The Evolution of London’s Business Improvement Districts

  • By Jane Harrison

 

New research from the London Enterprise Panel (LEP) and the Greater London Authority (GLA) offers an opportunity for London boroughs to consider their relationship with Business Improvement Districts (BIDs). This briefing outlines the research findings and explains why BIDs are likely to continue to become an integral part of the London business landscape and a key partner for London boroughs’ economic development work.

Backgound

A BID is a geographical area in which the local businesses have voted to invest together to improve their environment. BIDs provide additional or improved services, identified by the local businesses. For example this could include extra safety, cleaning or environmental measures and marketing the area. BIDs are business-led organisations, funded by a mandatory business rate levy on all eligible businesses after a successful ballot. BIDs have to re-ballot every five years.

Since 2005 BIDs have been set up in various different parts of London and there are now 51 BIDs in the capital. While initially focused on town centres in inner London, BIDs have developed, spreading to outer London boroughs and covering other types of area, including industrial estates.

During the last mayoral term the GLA and LEP have supported the set-up of BIDs and have recently completed research to provide them with recommendations for their next steps. In addition, an increasing number of London boroughs work with their existing BIDS or are working with businesses to support them to set up BIDs.

Analysis

In London BIDs and local authorities are often closely linked. This association can take a number of different forms - for example, many BIDs are initiated by local authorities, local authorities provide BID areas with core services, some BIDs are delivering services for local authorities and are taking an increasing role in place-shaping, and local authorities collect the levy on behalf of BIDs. In addition, business rate devolution will mean local authorities need to work more closely with local businesses to support their growth. In some areas BIDs will be a key conduit for this activity and a positive relationship between boroughs and BIDs will be important.

Since 2012 a significant number of BIDs (20) have been established in the capital. In part this is due to the Mayor of London and the LEP strongly endorsing the concept and providing financial support for the establishment of new BIDs, as well as support to existing ones. In addition, the Department for Communities and Local Government (DCLG) has provided loan funding to the establishment of new BIDs. Some London boroughs have also provided support to BIDs in the form of officer time and in some cases financial resource.

The growth of BIDs should also be viewed in the context of increasing austerity. Many local authorities are carefully considering what their statutory duties are and, in some cases, services that have previously been provided to business areas are being reduced. This has led to BIDs needing to find some way to resource and replace these services.

With the GLA BIDs grant funding now coming to an end, some boroughs reducing the services they provide to business areas, a new Mayor and the onset of business rates devolution, the GLA and LEP have updated their previous research on BIDs to provide new recommendations for the sector and its stakeholders.

The new research contains the following recommendations for London boroughs:

Quick wins

  • Talk with BIDs about providing services before they become vulnerable to cuts.
  • Set up regular forums for BIDs within a borough to discuss shared interests, joint purchasing and other efficiencies.
  • Establish a main point of contact for BIDs and ensure regular dialogue; allow officer time.
  • Use BIDs as a conduit to seek views of businesses and as a partner on consultations.

Longer term:

  • Explore fiscal mechanisms that nurture local businesses, e.g. late night levy discounts or exemptions, SME business rates relief.
  • Integrate BIDs into town centre strategies.
  • Engage with BIDs to review baseline agreements together regularly, to anticipate changes and manage expectations.
  • Include BIDs in the development of service delivery plans.
  • Include BIDs in any relevant work of multi-borough or sub-regional growth partnerships.
  • Continue to support organisations which facilitate BID/borough collaborations.

Commentary

The recommendations made in the new research are helpful in providing boroughs with practical ways to manage the borough – BID relationship in a fast changing landscape. As an industry, London’s Business Improvement Districts are still emerging. Some have become agents of economic growth and influence, while newer and smaller ones may have to prove their value to members to survive.

Considering the recommendations above, boroughs will want to reflect on how they can set up communication and dialogue between themselves and BIDs to best manage the likely changes businesses will experience in terms of the services delivered by their local authority. However, this communication route should not only be used to manage the expectations of businesses, but also to play a key role in working with BIDs to establish new forms of service delivery and working together to stimulate local economic growth.

This is important for both businesses and boroughs. Business rate devolution will mean that a large proportion of boroughs’ revenue will be generated from business rates and therefore the success and growth of local businesses is paramount in boroughs’ future economic development plans and, potentially, their own financial health. Where BIDs exist and are well functioning they can help boroughs to understand the development needs of local businesses. Boroughs will also need to work closely with their business communities ahead of business rate devolution. The rate re-evaluation in 2017 will hit London harder than the rest of the country, as the government’s desire for the system to remain ’fiscally neutral’ means the economically resilient capital will compensate for the impact of the recession in other regions. Businesses could face abrupt increases, with smaller businesses in high-growth areas particularly vulnerable. Furthermore, on the council side, austerity could make it difficult to continue protective initiatives such as small business rates relief. BIDs and boroughs will need a mature relationship to work through this together and support businesses as much as possible.

BIDs can be an essential partner for boroughs in supporting businesses in a changing landscape. Therefore, consideration should be given to a number of factors to ensure this relationship is as effective as possible:

  1. BIDs do not represent local residents. This means, while it is good practice to include BIDs in the development of town centre strategies, the economic development work of sub-regional partnerships and local consultations, boroughs will need to balance BIDs’ views with the needs of local residents who are affected by these strategies but who are not necessarily represented by BIDs. BIDs represent a certain constituency and in most cases in London there are significant residential populations within BID areas that may not be appropriately represented by a BID.
  2. BIDs offer only one way of engaging with businesses and boroughs should not neglect engagement with other forums, such as traders or business associations.
  3. BIDs vary in maturity and scope and while it is reasonable for a mature and large BID to respond to consultations and engage strategically with the borough on economic development issues, this may be difficult or less relevant for smaller, issue specific, BIDs.

BIDs can be astrategic partner with boroughs to support them in creating the best environment for businesses to thrive and grow. Boroughs have a role to play in enabling this partnership and working with BIDs to understand the needs of local businesses. However BIDs should not be used to replace statutory services – their role should be in leveraging revenue to provide additionality. Boroughs should also ensure they are balancing the needs of BIDs with the needs of those businesses not represented by a BID and saliently the needs of residents affected by activity undertaken in a BID area.

Jane Harrison, Principal Policy Officer