporate plan states ‘International trade can
benefit the regional economy by generating income and strengthening regional
businesses. We will continue to work with Trade Partners UK to encourage small and
medium sized enterprises to explore and develop new export markets, to encourage
a higher level of activity among existing exporters and to support businesses which
are developing new markets’.
International trade continued to be a priority in the 2006-2015 RES, specifically the

objective of ‘improving the international trade performance of South West
businesses’.
3.2.4 The case for additional RDA intervention
At the regional level, both UKTI and the South West RDA have responsibilities in the
field of international trade. These are enshrined in a joint framework for RDAs and
UKTI, which seeks to ensure that the agencies work collaboratively to promote
international trade at national and regional levels. According to this framework,
while UKTI provides ‘core’ international trade support services (with input from the
relevant RDA concerning regional business needs), RDAs have the ability to
supplement the scale of activity if it considers that necessary, and where it is in line
with the relevant Regional Economic Strategy. The South West RDA’s initiative on
international trade both sought to boost the scale of support provided regionally,
and to focus this on the key sectors outlined in the RES. This was a justifiable
decision, in the light of the relatively poor international trade performance of the
region (see below).
3.2.5 International trade performance in the South West (Goods)
This section considers the region’s performance in international trade between 2006
and 2008, to help establish the extent to which intervention was required. The data
comes from HM Revenue and Customs’ Regional Trade in Goods Statistics. The data
does not include trade in services or sub-regional data.
Figure 3-9 shows the number of exporting firms in each English region between 2006
and 2008. London and the South East have significantly more exporters than other
regions, due to established international linkages through large multinational
companies as well as their physical location and proximity to major transport
infrastructure. The number of exporters in the South West was virtually unchanged
between 2006 and 2007, before increasing 5.4 per cent in 2008.
Figure 3-9: Number of exporters (goods), 2006-08
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
-
LON SE EE WM NW EM SW Y&H NE
2006 2007 2008
Source: Regional Trade Statistics (HMRC)
The South West performed better, relatively speaking, than many of the other
regions over the three years. Only the North East experienced a rise in the number
of exporters between 2006 and 2007, and out of the other English regions the South
West experienced the smallest fall (data shows a fall of only 18 exporters in the
region). In 2008, the region experienced the highest percentage increase (4.5 per
cent) of all regions, comfortably outperforming the average increase in England of 2
per cent.
Provisional data for the first three quarters of 2009 shows that, in terms of total
export value, South West exports are faring better in the recession than other
regions on average. Up to Q3 2009, exports in the South West were down 11.3 per
cent on the first three quarters of 2008, compared with a 12.3 per cent fall across
England.
In terms of trade in goods, therefore, the South West’s poor export performance is a
historic trend; in recent years the South West has been performing well relative to
other English regions. Possible reasons for this poor performance are explored in
greater detail below.
Figure 3-10 shows export value per exporter, for all regions between 2006 and 2008.
The North East tops the list by a significant margin (due to a small number of large
scale exporters in energy and chemicals), with relatively little difference between
the other regions. In 2006 exporters in the South West exported the lowest value of
goods per firm out of all English regions. The previous section highlighted that the
average GVA per firm in the South West is lower than for the rest of the country, so
poor export performance can partly be attributed to a lower value of production for
the region in general. However, even when export intensity – the proportion of
output resulting from exports – is calculated, the South West is still the worst
performing region.
The picture is slightly better when export intensity is adjusted to only take account
of goods GVA (since export figures only measure trade in goods), with the South
West performing better than Yorkshire & Humber, but the change is marginal. The
relatively poor performance of London in this area probably reflects the fact that
these statistics focus on the trade in goods, rather than services (where London
would be expected to outstrip all other regions).14
Figure 3-10: Export value per exporter for goods, 2006-08 (£m)
0
NE
SW
SE
EE
EM
H
NW
d
LO
an
Y&
W
gl
En
2006 2007 2008
There are a number of possible reasons that could explain the low number of
exporting firms in the South West and the low export value. A report by University of
the West of England15 shows that there is a strong correlation between regional
productivity (given by GVA/head) and goods export intensity. Another possible
explanation for poor export performance given by the report is lack of access to
large freight gateways. The Port of Bristol (Avonmouth) is the only port of
significance in the South West; which has one of the lowest levels of freight tonnage
14
The Regional trade figures exclude services. We provide some analysis in services separately in this chapter.
15
University of the West of England, 2007, The export performance of businesses in the South West of England in comparative
perspective
in the UK. It’s not clear if this is a reflection of low capacity (i.e. supply) or demand. It
is likely to be both.
A third explanation for poor export performance could be industrial structure. Figure
3-11 shows the South West’s biggest exporting industries, by value in 2008.
Machinery and transport is by far the most valuable export sector, accounting for 62
per cent of the South West’s exports. Production in this industry is highly
concentrated in the South West; this percentage is considerably higher than the
average across England of 39 per cent. Miscellaneous manufacturing is the second
largest export industry, accounting for 14 per cent of total value, followed by
manufactured goods and chemicals, (10 per cent and 9 per cent of total value
respectively). Together, these industries account for over 90 per cent of the South
West’s total exported goods.
Figure 3-11: Major exporting sectors by SIC code
100%
90%
14% 13%
80%
70%
60% 39%
50% 62%
40%
13%
30%
20%
20%
10%
10%
9% 7%
0%
South West England
Mineral Fuels Chemicals Manufactured goods

Machinery and transport Misc. manufactures
The UWE report mentioned above, analyses the industrial structure of exports in the
South West, and compares it with the South East, chosen for its strong export
performance. The general conclusion is that the South West is not held back by its
industrial structure, although chemicals and pharmaceuticals, and fuels do make a
smaller contribution to exports in the South West than nationally. The same sorts of
firms in the region are less like to export. In turn, this strengthens the two
explanations given above – lower productivity and lack of access to freight gateways
– as contributors to poor export performance. So the economic rationale for support
in international trade, and the link between trade and FDI, is clear.
Research by the University of the West of England in 2007, undertaken on behalf of

the South West RDA16 corroborates this. Poor regional export performance is
explained by:
§ Structural factors, such as the potential absence of agglomeration and scale effects
in the South West due to low business intensity among large exporting sectors
§ Low productivity, which fails to provide the competitive edge required for export
success
§ Locational effects, for example the relative remoteness of the region from the larger
and more efficient freight gateways to Europe and beyond.
Figure 3-12 shows the percentage of regional goods exports that were traded with
the EU in 2008. Relative to total exports of goods, the South West sells the third
highest amount to other EU countries, with 58 per cent of its exports bought by EU
countries, compared with an average of 52 per cent for all English regions.
Figure 3-12: Exports within the EU
Pe rc e nt a ge o f e xpo rt s t ra d e d i n t he EU
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
NE NW YH EM WM EE L SE SW ENG
Figure 3-13 gives a greater breakdown of regional goods exports. While South West
exports to the EU increased by 5.1 per cent in 2008, total exports increased by 10
per cent. Exports to North America, where the South West has poor historic export
performance, increased by 21.4 per cent. Exports to Asia and Oceania increased by
12.9 per cent, with exports to all other destinations increasing by 19 per cent.
Figure 3-13: destination of South West exports

Destination Exports (£m) % change, 2007-2008
EU 7,002 5.1
North America 1,702 21.4
Asia-Oceania 1,448 12.9
Rest of World 1,760 19.0
Total 11,911 10.0
16
The export performance of businesses in the South West of England in comparative perspective, UWE 2007
Provisional data for 2009 shows that exports to the EU have been hit the hardest by
the economic downturn, with exports falling by 15 per cent in the first three
quarters of 2009. Exports to North America actually increased in the first two
quarters of 2009 compared with a year before, but fell in the third quarter. It is
unlikely that exports to North America will grow at the pre-recession rate for some
time, as the US attempts to reduce its trade deficit. Asia and Oceania may well
provide the best opportunity for export growth, with India and China particularly still
growing strongly, along with a number of other smaller developing countries.
3.2.6 International trade performance in the South West (Services)
In terms of services, Figure 3-14 shows regional service exports17 in 2007. London
and the South East export significantly more than other regions, accounting for 76
per cent of exports in the sectors recorded. The South West ranks fifth out of the
nine regions, with recorded service exports of £1,140m.
Figure 3-14: the value of service exports 2007

Exports in services,2007
25000
20000
15000
Value (£m)
10000
5000
0
Lon SE East NW SW EM WM YH NE
Source: BIS Analysis from ONS International Trade and Services.
There has been methodological changes in the collection and representation in the
latest set of this data, which prevent an analysis over time. Despite this, data
provided to us by BIS, using analysis consistent with the old methodology suggests
that South West service exports had been growing strongly, with an increase of 60
per cent between 2003 and 2007 (Figure 3-15).
This data shows regional service exports (see footnote 16) in 2004 and 2007. The
South West has the fifth highest level of service exports out of the nine English
regions, and the value of exports from the region saw strong growth of 59.7 per cent
between 2004 and 2007. As would be expected, services exports are growing more
strongly than goods.
17
This data only covers one third of the total value of service exports due to limited regional data on service exports
* Data for some regions is missing as some is deemed disclosive. The main service sectors omitted are travel, transportation
and financial services.
Figure 3-15: service exports in 2004 & 2007

2004 2007 % change
(£m) (£m)
London 12590 17765 41.1%
South East 8965 9945 10.9%
Eastern 2270 2760 21.6%
North West 1955 2480 26.9%
South West 1365 2180 59.7%
West Midlands 695 1120 61.2%
East Midlands 615 990 61.0%
Yorkshire & Humberside 535 855 59.8%
North East 435 600 37.9%
Figure 3-16 shows the largest service export sectors, and the proportion of total
exports these generate.
Figure 3-16: service exports by sector in 2004 & 2007
Ser vi c e expor ts by s ec to r
40.0% Royal ti es and

li cence s
35.0% Legal, ac count ing
c onsul ti ng
30.0%
25.0%
20.0% IT Oth er
15.0% R& D
Merchant ing &
o ther t rade
10.0% Adver ti si ng &
mark et resea rch
5.0%
0.0%
South West UK
Royalties and licences18 account for the largest proportion of services exports from
the South West, and account for a considerably larger proportion of service exports
than for the UK. Legal, accounting and consulting also takes a larger share of service
exports in the South West than nationally. The remaining sectors all have a lower
share of service exports. The ‘Other’ category includes architectural, surveying and
construction, property management, and other business and professional services.
Figure 3-17 below shows how well the South West is performing in each of the
recorded service export industries. The South West performs below the regional
average in every sector. The South West’s biggest service export industry is business
18
The IMF defines royalties and licence fees as ‘international payments and receipts for the authorised use of intangible, non-
produced, non-financial assets and proprietary rights’
and management consulting; it also performs well relative to other regions in legal &
accounting services, with only London and the South East exporting more.
Figure 3-17: South West’s position versus other regions (2007).

Industry South West Average of all Rank out of all 9
(£m) 9 regions (£m) regions
Communications Services 55 592 5(out of 7)*
Computer & information 110 764 6
Royalties & Licence Fees * 747 NA
Merchanting & other trade 20 312 9
Legal & accounting 60 546 3 (out of 7)*
Business & management consulting 355 632 3
Advertising & Market Research 25 259 7
R&D 165 539 6
Architectural, surveying & 20 124 =9
construction
Engineering & technical 215 531 5
Services between affiliated 115 369 5
enterprises, n.i.e.
3.3 Conclusions
3.3.1 Inward investment
The case for South West RDA intervention in inward investment was strong in 2004.
The most recent published data is for 2007, where it remained so. We have limited
information on the performance of foreign owned companies versus domestically
owned firms through the recession. National evidence would suggest a relatively
poor outputs performance through 2009, but without the corresponding
employment losses, at least so far, that this output performance would suggest.
Overall, we would not expect the fundamental patterns and characteristics of
foreign owned and domestically owned companies to have changed in the last two
years and so the rationale for intervention remains appropriate. This will be
assessed annually as part of our monitoring and evaluation work for the RDA,
described in the introduction.
§ Despite the strong growth trajectory of foreign owned firms in the South West, the
region still lags the England average in terms of these firms’ proportionate
contribution to regional GVA, productivity and average wages, suggesting that there
is more that can be done to maximise the contribution of foreign investment already
in the region
§ There were – and still are – market failures which argue for public sector
intervention in promoting inward investment, improving the flow of business activity
through the production of information, and encouraging FDI for the wider economic
benefits it might bring the region. The element of ‘coordination’ failure, and the
generation of positive externalities connecting networks and linking companies with
market opportunities, generating improved economic outcomes in UK owned firms,
is particularly relevant to the RDA. It is here that their regional role – as separate
from UKTI, or sub-regional partners, can add particular value.
§ National and regional strategies confirm the emphasis placed on public sector
encouragement of international investment, and support the role of the South West
RDA in this field; given the roles of other public agencies in this field, good
coordination is necessary to avoid duplication of effort and resource inefficiency
§ Evidence of company performance shows that in general the South West lags behind
national averages in 2004, and this remained the case in 2007. Despite this, the
positive economic benefits (in GVA and employment) that have come from foreign
owned firms in the South West is clear. Growth in their numbers, as well as GVA and
employment, outstripped the England average between 2004 and 2007. They pay
higher wages, their supply chains are generally of higher value, and their
productivity per employee has improved relative to national performance. If general
relative performance is poor, the role of FOCs in driving improvements is clear.
There is a strong regional economic argument for encouraging further FDI.
3.3.2 International trade
The public sector case for supporting international trade is a strong one. The
presence of market failures, confirmed in government policy and national research,
argue that international trade would be sub-optimal without the intervention of the
public sector.
The case for South West RDA intervention, above and beyond that already provided
by UKTI in the region, was predicated on the basis that the South West’s relatively
poor trade performance required an increase in the scale of support; and that a
focus on assisting the key sectors identified by the RES would benefit the regional
economy.
4. What the South West RDA was seeking to achieve

In this section, we set out the objectives that underpinned the South West RDA’s
interventions in inward investment and international trade, and comment on their
suitability and relevance.
4.1 Inward investment
4.1.1 Programme objectives
This section explores the objectives of the investments that have been approved by
the South West RDA in the period under evaluation. For each investment, these are
considered in investment appraisal reports ‘form proj2b’ which are submitted for
each investment. Alongside these, the agency has an FDI strategy, written in
February 2004, for internal use. On the basis of these documents, the South West’s
investment in overseas representatives had the following objectives:
1. Maintain and increase the contribution of overseas owned company investment

to the growth and development of the South West of England priority sectors.19
2. Increase awareness globally of activity within the regional priority sectors and of
the region itself. Particular emphasis is placed on leading edge, globally
competitive activity that advocates the region and encourages increased
collaboration with an investment in the region.
3. Achieve greater impact of FDI and priority sector focused activity on other key
Agency investment initiatives – particularly strategically positioned location
focused investments in the South West sub regions. We discuss the implications
of this, in terms of assessing the additionality of the investments and the
recording of outputs in section 6.
4. Demonstrably contribute to the achievement of Agency Corporate Plan
objective’s and targets.
In practice, investment projects which fall outside these sector groupings, but which
nevertheless could have a significant impact on the regional economy, will also be
pursued.20 The principle strategies for delivering the objectives are:
1. Influence appropriate leading individuals, companies, and academic institutions

in chosen global markets and demonstrate opportunity within the RDA’s priority
sectors;
2. Identify target groups of companies – within the key sectors – either who have
already invested in the South West, or have the potential to – advocate the
priority sector opportunity, and to identify, support and develop investment
opportunities appropriately;
3. Increase knowledge of leading edge HE activity in the region – within the priority
sectors. Work with regional HE to advocate that activity and identify
collaboration opportunities;
19
The Agency’s priority sectors are: advanced engineering and aerospace; ICT; creative industries; marine;
environmental technologies; biotech; and food and drink.
20
Taken from SWRDA’s 2004-2006 FDI strategy and the relevant project appraisal documents.
4. Develop a small group of location specific priority sector propositions – to

support overall sector investment proposition and advocate /benefit from other
Agency investment activity; and
5. Further develop a focused reactive investment enquiry service which the agency
taking the lead of priority sector enquiries and working with regional partners to
ensure a correct level of service to all investment enquiries received;
6. Ensure ready recognition and promotion of the South West sector proposition
amongst leading company investment intermediaries – in particular the global
UK Trade and Investment (UKTI) network.
4.1.2 Relevance and suitability
That the South West attracts less foreign direct investment than London and the
South East is not market failure. But the RDA specifically focuses on key sectors in
which they are strong and which have above average potential for added value.
Articulating these strengths coherently, on a regional basis, alongside sector
development activities; essentially highlighting supply chain, joint venture and other
market opportunities, at home and abroad fits with the rationale. So the activities,
examined later, are focused and suitable.
Poorly configured objectives can lead to inappropriate interventions, or problems

with determining programme performance and/or eventual impact. That has clearly
not happened in this case. But the objectives as set out in both appraisal documents
and internal strategy documents in our view, require greater clarity. They need to be
SMART, i.e. specific, measurable, achievable, relevant and timebound. We explore
the degree to which the objectives have been met in the effectiveness section of
chapter eight.
4.2 International trade
4.2.1 Programme objectives
There do not appear to have been any specific objectives set for the international
trade programme. They are certainly not clear from appraisal documents, nor were
they available from consultees. In good practice terms, this is a significant omission
in a programme’s development.
Fortunately, the intervention is a relatively straightforward one, i.e. the expansion of

a long running UKTI business support programme. The overall aims and objectives
of the national Passport scheme help to give some shape to the RDA’s intervention.
The following definition comes from a UKTI review of trade promotion schemes:
Passport is “Targeted at new and inexperienced exporters and aimed to enhance the
fundamental capacity of companies to win business in overseas markets”21
For the purposes of this evaluation, and to help shape the ongoing monitoring and
evaluation activity, we have therefore retrospectively drafted the following outline
objectives, based on our understanding of the programme’s original rationale, and
appraisal documents:
21
Review of Evaluation Evidence on Trade Promotion, UKTI 2005
§ To extend the provision of the regional Passport to Export programme to cover key
RES sectors, such as marine, aerospace and automotive
§ To support 365 SMEs, new to international trade, in developing their export markets
between 2004 and 2009
§ As a result, to improve exporting confidence, ability and success among new
exporters in key sectors, and therefore deliver positive economic benefits to the
region
Formulated like this, the objectives fit well with the original rationale for
intervention, and provide some specific targets in order to ensure that performance
and impact can be measured. We explore the degree to which the objectives have
been met in the effectiveness section of chapter eight.
5. How the South West RDA invested

In this section, we examine the activities that the agency has supported in inward
investment and international trade. For each we set out the activities; comment on
their relevance and suitability in the light of the rationale and objectives for
intervention; and reflect on the effectiveness of the delivery mechanisms. The
impact on beneficiaries and the wider economy are considered later in this report.
5.1.1 Logic Chain
Figure 5.1: Logic Chain for Inward Investment and International Trade Interventions
International Investment Trade Promotion
Market Failure in existence of public good, coordination Market failure from information asymmetries and
failures and positive externalities network externalities
Rationale Foreign owned firms higher GVA, average wages and Increasing globalisation providing new export
supply chains opportunities
Increase contribution of FOC on key sectors and global

Enhance the capacity of new and inexperienced exporters
Objectives awareness of the region
to win business in overseas markets
Increase FDI impact on Agency investment initiatives
Salaries and overheads of overseas reps

Funding for extension of Passport programme activities in
Expenditure on marketing materials to support their
Inputs activities
the South West
Salaries of extra ITAs
Work with FOC’s in the UK (visitor programmes )
Overseas, regional and sub regional activity. Extension of Passport programme in South West (see
Activities See ‘‘FDI activity map) Passport to Export activities and processes map)
Involved FDI successes’ Foreign direct investments where

the RDA has been significantly involved. Providing two or Improved skills and increased employment in businesses
Outputs more of the following: regional tour, location search, supported by RDA
access to UK R&D expertise/facilities, financial assistance, Match funding provided by supported businesses
presentation or lead generation.
Coordination and simplification of support to ‘new’ Contact development

investing businesses Support on export events and exhibits
Outcomes Logistical support (for employees and operations Funding for skills development
Soft landing, aftercare & advocacy Increased export turnover
Specialist sector expertise Increased access to new markets
Net additional GVA through FOC’s Net additional GVA through increased export
Impact
Spillover impacts turnover
5.2.1 Core activities
As of January 2010, the RDA employs or contracts five overseas staff through its
programme spend. This number has reduced by three staff since 2009 (those
employed in the Japanese and Indian offices). Their terms of employment and
operational models differ somewhat (
Figure 5-1).
Figure 5-1: South West RDA Overseas Representation

Location Staff Model Since
Australia/New Zealand 1 South West RDA service contract Presence
(Melbourne) since 2004
China (Shenzhen) 2 South West RDA service contract Presence
since 2004
India (Mumbai) 1 Shared with the South East of England January
(0.5 Development Agency (SEEDA). SEEDA 2008. Left
FTE) have decided against future shared post in
resource. January 2010
United States & Canada 1 South West RDA Employee 2004
(Boston)
United States & Canada 1 Consultant with a South West RDA September
(California) Contract. 2009
*Japan (Tokyo) 2 Employed by the South West RDA until 2004. Closed
the end of January 2010. Thereafter in January
UKTI employees with South West 2010
Targets and line management.
Source: Interviews and appraisal documents. PLEASE NOTE – some contractual delivery arrangements have changed
since fieldwork was undertaken – these have been reflected in the text below where relevant.
The expenditure under evaluation covers the direct cost of maintaining and staffing
overseas offices and of UK based work such as investor visits. The representatives
work closely with their UK based RDA colleagues (these costs are excluded from the
expenditure under evaluation), who undertake visits to and with companies,
develop research and marketing material to support leads generated by the
overseas representatives and keep them up to date with developments in the
region. The UK based team will subsequently deal with aftercare to the companies
that have invested in the region. This is delivered through sector specialists who are
contained within wider teams such as ICT or creative industries, who may provide
intermittent advice to a particular company, or ongoing and intensive support. The
RDA’s capacity in this area has recently reduced; there are now specialists in
Aerospace and Environmental Technologies. In addition, there are a larger body of
sub-regional partners who work with the RDA, developing marketing material and
responding to leads. A simplified version of this activity is summarised in Figure 5-2 .
Figure 5-2: Activity Map (FDI)
Initial Pre-investment
Generating Aftercare
Investment contact
leads
Support
a) Overseas Offices
- Report Directly the
-RDA Lead
to the RDA - RDA (Lead) - RDA Lead
Coordinator and
- Proactive and -UKTI (Support) UKTI (Support)
Signpost
reactive marketing
to
-Lead generation - Sub-regional - Sub-regional
UKTI / Sub-regional
partners (support) partners (Support)
partners
b) UKTI (DocStore) to
RDA (UK and direct
to Overseas Offices)
Source: Consulting Inplace
Whilst in practice, the service provided to each company differs according to their
requirement, the Agency representatives undertake five overlapping core activities:
§ Marketing: essentially promoting the South West as a place to invest and do

business. This is often generic promotional material, but more practical information
and advice is commonly provided. This includes information on specific sites and/or
premises/site information, academic links, existing specialist companies, salary
searches etc. It also includes Agency sponsored or supported events, such as trade
fairs or sector events. Teams/expertise within the Agency is also promoted well as
sources of other public sector support and local business groups.
§ Targeting and managing new opportunities: the Agency focuses inward investment
activity on priority sectors where the region has particular and genuine strengths.
The overseas representatives have a clear sector focus, supported by sector
specialists and area teams in the UK, working together. The overseas representatives
will also often lead on responding to direct UKTI leads as well as generate leads
themselves, as well as in conjunction with UK colleagues.
§ Investor relations (and aftercare): This essentially involves targeting key companies
in priority sectors and developing relationships with companies ‘post investment’.
This requires local knowledge and personal relationships with senior figures at key
firms. As part of this activity, the RDA has identified 50 strategic companies in the
region. About half of these are foreign owed firms, and each has an assigned RDA
‘relationship manager’; again this is organised on a sector basis.
§ Promoting strategic collaborations: this involves developing partnerships with
universities and supporting joint ventures with companies that together can exploit
a market opportunity or expand into a mew market.
§ Briefing embassies and consulates: ongoing working with consulate staff to raise
the regions profile overseas and to protect the regions existing share of UKTI leads.
Since late 2008 there has been a dedicated head of inward investment. The overseas
representatives report through a monthly activity report, in addition to targets set in
their contract. Regular teleconferences are also held with all of the representatives
to coordinate activity and discuss projects and upcoming activities. Periodically the
representatives will visit the UK for site visits, events, etc. A joint decision is made
whether to pursue an enquiry or not, based on their key requirements. All
representatives cited the South West’s main competitors as London and the South
East, who between them attract some 70% of UK FDI. The majority of these firms
are reasonably small in employment terms.
In addition, the Agency’s focus on aftercare, which has been in place for a number of
years appears to have positioned the Agency well through the recession, when many
Foreign Owned Companies (FOCs) will seek to limit exposure and we have seen
manufacturing and service output severely affected. In addition, anecdotal evidence
from consultees have suggested that the Agency’s key sectors appear proportionally
less exposed to the recession, compared to other regions that have placed greater
focus on financial services or related sectors, for example.
5.2.2 Activity by global region
Australia & New Zealand
§ The South West RDA employs one rep in Melbourne to cover Australia and New
Zealand who has been in post since 2004, (although the arrangements have recently
changed to a service contract). Over this period strong relationships have been
developed with key individuals in the business community as well as in UKTI. There
is a targeted approach, focusing on genuine leads rather than promotional work per
se. Close working relationships have been developed with UK based colleagues –
from both the South West RDA and directly with sub-regional partners themselves.
§ There is a clear focus on aftercare – with UK colleagues and the overseas office
working with foreign owned firms after they have started up in the UK. There is also
a sector development aspect to the job, a small number of companies are cold called
if there is a genuine market opportunity for them in the South West, as and when
that situation arises. The relationship with UKTI was not considered so important
here (although still important). We understand that the majority of leads are
generated by the Agency’s office proactively, rather than through UKTI staff in
overseas offices.22
China
§ The RDA has had an office (now service delivery contract) in Shenzhen, Southern
China since 2004. With other RDAs locating in Shanghai, the rationale was that a
southern China office, with Shenzhen growing rapidly, would be advantageous.
Feedback on the ground would strongly support the information asymmetry market
failure argument, with Chinese companies not knowing about opportunities in the
UK; beyond the principal cities much activity is therefore focused on awareness
raising. The office operates through a memorandum of understanding with the
Guangdong Provincial Government, using their name to help with introductions and
credibility. The UKTI relationship is considered to be essential and they have a good
working relationship, participating in events and briefings.
§ An improvement has been noted in the marketing and other material from UK
colleagues over the past year.
India
§ Up until January 2010, the Agency has employed a representative who was
effectively ‘shared’ with SEEDA based in Mumbai, since in January 2008. The post is
now vacant and SEEDA have indicated the arrangement will not continue.
§ Up until January, the overseas representative was officially employed by UKTI but
reported directly to the South West RDA and SEEDA. She had targets to generate
involved success in the South of England and consequently had a slightly wider
sector focus, agreed between the two RDAs. Again there is little knowledge among
Indian businesses about the UK as a business/investment location outside of London
and the South East. Additionally, in India there is a perception that a higher quality
of life is found in cities, rather than in predominantly rural areas, as much of the
South West is (or is perceived to be). In practice both regions are promoted to the
22
The source of leads and ‘conversion rates’ i.e. the proportion of those which are converted into inward investments has not
been possible to ascertain for this evaluation. We provide recommendations to support the RDA develop these as part of
ongoing monitoring and evaluation work under separate cover.
potential investor. The negatives of this arrangement for the South West are that it
compares less favourably, although this is offset by the larger body of potential FDI
that crosses the Ian offices desk, because both regions are covered. On balance, this
arrangement appears to have worked reasonably well for the South West, but it is
unlikely the arrangement will be reinstated at this stage.
§ There was a close relationship with UKTI and the rep was based in the Consulate –
perceived to be a benefit in developing personal relationships with staff. Joint
‘South of England’ marketing proposals were developed for leads with the strengths
of both regions articulated. There is no typical route for handling an enquiry – they
were generated directly through the work of the representative herself with Indian
firms, through the UKTI posts locally, or through DocStore.23
§ The RDA and UKTI are in the process of recruiting a replacement, to be based in
Bangalore.
Japan
§ This office closed at the end of January 2010. New representatives are currently
being recruited, who will transfer to UKTI’s Tokyo office (both physically and in
terms of their employment contracts). Line management responsibility will be
retained by the South West RDA, with regional involved success investment targets.
Due to the current handover process, we were not able to speak to the Japanese
representatives.
United States
§ Two full time representatives are employed/contracted by the RDA in the US. They
focus on IT and Aerospace companies and on high value added sectors, with the
remaining priority sectors largely covered by UK based colleagues. There is strong
aftercare focus – working with existing US owned companies already present in the
region – supporting joint ventures expansions and collaborations, etc. A modest
increase in resources has enabled new marketing activity to be undertaken – and for
the two representatives to be supported by a part time lead generator since late
2009.
§ The sector focus has not changed since 2004. The relationship with UKTI overseas
posts is considered to be good, having improved since 2004, they now have a clear
view of the South West’s particular sector strengths, which benefits the region as a
greater number of leads are passed directly to the overseas reps. Compared to other
RDA operations in the US, the South West RDA’s team in the US is the smallest in
terms of personnel, which is why a focus is placed on developing good relationships
with UKTI posts – to effectively widen their reach. The size of the team in the US has
recently increased with the addition of a contracted representative on the West
Coast, in response to increased funding for the US operation. We understand that
this is effectively an ongoing task due to the number of leads through UKTI and the
relatively high turnover of their overseas staff, noted below.
§ In the past year as the recession has impacted companies, and the nature of
enquires has changed somewhat. Joint Ventures were more common than a year
ago, as firms sought to limit risk – outright expansion and development on new sites
23
The IT system through which UKT&I distributes, coordinates and manages its worldwide leads.
has reduced. The introduction of direct flights from Bristol International Airport to
New York was cited as an important factor for US companies in their investment
decisions.24 The representatives’ view was that the involved success targets where
high based on the nature of the FDI market and the number of staff on the ground in
the US and in the UK. The focus of the South West message to firms has improved
and a consistent message was that there is not so much competition over projects as
there used to be between regions – they are each playing to their strengths and
developing more targeted propositions. The tight sector focus supports this
approach as the depth of expertise in each sector increases over time and the
propositions to businesses become more persuasive.
§ Links between the overseas offices and aftercare team appears to be good, and
projects grow from ongoing interaction with firms, both in the US and after they
locate in the UK. The sector, rather than a geographical focus, reduced the likelihood
of duplication, is more efficient and enables a better service to be given to the
businesses. It is hard to provide a sector service to companies if the organisation is
aligned geographically. Currently the team is targeting US aerospace companies that
are known to have offset requirements.25
5.2.3 Effectiveness of delivery
In the period under evaluation, the focus and prominence of FDI within the agency
has changed – so too has delivery. There has been modest expansion/reorganisation
in the US as well as representation in China and India, reflecting their significance as
emerging markets. In terms of delivery from the UK, the co-ordination and
communication between the UK and overseas offices has improved, especially in the
last eighteen months, this was attributed to the new head of inward investment. In
addition, the quality of marketing materials/company propositions has improved,
and colleagues are generally perceived to be more responsive to requests for
information. This is attributed to new leadership in the FDI team, and greater
resources on the marketing side, since that appointment has been made. This has
enabled marketing products to be expanded in breath and depth and more timely
information collected and regularly updated.
Overall, the overseas representatives clearly work with a degree of freedom and
flexibility, but with clear lines of reporting and transparent targets set. In terms of
delivery, the final evaluation in 2013 should explore how the transfer to a UKTI
contract in Tokyo (and potentially elsewhere) has worked in practice. The degree of
integration with FDI, sector and area teams, communication and speed of response
to requests for information from UK based colleagues are considered to be the
particular strengths of delivery.
Whilst we suggest some improvements to process and in demonstrating/recording

activity, in practice the strength of the programme’s delivery is the degree of
integration across the RDA of the overseas teams and their activity. This does
complicate an assessment of impact because the overseas representatives and UK
based sector specialists work together closely on an ad-hoc basis, in response to the
needs of the company in question. This would support the assertion that FDI impact
24
This service will discontinue from November 2010.
25
Offset requirements are trade agreements which generally involve the seller agreeing to purchase components used in the
production process for the good being traded.
is probably underreported. Moving forward options for other overseas offices have
been considered and options for the migration of other overseas offices, along the
lines of the Japanese office, are being considered.
A review of the operational side of the RDAs overseas offices was undertaken in
200726. This recommended a number of changes. To increase presence in North
America, it was recommended that the RDA employs an additional lead-generation
resource, as well as an additional home-based Vice-President. This has subsequently
been done. In terms of the Asia-Pacific region, the report advised maintaining the
level of presence in Australia and China, making provision for a full-time member of
staff in India, and performing a cost-review of operations in Japan. This has also
been completed- with the migration of the Japanese office staff to UKTI, albeit with
regional investment targets, and the closure of the Japanese office.
It was also recommended that an agent be appointed in France and Germany,

focused on lead-generation as well as investor development. Another
recommendation is much closer working between the RDA and UKTI. The report
points towards the relationship between SWRDA and UKTI agents in China, where
there is closer working as a result of initiatives in 2005. Greater organisational
alignment and integration of work, rather than wholesale structural changes was
preferred. Our findings, discussed later in the report, are in line with these
recommendations.
Working with UKTI
The role of UKTI is to maintain the UK as the prime FDI destination within the EU.
This is delivered through a series of overseas staff, working alongside all twelve UK
RDAs and devolved administrations. UKTI have a large number of staff working
overseas, who are both proactive and reactive in generating FDI leads. These staff
relay enquiries to UK colleagues who then pass them on to the RDAs. The RDAs then
work alongside sub-regional partners who provide information on, for example,
particular sector strengths, availability of sites and premises, wage rates and skills
levels. A client presentation is then developed which is sent to the company via the
overseas officers. Subsequent action, such as a visit or further face to face meetings
with the firm in question are then discussed directly.
The UKTI system to handle enquiries is DocStore. In the period under evaluation, of
a large number of enquires have been responded to in this manner, anecdotally, we
understand that only one has ever resulted in any regional investment in the South
West. We do not have data on the conversion rates; the number foe lads received
from each source, that turn into an involved success. This is an issue on which we
will focus in the monitoring and evaluation plan. In practice, most opportunities are
sent directly to the overseas representatives (and subsequently passed on the UK
colleagues). Sub regional partners have commented that the requests for
information received through DocStore are often generic, with responses required in
very short timescales. This often prevents sub-regional partners or the Agency
developing tailored material relevant to each enquiry. This system appears to
favour parts of the UK which attract greater FDI flows, namely the South East and
London; (i.e those parts of the country where there is less of a ‘sell’ required to
achieve FDI) rather than the South West. The lack of feedback from enquires
26
Neil Blakeman & Associates. Inward Investment Review and recommendations, including overseas offices. June 2007.
received through DocStore once submitted to the RDA was a source of complaint
among local partners - the RDA itself has received no feedback from UKTI, possibly
because of the volume of enquires UKTI has to handle.
An additional issue is the high level of labour turnover within UKTI, which
undermines the development of relationships and which means that the regional
message needs to be continually reinforced.
Working with sub-regional partners
Sub regional partners provide local information to enable the RDA to respond to
leads, generate marketing material as well as company or sector specific proposals.
On occasion, they work directly with the overseas offices and with existing overseas
companies located in the region, undertaking joint visits and a range of other work
direct with companies. The intention is to develop a seamless service to local
partners, with the RDA acting as regional coordinator. Clearly this is challenging in
terms of coordination – there is a degree of competition in attracting FDI amongst
the sub-regions, just as there is between RDAs. Interviews with local partners
highlighted both differences in the degree of engagement/involvement with the FDI
team at the RDA, as well as differences of opinion over the quality of delivery. Sub-
regional partners attributed some of the following factors to low levels of FDI in
some of the more peripheral areas of the region. The issues were:
§ Compartmentalisation and lack of co-ordination: Occasionally, information provided

to one section of the RDA was not shared with another. There appeared to be no
central repository of information so the same information is requested more than
once.
§ Organisational changes have been negatively received: The change from area to
sector focus in 2004 was not apparently communicated properly and local partners
found this confusing – not knowing who to contact and how the reorganisation and
change in focus affected them. More recently, a small number of sub-regional
partners were not clear who they should go to for information on FDI in general, and
non-priority sectors in particular.
§ Aftercare is good and improvements are evident: Consultees were generally
complimentary about this approach and focus. Despite the above, a consistent
message from consultees was that delivery has markedly improved, particularly in
the last eighteen months (to end 2009). The FDI operational group meetings were
genuinely welcomed and have improved co-ordination and efficiency of delivery.
Information from the RDA on their activity with foreign owned companies, has
improved.
Internal RDA Organisation and Integration
Clearly the degree of integration between the UK based FDI team, aftercare and the
overseas offices works well – it also creates challenges in terms of coordination and
information sharing, as well as in proving impact.. Whilst this integration is positive
in terms of delivery, it creates challenges in terms of attributing impact to the RDA.
We provide recommendations to support the RDA track relationships with and
support for Foreign owned firms in the monitoring and evaluation plan.
5.2.4 Relevance and Rationale to Objectives
The relevance of the activities delivered under the programme were well suited to
the original rationale underpinning the Agency’s investments. General advice as well
as more practical support – alongside ‘soft landing and aftercare’ was well designed
to support increased or enhanced foreign direct investment – as well as spillover
effects in the region. Based on the objectives for this intervention, the activities
were also relevant and appropriate.
5.3.1 Passport to Export
The South West RDA chose to invest in promoting international trade through an
existing UKTI product, Passport to Export. This has been a tried and trusted export
promotion programme since 2001 focusing where the case for intervention is
arguably the strongest, i.e. those companies who have little or no experience of
exporting.
The following table sets out the process and activity map for Passport. This is
relatively common to all regional Passport programmes. Specific differences relating
to the South West RDA offer are considered thereafter.
Passport to Export process and activity map

Suitability. Firms are judged for their suitability and eligibility for support. These
include the following:
§ The firm is a new exporter, or exports are less than 20 per cent of turnover
§ The firm is an independent SME
§ Subject to EU de minimis State Aid rules (a business can receive up to
€200,000 in public sector support before it is declared as ‘State Aid’)
Initial visit from International Trade Advisor (ITA). This acts as a second filter on
firm suitability. A diagnostic process is used to determine where (and whether)
support might be beneficial. Common issues revolve around firms lacking
expertise and knowledge in exporting/targeting foreign markets, and a lack of
resources (time and money) in filling the gaps without external support.
Formal offer of support. This sets out the offer from UKTI and the expectations of
the firm (including willingness to provide performance/impact information).
Free two day residential workshop. Designed and delivered by consultants, but
with ITAs also present, the workshop encourages firms to think about their own
position and future objectives. Some firms drop out at this stage if they consider
themselves not ready for the support.
International Business Review. ITAs try to conduct this review within two weeks
of the workshop to maintain the momentum of the programme. This uses a
diagnostic (software) tool to identify key issues within client businesses. These
are not always export-related, and ITAs may suggest alternative business support
solutions (e.g. via Business Link)
Business Action Plan. The formal development plan, flowing out of the business
review and providing a structure for ongoing support.
Ongoing support. A range of support activities are available to client businesses

to help them reach their action plan objectives, usually over a 12 month basis,
specifically:
§ ITA mentoring to client businesses on a range of issues
§ Additional one day training courses on offer for subjects such as internet
strategy; international presentation skills; appointment and management of
agents and distributors; and researching export markets
§ Business Development Credits: a grant scheme providing 50 per cent match
funding for export-related activity, such as international trade visits, overseas
marketing research and website development
Post project review. A final session to bring the support to a close, and to identify
specific impacts on the supported businesses.
South West RDA investment in the Passport programme sought to expand the
intervention, both in terms of its overall size and also to cover sectors of specific
relevance to the agency and the regional economy, in particular:
§ Marine
§ Automotive
§ Aerospace
§ Creative and media
§ Food and drink
§ Leisure and tourism
§ Environmental technologies27
The agency’s investment led to the recruitment of additional ITAs with specific
experience in supporting businesses within these key sectors.
As an addition to the existing Passport programme, the delivery of the agency’s

investment was through the existing Passport delivery bodies. At the beginning of
the agency’s intervention, this was Business Link Gloucestershire. In 2007, the
contract for delivery passed to GWE Business West.
5.3.2 Effectiveness of delivery mechanisms
The intention of the agency’s investment was that business clients of the Passport
programme would not see any difference in the quality or nature of delivery
between the UKTI and South West RDA supported activities. This appears to have
been successful, as beneficiary companies report that they were not aware of the
Agency’s involvement. Marketing materials were all branded UKTI, and the nature
of support provided has been the same. This does pose a strategic added value issue
for the Agency, which we explore in section 8.2.5. Ensuring activity has been
delivered through existing established routes has meant that administrative
processes have not been duplicated, and delivery lessons have not had to be
‘relearned’. The administration of the Passport programme has been smooth, and
record keeping has been of a high standard.
27
Only one business in this sector subsequently received support
In terms of the delivery process, the only substantive difference with the RDA-
funded element of Passport has been in the nature of the marketing required to
encourage businesses into the Programme. Recruited for their specific sector
knowledge, the RDA-funded ITAs were expected to generate a significant number of
business leads themselves. Given the level of business outputs required (365 over
the course of the programme), ITAs have considered this to be quite a challenging
target given their ‘standing start’. Nevertheless, this output target was met.
5.3.3 Relevance to rationale and objectives
The relevance of the activities delivered under Passport were well suited to the
original rationale underpinning the Agency’s investment in the programme. The
support provided to small companies, new to exporting, was well designed to help
boost their chances of international trade success.
Based on the retrospective objectives suggested for this intervention, the activities
were also relevant and appropriate.
6. Inputs and outputs of the programmes
6.1.1 Expenditure
Between April 2004 and March 2008 the South West RDA approved a total of £3.4
million on FDI attraction activities. A subsequent £750,000 was approved in
2008/09, bring investment in total up to £4.15 million. This includes direct and
related costs of the overseas offices as well as marketing activities. It includes UK
based work, such as hosting international investor visit programmes, but excludes
salaries of UK based colleagues supporting them in the sector development and area
teams. In practice, the overseas offices and UK RDA colleagues, as well as sub-
regional partners, all work together. To an extent, the outputs reflect this combined
effort.
Figure 6-1 shows annual expenditure on the two projects. In terms of inward
investment, expenditure is stable and reasonably predictable. In the last year there
is like to have been some upward pressure, due to falls in the value of sterling, this
an issue across the public sector and anyway will have been offset by more
advantageous exchange rates in previous years.
Figure 6-1: Annual Expenditure on FDI
Annual project spend, 2004-2009
850,000.00
800,000.00
FDI
spend (£)
750,000.00
700,000.00
650,000.00
600,000.00
2004-5 2005-6 2006-7 2007-8 2008-9
year
Source: South West RDA
6.1.2 Was investment sufficient?
Figure 6-2 below shows data provided by SWRDA on overseas office expenditure
between 2006 and 2009. Data for previous years combine SWRDA’s annual
expenditure in Japan, Australia and China. In 2004/5 expenditure was £352,630,
rising to £436,792 in 2005/6. This funded 6 staff in total, and a consultancy contract
in Australia. In comparison, total expenditure in 2006/7, stood at £339,838 (Figure
6-2).
Japan received the greatest funding, although this fell by 21 per cent from just over
£210,000 in 2006/7 to around £170,000 in 2008/9. Expenditure in North America fell
by 50 per cent between 2006/7 and 2007/8, mainly due to a reduction in staff.
Australia was the only country where expenditure was higher in 2008/9 than
2006/7. SWRDA’s overseas representation in Australia is delivered via a contract so
the costs reflect the delivery of consultancy services. China receives the least
expenditure between 2006 and 2009, although it is still sufficient to fund an office
and two staff. No data on expenditure in India was provided to us. This post is
currently vacant and it is not clear if the agreement with SEEDA will be reinstated at
this time.
Figure 6-2: South West RDA Overseas offices Expenditure (2006-2009)
Ove rs e a s o ffi c e e xp e n d i t u re , 2 0 0 6 -2 0 0 9
250000
200000
Exp e n di t ur e (£ )
150000
100000
50000
0
Japan China Australia North America
2006/07 2007/08 2008/09
Source: SWRDA Finance Department. Note: Data on the RDAs Indian Office was not supplied.
Overall, since 2006/07, expenditure on individual overseas offices has generally

renamed stable or decreased. This was mirrored in overall programme expenditure
until 2008/09 whereupon programme investment has increased by some £100,000.
Figure 6-3 overleaf examines expenditure versus involved success generation. Prior
to 2008/09 it suggests a clear link between overseas representation and involved
successes. But, the highest number of involved successes has been generated with
the least expenditure overseas – but with a greatest proportion of total spend on UK
operations.
Any assessment of investment is complicated by the nature of the programme; it

may take many years to generate a success with one firm; with another it may take a
matter of months. Furthermore, the overseas offices appear to have a reasonably
high turnover of staff (with exceptions) which clearly adds to costs. Overall it is
difficult to draw any conclusions on the sufficiency of expenditure although it
suggests that retaining presence overseas, with better resourced UK support, has
had results.
Figure 6-3: South West RDA Overseas offices Expenditure (2004-2009)
FDI spend and involved successes, 2004-2009
900 45
800 40
700 35
Involved Successes
600 30
Spend, £000s
500 25
400 20
300 15
200 10
100 5
0 0
2004-5 2005-6 2006-7 2007-8 2008-9
Total Overseas Offices Involved Successes
Source: SWRDA Finance Department. Note: Data on the RDAs Indian Office was not supplied. Consulting Inplace
Analysis.
6.1.3 Output performance
Figure 6-4 overleaf shows the number of involved successes28 in each year, claimed
by the RDA, which have subsequently been accepted by UKTI. In total, the RDA has
been involved in 146 individual FDI investment/projects, with a total of 121
individual companies (i.e. some companies generated multiple ‘involved successes
during the evaluation period). As noted previously this is a reflection of combined
effort, from overseas representatives, UK colleagues in the sector and area teams,
with input sub-regionally. These investments have been generated in a number of
ways and from a number of locations; we examine their characteristics in the next
chapter. The number of involved successes have generally increased year on year,
with the exception of 2007/2008.
In addition to the overall number of involved successes, Figure 6-4 shows the
number of companies that these investments have come from.29 This number too
has fluctuated, after a large increase after 2004/05. There is s step change between
2007/08 and 08/09, which stakeholder consultees have attributed to increased
resource and better coordination and communication.
For those years where an involved success target was set by the RDA, this has been
met, fallen short and exceeded since 2006, respectively.
28
Defined in section 2.1.1
29
In some instances multiple involved successes have been recorded with the same company. In the net impact section, we
have not used the number of involved successes, but the number of individual companies that have been supported. In our
view, this more accurately quantifies the impact of support. The companies themselves reported changes in their turnover
which they to attribute to the RDA support they received, to us in the survey.
Figure 6-4: Number of FDI involved successes generated by the South West RDA
Year Involved Successes (total) Involved Successes Target
(number of companies)
2004-2005 12 12 N/A
2005-2006 30 29 N/A
2006-2007 35 29 35
2007-2008 28 21 35
2008-2009 41 30 35
Total 146 121 ~
Source: SWRDA – FDI UKTI agreed involved success list 2004-2009. ** the 2009-10 RDA target is 40.
Recorded on the involved success claim form (BG3 form), are the new and
safeguarded jobs and capital expenditure that is expected to be associated with the
investment, at the time of the investment and across the next three years. This
estimate is made at the time of investment. On this basis, collectively, these firms
estimated that they would generate some 5,600 new and 12,000 safeguarded jobs, a
total of 17,500 new and safeguarded jobs related to investments where the RDA was
significantly involved.
The balance of new jobs associated with this FDI has fluctuated since 2004, from a
peak in 2006-2007 of 1,750. In 2008/2009, the number has fallen slightly where we
have seen a corresponding sharp rise in safeguarded jobs. We understand the large
number of safeguarded jobs in 2008/09 relates to a large project with Honda (Figure
6-5).
Figure 6-5: New and Safeguarded Jobs

Year New Jobs Safeguarded Jobs
2004-2005 1,053 847
2005-2006 799 2,329
2006-2007 1,750 3,839
2007-2008 1,148 1,633
2008-2009 853 3,336
Total 5,603 11,984
Source: SWRDA – FDI UKTI agreed involved success list 2004-2009.
Figure 6-6 overleaf reflects capital expenditure related to that investment. This
figure is the amount stated by the company in question and relates to the size of the
investment at the time it was made, and over a three year period afterwards i.e. the
approach is consistent with the stated number of employees. In total the quantum
of FDI that has been generated where the RDA was significantly involved since 2004
is some £460 million.
Figure 6-6: Capital Expenditure of foreign owned firms

Year Capital Expenditure, £m
2004-2005 12
2005-2006 117
2006-2007 197
2007-2008 84
2008-2009 47
Total 457
Source: SWRDA – FDI Master List 2004-2008.
6.1.4 Were outputs proportionate?
The gross output performance appears to have been good. The numbers of involved
successes have increased from a low number in 2004/05 and remained reasonably
stable until 2008/09 when the numbers have increased sharply, in line with
additional resource. The jobs and capital invested, although they relate to a three
year period after investment, are substantial. The balance of new and safeguarded
jobs appears to have favoured the latter in 2008/09. Although this related to one
large safeguarding project, the amount of capital investment has trailed off
substantially; likely to be a reflection of the recession.
6.2.1 Expenditure
Between April 2004 and March 2009 the South West RDA approved a total of £2.9m
on international trade promotion. The profile of spending over the programme’s
five years is shown in Figure 6-7. The gradual increase in expenditure over the first
four years is an expected profile for a programme such as this. We understand that
the further increase of expenditure in 2008/09 was due to an expansion of the
programme, to cover an additional year and a further 65 business supports.
Figure 6-7: Programme expenditure profile, international trade
£1,000,000
£900,000
£800,000
£700,000
£600,000
£500,000
£400,000
£300,000
£200,000
£100,000
£-
2004/05 2005/06 2006/07 2007/08 2008/09
6.2.2 Was investment sufficient?
It is difficult to comment on the sufficiency of the investment, given that no

objectives were set for this intervention. However, we assume that the programme
was designed to support 365 businesses; in which case, the investment amounts (in
gross terms) to £7,950 per business. This is close to the cost per business of the
overall Passport to Export Programme. In 2004/05 this was estimated to be £7,863
per customer.30
6.2.3 Output performance
The output performance for the RDA-funded element of the Passport programme is
provided in
Figure 6-8. These figures are taken from the RDA’s central programme management
system, and accord with the programme’s own record-keeping, with the exception
of the ‘Private regeneration’ figure. Our understanding (confirmed by the
programme’s management) is that this relates to the match funding provided by
supported businesses when accessing the Business Development Credits.
The only notional target that we understand the programme had was to support 365
businesses. As section 5.2.2 states, this appears to have been a stretching target
30
Study of the relative economic benefits of UKTI support for trade and inward investment, UKTI 2006
and, based on the performance of this output alone, the programme exceeded its
expectations.
Figure 6-8: Gross output performance, international trade

Businesses Private
Jobs created Skills developed
supported regeneration
192 376 £418,000 227
Source: South West RDA
6.2.4 Were outputs proportionate?
Once again, without clear objectives it is difficult to comment on the extent to which
the outputs were proportionate to the level of activity and investment expected.
However, that the programme exceeded its business support output target would
seem to be a very positive outcome, given that ITAs regarded it to be ambitious.
7. Outcomes for supported businesses

In this section, we consider the profile of businesses supported through the FDI and
international trade programmes; their views on the value of the support they
received; and the eventual outcomes they experienced. This draws on programme
documentation, interviews with programme delivery staff, stakeholders and
businesses; and a survey of beneficiary businesses. This section considers the gross
effects of support, with net impact being considered in the next section.
7.1.1 Outcomes for supported businesses
The outcomes for business that have been supported through the programme have
been explored with stakeholders and supported businesses. It is clear that the
overseas offices and FDI team are an accepted route for foreign owned companies
into support and expertise provided by other parts of the RDA. The exact support
delivered to each company is clearly tailored to their needs and specific
circumstances. These are different for each firm. Once in the UK, a relationship is
maintained with the company. This has generated further ‘involved successes’ as
the company expands and entrenches into the region. Businesses generally have a
reasonably clear idea of their own needs, but not the logistical details or the local
cost implications. A range of outcomes for the businesses concerned are delivered:
§ Coordination and simplification of support: The aim is to provide a ‘one stop shop’
for the business in question, here part of the RDA leverages local expertise and
information through the overseas representatives, directly to companies. This
effectively removes administrative burden on the company in question.
§ Logistical support (employees): includes advice on obtaining visas for staff, typical
salary costs, signposts to head-hunters, current availability of specialist and technical
staff, links to Universities, availability of foreign language schools, housing costs.
§ Logistical support (operations): sites and premises (availability, locations and costs
and support with property deals), advice on utility requirements and costs,
introductions to specialists in tax, legal and other technical advice from companies in
the South West with direct experience of working with foreign firms. Here part of
the RDAs role is developing multiplier impacts through supply chain linkages.
§ ‘Soft landing’ and aftercare: Relationships are developed and maintained at senior
level. This includes annual aftercare visits and a dedicated RDA member of staff
assigned to the firms, depending on the sector.
§ Advocacy: The RDA have also provided advocacy, for example in strategic town
planning issues, or in relation to tax duty (see case study overleaf).
§ Provision of specialist expertise (UK and overseas): The representatives in the
overseas offices ‘know their patch’ and in some cases have specific sector
experience from previous employment (e.g. aerospace). They know the local
business culture and customs and issues that similar companies have experienced
before them. A different skill set is required overseas compared UK based colleagues
They are clearly thinking tactically, in different ways depending on the markets they
are operating in, diagnostically looking at markets and analysing the gaps in the
South West and what the opportunities are. A different, but no less valuable, set of
expertise is then available through sector specialists once the firms are in the in the
South West. From January 2010 the RDA no longer has a sector specialist in
biomedical – leaving only Aerospace and Environmental Technologies. We
understand this is due to staff turnover.
Outcomes for Businesses – Advocacy:
An existing company was supported in relation to clawing back unnecessary
payments of tax duty on its raw materials. Discussions were held at senior level
between the RDA and HMRC and the World Customs Organisation (WCO) over an
extended period. Eventually these duties were quashed and costs awarded and
backdated. Feedback from the company in question has stressed the importance of
the RDAs involvement.
7.1.2 Characteristics of supported businesses
This section examines the types of companies that have been supported, and the
views from the businesses of the support they received. As noted above the
overseas offices have a clear target sector focus, articulating particular strengths.
Data on a firm’s sector has not generally been collected in a standard format. As
such as we have re-classified some of this data.
Overall, the key sector focus appears to be reflected in the patterns shown in Figure
7-1 although the type of company investing in the region is diverse. Aerospace, ICT
and engineering firms are the most common type of FDI successes. In terms of
changes over time, this data is shown in appendix II. Again, few trends are
discernable- the type of company investing in the region varies considerably.
Figure 7-1: Involved successes by industry sector (as recorded to UKTI)

Sector Total
Aerospace/Avonics 24
Automotives 12
Telecommunications 11
Engineering 10
Electronics 9
Financial Services 8
Healthcare 8
Software 8
Food and Drink 6
Info/communications technology 6
Business (and Consumer) Services 5
Environmental 4
Airports 3
Construction 3
Leisure and Tourism 3
Agriculture, Horticulture and Fisheries 2
Biotechnology and Pharmaceuticals 2

Education and Training 2
Entertainment Industry 2
Household Goods, Furniture and
Furnishings 2
Machine Tools 2
Power 2
Textiles, Clothing and Footware 2
Defence 1
Manf. Medical and surgical equipment 1
Metal Products 1
Mining 1
Plastics 1
Publishing/Printing 1
Creative and Media 1
Giftware, Jewellery and Tableware 1
Marine 1
Ports and Logistics 1
Total 146
Source: SWRDA – UKTI agreed FDI List 2004-2009.
In terms of the sources of FDI into the region, this is shown in

Figure 7-2. The more prominent the text, the more common it is as a source of FDI.
The correlation between sources of FDI and locations of SWRDA overseas
representation appears clear. The United States is the most important source of FDI
into the South West, with 40 successes since 2004, with a further 8 from Canada.
Australia, plus a small number from New Zealand, is the second most important
source (29 in total), followed by Japan (21), France (11), and China (11). Successes
from India are reasonably (with seven in total), all except two of these relate to
2008/09.
Figure 7-2: Origin of FDI (Size denotes volume of distinct inward investments)
Source: SWRDA – UKTI FDI agreed list 2004-2009.(This table is reproduced in full in Appendix II)
The data provided to UKTI does not show the sub-regional destination of this
investment, however the RDA master list, essentially a live record of the FOCs with
whom the RDA are involved, does indicate this, in general terms. It highlights the
attraction of the ‘West of England’ to overseas firms. This is likely to be driven
essentially by Bristol, Bath, and South Gloucestershire (Bristol’s North Fringe) as well
as along the M5 south of the city. Wiltshire (including Swindon) has performed well.
In terms of success in attracting FDI to more ‘peripheral’ areas, the distribution is
quite good; Cornwall appears to have been reasonably successful. However, in this
masterlist Plymouth has fared poorly.
7.1.3 Views on programme performance
The data below has been taken from a survey of businesses that had received
support from the RDA. As noted earlier, this is based on a survey on 21 supported
businesses. Admittedly, this is a low response rate; we sent letters to all the
supported companies and followed these up with telephone interviews in an
attempt to boost the sample. We discuss these issues later in the report.
As part of the beneficiary survey, we explored a number of qualitative elements of

the support that was received. Figure 7-3 highlights the nature of the support that
each received. It highlights the degree of interaction between the UK based teams,
sector representatives and the overseas representatives as well as the range of
practical and advice that is provided.
Figure 7-3: Nature of support received (from survey base 18)

Nature of RDA support Proportion of
sample
General advice from the RDA in the South West 56%
General advice from SWRDA's overseas representative 28%
A grant/financial support 28%
Supply chain/logistics advice 22%
Property/location advice 17%
Cultural advice (e.g. help with language, how to do business 6%
in the UK, etc.)
Labour market/employment advice 6%
Training 6%
Don't know 6%
Source: FDI Beneficiary Survey
Overall, satisfaction amongst supported firms was high (Figure 7-4 and Figure 7-5).
The responses suggest that the calibre of staff is high, but that improvements could
be made in the quality of research materials available, and in the detail of local
knowledge provided. Both of these issues have already been highlighted in this
report, and improvements have been noted by stakeholders in both of these areas
in the past year. The comments certainly support the continuation of the FDI team’s
efforts to improve relations and cooperation with local partners.
Figure 7-4: Satisfaction with support received (from survey - base 18)
Don't know
Very dissatisfied
Dissatisfied
Neither satisfied nor dissatisfied
Satisfied
Very satisfied
0% 10% 20% 30% 40% 50% 60%
Source: FDI Beneficiary Survey (base 18)
Figure 7-5: Satisfaction with elements of support (from survey – base 18)
Very Satisfied Neither Dissatisfied Very Don't
satisfied satisfied dissatisfied know
nor
dissatisfied
Ease of contact 39% 50% 6% 0% 0% 6%
Understanding of 33% 56% 6% 0% 0% 6%
requirement
Responsiveness to 33% 56% 6% 0% 0% 6%
requirement
Knowledge of 33% 50% 11% 0% 0% 6%
Staff
Links to other 22% 28% 17% 0% 6% 28%
organisations (e.g.
UKTI)
Quality of 11% 50% 0% 6% 0% 33%
research materials
Local Knowledge 11% 50% 22% 0% 0% 17%
A small number of companies (22%) said that they had considered locating outside
the South West. Despite this, the vast majority of responding firms (83%) said the
support they received made no difference in their decision to locate/invest in the
South West, as supposed to elsewhere (Figure 7-6). However a number of firms did
attribute additional benefits to the support they had received, in terms of the speed
and scale of their investments (Figure 7-7). We explore the impact of this, on GVA
and employment in next chapter.
Figure 7-6: Extent to which support was important in location decision

Response No. of %
respondents
Irrelevant – made no difference to decision 15 83
Useful – provided helpful but not essential background 2 11
information
Don’t know 1 6
Total 18 100
Figure 7-7: What action would you would have taken without RDA support?
Consequence of no support No. of %
respondents*
Would have invested in exactly the same way 11 55
Would have invested, but it would have taken longer 3 15
Would have invested, but on a smaller scale 2 10

Would have invested, but it would have been more expensive 2 10
Don’t know 2 10
Total 20* 100
Source: FDI Beneficiary Survey *Multiple responses permitted.
Firms’ assessment of RDA impact are influenced by a number of factors, which may
help to explain this rather negative view on the extent of the Agency’s influence
over inward investment decisions:
§ Low response rate and methodological challenges: the above information is based
on the responses of 18 companies, with further qualitative discussions held with a
small number of other firms who have been supported. This is from a population of
over 100 supported companies. The results are not therefore not statistically
significant. A review of similar evaluations, and the low statistical confidences in
other FDI evaluations set out the BIS Occasional Paper No.131, confirms that this is a
common methodological challenge in this field.
§ Integration of support and identification of specific FDI team involvement: A
related point, the FDI team is well integrated with these other teams in the RDA, as
set out in the Logic chain in the chapter five. This may complicate a firm’s picture of
where support came from.
7.1.4 Suggestions for improvement
Businesses were generally complimentary, but some minor improvements were

requested. These included a quarterly newsletter – signposting them to events with
local Chambers of Commerce, or other sector networks, specialist events etc. In
terms of sub-regional communication, a quarterly report from the RDA distributed
to local partners describing the activity that the RDA was undertaking with foreign
owned firms. We understand this was previously undertaken by the RDA - its
reinstatement would be welcomed. In effect this is already achieved at quarterly FDI
operational group meetings. These meetings are attended by sub regional partners
as well as UKTI staff and ensure that each partner in the region have a wider view of
31
BIS Occasional paper 1 – Research to improve the assessment of additionality. October 2009. This drew together much of the
existing additionality evidence generated from the recent national evaluation of RDA impact.
the activity with foreign owned companies that is taking place. Distributing minutes
would be beneficial for those who cannot attend.
In terms of aftercare, some businesses reported that ‘assigning’ a sector specialist to

them, from the RDA, has been useful. But also that businesses do not respect sector
demarcations; wider advice is sometimes sought. The full range of advice and
support that is available to businesses – or potentially available – should be made
clear. This will include additional UKT&I provision, which includes aftercare activities.
These have been designed alongside the RDA in line with the framework for joint
working between RDA and UKT&I 2009 to avoid duplication and maximise impact.
7.2.1 Characteristics of supported businesses
Data in this sub-section comes from GWE Business West’s management information
systems, and includes information drawn from application forms and post project
reviews completed by beneficiary businesses. While not completely comprehensive,
this has been well collected over the period of the programme.
The agency-funded element of the Passport programme supported 366 firms over
its five year duration. Figure 7-8 shows the pattern of sign-up by beneficiary
businesses, and their final sign-off. The relatively slow start in Year One is common
in new interventions as the new ITAs are recruited and settle in, and then begin to
generate business leads. Similarly, we would expect to see the number of new
business supports falling in the final year of the programme, as resources begin to
dwindle and activity is managed to a close. The 12 month duration of the support
provided also argues against bringing in many firms in the last year of delivery,
assuming that outputs have broadly been met in the previous years.
Figure 7-8: Number of firms per year signing up/signing off the programme
100
90
80
70
60
50
40
30
20
10
0
2004/05 2005/06 2006/07 2007/08 2008/09
Sign-up Sign-off
Source: Programme data
Similarly, we would expect to see beneficiary sign-off rates increasing over time.
Information on sign-off is not as complete in the programme’s records: only 137 (of
367) are recorded as having been formally signed off, with a further 38 withdrawing
during the course of support. A 2008 review of the UKTI Passport programme in
another English region32 indicates that this rate of withdrawal (c.10%) is to be
expected and is not indicative of a poorly performing programme in this field.
Furthermore, we are aware of the considerable efforts the programme has gone to
in order to chase companies for outstanding post-project reviews.
The Passport programme was intended to expand the scale of international trade
support and focus its attention on key sectors in the regional economy. Figure 7-9
shows that this was successfully achieved, with 78% of supported businesses coming
from the key strategic sectors.
32
Report ion the review of the passport to export development programme in the North West Region. Integra Project
Management. October 2008.
Figure 7-9: Programme beneficiaries by sector
Environment
ICT
Household Goods
Giftware, Jewellery & Tableware
Business & Consumer Services
Creative & Media
Leisure & Tourism
Food & Drink
Automotive
Aerospace & Advanced Engineering
Marine
0 20 40 60 80 100

Key strategic sectors are highlighted in orange
Given that no specific objectives were set on where support should be

geographically focused, we would expect an intervention like Passport to be
engaging businesses across the region, with perhaps more coming from sub-regions
where business numbers are higher (especially in the key sectors like marine and
aerospace). Figure 7-10 shows the location of supported businesses by sub-regional
location. The programme has managed to cover all sub-regions, although the
counties of Cornwall, Devon and Somerset have done less well in attracting
programme support.
Figure 7-10: Beneficiary firms by sub-region
Not known
West of England
Wiltshire
Wessex
Somerset
Gloucestershire
Devon
Cornwall
0 20 40 60 80 100 120
7.2.2 Views on programme performance
Grant support
The Passport programme offered beneficiary businesses grant support for export-
related activity (Business Development Credits). At the start of the programme, this
was set at a maximum of £3,000 (to 50% of costs), but was later dropped across the
whole national programme to £1,500. This reflected the fact that take-up of the
grant tended to be much lower than the original £3,000 ceiling, and was not
considered to be a major incentivising factor in the programme. The RDA-funded
element of Passport introduced this reduction too, although ITAs suggest that the
grant was an important element of the offer for some regional companies.
Beneficiary companies used the funding for three main purposes: to improve and
internationalise their websites; to research overseas markets; and to conduct
overseas visits. Figure 7-11 provides indicative comments from the beneficiary
survey. Where the funding was accessed, it appears to have been valuable.
Figure 7-11: Comments on grant support from beneficiaries

§ “It was just the funding of the travel that we benefited from”
§ “The financial support meant we could attend exhibitions and take more
people to exhibitions”
§ “Trade and export show funding helped a lot”
Source: Beneficiary Survey
The value of ITAs
The vast majority of beneficiaries have been very positive and complimentary about
the support provided to them through the ITAs. The close relationship with the ITAs
was highly valued, as was their knowledge of specific industry sectors. Beneficiaries
compared this favourably to other, more generic business support services. Figure
7-12 provides some indicative comments from the beneficiary survey. In terms of
volume, the majority of responses centred on the ability of ITAs to provide, and help
develop, international contacts; and their efforts to encourage firms to focus clearly
and strategically on the development of their export potential.
Figure 7-12: Beneficiary comments on ITA support

Developing contacts
§ “He introduced us to different places and arranged appointments; he had a
lot of contacts”
§ “He gave us some contacts and advised us how to approach certain
markets”
§ “They helped us with approaching businesses and getting contacts”
Providing focus
§ “Focusing the mind on what we were doing and helping to develop strategy
for export and international trade”
§ “Helped us to focus on export activities and marketing abroad”
§ “It helped me focus and provided guidance; they taught me to think more
constructively about what I was doing and the markets I was going into”
§ “Helped to concentrate our minds on particular markets”
§ “He gave us more focus and identified some market areas that we could
approach”
Events and exhibitions
§ “He was very helpful in pointing us towards one or two particular events
and B2B exhibitions which we eventually got involved with”
§ “They provided advice and help with planning also helped us with
networking through different exhibitions”
Overall performance
The overall performance of the programme was rated very highly by supported
firms: 92 per cent of respondents to the beneficiary survey stated that the
programme had met their expectations.
While there were a handful less positive comments, these predominantly related to
issues beyond the control of the programme, specifically:
§ The global economic downturn impacted negatively on some firms’ abilities to open
up new foreign markets, so their export plans were not fulfilled
§ Some firms decided, having started the programme, that they were not yet ready to
engage in exporting. This is not really a negative of the programme, in that it at least
helped firms to make a considered business decision about their future strategy
Suggestions for improvement
Beneficiaries made few comments about how the programme might be improved.
The comments that were received focused on the duration of support provided
(some businesses would have liked longer), and levels of financial support (some
would have liked more). Figure 7-13 provides some verbatim responses from the
survey. These do not point to any significant problems with the delivery of the
programme, or its performance. Our experience of other business support
programmes suggests to us that firms often would like more support (in time or
money) than is offered.
Figure 7-13: Beneficiary suggestions for programme improvement

Duration
§ If it was more sustainable in the longer term, a prolonged period of support
rather than getting cut off at the end of the programme
§ It could have gone on a bit longer
§ An extension to the programme would have been useful
Financial support
§ The grant system, if there was a longer time to access the money that would
have been a big help
§ It could have run for a little longer and have provided a bit more money, we
only received £3,000
§ An extension to the programme would have been useful, a greater
opportunity for funding in the programme would have been beneficial
7.2.3 Outcomes for supported businesses
Increasing export activity
Figure 7-14 shows business responses when asked what export activity that would
have occurred without their involvement in the programme. Of the total, 12 per
cent of respondents considered that they would not be exporting at all; a further 58
per cent considered that the programme had made some impact on exporting
activity, in terms of making it happen faster, in higher volumes, or across more
markets. Nearly one third (29 per cent) stated that their export activity would have
been exactly the same without the programme’s assistance.
Figure 7-14: Export activity that would have occurred without the programme
Response Number Proportion
Not exporting at all 9 12%
Would have taken longer 22 30%
Would be exporting at lower volumes 15 21%
Would be exporting to fewer markets 5 7%
Would have made no difference 21 29%
Don’t know 1 1%
Total 73 100%
Increasing export values
In Section 8 we will estimate the net impact of the Passport programme in terms of
GVA, derived from the turnover of supported businesses. In the post project
reviews, supported businesses were asked to comment on the extent to which their
export income had changed during the course of the programme. While not as
methodologically robust as the net impact calculations, this nevertheless provides
some indication of the change in export activity. Figure 7-15 shows how export
turnover has changed in beneficiary businesses in various key sectors. The number
of firms providing data is relatively small, but it does suggest that firms have
increased their exports during the period when they received support.
Figure 7-15: Export turnover change in supported businesses (£000s)

Sector Exports at Exports at Change Number of
start end firms
Aerospace 25,132 26,573 6% 22
Automotive 8,418 12,167 45% 38
Creative & Media 213 229 7% 3
Food & Drink 1,056 1,196 13% 24
Leisure & Tourism 153 478 214% 8
Marine 489 879 80% 5
Mechanical Engineering 687 1,105 61% 1
Total 36,147 42,627 18% 101
Despite the fact that the Passport programme is designed for firms new to
exporting, Figure 7-16 suggests that more than a quarter of supported firms already
had export markets amounting to more than 20 per cent of their turnover. The
majority of these businesses had relatively small amounts of exports by value;
however, six claimed turnover of over £1m each in export turnover. Our
understanding of the regulations for the RDA-funded element of Passport is that
there was no specific level beyond which firms were not eligible for support.
However, we would question whether Passport, which is an introductory support
scheme for those new to exporters, was entirely suited to these companies’ needs.
Figure 7-16: Export activity at start of project

Exports at start of project (% of total turnover) Number of firms Proportion
None 20 20%
Less than 10% 33 33%
10-20% 19 19%
More than 20% 27 27%
Total 99 100%
Accessing new markets
Of the 101 firms who fully completed post-project reviews, 62 claimed to have
accessed new foreign markets as a result of support through the programme. There
were 131 country citations (slightly more than two per company). Figure 7-17
breaks down these new markets by global region, which shows that Europe was the
dominant focus for beneficiaries (54 per cent of citations). Figure 7-18 shows the 50
most commonly cited countries in a ‘word cloud’ (the larger the word, the more
citations), helping to demonstrate the wide variety of markets accessed.
Figure 7-17: New markets cited, by global region
80
70
60
50
40
30
20
10
0
Asia Pacific Europe Middle East & Americas
Africa
Figure 7-18: 50 most commonly cited new markets (size reflects frequency)
8. Net impact of the South West RDA’s investments

This section assesses the net additional economic impact of the programmes, i.e. the
extent to which impacts occur as a result of an intervention that would not have
occurred in its absence.33 To calculate additionality a number of variables need
consideration, and these are set out. 34 We also explore qualitative impact - strategic
added value (SAV) - in this section.
8.1.1 Methodological considerations
In developing this assessment we have faced a number of challenges. It is important

to set out these issues in detail, so that we might design ways of avoiding or
mitigating these in subsequent evaluations.
§ Poor response rate to the business survey, driven by:

o Missing or out of date contact information: the contact details of the
individuals involved in each involved success were taken from BG3 forms
associated with each investment. These forms record the details of involved
successes (the characteristics of these are summarised in the previous
chapter). In older forms, names, job titles or departments and telephone
numbers of those involved were missing in some cases
o The time between decision-making and survey: in some cases, the time since
some firms made their investment decisions was several years. People
move on, and corporate memories fade
o Identifying individuals with the knowledge to respond: it is difficult to find
individuals in sometimes very large multinationals who have the perspective
to make a judgement on RDA influence
§ Commercial sensitivity around discussing important business decisions
§ Assessment of business metrics in the region: given the multinational nature of
firms, it is often difficult to isolate variables, such as turnover increase, that have
occurred only within the region.
§ Disaggregation of the impact of the FDI team: isolating and measuring the team’s
impact, as opposed to the influence of other sections of the South West RDA,
(including the impact of grants) is extremely challenging
§ The economic downturn: international economic conditions have changed markedly
in the past two years. This is a major contextual factor in this evaluation, significantly
affecting almost all activity we assess here. Despite this, it is not clear the extent to
which the recession has fed into the results this evaluation. We asked companies to
report their turnover and employment positions in the end of the last financial year
(i.e. April 2009). Across 2009, the productivity/output performance of he UK
economy has been particularly poor – but employment has not fallen off as much as
33
(Page 1, Additionality Guide Second Edition 2004, English Partnerships).
34
The actual computation is as follows ;AI = ( GI * (1-L) * (1-Dp) * (1-S) * M) - ( GI * (1-L) * (1-Dp) * (1-S) * M). Where ‘AI’ is
the net additional impact, ‘L’ is leakage, ‘S’ is substitution, ‘GI’ is the gross impact, ‘Dp’ represents displacement, ‘M’ stands for
multiplier and italics indicate the corresponding data for the reference case.
was expected. There are no clear patterns from the interviews we have conducted
to enable conclusions on how foreign companies have fared in the recession,
compared to UK firms – and what role the RDA have or have not played in this.
Anecdotal evidence suggests that behaviour has differed by nationality, with US
firms more likely to shed employees than, for example, those from Japan. What is
clear is that aftercare has become proportionately more significant for the RDA
through the recession (safeguarding FDI rather than generating new investment per
se). This appears to be a genuinely strong element of the overall programme.
Anecdotal evidence from stakeholders suggests that other agencies in other regions
are only now, rather belatedly, focusing on this area.
To address these challenges, we have used survey results carefully and examined the
evidence we do have in detail. We have explored other FDI evaluations from other
regions (all of which have had similar problems) as well as national evaluation
evidence from the BIS Occasional Paper. The latter is an extremely useful resource
which neatly brings together a decade of evidence. The result is an assessment
based on quantitative survey evidence, evidence from interviews and desktop
analysis, and our own judgement.
8.1.2 Additionality variables
Figure 8-1 overleaf considers all of the relevant IEF additionality variables relevant to
this evaluation, drawing on the evaluation evidence and other research where this is
deemed more robust and/or reliable. The values calculated in this section are then
subsequently used in the following net impact calculations.
8.1.3 Net economic impact
Figure 8-1: Additionality Logic Chain – Inward Investment

Factor Estimate Evidence and Rationale
The overall number of The beneficiary survey of foreign owned companies has not identified any companies who would
foreign owned companies not have invested in the South West if support had not been available. The sample size is very
investing in the South low, and we consider that this is likely to under-report impact slightly.
West might decline, but
Reference Case only marginally, based on The survey evidence indicates that the investment process has been made easier, quicker and
The position if the our survey evidence. enabled larger investments by foreign owned firms in the region than would otherwise have
RDA had not The speed at which foreign been the case. In addition it is clear that, through the work of the FDI team in the initial
intervened owned firms are able to engagement, other teams across the RDA have then provided ongoing support, generating
set up and start trading further impact. The economic impact is therefore likely to be catalytic rather than entirely net-
and the scale of their additional.
initial investments would
probably be lower.
Deadweight Deadweight is 69% In the beneficiary survey, no companies identified that the support they received had made the
Quantification of difference between investing or not in the South West: 100% would have invested anyway. 69%
impact under the of those surveyed considered that the support had no impact on their investment decision –
reference case. they would have invested in exactly the same way (11 firms of 16 who responded to this
question). The remainder considered the impact had accelerated or expanded what they could
do. We are exploring the net additional impact of support on FDI. We have recognised the
important role played by foreign owned companies on domestic economies – this accelerated
/enhanced impact is likely to have economic impact in and of itself. On that basis, deadweight is
69%. This is calculated after discounting multiple responses from the survey question as is
presented in Figure 7-7.
There is an alternative figure from which we could quantify deadweight, namely turnover
attribution. However, given the low number of observations and difficulties in obtaining

accurate turnover data from foreign owned companies, we feel using a more qualitative
measure of deadweight is likely to be a more accurate measure.
In this case the impact may be employment or turnover/GVA leaking out of the region.
The survey has identified a very small proportion of employment leakage (2%). Clearly there are
Less Leakage other sources of leakage in the form of profits sent overseas, for example. Estimating this is not
straightforward, will depend on the nature of the operation, its profitability and not least the
Impact benefiting
Leakage is 2% recession. This element of leakage is understood to be a factor in foreign owned firms and was
those outside of the
taken into account in the appraisal process and is mitigated by the spin off impact along supply
target area
chains. We have assumed this to be an accepted factor when dealing with foreign owned firms
and hence have dealt with leakage of domestic operations only. It is therefore low – in line with
other evaluation evidence.
Less Substitution We explored substitution directly with a small number of FDI beneficiary businesses and found
Where a firm might no evidence that firms had substituted activity to take advantage of the support from the RDA.
substitute existing National research into substitution levels in inward investment activity also suggests that
Substitution is zero.
activity to take substitution is very low, or negligible (5% upper range in BIS research). This makes intuitive
advantage of RDA sense: the scale of an inward investment decision, relative to the direct tangible benefits
support received from the RDA, would seem to argue strongly against any substitution.
In this case displacement could occur when a new foreign owned company takes market share
Less Displacement from an incumbent firm, or creates local scarcity and hence drives up costs. The degree to which
Proportion of displacement occurs will be influenced by the market share of the new company (regional sales)
outputs/outcomes and the proportion of their main competitors based regionally. On this basis, we have multiplied
accounted for by the proportion of the firms’ market (sales) in the South West, by the proportion of the firms’
Displacement is 2%.
reduced main competitors based in the South West. This approach is consistent with that set out in the
outputs/outcomes IEF plus guidance.
elsewhere in the
target area This delivers a very low level of displacement, which is intuitively correct. Large scale FDI in a
region such as the South West is more likely to be focused on exploiting national UK and EU

markets than those within the region itself. As such, the impact on the region’s businesses would
be relatively small.
Plus Composite 1.4 In the absence of survey evidence and the likelihood that supported businesses will already have
Multiplier established global purchasing patterns (as compared to the level of regional purchasing)
Further economic meaning that a figure of 1.4 as taken from BIS benchmarks is a more realistic regional composite
activity associated multiplier than the average derived from regional accounts (1.6). This figure has been arrived at
with additional following consultation between the evaluators and RDA colleagues.
local income or
supplier purchases
Source: CONSULTING INPLACE.
8.1.4 GVA Impact
We have assessed the net-additional impact in terms of regional Gross Value Added
(GVA). The information below has been set out in more detailed in Appendix IV –
technical annex. We have noted above that the impact is catalytic; the RDA
accelerates and enhances FDI in the South West. This process is therefore not
straightforward, is complicated by the recession and low response rates from
beneficiary firms. Our estimate of GVA impacts have been driven by self reported
changes in annualised turnover from the businesses that took part in our survey,
attributed to the RDA support they received, then grossed up to the number of
businesses that have been supported. Overall, across the sample we identified
£10.4m in additional turnover in supported firms during the period they had been
supported by the RDA, representing average growth of 32%. Within these firms, our
survey suggests that just under a third of supported businesses have reported to us
that the support they received has had an effect on their investment, increased the
scale accelerated the process, etc were it not for the support provided by the RDA.
After allowing for additionality adjustments, this suggests that some £4.4m of
turnover in our sample can be attributed to RDA support.
The steps for calculating the net turnover increase in the sample is set out in Figure
8-2.
Figure 8-2: Adjusting sampled turnover changes for additionality factors

Stage Operation Value
1 Total positive turnover increases £10.4m
2 Of which, proportion of turnover attributed to
SWRDA intervention (31%) £3.3m
3 Less displacement (1.8%) £3.2m
4 Less leakage (1.8%) £3.1m
5 Plus Multiplier effects (1.4) £4.4m
Source: Consulting Inplace 2010
We then transform the additional turnover generated in the sample into GVA and
then estimate a likely net effect for the population of businesses supported. This
process is set out in Figure 8-3. We also consider persistence effects. The figures in
brackets show the range of GVA, based on the confidence interval generated by our
businesses survey.
First we convert net turnover to economic output (GVA) using Annual Business
Inquiry regional accounts, which provide standard turnover to GVA ratios – this
provides some £1.5 million. In addition, we need to take account of persistence
impacts, i.e. allowing for continued economic impact. We have used a persistence
impact, of 5 years consistent with the practical guidance from DBERR on
implementing IEF evaluations made in line with the national RDA evaluation35.
Although the figure is the average persistence of an International Trade
intervention, in the absence of any specific FDI related metric or survey information
we consider it appropriate to use this figure. We have made no allowance for time
lag, as the impacts identified in our survey has already been identified by companies
that have been supported – (i.e. it is already in effect). Finally, we gross up the
35
The impact of RDA spending. BIS March 2009. See technical annex for justification of the use of this data source
impact identified in our survey sample to take account of the number of distinct
companies that have been supported by the RDA throughout the programme (121).
The net impact is some £10.1m, (plus or minus some £2m). When we take account
of persistence effects the net impact is some £57.6 million (plus or minus some
£11.3 million) since 2004. While persistence benefits do include some measure of
future economic impact, beyond the figures here it is not possible to quantify these.
Figure 8-3: Calculating net additional GVA benefits

Factor and description Estimate
Net Additional turnover attributable to SWRDA Intervention £4.4m
Factor to transform turnover to GVA 0.34
Net sampled Additional GVA (actual) £1.5m
Net sampled Additional GVA incl. persistence effects £8.6m
Grossing up to region wide impacts
Sample Size 18
Population of supported businesses 121
Scaling factor 6.72
NET ACTUAL ADDITIONAL GVA £10.1m
(£8.1m - £12,0m)
NET ADDITIONAL GVA including persistence effects £57.6m
(£46.3m - £68.8m)
Value for Money
GVA per £ of RDA investment £2*
GVA per £ of RDA investment (including persistence) £14
Source: Consulting Inplace. Note: Figures may differ due to rounding
NOTE:*GVA per £ of RDA investment rounded. (Actual number £2.40).
8.1.5 Employment Impact
In addition, we are able to estimate net additional jobs generated through the
programme. From the beneficiary survey, we identified 760 additional jobs as a
result of the intervention. We then adjust this figure for attribution, leakage and
multipliers and gross up to the regional level. Please note that we revert to a
multiplier derived from the regional accounts as calculated by the South West
regional observatory of 1.6, as catalytic effects from employment are likely to
remain high regardless of whether a business is home-grown or not. After
accounting for additionality factors, the gross increase in employment of 760 is
adjusted downwards to 143. This is set out in Figure 8-4.
Figure 8-4: Adjusting sampled employment changes for additionality factors

1 Total increase in employment 760
2 Increases in employment attributed to SWRDA 91
intervention (12%)
3 Less leakage (1.8%) 90
5 Plus Multiplier effects (1.6) 143
Source: CONSULTING INPLACE.
NOTE: Numbers rounded.
We can then translate this into impacts at the population level by replicating the
process above (Figure 8-5). On this basis, the intervention has created some 963 jobs
(between some 775 and 1,151 when we apply the confidence intervals generated
through the survey).
Figure 8-5: Calculating net additional employment benefits

Net Additional employment attributable to SWRDA
143
Intervention
Additional GVA generated through employment (using the £6.2m
average GVA per employee of foreign owned firms in the SW) (5m – £7.4m
Sample Size 18
Scaling factor 6.72
Net additional employment through intervention 963
(775 – 1,151)
Net Additional GVA via employment £41.7m
(33.6m – £49.8m)
Source: Consulting Inplace. NOTE: Numbers rounded. We have not made assumptions on persistence for this
measure as we quantify persistence impacts in relation to attributed net-additional turnover.
8.1.6 Value for Money
Economy
This examines whether activities were delivered at minimum cost. The RDA operates
a number of different models for the overseas offices and has sought to minimise
costs on an ongoing basis, through internal and external audits. The overseas offices
are maintained in a number of different ways, including using overseas
representatives who are physically based in consulates or who work from home.
Overall the size of the RDAs overseas operation and the amount invested is
reasonably modest and expenditure has been reasonably stable and predictable,
despite some recent upward pressure as a result of unfavourable exchange rates.
The impact assessment appears to verify the migration of overseas offices to UKTI, in
particular in Japan, where historic expenditure has been higher than elsewhere.
Although it is not clear if this will result in anything more than marginal cost savings.
Historically, sub-regional partners have not been engaged as much as they could, to
maximise what resource there is in the region. This area of the operation is likely to
become increasingly important and the evident improvements here in the last two
years should be maintained to maximise existing resources and expertise.
Efficiency
This considers the benefits – net outputs and outcomes versus expenditure. The net
cumulative GVA impact offers a good rate of return. In total since, 2004 (and
including 2008/09, the South West RDA has invested £4.15 million in overseas
representation. Regionally, we estimate this to have generated some £57.6 million in
net GVA impact. For every £1 invested, approximately £14 has been generated in
the region. There is limited information with which to compare this return and we
would caution that the exact methodological approach may differ somewhat in
other studies. In addition there may be differences in budgetary allocations and
there are differences in the size of overseas operations. Nevertheless, four available
benchmarks indicate a return on investment of £1 RDA investment to £41 benefit in
the North East, £1:29 in the East Midlands and £1:15 in the West Midlands.36 a more
recent study of Scottish enterprise indicates ROI of £1:1137. Compared to other
available benchmarks, the South West RDA has generated a reasonable rate of
return.
Effectiveness
This considers if the objectives have been met. These objectives and our assessment
are set out in the following table.
Objective Assessment
Maintain and increase the contribution The number of involved successes have
of overseas owned company investment increased into 2008/09 in line with
to the growth and development of the additional resource domestically and
South West of England priority sectors.38 reflecting new overseas offices in
emerging markets. Data held by the RDA
on the involved successes suggests that
the majority were within the priority
sectors. Overall this objective has been
achieved.
Increase awareness globally of activity All RDAs have overseas offices, although
within the regional priority sectors and the size and scale differs. The level of
of the region itself. Particular emphasis engagement with foreign owned
is placed on leading edge, globally companies is good, some 120 different
competitive activity that advocates the foreign owned firms have has support
region and encourages increased from the RDA, in a range of different
collaboration with an investment in the sectors. This involvement undoubtedly
region. has increased awareness of the South
West key sector offer amongst foreign
owned firms. Overall this objective has
been achieved.
Achieve greater impact of FDI and Essentially this is an ongoing objective
priority sector focused activity on other delivered through the aftercare teams
key Agency investment initiatives – and others in the RDA and sub
particularly strategically positioned regionally.
location focused investments in the
South West sub regions.
Demonstrably contribute to the A large net additional impact has been
achievement of Agency Corporate Plan generated in high value adding sectors,
objective’s and targets. we have quantified this in both GVA and
employment terms. A review of the
sectors of the involved success
generated suggests reasonably success
36
ADL: Evaluation of ONE Investment, Aftercare and Overseas Function.
37
The Economist, June 3rd 2010. ‘Pickles cable and the search for the new economy.
38
The Agency’s priority sectors are: advanced engineering and aerospace; ICT; creative industries; marine;
environmental technologies; biotech; and food and drink.
in the agencies key sectors.

Overall this objective has been met.
8.1.7 Strategic Added Value
Strategic Added Value (SAV) is an important factor in determining the impact of

RDAs. As regional partners, leaders and influencers, the impact of RDA activity is
often more than that achieved through direct project and programme delivery
alone. The IEF framework defines a series of areas where RDAs can have a strategic
impact, and each of these is considered for the FDI programme in Figure 8-6.
Figure 8-6: Strategic Added Value for FDI programme

SAV element Evaluation assessment
Strategic leadership The South West RDA has maintained an overseas presence
and catalyst throughout the period of evaluation. Throughout this time the
partnership with UKTI was deemed to be important and reasonable
relationships have been maintained – recognising the particular
challenges involved.
Sub-regionally in the UK, the RDA’s performance in this area appears

to have been mixed, with sub-regional partners disengaged and
occasionally confused historically. This appears to have improved
markedly in the past two years. An FDI operational group has been
created which meet quarterly, the aim is to ensure that all partners
are aware of the work that each other are doing and coordinate
efforts where appropriate. These meetings are also attended by
UKTI staff. The reinstatement of these meetings has been genuinely
welcomed and is an important element of regional co-ordination.
The sector focus is clearly articulated in investment propositions and
there has been a reasonably strong fit of involved FDI success within
the RDAs key sectors.
In terms of outcomes for the businesses themselves, there have

been instances of political support and advocacy to resolve
particular issues for strategically important companies. In addition to
the more practical support, this appears an area of added value that
the RDA operating as a regional body – can and has added value.
The RDA have led the organisation of events, co sponsoring events/
briefings and undertaken numerous visits with overseas firms,
alongside UKTI and Sub-regional partners. The RDA appears to have
been successful at ‘getting the regional message out’ to UKTI
through the overseas offices.
The activities generate net-additional economic activity, typically
making investment of foreign owned firms quicker, larger and less
expensive. We have not found evidence in our primary research of
investments that are entirely additional to the region.
Strategic influence Clearly all the work of the overseas representatives falls in to this
category – we discuss each office in chapter 5. We have found some
evidence that over time all RDAS have developed a more
complementary approach to UKTI through clearly articulated – and
tightly focused sector propositions. Again the relationship to
overseas staff at UKTI and within consulates and embassies is
considered important . The advocacy example with HMRC set out in
chapter 7.1.1 as a case study is one such example where the RDA has
been able to use its strategic influence to secure a practical outcome
that has generated an economic outcome for the region.
Leverage The overseas offices work tactically, alongside UK colleague foreign
owned firms, including those already located in the South West, to
leverage in South West suppliers and/or fill gaps in the domestic
supply chain. This includes introduction of FOC’s to domestic service
providers (accountants etc). This economic leverage is substantial.
Synergy Performance in this area has been reasonably good – recognising
there is an element of competition for FDI. Sub-regional
coordination has improved. Coordinating information internally
beyond the FDI team with the wider RDA could improve.
Engagement Information sharing has improved with sub-regions through the FDI
operational group which meets quarterly. This has been positively
received and has clear benefits to both regional coordination and
awareness foe ach other activity, and cooperating in developing
Proposition to Foreign companies, clearly the RDAs role.
This has had a positive effect on performance in the last eighteen

months and this work should continue. With resources likely to
tighten for all partners moving forward this is a key activity and one
that should be maintained and enhanced as members/the RDA see
fit.
Source: CONSULTING INPLACE from stakeholder interviews.
8.2.1 Methodological considerations
Compared to FDI, the methodological challenges have been less pronounced for the
international trade evaluation. The survey response was higher (73 of 330
businesses who completed the programme), providing a confidence interval of +/-
10% at the 95% level. While this is a reasonable level of confidence, it is still lower
than the expectation of 5% stated in IEF guidelines. Furthermore, the response rates
for individual questions about turnover change and additionality vary (i.e. not all 73
firms responded to every question). The results of the net impact assessment need
to be read in the context of these limitations.
8.2.2 Additionality adjustments
Figure 8-7 overleaf outlines the values and explanations for the additionality
adjustments being made to derive the net impact of the international trade activity.
It draws evidence primarily from the survey, but also BIS evidence of additionality
factors from a range of other similar evaluations.
Figure 8-7: Additionality Logic Chain – International Trade Promotion

The number of
small businesses
Reference Case exploring and Figure 7-14 suggests that 12% of supported businesses would not be exporting if it had not been for
The position if the exploiting export their involvement in the Passport programme, and a further 58% had seen other positive effects, such
RDA had not opportunities as scale and speed of activity. However, 29% did not think that the programme had made an impact on
intervened would have been their exporting activity.
lower, based on
survey evidence.
Deadweight This figure represents the level of turnover that survey respondents believed would have occurred
Quantification of anyway without the programme intervening. This figure accords with the 12% of businesses who
impact under the considered that they would not be exporting at all without the help of the programme (i.e. 88% would
reference case. have undertaken some exporting without support)
80.8%
This is a high level of deadweight compared to national evaluation evidence (BIS Occasional Paper No.1),
which indicates an upper end range of 70% deadweight for international trade activities (22
observations, 10% confidence interval). However, our survey evidence is equally robust in confidence
interval terms, so we have stayed with this figure.
Less Leakage
Proportion of Survey responses suggest a very low level of leakage. This seems intuitively correct, given that support
outputs that was targeted to SMEs, who are less likely to have multiple sites and activities beyond the region.
1.4%
benefit those National evaluation evidence confirms this low level. BIS report an upper end range of 5% based on six
outside of the observations of internationalisation activity.
target area
Less Substitution Data on substitution was not available from the survey, so we have used national estimates. BIS
Where a firm might estimate a mean figure of 3.3%, although this is only based on three observations at an 8% confidence
3.3%
substitute existing interval. Nevertheless, we assess that the likelihood of substitution is very low, given the very limited
activity to take direct financial support involved (£3,000, reducing to £1,500 over the course of the programme).

advantage of RDA
support
Less Displacement
Proportion of This figure, derived from survey responses, combines the value of the regional market to supported
outputs/outcomes businesses, and the proportion of regional competitors, and is consistent with IEF+ guidance.
accounted for by This is considerably lower than the 20.4% mean displacement figure provided by BIS for
5.9%
reduced internationalisation activity, which is based on 20 observations. However, intuitively we would expect
outputs/outcomes displacement to be low, given that increased business growth and activity delivered by the programme
elsewhere in the is likely to be focused primarily on overseas markets rather than on inter-regional competition.
target area
Plus Composite
Multiplier
Further economic Evidence was not available from the survey, so we have used the composite multiplier as identified in
activity associated 1.6 South West Regional Accounts. We consider the multiplier effects in an export promotion programme as
with additional involved firms are likely to have more localised supply chains as compared to foreign direct investors.
local income or
supplier purchases
Source: Business survey, BIS additionality guidance and CONSULTING INPLACE calculations
8.2.3 Net GVA impacts
Figure 8-8 provides an overview of the net GVA impact calculation for the
international trade programme. The following notes explain elements of the
calculation:
§ Turnover change from the survey has been converted into GVA using the relevant
sector GVA figures from the Annual Business Inquiry and annualised based on the
number of years of support. This annualisation is required as we have turnover
changes across variable periods. Please see appendix IV for more details.
§ Details of, and rationale for, the additionality factors and multipliers are provided in
figure 8-7. Some figures have been reversed in order to perform the calculation.
§ Persistence effects apply a rate to the figures in order to reflect that benefits are
likely to persist over a five year period, consistent with guidance from IEF+ made in
line with the national RDA impact evaluation. The figure is average persistence of an
International Trade intervention. In the absence of survey information, this provides
the best source of evidence on persistence in interventions of this type.
§ Scaling to the level of the population translates the GVA change to all businesses
supported (those completing the programme) according to the proportion of
positive survey responses on turnover change.
§ GVA per £ of RDA investment divides the net GVA figures by the total amount of the
South West RDA’s investment to provide a headline ratio.
The steps of the calculation are shown in the following two figures.
Figure 8-8: Adjusting sampled turnover and export turnover changes for additionality
Stage Overall Export
Performance Performance
1 Total positive turnover increases £26.19m £11.82m
2 Transforming turnover to GVA £12.42m £4.38m
3 Changes in GVA attributed to SWRDA £2.38m £0.84m
intervention (19%)
4 Less leakage (1%) £2.35m £0.83m
5 Less Substitution (3%) £2.27m £0.80m
6 Less displacement (6%) £2.14m £0.75m
7 Plus Multiplier effects (1.6) £3.42m £1.21m
Source: CONSULTING INPLACE, 2010. Note: Figures may differ due to rounding
The above figure adjusts our sample of businesses for additionality factors, and
subsequently we are interested in what the possible benefits are at the regional
level including persistence effects.
Consulting Inplace 79
Figure 8-9: Adjusting sampled turnover and export turnover changes for additionality
Factor Overall Performance Export Performance
Additional GVA £3.42m £1.21m
Additional GVA plus persistence effects £13.5m £6.9m
Sample Size 69
Scaling factor 4.52
NET ADDITIONAL GVA £15.5m £5.5m
(£12.5m - £18.5m) (£4.4m - £6.5m)
NET ADDITIONAL GVA including £61.0m £31.3m
persistence effects (£49.1m - £72.9m) (£25.2m - £37.4m)
GVA per £ of RDA investment £5 £2
GVA per £ of RDA investment (including £21
persistence £11
Source: CONSULTING INPLACE, 2010. Note: Figures may differ due to rounding errors
8.2.4 Employment impacts
We are able to estimate the effects of support on employment, including both net
additional jobs and also GVA generated as a result of increased levels of
employment in the regional economy. From the beneficiary survey, we identify 236
additional jobs as a result of the intervention.
Figure 8-10: Adjusting sampled employment changes for additionality factors

2 Increases in employment attributed to SWRDA 236
intervention
3 Less leakage (1.4%) 233
5 Plus Multiplier effects (1.6) 372
Source: CONSULTING INPLACE, 2010. NOTE: Figures may differ due to rounding errors.
After accounting for additionality factors, the SWRDA attributable increase in

employment of 236 is adjusted upwards to 372 after having considered employment
leakage and multiplier effects of employment. We can then translate this into
impacts at the population level.
Figure 8-11: Calculating net additional employment benefits

Net Additional employment attributable to SWRDA
372
Intervention
Additional GVA generated through employment (using the £11.4m
GVA per employee of UK owned firms in the SW)
Sample Size 69
Scaling factor 4.52
Net additional employment through intervention 1,052
(947 – 1,157)
Net additional GVA generated from employment £51.5m
(£46.3m - £56.7m)
Source: CONSULTING INPLACE. NOTE: Numbers rounded.
The intervention has created between 947 and 1,157 net employment (FTE
equivalents) which is equivalent to between £46.3m and £56.7m of GVA to the
regional economy.
8.2.5 Value for Money
Economy
This examines whether activities were delivered at minimum cost. Evidence from
the evaluation suggests that the international trade intervention has been delivered
economically. RDA support was channelled directly into a long running and
successful UKTI intervention, meaning that start-up costs were kept to a minimum,
and there was no long lead-in time for the establishment of the programme’s
activities and processes.
Efficiency
This considers the benefits – net outputs and outcomes versus expenditure.
§ GVA: as Figure 8-9 demonstrates, the value for money delivered by the programme
in GVA terms is reasonable: £5 for every pound of RDA money invested. Within this
overall figure, £2 has resulted from export activity.
§ Employment: all but two of the supported companies responding to the survey
suggested that they had been able to increase employment as a direct result of the
programme. The total number of jobs created, according to the survey and based
on the impact of the programme alone, was 236. Scaled up to the programme level,
this suggests indicatively that the programme may have been responsible for as
many as 1,056 jobs. This is much higher than the 192 ‘claimed’ job outputs for the
programme as a whole, according to RDA central records. The difference between
the two may be a cause of different interpretations of a ‘job’ (output claims use
strict definitions), and the likelihood of persistent employment benefits occurring
after formal support through the programme has ended.
Effectiveness
This considers if the objectives have been met. The international trade activity did
not have a formal set of objectives, but its overall thrust is clear. The programme
was intended to support businesses new to international trade in improving their
export potential. The increased value of turnover produced by supported
businesses as a result of the programme has been high, as has the net effect on
GVA. In the beneficiary survey, some 70% of businesses reported a benefit to their
exporting potential from their involvement in the programme, and qualitative
comments have been very complimentary.
Looking at the net GVA and turnover figures, at first glance it might seem surprising
that the value of export growth has only been a relatively small proportion of overall
business turnover and GVA growth. However, wider research and evidence strongly
points to the fact that exporting businesses tend to be more efficient and productive
generally, compared to their non-exporting counterparts. It is therefore likely that
the programme, in promoting internationalisation, has succeeded in improving the
wider business performance of the firms it has supported.
8.2.6 SAV assessment
There is very little evidence of SAV within the South West RDA’s investment in the
Passport to Export programme. Essentially, the RDA funded an expansion of an
existing UKTI programme, and played no other role in its strategic delivery. All of
the impact has come through direct programme delivery. This is not necessarily a
criticism. Indeed, it has avoided any duplication of effort between the RDA and
UKTI.
What RDA investment did deliver, aside from a scale increase in international trade
support, was an explicit focus on strategically important sectors identified in the
Economic Strategy, and therefore a greater sense of strategic alignment between
UKTI activities and the region’s economic ambitions.
9. Conclusions and recommendations
9.1.1 Conclusions
A diverse range of support is provided from the RDA, both overseas and in the South
West to foreign owned companies, before, during and after investment. The
complexities of the interrelationships between the RDA and supported businesses,
and between RDA departments, means that this evaluation has struggled to isolate
specifically the impact of the FDI team alone. While this cross-departmental
collaboration makes sense to maximise the support to inward investors and should
be encouraged, it makes attribution extremely difficult.
Notwithstanding the methodological challenges, our assessment is that the South

West RDA’s FDI support is estimated to have generated some £57.6 million net
additional GVA in the region since 2004: a return of some £2 for every £1 the RDA
invests before persistence, £14 for every £1 invested when persistence effects are
included.
While on the ground support in the region is clearly of material value to inward
investors, there is very little evidence from this evaluation to suggest that foreign
owned companies are persuaded to redirect investment from another region in the
UK, or overseas, as a direct result of pre-decision interaction with the RDA, either in
the region or abroad. Nevertheless, a proportion of foreign owned businesses have
reported that the speed at which they were able to establish operations in the
region has been increased, and the scale of their initial investments has been
enhanced, as a direct result of the support they have received. If the RDA is not
directly influencing new FDI decisions, it is certainly accelerating and enhancing the
flow of FDI into the South West. It is also, in some cases quite forensically,
supporting the development of key sectors.
This is not to suggest that the RDA’s overseas offices are superfluous or do not
support the operation. They clearly do. But a strength of delivery is the degree of
integration between the FDI, sector and area teams. This structure appears to have
benefited the region through the recession, where the balance between
safeguarding economic activity and attracting new economic activity changes
somewhat.
9.1.2 Impact lessons
There are two elements to economic impact in this case: generating new FDI into
the South West, that would have otherwise gone elsewhere, and enabling larger or
faster FDI investments. The impacts we have identified have been generated
through the latter route. In addition, the evidence shows that those firms that have
reported impact have been supported in other ways, through a grant, for example.
This highlights the degree of integration, but also the difficulty in isolating and
quantifying impact and the fact that multiple activities have to be delivered to
foreign owned companies in order for an involved success to be claimed.
Despite this, it is likely that if there are genuinely net additional FDI firms who invest
in the region, then the upside impacts are likely to be considerable. This has not
come through the survey due to combination of factors including low response
rates. In the absence of these, the net additional impact generated by the RDA
activities appears be catalytic. The vast majority of responding firms (83%) said the
support they received made no difference in their decision to locate/invest in the
South West.
9.1.3 Policy lessons
9.1.4 Inward Investment
Additionality vs. return on investment
The economic impact calculations for the South West RDA’s inward investment
programme indicate a high return on investment, but with low additionality.
Policymakers may want to consider the potential implications of this for future
inward investment strategies.
Low additionality – and high deadweight – suggest that (information) market failures
at the level of individual businesses may be quite weak (i.e. a large majority of firms
have not needed RDA support to relocate to the South West). That the region
continues to underperform in terms of FDI relative to most other regions may
therefore have more to do with structural weaknesses than information barriers, for
example relative geographic remoteness from large markets and trade routes.
The alternative argument is that the high return on investment – the size of the
economic benefit accruing from FDI – justifies intervention, almost irrespective of
the level of additionality. Analysis of the characteristics of foreign owned companies
has underlined the importance of these firms in the South West. On average they
pay more, have a higher value supply chain and grow faster (both in terms output
and employment) than UK owned firms in the region.
Sector focus
In terms of the key sector focus of the overseas representatives, their focus has not
changed since 2004. They key sectors remain suitable, are focussed on key regional
strengths and are likely to generate the high value adding/skilled employment that
the RDA seeks to support. We have found no evidence to suggest these should be
reconsidered at this time. However, they deserve to be reviewed periodically as part
of ongoing investment appraisals and evaluation.
Integrated operations
Stakeholder consultees as well as foreign owned firms have indicated that the
Agency’s integrated approach, focus on aftercare and on sector development,
through UK based RDA staff and the overseas offices, works. As noted above, the
current level of integration is a strength of delivery.
Programme development
In terms of future project planning clearer objectives could be developed in

subsequent funding approvals, and set out in more detail in corporate plans. These
objectives should adhere to SMART principles.
Delivery mechanisms
The delivery structure for the RDA’s overseas offices differs between countries. So
too does the importance attached (but not necessarily the nature of) the
relationship to UKTI. There is no evidence to suggest that one delivery structure has
worked more efficiently and effectively than others. Despite this, the structure of
the Japanese office has recently changed. The RDA office has closed with staff
migrating to UKTI contracts with regional targets. The success of this new format
must be examined closely in future monitoring activity, compared to the existing
‘stand alone’ RDA offices.
9.1.5 Process lessons
It is clear that maintaining overseas offices poses some challenges from a

management and practical perspective. Labour turnover is generally high in overseas
posts and in UKTI which interrupts momentum and requires continual effort in
ensuring that the South West message is sufficiently understood and communicated
to potential investors. RDA investment has been relatively consistent throughout the
period under evaluation, although recently the proportion of total programme
spend that has gone directly to maintaining overseas posts has reduced, whilst total
programme expenditure has increased, generating the highest number of involved
successes since 2004. Whilst not a straightforward relationship, the evidence
appears to suggest that the RDA should not only maintain overseas presence, but
that a well resourced RDA operation in the UK is important alongside this in
generating impact. Demonstrating impact is challenging and we will be working with
the RDA to ensure that this is integrated into operations, where appropriate and
practicable. As the historic FDI operation moves into the new globalization project,
funded to 2013, and intended to really embed this integrated structure, it will be
tested. Attracting ‘new’ and keeping ‘old’ FDI will be difficult as the global (and
certainly UK) economic outlook is still so uncertain. Nevertheless, the role of these
firms in driving economic growth in the South West appears absolutely clear.
Aims and objectives for the programmes were developed early on although these
were subsequently amended in internal documents, subsequent to project appraisal
documents. These objectives in our view would have benefited from greater clarity
and ensure that they are drafted according to SMART principles. The objectives
developed for the South West Globalisation Project – which effectively replaces the
FDI programme evaluated here, are sufficient. This will allow a greater degree of
integration between FDI and International Trade promotion programmes.
The agency is sufficiently involved in delivery. Relationships with UKTI domestically

and overseas are generally good. Sub-regionally engagement coordination and
communication has improved and the quarterly meetings that have been instigated
with sub-regional partners should be maintained. Stakeholders have noted

particular improvements in the quality of research materials.
There are also a number of methodological conclusions. Speaking to businesses that

have been supported has proved a real challenge and has undermined efforts to
quantify impact precisely. In this, discussion with other RDAs and a review of the
evidence indicates we are not alone. There are several complicating factors:
§ We are essentially dealing with commercially confidential decisions which were

made a number of years ago, abroad, during a period of economic growth. In the
last year operation have in some cases closed and in many cases changed, moved or
their parent companies have been forced to make redundancies or otherwise scale
down their operations. Business participation in surveys is always low and we are
dealing with a small population of extremely busy people. We need to ask them
confidential questions. A standard range of data needs to be collected at the point
when the company is classified as a ‘success’, as a pre-condition of support. This
need not be onerous.
§ The new IEF+ guidance rightly challenges evaluators to address the inconsistencies
and gaps in existing evidence and delve deeper in exploring economic impact. We
should balance this against what information we can realistically obtain from
beneficiary surveys. Moving forward, we should explore what information can be
obtained from published company accounts, namely changes in turnover to fill in
gaps and cross reference findings. A smaller number of key data fields should be
collected which presents a ‘support path’ for foreign companies across the RDA. This
will need to be centrally held and be accessible to all those interacting with the
companies in question. This should include, recorded on a consistent basis:
§ Source and destination of FDI;
§ Source of lead;
§ Type of support received;
§ Level of involvement from public sector: (UK/Overseas/sub-regional or all –
light, intensive/ongoing);
§ Overseas office involvement (Y/N) (at pre, during, post investment);
§ Turnover and staff (SW operation only in first year of support, together with
an estimate of future impact);
§ Are they willing to be contacted in the future?
§ Confirmed capital investment and existing plus any new SW based
employees;
§ Contact name and position (email or phone number);
§ details of others involved in the decision who can report on its impact;
§ Influence of the RDA on bottom line/productivity/location.
9.1.6 SAV/Partnership lessons
When the firms are based in the region SWRDA has SAV impact but this is where the
various other agencies get involved, making it difficult to align and coordinate
activity. There appears to be a differing degree of engagement within sub-regional
partners and some have been critical of the RDA, at least historically. These related
to a perceived compartmentalisation and lack of co-ordination at the RDA. In
addition there have been instances where information provided was to one section
of the RDA which was apparently not shared with another. Similarly, the RDA has
apparently requested the same information from sub-regional partners more than
once.
The quarterly meetings have been well received and there are clear benefits in
maintaining and enhancing activity. Ongoing communication and coordination with
sub-regional partners has clear benefits.
9.2.1 Conclusions
Between 2004 and 2009, the South West RDA adopted a straightforward approach
to supporting the internationalisation of trade. It expanded the scale of an existing,
proven UKTI intervention (Passport to Export) and also broadened its scale to be of
more relevance to the RES.
9.2.2 Impact lessons
The impact on businesses, and the regional economy in terms of jobs and GVA, has
been very high. This suggests good targeting of businesses by the programme,
efficient and constructive activity delivered through its activities and ITAs, leading to
a demonstrable impact on business performance. That export activity is widely
regarded as having very positive benefits for businesses (in terms of raising
productivity, efficiency, etc.), it is perhaps not surprising that the impacts should be
considerable. It is also worth noting that few of the companies we spoke to had
negative business experiences as a result of the recent economic downturn. While
the recession has certainly hit global trade, this may suggest that the programme
has helped to inject some robustness into business activity. Our assessment is that
the programme has generated some £61 million net additional GVA in the region
since 2004, of which £31 million is accounted for by improved trace performance.
Overall this generates a return of some £5 for every £1 the RDA invests before
persistence, £21 for every £1 invested when persistence effects are included. For
export performance, the results are £2 and £11 respectively.
9.2.3 SAV/Partnership lessons
The simplicity of the Agency’s approach, which has delivered a highly efficient
programme, has also limited its Strategic Added Value. This was a financial
investment in an existing UKTI programme, with no other involvement required (or
identified by us) by the RDA. If there is a strategic value to the programme, then it is
the expansion of Passport to ensure its coverage of industry sectors of strategic
importance to the region. Furthermore, while the RDA was not directly involved in
delivery, the initiative has practically reinforced the way in which UKTI and the
Agency collaborate on internationalisation activity.
9.2.4 Policy lessons
Additionality vs. return on investment
There is a similar argument to be had on additionality and return on investment here

as there was for inward investment. The additionality of Passport to Export was low,
but its impact in terms of regional GVA was high.
While Passport to Export has generated significant economic impact at the company
level, the historical data still suggests that the South West underperforms on exports
compared to England as a whole. This evaluation has not identified any specific
reasons for this poor regional performance. However, the industrial structure of the
economy, and the lack of freight gateways are likely to be contributory factors. In
any wider policy considerations of how the South West could improve the
internationalisation of its economy, these large strategic issues need to be
considered.
Delivery
This is an interesting example of an RDA funding an intervention that is already

being successfully delivered by another public sector organisation (UKTI). Beyond its
financial contribution, and the stipulation of required outputs (specifically the
strategic sector focus), the South West RDA has played no role in managing the
delivery of the project. Given the strong return on investment, this seems entirely
pragmatic from the RDA’s perspective. But to a certain extent, it does beg the
question as to the value of the RDA’s role, when it is reduced to little more than a
financial investor in another arm of government.
APPENDIX I
Interviewees
§ Ellen Stallins, Gary Chambers, James McNaughton, Denise Reeves, Steven Bohane,
Andrew Southall, Steve Richards, Ban Liu, Craig Ondarchie, Michael Strohecker,
Katherine Ellis, Amrita Sadarangani, South West RDA
§ Amanda Bembridge, Matthew Cross and Kate Martin, Plymouth City Development
Company;
§ Maureen Gori de Murden, Exeter City Council;
§ Lucy Hunt and Nick Blandford, Cornwall Development Company
§ Helen Heanes, Dorset County Council
§ Jo Rufus, Bournemouth Dorset and Poole. Property Pilot Project Officer.
§ Valentina Di Michelli, West of England Partnership
§ Jason Carter - Deputy International Trade Director South West, UKTI
§ Clive Wray – General Manager, UKTI South West
§ John Thompson – International Trade Advisor, UKTI South West
§ Tracy Ruff – International Trade Manager, UKTI South West
§ John Cornbill – Managing Director, The Insight Works
§ Andrew Fraser – ITA Team Leader, UKTI South West
§ Nigel Jump – Chief Economist, South West RDA
APPENDIX II
Data Tables
Figure A1: Source of FDI by Year

Country 2004/05 2005/06 2006/7 2007/08 2008/09 Total
Australia 5 6 11 4 26
Canada 1 3 4 8
Cayman 1 1
Islands
China 1 4 2 4 11
France 1 4 5 2 2 14
Germany 3 1 1 5
Hong Kong 1 1
India 1 1 5 7
Israel 1 1
Italy 1 1 2
Japan 2 5 6 4 4 21
Netherlands 1 1 2
New Zealand 1 2 3
Oman 1 1
Slovenia 1 1
Sweden 1 1
Switzerland 1 1
United States 6 10 5 5 14 40
Total 12 30 35 28 41 146
Source: SWRDA – UKTI agreed list 2004-2009.
Figure A2: Involved Successes - Sector of FOC (raw data)

Sector 2004/05 2005/06 2006/7 2007/08 2008/09 Total
Aerospace/Avonics 2 2 9 2 9 24
Automotives 1 2 3 3 3 12
Telecommunications 1 3 4 2 1 11
Engineering 1 3 4 2 10
Electronics 2 4 1 2 9
Financial Services 2 3 3 8
Healthcare 1 1 1 1 4 8
Software 1 4 3 8
Food and Drink 1 2 2 1 6
Info/communications technology 1 2 2 1 6
Business (and Consumer) Services 3 2 5
Environmental 1 2 1 4
Airports 1 1 1 3
Construction 1 2 3
Leisure and Tourism 3 3
Agriculture, Horticulture and Fisheries 1 1 2
Biotechnology and Pharmaceuticals 1 1 2
Education and Training 2 2

Entertainment Industry 1 1 2
Household Goods, Furniture and 1 1
Furnishings 2
Machine Tools 2 2
Power 2 2
Textiles, Clothing and Footware 1 1 2
Defence 1 1
Manf. Medical and surgical equipment 1 1
Metal Products 1 1
Mining 1 1
Plastics 1 1
Publishing/Printing 1 1
Creative and Media 1 1
Giftware, Jewellery and Tableware 1 1
Marine 1 1
Ports and Logistics 1 1
Total 12 30 35 28 41 146
Source: SWRDA – UKTI agreed list 2004-2009.
APPENDIX III
Beneficiary and non-

beneficiary survey
questionnaires
FDI Beneficiary Survey

ASK TO SPEAK TO NAMED RESPONDENT, OR SOMEONE WHO MIGHT KNOW ABOUT
THE INWARD INVESTMENT SUPPORT THEIR COMPANY RECEIVED FROM THE SOUTH
WEST OF ENGLAND REGIONAL DEVELOPMENT AGENCY.
Good morning/afternoon. My name is ___________ and I’m calling from an

independent research agency called McCallum Layton, on behalf of the South West
of England Regional Development Agency. They have asked us to undertake an
evaluation of their Inward investment support activities over the past five years, and
we understand that your company received such support.
Are you the right person to comment on this support?
IF NO, ASK FOR CORRECT PERSON’S DETAILS AND RE-INTRODUCE
We would like to take no more than 15 minutes of your time to answer some simple
questions about the support you received. Your responses will be kept in complete
confidence and your details will not be passed to anyone else. Are you willing to
help?
If you have any questions about our work please call please contact the evaluation
project manager David Tyrer on 0203 008 5546. Our contact at the South West RDA
is Katherine Stewart and she is available on 01392 229178. I will repeat the number
at the end of the survey.
Thank you very much for your assistance.
Q1. In which financial year did you first receive inward investment support from the
RDA?
· 2004 - 2005
· 2005 - 2006
· 2006 - 2007
· 2007 - 2008
· 2008 - 2009
· Don’t know
Q2. What is your main business activity?

[Open ended – we will be sent a list of codes to use here once survey completed]
Q3. And is your business…

READ OUT – TICK ONE ONLY
· a private limited company
· a public limited company
· a sole trader
· a partnership
· or something else [specify]
For the rest of my questions, unless I state otherwise, please answer thinking only
about the elements of your business that are located in the South West.
NOTE: If respondent is unsure about SW boundaries it includes the following: Bath

and North East Somerset, Bournemouth, Bristol, Cornwall, Devon, Dorset,
Gloucestershire, Isles of Scilly, North Somerset, Plymouth, Poole, Somerset, South
Gloucestershire, Swindon, Torbay, Wiltshire.
Q4. What proportion of your markets are located in…

Please give your answer as a percentage.
NOTE: IF RESPONDENT IS UNSURE, ASK FOR A ROUGH ESTIMATE. PLEASE ALSO

NOTE THAT THE TOTAL OF THE PERCENTAGES GIVEN MUST BE 100%
§ the South West _______%

§ the rest of the UK _______%
§ the EU excluding UK _______%
§ the rest of the world _______%
Q5. And what proportion of your major competitors are located in...
Please give your answer as a percentage


Q6. And now thinking about the location of your supply chain by value, what
proportion is located in...


Q7. How would you describe your facility or facilities in the South West?
READ OUT – TICK ALL THAT APPLY
· Head office
· European head office
· Regional head office
· Regional base
· Specialist facility
· Other facility (please specify)___________________
· None of these
Next we would like to ask about your involvement with SWRDA…
Q8. How did you first hear about the South West RDA’s inward investment support?
[Open ended]
Q9. What was the nature of your intended investment?

[Open ended. PROBE – Was it property? If so, what kind?]
Q10. What exactly was the nature of the support you received? Did you receive...
READ OUT - TICK ALL THAT APPLY
· General advice from SWRDA’s overseas representative

· General advice from the RDA in the South West
· Cultural advice (e.g. help with language, how to do business in the UK, etc.)
· Property/location advice
· Labour market/employment advice
· Supply chain/logistics advice
· Other [please specify]
Q11a. Did you receive inward investment or relocation support from any other
agency or organisation?
· Yes
· No
· Don’t know
IF Q11a = YES, ASK Q11b AND Q11c. OTHERS GO TO Q12
Q11b. Who else did you receive support from?

[Open ended]
Q11c. And please could you explain the nature of this support?
[Open ended] NOTE: IF RECEIVED SUPPORT FROM MULTIPLE
ORGANISATIONS, ASK WHICH ORGANISATION THE DIFFERENT TYPES OF

SUPPORT CAME FROM.
Q12. What was your main reason for using the support from the South West RDA?
[Open ended]
Q13a. Were you considering investing in any other locations?
· Yes
· No
· Don’t know
IF Q13a = YES, ASK Q13b, OTHERS GO TO Q14
Q13b. Was this...
READ OUT – CODE ALL THAT APPLY
· Elsewhere in the South West

· Outside the South West but in the UK
· In the EU , excluding UK
· Rest of the world
· Don’t know
Q14. What were the main reasons why you eventually chose to locate in the South
West?
[Open ended]
Q15. I am now going to read you a list of different aspects of the support you received
from the South West RDA. I’d like you to tell me how satisfied you were with
each aspect.
§ Their understanding of your requirements

§ Responsiveness to your requirements
§ Knowledge of the staff you dealt with
§ The ease of contact with the RDA
§ The quality of research materials about the region
§ Their links to other agencies such as UKTI
§ Their local knowledge
SCALE:
· Very satisfied
· Satisfied
· Neither satisfied nor dissatisfied
· Dissatisfied
· Very dissatisfied
Q16a. How satisfied were you with the overall support you received from the South
West RDA in your investment or expansion in the region?
· Very satisfied
· Satisfied
· Neither satisfied nor dissatisfied
· Dissatisfied
· Very dissatisfied
IF Q16a = DISSATISFIED OR VERY DISSATISFIED, ASK Q16b. OTHERS GO TO Q17

Q16b. Why is this?
[Open ended]
Q17a. What were the main strengths of the support you received?
[open ended]
Q17b. What were the main weaknesses of the support you received?
[open ended]
Q18. Thinking about the entire process, what areas of the support could be improved?
[open ended]
Now we would like to ask about the impact the support has had on your business…to
remind you, unless I state otherwise, please try to consider only the elements of your
business located in the South West.
[DISPLAY TEXT BELOW IF ANSWER GIVEN AT Q1]

You told me earlier that your first received inward investment support from the RDA in the
financial year [ANSWER FROM Q1]
Q19. Approximately what was your annual turnover in the financial year before you
first received support from the RDA?
NOTE: IF RESPONDENT DOES NOT KNOW, ASK FOR A ROUGH ESTIMATE
ENTER FIGURE IN £ ________________
Q20. And what was your annual turnover in the financial year when you first received
support from the RDA?
ENTER FIGURE IN £ ________________
Q21. And what was your annual turnover in the financial year 2008 to 2009?
ENTER FIGURE IN £ ________________
IF RESPONDENT DID NOT KNOW ANSWER TO Q19 OR Q21, ASK Q22. OTHERS GO TO
Q24a.
Q22. How has your annual turnover changed since you received support from the
RDA? Has it...
· Increased
· Stayed the same
· Decreased
· Don’t know
IF Q22 = INCREASED OR DECREASED, ASK Q23
Q23. Approximately how much has your annual turnover

[increased/decreased] since you first received support?
ENTER PERCENTAGE: ___________
IF RESPONDENT GAVE AN ANSWER AT Q19 AND Q21, OR Q22 (I.E. THEY KNOW HOW
TURNOVER HAS CHANGED), ASK Q24a. OTHERS GO TO Q25
Q24a. Based on what you have just said, how much different do you think your
current turnover would have been now if you had not received the support
from the South West RDA? Would it have been...
READ OUT
· A lot lower
· A little lower
· About the same
· A little higher
· A lot higher
· Don’t know
IF Q24a = LOWER OR HIGHER, ASK Q24b. OTHERS GO TO Q25
Q24b. Providing your best estimate, how much [higher/lower] do you

think annual turnover would have been? Would it have been
between...
READ OUT
· 1-19% higher/lower
· Higher/Lower by 100% or more
· Don’t know

Q25. Approximately how many people did you employ in the financial year before you
first received support from the South West RDA? Please give the number of ‘Full
time equivalents’ (FTEs), where part time staff count as 0.5 of an FTE.
ENTER NUMBER OF EMPLOYEES _______________
· Don’t know
Q26. And how many people did you employ in the financial year when you first
received support from the South West RDA?
IF NECESSARY: Again, please give the number of ‘Full time equivalents’ (FTEs),
where part time staff count as 0.5 of an FTE.
· Don’t know
Q27. And how many people did you employ in the financial year 2008 to 2009?
· Don’t know
Q30a.
Q28. How have your staffing levels changed since you received support from
the RDA? Have they...
· Increased
· Stayed the same
· Decreased
· Don’t know
Q29. Approximately how much have staffing levels [increased/decreased]

since you first received support?
IF EMPLOYEE NUMBERS INCREASED BETWEEN Q25 AND Q27, OR Q28 = INCREASED,

ASK Q30a. OTHERS GO TO Q31a
Q30a. Just thinking about these additional staff, are any of them based outside the
South West region?
· Yes
· No
· Don’t know
IF Q30a = YES, ASK Q30b. OTHERS GO TO Q31a.
Q30b. Approximately how many?
ENTER NUMBER OF STAFF: ___________
IF RESPONDENT GAVE AN ANSWER AT Q25 AND Q27, OR Q28 (I.E. THEY KNOW HOW
STAFFING LEVELS HAVE CHANGED), ASK Q31a. OTHERS GO TO Q32
Q31a. Based on what you have just said, how much different do you think your
current staffing levels would have been now, if you had not received the
support from the South West RDA? Would it have been...
READ OUT
· A lot lower
· A little lower
· About the same
· A little higher
· A lot higher
· Don’t know
IF Q31a = LOWER OR HIGHER, ASK Q31b. OTHERS GO TO Q32
Q31b. Providing your best estimate, how much [higher/lower] do you

think staffing levels would have been? Would it have been
between...
READ OUT
· Don’t know
Finally, I’d just like to ask you some questions about your investment in the South
West.
Q32. What impact has your investment in the South West had across the business as
whole?
[open ended]

Q33. I’m now going to read you a number of statements. Which one best describes the
extent to which the South West RDA support was important in your decision to
locate in the South West?
SELECT ONE ONLY
· It was crucial. It made the difference between locating and not locating
· It was influential. It was an important element of our decision-making
process
· It was useful. It provided helpful but not essential background information
· It was irrelevant – it made no difference to our decision
· Don’t know
Q34. What action do you think you might have taken if you had received no support
from the South West RDA?
· You would have invested anyway, in exactly the same way

· You would have invested anyway, but it would have taken longer
· You would have invested anyway, but it would have been on a smaller scale
· You would have invested anyway, but it would have been more expensive
for you
· You would not have invested in the South West
Thank you very much for your time.

project manager David Tyrer on 020 3008 5546

FDI Non-beneficiary survey

ASK TO SPEAK TO SOMEBODY RESPONSIBLE FOR <JOB TITLE> AT <COMPANY NAME>
Good morning/afternoon. My name is ___________ and I’m calling from McCallum

Layton on behalf of the South West of England Regional Development Agency. We
are undertaking an evaluation of their Inward investment support activities over the
past five years. As part of the study we are interested in talking to foreign owned
companies that have not received any inward investment support, so we can
improve the Agency’s responsiveness to companies’ inward investment needs.
This survey will take no more than 5 minutes. Your responses will be kept in
complete confidence and your details will not be passed to anyone else. Are you
willing to help?
[If not make appointment to call back/later]
project manager David Tyrer on 0207 096 9924. I will repeat the number at the end
of the survey.
Q1. The South West RDA offers several types of support to companies wishing to
locate in the region. This includes international representatives in overseas offices
working with companies directly, support in the investment decision making
process and during establishment, and an aftercare team that supports firms once
they have located to the region.
Were you aware that this support was available?
· Yes [go to Q4]

· No [go to Q2]
IF NO AT Q1, ASK Q2. OTHERS GO TO Q4

Q2. Do you think that some kind of inward investment support would have been
helpful to your company?
· Yes [go to Q3]

· No [go to Q5]

IF YES AT Q2, ASK Q3. OTHERS GO TO Q5

Q3. More specifically, which of the following types of support would have
been helpful?
· Finding the most appropriate sites/premises

· Understanding about the local labour market – including cost of
labour
· Understanding of the local business environment
· Local knowledge – of firms providing specialist advice or services
· Local knowledge – of firms you could incorporate into your supply
chain
· Local knowledge – of the local business environment, culture and
customs
· Local knowledge – of finance, taxation or similar issues
· Overcoming language barriers
· Transport and logistics
· Other [specify]
IF Q1=YES, ASK Q4. OTHERS GO TO Q5

Q4. Why did you not use this support?
[Open ended]
ASK ALL
Q5. Did you consider locating in other parts of the UK?
· Yes
· No
· Don’t know
IF Q5=YES, ASK Q6. OTHERS GO TO Q7

Q6. Where else did you consider?
[Open ended]
Q7. What were the main reasons for you choosing to locate in the South West?
[open ended]
Finally, I’d like to ask you a small number of questions about your business
performance. The answers will be kept completely confidential.
Q8. Approximately what was your annual turnover in the financial year 2004 to
2005?
ENTER FIGURE IN £ ________________

ENTER FIGURE IN £ ________________
IF RESPONDENT DID NOT KNOW ANSWER TO Q8 OR Q9, ASK Q10. OTHERS GO TO Q12.
Q10. How has your annual turnover changed since 2004. Has it...
· Increased
· Stayed the same
· Decreased
· Don’t know

[increased/decreased] since 2004?
Q12. Approximately how many people did you employ in the financial year 2004 to
2005? Please give the number of ‘Full time equivalents’ (FTEs), where part time
staff count as 0.5 of an FTE.
· Don’t know
· Don’t know
END.
Q14. How have your staffing levels changed since 2004. Have they...
· Increased
· Stayed the same
· Decreased
· Don’t know

IF Q14 = INCREASED OR DECREASED, ASK Q15. OTHERS GO TO END.

since 2004?

project manager David Tyrer on 0203008 5546

International Trade Beneficiary Survey

ASK TO SPEAK TO NAMED RESPONDENT, OR SOMEONE WHO MIGHT KNOW ABOUT
THE SUPPORT THEIR COMPANY RECEIVED FROM THE PASSPORT TO EXPORT
PROGRAMME.
Good morning/afternoon. My name is ___________ and I’m calling from an

independent research agency called McCallum Layton, on behalf of the South West
of England Regional Development Agency. They have asked us to undertake an
evaluation of their Passport to Export Programme over the past five years, and we
understand that your company received such support.
Are you the right person to comment on this?
IF NO, ASK FOR CORRECT PERSON’S DETAILS AND RE-INTRODUCE

We would like to ask you a few quick questions about the support you received, and
draw on the information you provided when you completed the programme. It
should take no more than five minutes. Your responses will be kept in complete
confidence and your details will not be passed to anyone else, without your
permission. Are you willing to help?
project manager David Tyrer on 0203 008 5546. Our contact at the South West RDA
is Katherine Stewart and she is available on 01392 229178. I will repeat the number
at the end of the survey.
S1. Before I go any further, have you recently been surveyed in connection with any
government-funded business support?
· Yes
· No
IF YES AT S1, ASK S2. OTHERS GO TO START –
S2. Although you may have provided some feedback before, we are still very
interested in recording your views. Are you still willing to take part in the survey?
· Yes - CONTINUE
· No – THANK AND CLOSE
I’d like to start by asking you some questions about your business.
Q1. Does your business have any other sites outside the South West region?
· Yes (Go to Q2)
· No (go to Q3)
IF Q1 = YES, ASK Q2. OTHERS GO TO Q3
Q2. Has the Passport to Export programme benefited these other elements of your
business?
· Yes
· No
ASK ALL
Q3. What proportion of your turnover is accounted for by sales in the South West?
ENTER PERCENTAGE _____________
· Don’t know
Q4. And approximately what proportion of your competitors are located in the South
West?
ENTER PERCENTAGE______________
· Don’t know
[IF WE DON’T HAVE TURNOVER AT THE START OF THE PROGRAMME ASK QUESTION 5 AND
6, IF WE DO HAVE THIS DATA, GO TO QUESTION 7:
Q5: At the start of the programme of support, approximately what was the turnover of
the company?
Q6: At the end of the programme of support, approximately what was your turnover?
Q7: At the start of the programme of support, you specified that your turnover was
[check using spreadsheet]. At the end of the programme of support, approximately
what was your turnover?
Q8: How much different do you think your turnover would have been without
receiving the support from the South West RDA? Would it have been...
READ OUT
· A lot lower
· A little lower
· About the same
· A little higher
· A lot higher
· Don’t know
IF ANSWER GIVEN AT Q8 (I.E. NOT DON’T KNOW), ASK Q9. OTHERS GO TO Q10

Q9. Providing your best estimate, how much higher/lower do you think your
annual turnover would have been? Would it have been between…
READ OUT
· 1 – 19% lower/higher
· Don’t know
ASK ALL
Q10. Do you think that your turnover is likely to increase in the future as a result of the
support you received?
§ Yes
§ No
§ Don’t know
ONLY ASK Q11 IF WE DON’T HAVE VALUE OF EXPORTS AT THE START OF THE
PROGRAMME ON THE SPREADHSEET. IF WE HAVE THIS DATA – GO TO Q13.
Q11: At the start of the passport to export programme, approximately what was the
value of your exports? [Record actual amount or as a percentage of turnover]
Q12: At the end of programme of support, what was the value of your exports?
[Record actual amount or a percentage of turnover).
Q13:At the start of the passport to export programme of support you specified the
value of your exports was [check using spreadsheet]. What was the value of your
exports at the end of the programme of support?
ONLY ASK Q14 IF WE DON’T KNOW EMPLOYMENT CHANGE – IF WE DO – ASK Q17.
Q14: How many new staff, if any, have you employed during the period you were
receiving support through the passport to export programme?
Q15: How much different do you think staffing levels would have been without
receiving the support from the South West RDA? Would it have been...
· A lot lower
· A little lower
· About the same
· A little higher
· A lot higher
· Don’t know
IF ANSWER GIVEN AT Q15, ASK Q16. OTHERS GO TO Q17

Q16. Providing your best estimate, how much different do you think your
employment numbers would have been? Would they have been between…
READ OUT
· Don’t know
Q17: You specified that your employment changed by [AMOUNT FROM SAMPLE] over
the course of the Passport to Export programme. How much different do you
think staffing levels would have been without receiving the support from the
South West RDA? Would it have been...
· A lot lower
· A little lower
· About the same
· A little higher
· A lot higher
· Don’t know
IF ANSWER GIVEN AT Q17, ASK Q18. OTHERS GO TO Q19.

Q18. Providing your best estimate, how much different do you think your
employment numbers would have been? Would they have been between…
READ OUT
· Don’t know
ASK ALL
Q19. Which new markets have you accessed, if any, through the support you received?
[Note: list of new countries the firms now exports to]
Q20: In terms of your international trade and export activity, which of the following
describe what you think you would have done if you did not receive the support of
the Passport to export programme?

· We would not be exporting at all

· We would be exporting, but at lower volumes
· We would be exporting, but in fewer markets
· We would have taken longer to develop our exporting activities
· It would have made no difference
· Don’t know
Q21. In what ways did the International Trade Advisor help your business?
[OPEN ENDED]
Finally, I’d like to ask you some questions on your experience of the programme.
Q22a. Did the Passport to Export programme of support meet your expectations?
· Yes
· No
· Don’t know
IF Q22a = NO, ASK Q22b. OTHERS GO TO Q23

Q22b. Why not?
[OPEN ENDED]
ASK ALL
Q23. Are there any ways in which the Passport to Export programme could have been
improved?
[OPEN ENDED]
Q24. Finally, are there any other comments you’d like to add about any aspect of the
programme?
[OPEN ENDED]

project manager David Tyrer on 0203008 5546

Final International Trade: Non-beneficiary survey
ASK TO SPEAK TO SOMEBODY RESPONSIBLE FOR <JOB TITLE> AT <COMPANY NAME>
Good morning/afternoon. My name is ___________ and I’m calling from McCallum

Layton on behalf of the South West of England Regional Development Agency. We
are undertaking an evaluation of the Agency’s support for businesses in the region
who want to export.
We would like to ask you a few quick questions about how support to promote the
region’s international trade and exports might help companies like yours.
This survey will take no more than 5 minutes. Your responses will be kept in
complete confidence and your details will not be passed to anyone else. Are you
willing to help?
[If not make appointment to call back/later]
project manager David Tyrer on 0207 096 9924. I will repeat the number at the end
of the survey.
Before we start, I just need to ask you a few questions to make sure that you are
relevant for the survey.
S1. Can I just check, have you recently begun to export your products or services,
by which I mean have you started export activities in the past 5 years?
· Yes - CONTINUE
· Don’t know – THANK AND CLOSE
S2. Can I also confirm whether you have received any government funded support
for any export-related activities in the last 5 years?
· Yes - CONTINUE
· Don’t know – THANK AND CLOSE

S3. When did your organisation start exporting?
· 2003 or earlier – THANK AND CLOSE

· 2004
· 2005
· 2006
· 2007
· 2008
· 2009
· Don’t know
[If before 2004 – explain that the project only started in 2004 so we need to talk to
firms who could have used the support but didn’t]
S4. Have you recently been surveyed in connection with any government-funded
business support?
· Yes
· No
IF YES AT S4, ASK S5. OTHERS GO TO START (Q1)
S5. Although you may have provided some feedback before, we are still very
interested in recording your views. Are you still willing to take part in the
survey?
· Yes - CONTINUE
Q1. Are you aware of the government support that is available to help firms develop
their exports?
· Yes (go to Q4)

· No (go to Q2)
· Don’t know (go to Q2)
IF Q1 = NO OR DON’T KNOW, ASK Q2. OTHERS GO TO Q4

Q2. The UKTI Passport to Export scheme provided business advice, training, and
small amounts of financial support to help companies in the South West
develop their exporting potential for the first time. Do you think that such
support would have helped your company with its export activities?
· Yes (go to Q3)

· No (go to Q5)
· Don’t know (go to Q5)
IF Q2 = YES, ASK Q3. OTHERS GO TO Q5

Q3. More specifically, what kind of support do you think would have been
helpful?
DO NOT READ OUT – CODE ALL THAT APPLY
· Marketing (e.g. website development, materials in other
languages)
· Information on foreign markets
· Training in export promotion and international business
· Financial support to visit foreign markets and exhibitions
· Overseas market research
· Support in the overseas market
· Other (please specify)_______________________
· Don’t know
IF YES AT Q1, ASK Q4. OTHERS GO TO Q5

Q4. Why did you not use this support?
[OPEN ENDED]
ASK ALL
Q5. In your opinion, what are the biggest barriers facing firms in the South West when
they first decide to export?
[OPEN ENDED]
Now we would like to ask you a small number of questions about your business
performance, the answers will be kept completely confidential.
Q6. Approximately what was your annual turnover in the financial year 2004 to
2005?
ENTER FIGURE IN £ ________________
ENTER FIGURE IN £ ________________
IF RESPONDENT DID NOT KNOW ANSWER TO Q6 OR Q7, ASK Q8. OTHERS GO TO Q10.
Q8. How has your annual turnover changed since 2004. Has it...
· Increased
· Stayed the same
· Decreased
· Don’t know

[increased/decreased] since 2004?

IF TURNOVER INCREASED AT Q6-7 OR AT Q8, ASK Q10. OTHERS GO TO Q11
Q10. You indicated that your turnover has increased since 2004. How much of this
change has been affected by your export activities?
ENTER PERCENTAGE:___________
IF TURNOVER DECREASED AT Q6-7 OR AT Q8, ASK Q11. OTHERS GO TO Q12
Q11. You indicated that your turnover has decreased since 2004. Would you say
that exporting has...
READ OUT
· Positively helped to limit declining turnover

· Had no effect on falling turnover
· Worsened turnover
· Don’t know
ASK ALL
Q12. Approximately how many people did you employ in the financial year 2004 to
2005? Please give the number of ‘Full time equivalents’ (FTEs), where part time
staff count as 0.5 of an FTE.
· Don’t know
· Don’t know
Q16.
Q14. How have your staffing levels changed since 2004. Have they...
· Increased
· Stayed the same
· Decreased
· Don’t know
IF Q14 = INCREASED OR DECREASED, ASK Q15. OTHERS GO TO Q18.

since 2004?

IF STAFFING INCREASED AT Q12-13 OR AT Q14, ASK Q16. OTHERS GO TO Q17
Q16. You indicated that your staffing levels have increased since 2004. How much
of this change has been affected by your export activities?
ENTER PERCENTAGE:___________
IF STAFFING LEVELS DECREASED AT Q12-13 OR AT Q14, ASK Q17. OTHERS GO TO Q18
Q17. You indicated that your staffing levels have decreased since 2004. Would you
say that exporting has...
READ OUT
· Positively helped to limit declining employment

· Had no effect on falling employment levels
· Worsened employment numbers
· Don’t know
ASK ALL
Q18. Are you happy for us to pass your details to UKTI to see if they might be able to
offer your company support?
· Yes
· No

project manager David Tyrer on 020 3008 5546

APPENDIX IV
Technical Annex

Technical Annex
9.3 Introduction
This annex presents supporting technical information supporting the impact
calculations presented in Chapter 8 - Net impact of the South West RDA’s
investments. The steps and assumptions for calculating impact for both Inward
Investment and International Trade are presented.
9.4.1 Calculating additionality factors
The following steps and assumptions have been made in calculating additionality
factors:
Deadweight – is calculated directly from the survey and is the average response to
whether companies considered that the support had no impact on their investment
decision.
Leakage – In this case only employment leakage could be calculated from the survey
evidence. We take employment leakage as the proportion of additional employment
based outside SW (14) to the total increase in employment (760). This provides an
estimate of domestic leakage only of 1.84%.
Displacement - Average proportion of markets located within the SW region. This

factor (12.2%) is then multiplied by average proportion of competitors based within
the SW (14.6%) giving a displacement factor of 1.8%.
Multiplier – evidence for the multiplier effect follows BIS additionality guidance and
estimated at 1.4.
Overall additionality ratio – in order to obtain an estimate for net additional

turnover as a result of SWRDA support, we adjust changes in turnover for all of the
above factors. We can summarise this operation by multiplying the above factors
together. Please note that in order to do this we have to take the inverse of some of
the proportions. The operation is shown in the table below:
Figure 0-1: Overall additionality calculation – Inward Investment
Non-Deadweight 1 – 0.69 0.31

Non-Leakage 1 – 0.02 0.98
Non-Displacement 1 - 0.02 0.98
Multiplier 1.40
Overall additionality ratio 0.42

9.4.2 GVA Impact
In calculating GVA impact of the interventions the following steps and assumptions
have been made:
Calculating the change in turnover – we assess change in turnover for SW

businesses responding to the business survey. Too few businesses provided turnover
data for all three points in time – and in particular there was a lack of response for
the pre-support point. For this reason the period for which turnover change was
calculated was between the ‘year support received’ to 2008/09 financial year, where
a larger number of businesses provided a fuller picture of turnover. The turnover
figures relate to varying periods depending on the intervention year. In order to aid
the persistence calculation, we therefore annualise the figures depending on the
period between the business first receiving support and 2008/09. We assume
however that the increases in turnover occurred uniformly across the period. We
also select positive changes in turnover by making the assumption that negative
growth in turnover and hence GVA cannot be attributed to SWRDA intervention.
Transforming turnover to GVA – in order to arrive at a figure of Gross Added Value,

we use a secondary source to transform our net additional turnover figure to net
added value. The ABI regional accounts (ONS) collect information on businesses
turnover and make an estimate of their GVA (through collecting the individual
components i.e. profit, wage costs, depreciation, etc). This information is available
disaggregated at a regional level and at a 2003 SIC section level. We do not have
information on the sectors of businesses interviewed for the surveys so we calculate
the GVA to turnover ratio for all firms in the SW, and apply this general factor to our
survey information on turnover to arrive at an estimate of net additional GVA.
Applying persistence effects – Recent guidance39 states that evaluations should

increasingly recognise the persistence effects of interventions. There are three
assumptions required to do so:
§ Length of persistence effects – we assume that the average persistence of benefits is

five years. This is based on the practical guidance on IEF released by DBERR and
presented as a result of the national impact evaluation of RDA investment.40
§ Use of decay - while the national evaluation of RDAs assumes a decay factor in its
calculations (i.e. the persistence of benefits decays over time) we do not do so in this
case. The IEF guidance states that there is insufficient evidence to use decay factors.
We therefore apply persistent benefits which do not decay.
§ Use of discounting – in conjunction with Green Book Guidance41 we apply discount
factors. Discounting is a technique used to compare costs and benefits that occur in
different time periods, based on the principle that, generally, people prefer to
receive goods and services now rather than later.42 We have an added complication
that interventions themselves occur in different time periods. We assume that
discounting does not apply retrospectively; that the benefits accruing in 2005 as a
result of intervention in 2004 should not be discounted as we are estimating
benefits in 2010. Following treasury guidance we use a discount factor of 3.5%.
39
RDA Evaluation: Practical Guidance on Implementing the Impact Evaluation Framework, BIS, Dec 2009
40
Department for Business, Enterprise & Regulatory Reform Impact of RDA spending – National report – Vol2. March 2009
41
The Green Book. Appraisal and Evaluation in Central Government. HM Treasury.
42
Pg. 26 The Green Book. Appraisal and Evaluation in Central Government. HM Treasury.
The process we follow for calculating persistence effects is as follows:
§ Translate changes in individual company turnover (annualised in nominal prices) to

GVA using ratios from ABI regional accounts
§ Sustain that change in GVA over five years - the average length of persistence effects
– and apply discounting rates
§ Sum the positive changes in GVA and then apply additionality metrics
Scaling up our sampled effects – we have calculated the net additional impact for
our sample of 18 businesses. We can scale this impact up to understand the full
impact of the programme. We cannot draw statistical inferences from a sample of
18 businesses.
However, with the above caveat in mind, we can still estimate the scale of possible
benefits as a result of the programme. To do so we apply a scaling ratio by dividing
the population by the sample size (121 / 18) and apply the subsequent ratio of 6.72
to the net additional GVA figure. We therefore arrive at a figure of £57.6m. This
equates to a value which lies between £46.3 and £68.8m (including persistence
effects) – i.e. we are 95% confident that the true value lies between these two
points.
9.4.3 Employment Impact
We follow a similar process in terms of estimating the impact of SWRDA intervention

in terms of employment. Our survey allows us to estimate the change in
employment attributable to SWRDA intervention. We then adjust this for
appropriate additionality concepts (in this case attribution, leakage and multipliers).
Please note that we use the higher multiplier figure for employment impacts. We
would expect higher knock on effects through employment than is the case when
calculating impact from turnover. This leads us to conclude that the intervention has
generated an additional 143 jobs. We then scale this employment effect up to the
level of the population which indicates that we the regional effect is 963 ( ± 188).
We can also translate these employment impacts into GVA.
To do this we use the average GVA generated per employee of foreign owned firms
in the South West region43 which equals £43,315 multiplied by the number of
additional jobs. We arrive at an estimate of GVA generated through employment
impacts of (£41.7 ± 8.1m) as a result of employment.
9.5 International Trade
9.5.1 Calculating additionality factors
The following steps and assumptions have been made in calculating additionality
factors:
43
This information is sourced from the Annual Business Enquiry, 2008.
Deadweight – is calculated directly from the survey and is the average response to
whether companies considered that they would not be exporting at all without the
help of the programme.
Leakage – is the average proportion of outputs that benefit those outside of the
target area.
Substitution – estimating substitution from the survey was not possible but
nevertheless there is a strong rationale for its application. Therefore national
evidence from BIS was used to arrive at the level of substitution.3
Displacement - Average proportion of markets located within the SW region. This

factor (31.5%) is then multiplied by average proportion of competitors based within
the SW (18.7%) giving a displacement factor of 5.9%.
Multiplier – evidence for the multiplier effect was obtained from SWRDA from the
regional accounts, and is estimated at 1.6. Multipliers are much more likely to be
consistent with regional averages than is the case for the inward investment
intervention.
9.5.2 Calculating Impact
Calculating the change in turnover – we assess change in turnover for SW

businesses using information provided by the business survey. We are able to split
turnover into two components; overall turnover and export turnover. We calculate
the change in turnover / export turnover as the difference between turnover /
export turnover at the start and end of the programme. The length of the
programme typically was one year for most businesses, however a few were
involved for a longer period so we annualise using the programme start and end
dates and apply the average length of programme (1.64 years) to observations with
missing data.44
Transforming turnover to GVA – in order to arrive at a figure of Gross Added Value,

we use a secondary source to transform our net additional turnover figure to net
added value. The ABI regional accounts (ONS) collect information on businesses
turnover and make an estimate of their GVA (through collecting the individual
components i.e. profit, wage costs, depreciation, etc). This information is available
disaggregated at a regional level and at a 2003 SIC section level. We apply a GVA to
turnover ratio depending on the sector a company belongs to. Our sample consisted
of a broad range of companies as set out in the table below. Matching SIC sections
to the listed sectors in the database requires some judgement and is dependent on
data availability. The table also contains the ratio applied and from which SIC
sections the ratio is derived.
Figure 0-2: Deriving GVA / turnover ratios

Sector Businesses % GVA / ABI Sectors
Turnover
Ratio
Aerospace 18 24.7 0.31 Manufacture of other transport equipment and air
44
Please note that one observation was excluded from the analysis. The turnover change calculated was a significant outlier
and would have led to an over-estimate of the impact of the programme
transport
Automotive 22 30.1 0.24 Manufacture of motor vehicles
Creative & 4 5.5 0.63 Other business activities
Media
Food & Drink 16 21.9 0.48 Hotels and restaurants as data for food
manufacturing unavailable
Leisure & 6 8.2 0.33 Hotels and restaurants, retail trade, recreational and
Tourism sporting activities
Marine 7 9.6 0.40 Fishing, other transport manufacture, water
transport, recreational activities
Source: Consulting Inplace calculation based on ABI Regional Accounts 1998 – 2007.
Overall additionality figure – we can calculate an overall additionality ratio by taking

the inverse of our estimates of deadweight, leakage, substitution and displacement
and multiply together. This operation summarises all the above adjustments into a
single figure, the operation is shown in the table below.
Figure 0-3: Overall additionality calculation – International Trade

Additionality concept Ratio
Non-Deadweight 0.192
Non-Leakage 0.986
Non-Substitution 0.967
Non-Displacement 0.941
Multiplier 1.60
Overall additionality figure 0.28
Adjusting for persistence effects – Recent guidance45 states that evaluations should
increasingly recognise the persistence effects of interventions. There are three
assumptions required to do so:
§ Length of persistence effects – we assume that the average persistence of benefits is

five years. This is based on evidence presented in the national impact evaluation of
RDA investment.46
§ Use of decay - while the national evaluation of RDAs assumes a decay factor in its
calculations (i.e. the persistence of benefits decays over time) we do not do so in this
case. The IEF guidance states that there is insufficient evidence to use decay factors.
We therefore apply persistent benefits which do not decay.
§ Use of discounting – in conjunction with Green Book Guidance47 we apply discount
factors. Discounting is a technique used to compare costs and benefits that occur in
different time periods, based on the principle that, generally, people prefer to
receive goods and services now rather than later.48 We have an added complication
that interventions themselves occur in different time periods. We assume that
discounting does not apply retrospectively; that the benefits accruing in 2005 as a
45
RDA Evaluation: Practical Guidance on Implementing the Impact Evaluation Framework, BIS, Dec 2009
46
Department for Business, Enterprise & Regulatory Reform Impact of RDA spending – National report – Vol2. March 2009
47
The Green Book. Appraisal and Evaluation in Central Government. HM Treasury.
48
Pg. 26 The Green Book. Appraisal and Evaluation in Central Government. HM Treasury.
result of intervention in 2004 should not be discounted as we are estimating

benefits in 2010. Following treasury guidance we use a discount factor of 3.5%.
The process we follow for calculating persistence effects is as follows:
§ Translate changes in annualised individual company turnover to GVA using ratios

from ABI regional accounts (in nominal prices)
§ Sustain that change in GVA over five years - the average length of persistence effects
– and apply discounting rates
§ Sum the positive changes in GVA and then apply additionality metrics
Scaling up our sampled effects – we have calculated the net additional impact for
our sample of 69 businesses. We can scale this impact up to understand the full
impact of the programme. We can be more confident in drawing statistical
inferences from the sample
However, with the above caveat in mind, we can still estimate the scale of possible
benefits as a result of the programme. To do so we apply a scaling ratio by dividing
the population by the sample size (312 / 69) and apply the subsequent ratio of 4.52
to the net additional GVA figure.
9.5.3 Employment Impacts
We follow a similar process in terms of estimating the impact of employment of the

International Trade intervention. In the business survey, we ask companies to
attributable to additional employment to SWRDA intervention. We then adjust this
for appropriate additionality concepts (in this case leakage and multipliers), leading
us to conclude that the intervention has generated an additional 373 jobs. We then
scale this employment effect up to the level of the population which indicates that
we the regional effect is 1052 ( ± 105). We can also translate these additional jobs
into impacts in terms of GVA.
To do this we use the average GVA per employee of UK owned firms in the South
West region49 which equals £30,625 multiplied by the number of additional jobs.
After scaling to reflect the total population of beneficiaries, this gives us an estimate
of the equivalent GVA generated per employee as a result of new employment
opportunities of £51.5 ( ± 5.2m).
9.5.4 Estimating Impact – Turnover and employment impacts
We have estimated GVA impact through two approaches – turnover and

employment. For International Trade, the employment approach delivers a figure
which falls within the confidence interval for the turnover approach. This provides
some reassurance as to the robustness of the figures. For FDI, the employment
figure falls slightly under the confidence interval for the turnover approach. Our
assessment is that this is primarily due to the low number of observations from the
survey, and the variance that this can create. See figure 0-4 overleaf.
49
This information is sourced from the Annual Business Enquiry, 2008.
Figure 0-4: Turnover and employment GVA figures.

Inward Investment Trade
Turnover approach - Net £57.6m £61m
additional impact (incl. (£46.3m - £68.8m) (£49.1m -
persistence) £72.9m)
Employment approach – £41.7m £51.5m
net additional impact

n Communities
n Economies
n Skills
n Enterprise
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Final Report

Inward Investment and

BRADFORD LONDON MERSEYSIDE

1. Executive Summary – Inward Investment............................................ 4

1. Executive Summary - International Trade............................................ 6

3. Why the South West RDA intervened................................................ 12

4. What the South West RDA was seeking to achieve ............................ 30

5. How the South West RDA invested.................................................... 33

6. Inputs and outputs of the programmes ............................................. 44

7. Outcomes for supported businesses.................................................. 51

8. Net impact of the South West RDA’s investments ............................. 65

9. Conclusions and recommendations ................................................... 83

FDI Beneficiary Survey.............................................................................. 95

FDI Non-beneficiary survey..................................................................... 104

International Trade Beneficiary Survey ................................................... 108

Final International Trade: Non-beneficiary survey................................... 113

Technical Annex ..................................................................................... 119

Figure 2-1: Approach 10

Figure 3-9: Number of exporters (goods), 2006-08 22

Figure 0-2: Deriving GVA / turnover ratios 122

1. Executive Summary – Inward Investment

1. Executive Summary - International Trade

Providing international trade support through the Passport to Export programme

Beneficiaries’ comments on the programme were generally positive; 92 per cent of

2.1 Evaluation Scope

In October 2009 Consulting Inplace was commissioned to provide an interim

For further details, please contact either:

2.1.1 Foreign Direct Investment (FDI)

Significant involvement in a ‘success’ may be claimed by a Development Agency

§ Arranged a regional tour

2.1.2 International Trade Promotion

2.2 Evaluation approach

2.2.1 The Impact Evaluation Framework and ‘IEF Plus’

Figure 2-1: Approach

After finalising our methodology at the inception meeting we undertook desk-based

programmes to learn more about additionality factors, particularly persistence and

2.3 Report structure

The remainder of the report is structured as follows:

3. Why the South West RDA intervened

3.1 The case for inward investment (FDI) support

3.1.1 Market Failure

§ Under-provision of information: because information is non-rivalrous – use of it by

3.1.2 National strategy

3.1.3 Regional strategy

The 2003-2006 corporate plan recognises the importance of inward investment in

3.1.4 The performance of foreign owned companies in the South West

Figure 3-1: Number of foreign owned firms by region

Figure 3-2: GVA contribution from foreign owned companies

GVA c ontr i buti on, 2 0 0 7

UK owned Foreign owned

Source: Annual Business Inquiry

Figure 3-3: Annual Average GVA per firm, 2007 (£)

Although productivity explains part of the differential in Figure 3-4, differences in

Figure 3-4: Average GVA per employee, 2007

GVA gr owth r a te, 2 0 0 4 -0 7

England SW Eng less London & SE

Source: Annual Business Inquiry

FOC performance: South West vs England

FOC performance vs UK-owned companies in the South West

GVA produced by foreign-owned companies in the South West increased by over 50

Figure 3-6: Employment growth in foreign owned firms

Empl oyment gr owth ra te, 2 0 0 4 -0 7

England South West Eng less London & SE

§ Knowledge and technology transfer – foreign firms often have firm-specific