Reconsidering Private Sector Engagement in Sub-National Economic Governance

Revised Paper submitted to Environment and Planning A,
 February 2012

* Stephen Syrett,
Centre for Enterprise and Economic Development Research,
 Middlesex University
The Burroughs, London NW4 4BT, UK
Tel: +44 (0) 208 411 5327; s.syrett@mdx.ac.uk

Marcello Bertotti,
Institute for Health and Human Development,
 University of East London
Water Lane, London E15 4LZ, UK
Tel.: +44 (0)208 223 4139; m.bertotti@uel.ac.uk

*corresponding author

Reconsidering Private Sector Engagement in Sub-National Economic Governance

Abstract 
One consequence of the economic downturn and pressure for public sector reform is a renewed focus upon private sector engagement (PSE) within sub-national economic governance. Yet past attempts to promote PSE within urban and regional development policy and governance have been routinely characterised by the partial and uneven involvement of business interests. Adopting a strategic-relational approach (SRA), and building upon insights from the developing literature on business/society relations, this paper critically examines how PSE unfolded in a specific spatial and temporal context,through empirical investigation of the evolution of the City Growth Strategy (CGS) as realised within two areas in London.This analysis explores the difference between policy script and business performance and identifies key dimensions of material self-interest, non-market based rationales and divergent private/public discourses as critical to the selective nature of emergent PSE strategies and tactics. Critically these issues remain largely unaddressed within current moves to put in place a private sector led sub-national agenda with clear consequences for understanding its likely impact across differentially constituted urban and regional contexts.

Keywords
private sector engagement		local/regional economic governance
public/private partnership		strategic-relational approach
Introduction

Over the last 30 years, the need for active engagement of the private sector to drive urban and regional development has become accepted policy orthodoxy. In policy practice private sector engagement (PSE) has ranged from formulations that place the private sector as the driver and determinant of processes of local and regional economic development, through a range of partnership working models that variously seek to integrate private sector interests with those of other public and third sector stakeholders (Bovaird, 2004; Geddes, 2006).

Given the centrality of the private sector to the operation of market based capitalist urban societies, engagement with the private sector in urban and regional economic policies is a necessity. Yet the objectives of PSE and its extent, nature and consequences for sub-national governance and policy, remains deeply contested. The constitution of various public-private partnership models that set out differing scales and scope for PSE reflects multiple variants of a hegemonic neo-liberal discourse (Peck and Tickell, 2002), These commonly assume the benefits of such engagement in the pursuit of market-based solutions to spatial challenges are largely self-evident in terms of competitiveness, efficiency and productivity. In contrast, this discourse downplays the contradictions that arise from a prominent role for business interests in relation to issues of democratic accountability and transparency, as well as the negative consequences that such involvement can lead to in terms of social justice and environmental sustainability (Swyngedouw, 2003; Cochrane, 2007) 

In the UK, successive Conservative and Labour governments have emphasised the need for a strong private sector presence in urban and regional policy and pursued this through a plethora of policy initiatives. The Conservative-Liberal Democrat Coalition government elected in 2010 has responded to the prolonged economic downturn with a programme of major reductions in public spending and assigned a lead role to the private sector in promoting growth and ‘rebalancing’ the UK economy. As part of this, private sector interests have been placed at the heart of a sub-national economic development agenda within England, where a shift towards ‘decentralisation’ and ‘localism’ has been combined with a more ‘hands-off’ approach to local business and the development of business-led initiatives, for example through the introduction of Enterprise Zones and the new Local Enterprise Partnership (LEP) governance structures (BIS, 2010; Pike et al, 2012).

Yet the experience of past UK policy attempts to achieve PSE in spatial governance and policy developments has consistently demonstrated a highly uneven pattern of selective and/or temporary involvement of private sector interests (Green et al. 2010; Harding et al, 2000; HM Treasury, 2007; ODPM, 2006; Payne, 2008). In fact the surprisingly limited understanding of why and how PSE takes place in practice and with what consequences (Cook, 2009; North et al, 2001; Raco, 2003) presents a major challenge to the development and implementation of this policy agenda. As a guide prepared to inform English local authorities and LEPs about the expectations of PSE in sub-national economic development noted:

“This is an area where practice across much of local government is in need of development, with many councils concerned about how and who to engage, for what purpose, and how to retain appropriate governance and accountability for decision-making and public funding” (LGID, 2011: p.14). 

Moreover the new economic context raises further fundamental questions as to how PSE in sub-national economic development will play out in practice. Weak financial and economic conditions have undermined the basis of much past engagement within regeneration models reliant upon increasing land values, cheap credit and high property demand (Glossop, 2009), whilst public funds previously used to lever in private sector involvement have disappeared or been substantially reduced.

Within this context a critical investigation of PSE as part of the wider neo-liberalization of sub-national governance is particularly timely. The purpose of this paper is to examine critically the practice of PSE in urban and regional governance, focusing upon understanding what Wood (2004: 2108) identifies as “the slippage between the scripted role for business interests and their actual performance”. Adopting a strategic-relational approach (SRA), and building upon insights from the developing literature on business/society relations, the paper presents empirical analysis of the manner in which past PSE unfolded in practice within a given spatial and historical context in England. In depth, longitudinal analysis of the implementation within two areas in London of the City-Growth Strategy (CGS), a New Labour urban policy initiative that more than any other attempted to place the private sector at the centre of the design and implementation of the regeneration process, identifies how the calculations and tactics of a range of reflexive actors produced a spectrum of engagement/non-engagement rooted within the wider strategic-relational context. 

The insights provided here into the evolution of the practice of PSE questions the possibilities of such engagement and raises implications for current policy and institutional developments that seek to further advance models of private sector led urban and regional development. The limited understanding of processes of PSE and misconceptions over what it can achieve evident in the CGS initiative, are now being repeated in the development of new institutional forms such as LEPs. These consequently provide a fundamentally flawed governance model for addressing the practical realities of pursuing sub-national economic development across differentially constituted economic and political urban and regional contexts

Private sector engagement under neo-liberalised sub-national policy

The engagement of private and business interests within urban and regional governance has a long and varied history. Within UK sub-national policy, the Thatcher led Conservative government elected in 1979 decisively moved away from previous Keynesian social welfare policy models to place private sector interests and the operation of market mechanisms at the centre of urban and regional development. The subsequent evolution of what Jessop (2002a) has termed a ‘Schumpeterian workfare postnational state’, informed by a particular mix of variants of neo-liberalism, neo-corporatism, neo-statism and neo-communitarianism, provided the context in which the engagement of the private sector within urban and regional development and policy has proceeded. At the heart of the predominant neo-liberal discourse is an ideological belief in the superiority of market based mechanisms in delivering efficiency and productivity which necessitates placing private sector interests at the centre of sub-national governance arrangements and institutions (Cochrane, 2007; Geddes, 2006). This ensures that regulatory practices and policy actions are driven by, and sympathetic to, the needs of business, thus attracting and retaining the private sector investment vital to urban entrepreneurialism and economic competitiveness. 

Beyond the narrow market based view of business engagement as a route towards urban and regional economic competitiveness, there is also recognition that business has some degree of responsibility to engage positively with local communities and social and environmental issues. That business should recognise its responsibilities and contribute to a wider social and public good was evident in New Labour’s ‘Third Way’ project (Giddens, 1998) and the subsequent notion of the ‘Big Society’ promoted by the Coalition government (Cabinet Office, 2010). These neo-communitarian discourses emphasise the ‘rights and responsibilities’ of a range of stakeholders and individuals in relation to issues such as social inclusion, community cohesion, environmental sustainability and building a vital civil society. Significantly these discourses set out the societal ‘responsibilities’ of business in only a generalised manner (DTI, 2004), and critically the emphasis is upon voluntary action promoting corporate responsibility (BITC, 2010) for fear of ‘frightening’ away private sector investment with a hostile regulatory environment.  The precise nature of the motivations for business engagement rooted within a wider sense of societal responsibility and philanthropy remain weakly set out and understood in comparison to the logic of market driven activity. Yet despite this, assumptions of business engagement on this basis have been at the centre of many recent institutional changes (for example Local Strategic Partnerships) and policy initiatives including the current Coalition government’s plans for LEPs.

Theorising business engagement: between script and performance

The neo-liberal and neo-communitarian discourses that have informed the recent development of urban and regional governance scripts particular roles for business, yet their performance is frequently somewhat different. A wide range of policy evaluations have consistently demonstrated that where the restructuring of state-market relations has created new institutional spaces for PSE and business leadership, the resulting engagement has been selective in scope and frequently limited in impact (Green at al. 2010; Harding et al, 2000; HM Treasury, 2007; ODPM, 2006; Payne, 2008). The process of identifying the disjunctures and lacunae between the assumptions made within the policy discourse and the realities of PSE provides important insights into the possibilities and implications of private sector involvement and business led local economic development.

The theoretical challenge presented by seeking to understand the everyday practice of PSE within urban and regional governance requires bringing together an understanding of the wider restructuring and rescaling of state-market relations (Brenner, 2004; Jessop, 2002b) with an understanding of the strategies, motivations and perceptions of the variety of private and public sector actors who play out the engagement process in practice (Wood, 2004, Jones et al, 2004). To date much of the theorising of the augmented role for PSE within a shift towards neo-liberalized urban and regional policy has focused upon how state restructuring has opened up new spaces, institutional settings and expectations for business involvement, and rather less upon the diverse motivations, perceptions and strategies of businesses which informs the nature and extent of their actual engagement. Whilst state centred analyses provide insights into the changing terrain which provides enhanced possibilities for PSE, they have proved largely unable to explore why businesses actually choose to engage (or not) in urban governance, the mechanisms by which actors are engaged, and how the nature of engagement is played out to impact upon the evolution of practice (North et al, 2001; Wood, 2004).

Attempts to retheorise the relationship between structure and agency within a strategic-relational approach (SRA) (Jessop, 2001; 2005; 2007; and Hay; 2002) provides the possibility for going beyond state-centric readings of PSE in urban governance (Valler and Wood, 2004). The SRA seeks to overcome the traditional structure/agency dichotomy by examining “structure in relation to action and action in relation to structure” (Jessop, 2001: 1223). Analysed in this way, structures are treated as strategic in their form, content and operation, whilst actions are structured, more or less context sensitive, and structuring. Structures are therefore studied in terms of their “structurally inscribed strategic selectivities and actions, in terms of (differently reflexive) structurally oriented strategic calculation” (Jessop, 2001:1223).

A strategic-relational approach to the emergence and reproduction of PSE in sub-national governance and policy identifies a number of issues as central to any analysis. First, it views business engagement as path-dependent and path-shaping in nature; a complex, emergent and unstable phenomena recursively reproduced through particular forms of action. Second, time and space are key dimensions, with temporalities and spatiality inscribed both within specific institutional forms and the horizons of actors. Structures here are seen as having no meaning outside the context of specific agents pursuing specific strategies and hence are “irredeemably concrete, spatialized and temporalized” (Jessop, 2001:1228). Third, actors, identities, interests, strategies and tactics need to be located in relation to PSE within a wider strategic-relational context, which reinforces particular forms of action and strategy and discourages others. Finally, there is a need to examine the reflexivity and recursivity of actors, in terms of their experiences, identities and capacity to engage in learning, to reflect on institutional contexts and to engage in strategic calculation in the pursuit of their interests.

Of particular significance in taking forward a SRA to the analysis of PSE is its emphasis upon the reflexivity and recursive nature of actors within a wider strategic-relational context and their role in defining the economic and social spaces for governance practice (Pemberton and Goodwin, 2010). Within existing urban theory the analysis of the nature, extent and rationales for business engagement, has been somewhat limited. Debates in urban politics in the 1980s and 1990s relating to urban regimes and urban growth machines went some way to explaining the trajectories of urban economic policy in terms of the formal and informal modes of collaboration between public and private sectors apparent across regime types differentiated in terms of the interests of different actors (Stone, 1993) and historical and local differences (Fainstein and Fainstein, 1983). Yet studies beyond the US context demonstrated the limited explanatory power of these models, not only in terms of their restricted theorisation of the state but also in relation to their conceptualisation and empirical investigation of diverse business interests and varied rationales for engagement. European studies demonstrated the different strategic-relational contexts within which city-based public-private partnerships developed (e.g. in relation to the organisation of business interests or the role of the central state) (Cochrane et al, 1996; Davies, 2003). These reinforced different strategies and tactics, produced different experiences, perceptions and identities of private and public actors to provide highly differentiated and contested landscapes for business, urban politics and agency (Raco, 2003; Fuller, 2010).

Explanations for business engagement in urban governance within the urban politics literature have focused predominantly upon the pursuit of material self-interest, either within paradigms of individualist rational-choice theory or regulationist political economy (Bennett, 1999; Cox and Mair, 1989). The strong logic for PSE provided by the pursuit of material self-interest is evident within the shift towards increasingly competitive, market-based urban systems, particularly within the traditionally dominant area of property development but also in relation to an expanded set of market opportunities provided by shifts towards privatisation and the contracting out of services. Yet the extent to which the rationale for PSE in sub national policy reflects only a narrow market rationale requires further exploration. As Wood (2004) demonstrates, there appears limited evidence to support the simple reading of political engagement only in terms of locally based material interests as advanced by Cox and Mair (1989). UK studies have demonstrated the influence of business elites within the urban development process in Britain (e.g. Peck and Tickell, 1995), but they have also routinely shown the varied and frequently constrained nature of business engagement (Raco, 2003; Wood et al, 2005) and the ’multifarious and fractured’ nature of private sector interests within urban policy initiatives (Cook, 2009) across different contexts.

In contrast to the limited conceptualisation and empirical investigation of business strategies and motivations within the existing urban politics literature, the burgeoning literature on strategic management and business-society relations has placed a central focus upon these issues, seeking to develop an enhanced understanding of the extent and significance of wider social and ethical objectives and motivations of business. This is particularly pertinent at a time when notions of corporate social responsibility, responsiveness, and performance are under increased scrutiny in the aftermath of the financial crisis and there are growing expectations from consumers, citizens and governments that business should act responsibly, sustainably and ethically.

Existing theorising of business-society relations frequently displays a conceptual distinction between a strategic economic perspective, whereby such activity is understood as part of business strategy aimed at creating wealth and maximising profit, and an ethical perspective, which focuses more upon the duties and obligations for firms to make a positive contribution to society (Gond and Crane, 2010). The strategic and instrumental economic view argues that the development of corporate social responsibility (CSR) type activity can be adequately understood from within traditional economic theories of the firm (McWilliams and Siegel, 2001; Husted et al, 2010). In contrast, views that businesses are influenced by conceptions of moral duty and responsibility stress the importance of national and local contexts and cross-cultural differences in order to understand how business-society relations are conceived of and acted upon (Blasco and Zolner, 2010).

Studies of CSR behaviour demonstrate the multiple and multifaceted nature of ‘plural’ corporate social responsibilities, driven by what Godfrey et al (2010) call beneficence (i.e. doing well promotes doing good); profitability (i.e. doing good improves doing well), insurance (i.e. goodwill is worth investing in for protection) and industry heterogeneity (i.e. significant variation exists across industries independent of firm level considerations). Such studies provide a basis for a more nuanced understanding of the rationale for PSE, particularly in terms of firm level engagement in economically focused strategies. Yet care is also required in transferring these findings to the arena of sub-national policy, not least because such theory and analysis has focused almost exclusively upon large private sector corporations. Furthermore, much of this theorising remains based upon a disparate and atomistic conception of business and society as largely distinct and separate spheres (Marcus et al, 2010), failing to understand how economic activity is in fact embedded within wider social and political relations that are constituted within and across space. 

This study therefore adopts a SRA that seeks to build upon insights from theories of business-society relations to go beyond ascribed motivations and broad regime types concerning PSE, towards an empirical analysis of the strategies, discourses, and motivations of private sector interests as realised in practice within particular spatial and temporal contexts.This provides a starting point to address, rather than explain away, the complex and varied reasons which underlie the nature and extent of business engagement within urban and regional development and governance and go beyond the normative visions that inform much of the theorising upon business-society relations and progressive urban regimes (Gond and Crane, 2010; Davies, 2002). The paper argues that analysis of this type is crucial in terms of understanding the possibilities and implications for PSE which remains central to the current development of English sub-national policy.

Study methodology

The methodological approach adopted was to consider the path-dependent evolution of PSE within two examples of City Growth Strategies (CGS) in London, from their implementation in 2001 through beyond their formal completion in 2006. The emphasis was upon developing a better understanding of the strategic-relational context in which PSE developed, exploring the interplay between structures inscribed with strategic selectivities and the adopted strategies and tactics of reflexive and differentiated actors. This approach pays attention to the significance of inherited institutional arrangements and the ways in which actors understood and acted upon the politically scripted space for ‘private sector led regeneration’ rooted within particular spatial and temporal context, and the contingent, diverse, and unintended consequences that resulted.

The two CGS case studies, Haringey and the ‘City Fringe’ (located across the London Boroughs of Camden, Hackney, Islington, and Tower Hamlets), were selected for study as although they shared fundamental contextual similarities in terms of being geographically closely located within inner London and characterised by wide spatial contrasts in wealth and poverty, they also demonstrated important differences in terms of past public-private sector institutional development. A qualitative, longitudinal methodology was adopted. In-depth, face-to-face semi-structured interviews with a variety of business owners/managers, representatives of public sector bodies and those working with delivery organisations were completed over a ten year period. An initial round of 44 interviews was conducted in 2001-02. Subsequently selected respondents were re-interviewed in 2004-05 and again in 2010. This enabled the research to track the evolution of institutions and actors engagement and changes in strategies, discourses and perceptions. Key actors were identified through snowballing procedures and institutional contacts with the London Development Agency and local government, and intensive working in the case study areas over a period of time enabled access to be negotiated with a wide range of actors. These primary interview data were combined with a wide range of other source material - minutes from meetings, statistical information, cluster specific documents - in order to develop a fully contextualised understanding of the case study areas.

Institutionalising private sector led regeneration: the City Growth Strategy 

The introduction of the City Growth Strategy (CGS) policy to England in 2001 with its emphasis on a lead role for the private sector was a notable departure from other urban regeneration policies being pursued by the New Labour government at this time, which had until then stressed a cross-sectoral partnership process. It reflected the increased focus of the New Labour government upon promoting a neo-liberal urban competitiveness agenda and a shift away from the earlier emphasis upon tackling social exclusion that had informed initial neighbourhood renewal policy (Syrett and North, 2008).

The CGS policy was transferred from the United States where it had been initially developed by the Initiative for Competitive Inner Cities (ICIC) to translate into practice Michael Porter’s theories on competitive advantage and localised clusters of economic activity (Porter, 1995). The CGS had two defining characteristics; an emphasis on achieving economic growth via a focus on the economic advantages of inner city areas, and the placing of the private sector at the centre of the design and implementation of policies aimed at driving forward the economic development of inner city areas (SBS, 2001). 

The CGS approach was to be guided by an evidence based strategy that involved the mapping of key local economic clusters and encourage a ‘joined up approach’ between private, public and third sector stakeholders engaged in local regeneration. The CGS was implemented in English cities across two phases. The programme was intended to provide only minimal start up public funding and was managed nationally by the Small Business Services (SBS) and regionally by the Regional Development Agencies, in London by the London Development Agency (LDA).

The Haringey CGS 

The Haringey CGS covered 11 wards in the Eastern side of the local authority area of the London Borough of Haringey. Despite high levels of relative deprivation the area formed part of an identified area of economic development potential through its location at the start of the Lee Valley/M11 Stansted-Cambridge ‘growth corridor’. The LDA contracted Haringey council to manage the initial development of the CGS and oversee the creation of a Strategy Board. The first Board comprised six public sector and delivery organisation representatives, 12 self-selecting predominantly small and medium sized businesses and one business representative organisation (the North London Chamber of Commerce) (PACEC, 2003). The Strategy Board commissioned a cluster mapping exercise that identified four clusters: food and drink, information and communication technologies (ICT), creative industries and clothing. Four associated Cluster Action Groups (CAGs) were set up, intended to be led by a ‘business champion’. However by early 2003 the number of businesses represented on the strategy board had declined steadily to only five. Following concerns raised by business over the influence of the council, the LDA intervened to re-establish a higher level of business representation. Ongoing difficulties over business involvement led to further intervention in 2005 when the LDA commissioned an external consultant to radically restructure the operation of the CGS. The result was a shift towards greater involvement of larger businesses on the Board and the removal of Haringey Council from its role as the managing organisation, and a changed focus upon attracting inward investment.

The City Fringe CGS 

The City Fringe CGS comprised 13 of the most deprived wards in the country across four London Boroughs (Camden, Hackney, Islington, and Tower Hamlets) located adjacent to the wealthy financial centre of the City of London. In 1996, the City Fringe Partnership (CFP) had been created to promote economic growth and social inclusion in this area by attempting to maximise the benefits of its proximity to the City of London.  For the CGS, the CFP was selected as the managing organisation and it chose to operate predominantly through eight Cluster Action Groups: Furniture, Jewellery, Printing and Publishing, Fashion, Catering and Hospitality, Financial and Professional Services, ICT, and Construction. For each cluster a private sector investment plan (PSIP) was devised which aimed to be responsive to the needs of private sector interests and secure a strong match between projects and business needs. In practice two clusters, jewellery and printing and publishing, achieved stronger PSE and higher levels of activity, with the former building upon past public/private co-operation.

Private sector engagement in Haringey and the City Fringe

The nature and extent of PSE generated by the CGS in both Haringey and the City Fringe was limited and variable. At the strategic level the approach adopted in the City Fringe of devolving decision making to the cluster level achieved some success in creating a lead role for the private sector, although this was largely restricted to the jewellery and printing and publishing clusters. Yet even here the most tangible success was in fulfilling a traditional role of developing a public-private grant coalition in order to access European Regional Development Fund (ERDF) and LDA funds to resource their development. The LDA emerged as a key funding body for both clusters contributing match funding to the printing and publishing sector ERDF bid, and to the development and implementation of the jewellery sector investment plan. For the printing and publishing sector, its sector investment plan provided the basis for a successful ERDF bid which secured £1 million additional funding for the 2005-2009 period. The jewellery sector demonstrated the greatest success in securing private sector investment. Between 2006 and 2011 this totalled £4.9 million, above the projected target of £4.1 million, although this was largely raised via ‘section 106’ planning agreements which required developers to invest in community interest projects (CITIES, 2009).

In Haringey the CGS remained a largely public sector led initiative characterised by limited PSE. This generated considerable tension between those businesses involved in the management and development of the CGS and public sector actors who pointed to a failure of the private sector to come forward and commit to the initiative. The initial development strategy adopted and its subsequent evolution meant decision making power remained centralised within a Strategy Board largely dominated by the local authority and this limited the ability to exploit sector specific knowledge and business networks within the CAGs. Private sector input was limited largely to advice and skills rather than investment finance with the LDA supplying the majority of funding. 

In both Haringey and the City Fringe CGSs concrete achievement in relation to the design, implementation and development of projects was limited across the CGS delivery period. Action in Haringey was restricted to the development of a referral and apprenticeship system in the ICT cluster, a training initiative to help local small businesses bid for local authority contracts, and private sector commitment to joint marketing strategies. In the City Fringe, a greater range of initiatives was generated which included participation in international trade shows, business support and training and increased workspace provision (Bagwell 2008). These initiatives provided some assistance to business growth and improved skills levels, particularly within the jewellery and printing and publishing sectors, but by 2009 the overall impact in terms of safeguarding or creating local employment had been limited (CITIES, 2009).

Understanding private sector engagement in the CGS 

The CGS was intended to provide a space for private sector led urban regeneration characterised by strong levels of business engagement. Yet in practice the two CGS areas of Haringey and City Fringe demonstrated the evolution of a very limited and highly selective involvement of the private sector. The strategies and tactics of engagement that emerged in practice reflected the calculations of a range of reflexive actors in relation to structurally inscribed strategic selectivities. A number of key mechanisms can be identified through which these strategic selectivities and calculations produced the spectrum of engagement evident in practice - one that ranged from non-engagement by the majority of business through to high levels of engagement restricted to a minority of businesses types operating in particular sectors.

Material self-interest: business opportunities and benefits

An informing concept of the CGS was the business opportunities that disadvantaged inner city areas provided for the private sector through the existence of local ‘underserved markets’ and access to a pool of low cost labour,lower cost premises and buoyant markets (Porter, 1995). The central rationale for business engagement was therefore rooted in the existence of a strong business case. As one public sector official pointed out:

“We are not looking for philanthropic charitable stuff CSR type of activities. We want the private sector to be involved because there are economic and business benefits for them to be operating within certain inner city areas”

However, despite initial business interest generated by high profile launch events, it quickly became apparent to the majority of businesses that the CGS provided little in the way of immediate business opportunities. Although businesses, particularly manufacturing ones, had closed and relocated from this area from the 1970s onwards, the targeted areas did not display the same level of private sector withdrawal and ‘ghettoisation’ that characterised the US cities where the CGS policy was conceived. Consequently the expected drivers for private investment provided by underserved markets and low rents and wages were only weakly present. This absence of a clear commercial benefit for the majority of business from engagement with the CGS contrasts with those area-based initiatives that have mobilised involvement of certain business interests, whether through property-based regeneration activity underpinned by substantial public investment in the case of Urban Development Corporations, or businesses directly investing in improved environmental conditions through the creation of Business Improvement Districts (BIDs) (Hoyt and Goppal-Agge 2007).

Against this general background however, important selectivities were evident in relation to the extent of the private sector, its composition in terms of sector and size structure, and its relative dynamism, which was spatially unevenly developed across the two localities. In terms of firm size, the lack of obvious and immediate returns to business was particularly significant in relation to small business engagement in both areas. For smaller businesses, many of which were engaged in low margin activities, their focus upon short term trading conditions allied with limited resources and a lack of strategic development, shaped an approach to engagement that required immediate business returns to justify any resource input. Although longer term improvements in the health of the local economy may have been of particular importance to the business prospects of these smaller businesses given their rootedness in the local economy, buy-in to any longer term strategic vision was limited by the short time horizons that drove their business decisions combined with a lack of belief that the CGS would indeed bring any longer term benefits.

Given the ‘cluster’ orientation of the CGS, the extent and scale of agglomeration produced differentiated possibilities for business engagement. The identification of clusters at the local rather than city-wide scale created a major disjuncture between the small scale of CGS interventions and the much larger scale at which most clusters operated. This provided a weak basis for business engagement across the majority of sectors as there was at best only a weak economic relationship between the CGS areas and any sectorally based agglomeration economies. The operation of identified clusters such as ICT at the scale of the sub-region and beyond, provided little basis for localised strategies and tactics. In contrast, the unique and pre-existing cluster of retail and manufacturing jewellery businesses in the small geographic area of Hatton Garden within the City Fringe was the one case where the scale of intervention was congruent with the scale of cluster activity. Here, and to a lesser degree in the printing and publishing sector in the City Fringe which also provided a better scalar fit with sectoral economic geography, a stronger degree of commercial engagement from business was achieved as a result of strategic calculation rooted within recognition of mutual economic interests.

Beyond the market: social responsibility and place based identity 

In the absence of any overwhelming business case for engagement, the minority business involvement that did occur was motivated by a mix of overlapping motivations ranging from the well-being of the industry and locality, through to wider social responsibility and public service agenda - a desire to ‘put something back into the community’ - as well as the exercise of political influence over local policy decision-making and ‘enlightened self-interest’. 

These interweaved motivations were evident in the response of one business manager:

To be honest it is pure self-interest. Absolutely to start with. But then again, I have been 23 years with [business 1], 25 years in the jewellery industry and I have a lot of friends and colleagues in the jewellery industry and I want to make sure that they continue to have a living and the industry they work in thrives

Importantly, as the quote above indicates, the relative importance of the strategic motivations of business owners and managers varied over time and in response to changing circumstances within their businesses and the locality (see also Spence and Rutherfoord, 2000), demonstrative of a reflexive process informed by their experiences of becoming engaged with the CGS.

Although the CGS itself did not target the promotion of CSR activity, the importance of the presence/absence of larger corporations was a significant element informing ‘selectivity’. There was evident a greater propensity of some larger businesses to engage with the CGS, often as part of their CSR strategies augmented in some case by a degree of place-based identification, and these demonstrated a superior ability to contribute staff time and financial resources. Spatial variation was important here. The City Fringe presented a greater mix of large and small businesses and through the pre-existing City Fringe Partnership, had a history of mobilising ‘beneficient’ CSR activity through engaging prosperous city businesses to support local initiatives. In contrast the Haringey CGS lacked the presence of large employers and was dominated by small and micro businesses (EDAW, 2005). As a result, in the development of the Haringey CGS, the initial engagement of smaller business, and the maintenance of this over time, proved much more difficult. Notably when the Haringey CGS was relaunched the focus shifted towards engagement with larger companies. In fact the more active CGSs across England were characterised by the engagement of one or more large businesses and this was also the case in the US CGS experience (GHK, 2003). In economically disadvantaged areas which tend to be dominated by smaller businesses (Spence, 2007) this necessarily limits the scope for PSE, as well as contributing to a tendency for PSE to become dominated by corporate agendas in particular sectors. In contrast, sectors dominated by high concentrations of small business are characterised by non-engagement and/or minimal representation. 

Other bases for PSE selectivity rooted within wider business-society relations concerns the absence/presence of place-based identification allied to sectoral heterogeneity. What was generally apparent in the study of CGS areas was the relative absence of place as a source of mobilisation. As one respondent with experience of the US context observed:

It is tangible almost when you are there [in the US], and it translates itself down to something very powerful, pride in the place and passion for your own area. Your own downtown, your own bit of city. And it is a struggle to find that in many of the places we are involved in here

The one exception to this was the case of the jewellery cluster where place-based identification provided a strong rationale for business engagement. Here, and to a more limited degree in the printing and publishing sector, stronger place-based attachment manifested itself in engagement rooted within ‘insurance’ motivated business engagement, with businesses investing for ‘protection’ (for example in worker training initiatives and developing marketing initiatives such as visitor centres), motivated by a concern for their competitive future given challenging external economic conditions.

Divergent private/public discourses 

The existence of contrasting public and private sector discourses surrounding PSE, constituted differently in different places, shaped the tactical and strategic approaches of private and public sector actors in the two CGS areas. The progressive injection of a private sector ethos into the working and management practices of the public sector over many years might have been expected to reduce such differences. Yet the persistence of fundamentally different discourses, reflective of different interests and identities, produced a significant divergence in attitudes and understanding of PSE. Indeed the enduring significance of sectoral differences in objectives, attitudes, skills and languages, to the effectiveness of public-private partnerships has been noted more widely (e.g. Centre for Cities, 2006; HM Treasury, 2007; Tucker and Neal, 2008).

The dominant private sector business discourse evident in the language of ‘getting on with things’ via entrepreneurial and risk-taking activity led to frequent criticism of slow, bureaucratic and risk averse public sector working practices that discouraged PSE. As one business actor wryly observed, the development of the CGS initiative was characterised by “thirty-two words for slow”’. Another business manager noted in relation to attitudes to risk:

Basically council officers are not paid to show initiative. They do not get rewarded for it. They actually expose their position to risk. They have no interest in initiating projects that involve risk (Haringey business manager).

In contrast the discourse of public sector actors stressed the need for accountability and transparency in the actions taken and need to engage with a broad range of stakeholders. Here criticisms over slowness to act and risk aversion were rejected on the basis of a lack of understanding by business of the working of the public sector. As a public official pointed out: “Businesses may not know how a strategy works, it is new to them [..] they don’t have the experience”.The different discourses and associated languages of the public and private sector for some provided a clear barrier to communication: 

Businesses do not relate to the council. They just don’t relate. I don’t know what it is, the language is different, they just, you really want businesses being addressed by a business person yeah? (Haringey business owner)

Yet there were notable differences between the two areas, with past local histories of public-private sector relations crucial in shaping the terrain for business engagement. Levels of pre-existing trust and respect between private and public actors was crucial to the subsequent evolution of governance relations under the CGS. In the case of Haringey, low levels of pre-existing trust rooted in past public-private initiatives in which business often felt marginalised, was subsequently reinforced by the CGS experience

They have done what Haringey always does, it mouths attitudes about the private sector, and working with the private sector but it is incapable of doing it. Because it has a very poor historical record [….] it goes back 20 years. (Haringey business manager).

There is evidence in Haringey of long term suspicion between the Labour controlled local authority and elements of the business community (North and Baldock, 2000) and development of public and private relationships under the CGS at times appeared something of a ‘dialogue of the deaf’. In contrast, in the City Fringe there was some prior history of working in partnership with the private sector, particularly in the jewellery sector (GHK, 2003), which brought some private and public actors together around a common discourse. Significantly, unlike the Haringey CGS, the City Fringe Partnership, set up prior to the development of the CGS, was not directly accountable to the local electorate and had the flexibility to pursue its own mission in a manner suited to the business-led orientation of the CGS. In contrast, the local authority led CGS in Haringey was centrally concerned with the need to manage the tension between the need to prioritise business interests, as imposed by a central government initiative (the CGS), and the needs of local residents to whom they were accountable.

The strategic response of many private sector players to this situation was to drift away from engagement in the CGS as differences in attitudes and approaches became apparent and doubts of its effectiveness grew. For the stakeholders charged with managing the CGS initiatives, the problems encountered in getting ‘buy-in’ from private sector companies led engagement activity to become focused on a small number of receptive firms, a strategy evident also in other initiatives (Payne, 2008). This tactical response within the context of limited time and resources resulted in engagement centred upon a minority of self-selecting businesses that were neither representative nor accountable to any broader local private sector interest. 

Of particular importance with regard to CGS development was the absence of a dedicated funding stream to support its development, intended to avoid the emergence of a ‘funding-driven’ agenda. From the outset this caused tensions as many local stakeholders embedded within a culture of bidding for grant funding mistakenly assumed involvement in the CGS would provide access to a new ‘pot of money’ to develop existing initiatives. That the CGS did not itself provide a mechanism to mobilise public financial resources meant the most common mechanism for drawing private and public interests together within the urban and regional policy context was absent. In response, in both areas a driving concern of the engaged public and private partners became to secure funding in order to develop a programme of activities. Unable to lever in significant private-sector funding, tactics rapidly reverted to what many actors were most experienced at, traditional grant-chasing, the outcomes of which strongly influenced the direction of CGS activity. The result of this process were actions undertaken to meet the priorities of potential public sector funding bodies rather than necessarily placing the needs of business centre stage as the CGS had intended.

Conclusions

The limited and variable impact of urban and regional governance arrangements that have sought to promote PSE reflects an ongoing failure by policy-makers to recognise the characteristics and contradictions inherent in this project. The result is a significant gap between the policy script and the realities of practice as evident in the CGS initiative. Although conceived and implemented in a very different economic climate, the dimensions of material business interest, wider notions of social responsibility and divergent private/public discourses identified in the analysis of the CGS as critical to the selective nature of emergent PSE strategies and tactics, are central too in understanding the rolling out of current private sector led sub-national governance arrangements and their likely impacts. The development of LEPs has failed conspicuously to address the fundamental issues that constrained business engagement within past sub-national governance arrangements, not least whether the private sector has the will, capacity or resources to take on a leadership role (Staite, 2010). 

Analysis through a strategic-relational approach demonstrates how reflexive actors from private and public sectors engage with structurally inscribed strategic selectivities rooted within particular spatial-historical contexts, to pursue particular tactics and strategies. That the private sector did not generally respond in the manner that policy-makers intended within the CGS reflected a process of ill conceived policy transfer (see Ward, 2011), which here resulted in an inadequate specification of business interests and agendas in the process of policy design and delivery, both nationally and at the level of particular localities. Once local business realised that the business opportunities within deprived urban areas upon which the CGS was premised were either illusory, or required considerable additional commitment to be realised in the absence of additional public resources, the vast majority of private sector interest rapidly evaporated.

PSE is at its strongest and most vital where a clear economic self-interest for business is apparent. This process inevitably generates business engagement limited to specific business interests (e.g. property, retail) and reflects the spatially uneven development of market opportunities as well as the composition and relative dynamism of the private sector (Webber and Swinney, 2010). For business to be engaged from the outset in the design and delivery of interventions in order to achieve meaningful and longer term PSE - as the CGS intended and other studies have recommended (Tucker and Neal, 2008; Swinney et al , 2010) – requires the presence of local accommodation between private and public discourses underwritten by a degree of trust, resources and shared understanding of issues. Such private/public sector working relations are highly unevenly developed across space and act to shape the trajectory of institutional development, as has been evident in the setting-up of LEPs. 

An enhanced leadership role for business in urban and regional economic governance within a context of prolonged economic downturn and major reductions in public sector spending raises significant issues for local and regional politics. In the search for a new institutional fix, emergent political discourses have emphasised a lead role for responsible business, and/or the intensification of neo-liberalism through further marketisation of public services. In the case of the former, the debates triggered in the aftermath of the financial crisis over what constitutes ‘good’ business in relation to the public realm has renewed interest in philanthropic traditions and the promotion of social entrepreneurial activity. The development of a wider and more generalised sense of societal obligation into business practice as a matter of everyday routine and the development of alternative organisational forms incorporating social values could indeed provide a basis for different forms and models of PSE. However in the highly competitive conditions of an ongoing economic crisis which sees many businesses focused only upon their immediate survival, any movement towards widespread and deep seated voluntary business engagement and a thriving social economy appears more of an ideal than a likely reality.

Contrary to its stated intentions, much of the PSE generated by the CGS was rooted within non-market rationales relating to serving a common public good, social responsibility and local politics. This generated a self-selecting process of particular business interests that frequently were only of marginal importance to the functioning of local and sub-regional economic clusters. Governance arrangements reliant on this type of PSE display a number of limitations rooted in their reliance on voluntary involvement and the lack of legitimacy, credibility and representativeness of those businesses involved within the wider business community. Furthermore, reliance on CSR activity limits engagement to particular predominantly larger corporate business interests and bypasses the majority of SMEs, despite their crucial importance within local economies. The developing theorisation of business-society relations demonstrates that understanding PSE on the basis of material self-interest can be drawn in part from an economic rationale located within an elaboration of existing theories of firm development. Indeed the case for engagement is sold to business largely as a business strategy that is good for the firm in terms of its economic performance (BITC, 2008), even though the available empirical evidence related to this remains inconclusive (Husted et al, 2010). Yet such firm centred theoretical approaches commonly fail to engage with the manner in which business is embedded within wider social relations constituted within and across spatial scales. It is only through an embedded understanding of business responsibility, as is possible within a strategic-relational approach, that a fuller understanding is achieved of the everyday practice of business engagement across a range of business types and localities and in relation to evolving local politics and governance, 

The possibilities for the further marketisation of local government and public service delivery in a period of declining public resource provides another important political dimension to any enhanced business leadership role in sub-national economic governance. Current moves in a small number of English local authorities towards the contracting out of strategic services such as regeneration, economic development and planning, is set to place private sector interests at the very centre of local government in a manner which past and current governance models have not previously done. A model of stripped down local government with private sector contractors as ‘strategic partners’ potentially provides business a lead role in local economic development largely unfettered by some of the traditional requirements of democratic accountability, transparency and scrutiny. In the face of such trends and an ideological context where models of private sector led development are once more in the ascendant, the challenge to refashion the practice and discourse of PSE in a manner that fundamentally roots it within a socially just and democratically accountable process of local and regional economic development appears more important than ever.

Acknowledgements
The authors would like to thank the ESRC and LDA for their support in undertaking the first phase of this research and David North and three anonymous referees for their insightful comments on earlier versions of this paper.

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