McFilter

The Regeneration/Innovation Cycle

Of late there's been another round of articles in the local press discussing the lack of "inward investment" and "Grade A office space" in Liverpool.

It's a perennial topic, and these articles haven't added anything new. They'll blame the Council for not attracting the big employers; argue that we don't have enough Grade A office space, and that maybe there needs to be public investment to bail out incentivize the property developers; and add a dash of the "compete with Manchester..." bogeyman.

These supposedly hard-hitting articles never explore the attempts which have been made to solve this issue because—possibly unwittingly—they're part of The Innovation/Regeneration Cycle. As a result we never learn from our mistakes.

It's not specific to Liverpool. We have it all over the UK, and elements further afield too. Liverpool is just where I run into it the most, given that I live here (and where I'm part of an alternative approach).

Those playing the game claim that they're trying to make the locale/country/world better, and that succeeding at innovating or regenerating an area is hard (which it is). However, I find Stafford-Beer's razor more useful here: The purpose of a system is what it does. Not what you say it will do, or hope it will do.

Like any game it has its rules and players. The rules aren't laid down in a convenient booklet, and it's presented as if it's just the natural way of the world. That's not true. There are many different ways we could approach revitalising our cities, towns and villages.

I tend to take Joshua's advice that "the only winning move is not to play". But I'd much rather we could work out a new game with better outcomes for the city.

Back to the current game. What does it look like?

It's best if you can play multiple cycles concurrently, somewhat like singing a round. That way steps 1 and 3 (top and bottom in the diagram) for new projects can provide opportunities for press releases and activity, which will distract and excite people, thus helping with step 4 (the failing) of any earlier projects.

Not everyone playing the game is just in it for themselves. However, those trying to improve the city are up against a system that is indifferent to that outcome.

It's not always property. There has to be a grain of truth in it all to make it vaguely believable, but you can overhype it because you never really have to deliver on it. There are versions of the game going on around any latest buzzword in tech (which is why it's important to heed Laurie Anderson's advice to "Get a really good bullshit detector. And learn how to use it.")

Occasionally you get one that isn't a complete white elephant and actually achieves something beyond enriching the players and perpetuating the cycle. This is by chance, rather than design. It will be held up as an example that the system works, while overlooking the poor efficiency of the approach.

Sensor City, a Cycle Case Study

There are many, many examples of this in Liverpool, but let's look at Sensor City. It's neat and self-contained. (As far as I know). I'm not an accountant, nor an expert in funding, but I think I'm reading the annual reports right. I am an expert in the Internet of Things and sensor technology, so have had a pretty good view of developments professionally. Despite—or perhaps because of—that, I've only visited the building twice.

Step One: Hype

In 2013 the Government announced plans for a £15 million boost for local business growth at universities. Liverpool University and Liverpool John Moores University, with help from the Local Enterprise Partnership, submitted a bid; each uni will chip in £5m to match £5m from the Government, as outlined in the propsal...

To establish a unique sensor-systems business incubator focused on creating, nurturing and establishing commercially-viable, hi-tech companies; and, over a 10-year period, drive growth both locally and beyond, creating a cluster of over 300 new businesses and over 1000 jobs in emerging technologies.

We hosted them at the IoT Liverpool meetup to share their plans. There were grand announcements from the Chancellor, events to share the architect's plans, opportunities to roll it into the "£2bn Knowledge Quarter vision", and so many more...

Step Two: Get the Money

Actually, they get the £5m from the Government, and then a further £5m from ERDF to cover some of the amounts they were due to chip in. The company is incorporated in 2014. The 2017 accounts list another £2m of "other grants": £1m from each university.

Step Three: Building

With the money secured, they do need to actually build something. They manage that, although on the face of it it doesn't seem to be value for money.

During development the "assets in the course of construction are valued at cost". Once built they're revalued and "depreciation and impairment losses are subsequently charged on the revalued amount". In the 2017 accounts, they note that "an external valuation" valued the building at £2.19m. "This valuation is below cost [...] resulting in a £7,701,102 charge". Does that mean they made a £7.7m loss on building the building?

With the building open, in 2018 you can invite the press in, show visiting ministers and dignitaries around, enter award competitions, and make a go of things. If you're lucky, you might also get further rounds of public money for other projects, such as £3.5m from Innovate UK. Remind everyone of your key objective to "Create 300 new businesses and 1000 new jobs within the next 10 years".

Step Four: Reality

The wheels had started to come off the project in 2019. The executive director had left at the end of 2018 and there were rumours of it being folded into the management of the Science Park. Then in the 2020 accounts there was a further £1.5m impairment charge—with the building being revalued at £467k, about the same as my 3-bed ex-council terraced house in the Cambridge suburbs!—as it booked a loss of £1.8m.

The interim executive director left in May 2020, handing over control to Colin Sinclair of Sciontec. In December the building closed for a refit to "transform the Sensor City building and its internal facilities", aiming to reopen in Autumn 2021.

The 2021 accounts are, compared to previous years, relatively uneventful. Only a £250k loss this year, with the building being further devalued to £430k. The accounts continue to state the objective to "Create 300 new businesses and 1000 new jobs within the next 10 years". However, a single paragraph at the end of the accounts noted:

Events after the reporting period

As of 15 October 2021 all Sensor City Liverpool Limited employees were made redundant, as previously discussed at an Emergency Board meeting of 17 August 2021, and subsequently agreed by the directors. The costs associated with the redundancy process totalled £56,044.08 which includes an element of P3 salary.

The building, unsurprisingly, failed to reopen in Autumn 2021, or at all since. In a Freedom of Information request Julian Todd found that "Sensor City is loss making with the pre-Covid-19 loss of £1m per annum requiring both HEIs to invest £500k each to ensure that it is maintained." (section 10.4).

Back to Step One

Conveniently, while I was drafting this post, they have completed the loop. At the end of September there was the grand announcement that £2m will be invested to relaunch Sensor City "as a global hub for innovation, technology, digitalisation and the internet of things". So, err, the same thing that we spent £12m to do five years ago?

Infinite Loop?

I don't like complaining about things without suggesting some alternative approaches as possible solutions. However, there isn't "one weird trick" that will solve Liverpool's ills, despite our desire—and our leaders' exhortations—that one exist.

Given the universities, with some level of access to academic IoT and sensor expertise (there's always an insulating layer of usually-limited-in-knowledge business-dev folk between us and the academics), couldn't turn Sensor City into a global hub of sensor tech, I can't see how giving control to property developers is going to fare any better.

I'm not especially bothered about the new buildings, or the wasted money; I'm frustrated by the fact that it crowds out genuine activity, and is a barrier to the development and growth of the local tech community. The exact opposite of what it claims to want.

We were promised 300 new businesses and a 1000 new jobs, in sensor and IoT technologies. The construction firms got £10m. The property developers got a new Grade A asset. Those new businesses and jobs are conspicuously absent. And the answer is to spend a further £2m on the building?!? How about we acknowledge that it didn't work last time, and have some difficult conversations about how we might fix it?