Welcome, everyone, to this meeting of the Economy, Trade, and Rural Affairs Committee at the Senedd. I hope that you've all had a good summer. I haven't received any apologies this morning, but are there any declarations of interest that Members would like to make? No.
We will move on, therefore, to item 2 on our agenda, which is papers to note. There are a number of papers to note, as you can see, but are there any issues that Members would like to raise on these papers? No.
We'll move on, therefore, to item 3 on our agenda. Today, we're considering the development of the projects of the four growth and city deals. This is the first time that the Economy, Trade and Rural Affairs Committee has received an update on these. The predecessor committee, which was the Economy, Infrastructure and Skills Committee, had an update on the projects in March 2021. Can I therefore welcome the witnesses and also ask them to introduce themselves? But, before that, it's worth noting that a number of bodies are involved in the mid Wales growth deal and, as a result, we have an unusually large panel of witnesses for this session, and so can I therefore ask everyone to be succinct in your answers and to avoid any unnecessary repetition? So, before we move straight to questions, can I please ask you to introduce yourselves for the record, and can I start with Nicola Williams, please?
Good morning. Bore da. My name is Nicola Williams, and I'm the joint strategic lead for the mid Wales growth deal and the Mid Wales Corporate Joint Committee.
Good morning. I'm Carwyn Jones-Evans, I'm growth service manager for Ceredigion County Council, but also the joint strategic lead with Nicola on the work of Growing Mid Wales.
Good morning, everybody. I'm Kellie Beirne. I'm director of Cardiff capital region and chief executive of the South East Wales Corporate Joint Committee.
Well, thank you very much indeed for those introductions. Perhaps I can just kick off this session with a bit of a general question, really. Can you outline the main areas of progress that your particular deals have made since you or your colleagues last gave evidence to our predecessor committee, which was back in 2021? Who would like to kick off with that? Clive.
Since 2021, we have set about developing the strategic portfolio business case, and that was following the Government guidance and best practice, and then commencing that and then the programme and project development. That led to the approval and agreement of the final deal in January 2022, which confirmed the scope of the portfolio, including two indicative programmes and nine stand-alone projects. And then, throughout the summer and autumn of 2022, projects were submitted with their strategic outline cases, which have been assessed and approved, giving about six projects to proceed to development of their outline business cases, of which two are required to be resubmitted, and there is one future project looking to progress from feasibility to an SOC in autumn 2023. There is also progress being made on the two programmes, the digital and the sites and premises, as well. So, quite a lot has been done in a short space of time. We've gone from heads of terms to getting into delivery within a calendar year, almost. Thank you.
Well, just to say, it's very welcome that we've had the first tranche of money from Welsh Government, which was quite long awaited, but welcome nevertheless. That's pretty crucial, really. It was quite a crucial milestone for us to see the first—. It gives reassurance, doesn't it, all around, both to ourselves, but also to the sponsors and the project leads, that this is really happening. That, for us, was a big boost.
Yes, if I can go, please, Chair. We're in a different place, as you know. We've been operating for six years. This will be our seventh year now of full operation as the Cardiff capital region city deal. We've actually committed about 87 per cent of our fund to date, as you'd probably expect at that stage in our process. We're on track with all of our targets in relation to both job creation and leverage. We hope to leverage over about £2 billion-worth of additional funding. There's lots of match funding coming in via our work with Welsh Government, via the work that we do with organisations like UK Research and Innovation. We've secured those two Strength in Places funds: nearly £40 million on Media Cymru—that's to help our creative industries in the region—and £45 million for the compound semiconductor sector and CSconnected, which is our cluster group.
So, we're making really good progress on clusters generally. Along with Welsh Government, we've invested nearly £20 million in the cyber innovation hub. That's a hub that catalyses growth in cyber innovation, not just for economic benefit, but for societal benefit, and that's something that truly embraces the whole of our region, given the asset base, given where our companies are, many of which are in the northern Valleys, alongside some of our key educational institutions. We've also invested in Media Cymru, as I've just mentioned. Last November saw the launch of our £50 million innovation investment capital, which is run and managed by Financial Conduct Authority-accredited fund managers. We've just announced the first investment from that fund.
I suppose the big piece of news was that, about 18 months ago, we acquired the former coal-fired power station at Aberthaw in the Vale of Glamorgan—really significant. That represents about a £40 million investment, and significant because we're trying to take that asset and repurpose it as a green energy hub, which will hopefully fulfil some of the region's energy requirements, particularly around renewable energy generation as we look ahead. So, that's a particularly ambitious project. We've acquired the site. We're in the process of letting a demolition contract. But clearly, many more opportunities to come, particularly around the research and development space, which for us is critical. If we're going to grow the Cardiff capital region economy in the right ways, then we have to invest in high-productivity mechanisms, so a research and innovation system is really, really important.
And on top of some of the activity that we've seen in the northern Valleys, for example, our first investment under our strategic premises fund was in a company just outside of Ebbw Vale, and Zipworld, of course, that's a really important asset, but this summer as well, our regional cabinet agreed a £50 million investment in the northern Valleys seed fund, which we hope to match against other investment sources, which will look to leverage some of the benefits of the Heads of the Valleys road, the dualling of the A465. Regional cabinet also agreed a £45 million investment in upgrading to full fibre connectivity, which, again—. We're looking for investments that can really benefit the whole of the region.
I think, in the Cardiff capital region, we've all been hit with the same set of issues. The headwinds are global at the moment, aren't they? The economy is the geo-economy. The issues that we face in sectors like compound semiconductors are geopolitical, so we are now competing with the world, which is very, very different stakes. So, yes, there will always be crosswinds, there will always be an upside and downside, but, I think, understanding the nature of some of those global trends is really important.
We've seen, with the war in Ukraine in particular, the rising cost of energy, instability of global supply chains, and, I think, around some of our infrastructure projects, perhaps transport in particular, the rising costs of goods and materials is having an impact. We're trying to manage that as best as we can, but, yes, that's something that I would highlight as being a factor that we really have to keep an eye on in relation to our key risks and challenges.
Well, I suppose, similarly to the previous speaker, the headwinds that are affecting everybody, they're bound to affect your investor confidence, and the confidence of the people developing these projects. And inflation is a really big issue, because this is a deal that is—. All the deals are over a period of years, and for every year that goes by, the costs rise, and so, I should say that that is certainly hampering progress with some of the projects, for sure. But we're still making progress; it's still moving forward. And I think we're confident that this is going to work despite all the pressures. So, yes. But I think all of these growth deals are bound to be affected by these similar problems.
[Inaudible.] I think the advantage we've got, in terms of where we are, is that the projects are still in their planning phases, and we're very much in that position of, 'Okay, so your ideal utopian vision of the project is no longer deliverable'—they need to work harder in terms of looking at investment, levering investment from other sources. And I think it's not a bad conversation to have, rethinking, relooking at all these aspects: is building a building the right option? Can you build it in a different way? Can you reuse? Again, thinking about net zero and climate change targets as well. So, it's not a bad conversation to be having, but it is also a bad conversation in terms of ensuring that we actually give accurate figures to Government in terms of what spend we'll be able to achieve in the coming year. And it is a challenge because, with prices, the outline business case is pre-procurement and the full business case is post-procurement, and things change in that landscape as well. So, just to articulate that, but we're mitigating it just because of where we are. But as Councillor James Gibson-Watt said, we're still confident; we're just having to relook at the optimism bias in the figures we've got currently. But we're still confident.
Just to add very briefly, one thing that's good—. As has been said, it's early days yet, but the portfolio of the project is a good mix to mitigate some of that risk, I think.
With regard to the UK Government's re-profiling of its financial contribution to the deal, have you had information about that, and will you expect to receive confirmation?
So, I'm happy to answer this one. So, no, we haven't officially. So, the process is, I believe, that all Welsh and city deals are being re-profiled by the UK Government currently. We submitted a re-profile a couple of months ago via Welsh Government, being the accountable body between the UK and Welsh Government, but we still haven't had confirmation, no. But from civil servants, we have had assurance that it is being considered and no issues. So, we're taking it as no news is good news, but we're proceeding regardless.
Thank you, Chair, and good morning to all the witnesses. I've got some questions on the Cardiff capital region city deal, so I'll direct those to Kellie. And thank you, Kellie, for the update that you've already given us. I'll start by asking about the wider investment fund, and maybe if you could outline for us the latest position regarding the projects that have been approved there, and maybe the amount of money invested, and the extent to which those projects are actually spread across the region.
Thank you very much for the question. So, yes, 87 per cent of the fund is now committed, of our wider investment fund, which has been really good progress. We've tried to drive that really hard in the last few years. So, our level of spend was up to about £50 million last year, which is significant for us. That represents quite a big ramp. So, you've got all the leverage coming in against that.
So, significant projects that have been approved and we're delivering and deploying on: the innovation investment fund; some of the cluster projects; in our strategic premises fund, for example, Pulse Plastics, just outside of Brynmawr—really significant to sit alongside some of the assets that we're starting to build up in the northern Valleys. And again, some of our equity investments include Apex, which is an additive manufacturing facility that we've supported in the northern Valleys as well.
So, our regional cabinet were really keen that, in terms of how we distribute our fund—. So, with our £500 million, what we've tried to do is invest in a range of projects that benefit all areas. So, you'll see that every single area has a metric for a sustainability project. Every single area will get access to the full fibre connectivity, to our Venture skills programme to try and retain graduates, to try and get people reskilled and upskilled in terms of future industries. Every single area has access to things like our housing viability gap fund. Then what we do with the rest of the fund is try and deploy that in terms of investments, and I think the really good news is, yes, regional cabinet approved that northern Valleys initiative—£50 million—they've just recently approved the full-fibre connectivity project, but a lot of our investment—. The significant thing is we've made investments. Yes, we've had to put some subsidy into places, because not everywhere is commercially viable—we're trying to work on that—but because we have equity investments, because we have debt investments, those things are starting to repay. So, the big benefit, and I'm probably holding myself here as a bit of a hostage to fortune, because something will probably happen after I've said this, but I think the real benefit for us is those things are starting to come back into a secondary fund that we can use to leverage against and we can redeploy to have further impact in the region. So, I think for us, the financial sustainability of what we're doing, especially in this climate, where the outlook on public finance is very serious and there are some grave challenges—building in that sense of self-sufficiency, self-reliance will be really important, especially when we go to other funding sources and try to leverage against them.
So, geographical spread is really important for us, and I think the good news is we recently did a deep dive into the competitiveness of the northern Valleys, and we've seen some significant improvements. Blaenau Gwent no longer sits at the very bottom of the UK competitiveness index now, which is important. But in the 2023 index, the Cardiff capital region was the biggest climber on the index that measures the UK city regions. I'm not saying that's all down to us, of course it's not—it's always about a partnership—but I think for us, the trajectory looks good. I think the bit that we've got to nail is that there's more opportunity than there is money. So, how do we start leveraging against our collateral to raise more investment, to keep this going for the future?
Thanks very much, Kellie. And would you say that the degree of progress in approving and investing in projects to date would be as expected at this point, seven years since the fund was agreed?
Yes. So, it's a really good point. So, our deal—. I think that the re-profiling question is important for us as well. So, our deal was re-profiled from 20 down to 15 years. As I said, we're in year 7, and we've committed about 87 per cent of our fund. So, I think the big opportunity for us is getting that money back into the recycled fund, so we can have a second churn of our wider investment fund, if you like, and keep that approach going.
Thank you. And so, with those years in mind that you just outlined, what’s the current target date for fully committing the wider investment fund? And do you feel confident that you'll be able to secure the pipeline of projects needed to achieve that?
Yes. We have a significant pipeline at the moment. I think, best-case scenario, we've got about £70 million left in the fund. We're going through an exercise at the moment where we're doing a portfolio review of all of our projects. So, I think we could probably deploy all of that within the next couple of years. So, our fund will now be fully committed within a 10-year window. I think the big question is: what happens after that? Because we would like to use our recycle fund to go to UK Government, to go to private markets. We would like new instruments, through the CJC, like tax increment financing, value capture. So, we've got really innovative financial levers and mechanisms to keep having an impact beyond the life of just this first city deal.
Diolch, Cadeirydd. If I could just stick with you, Kellie, just around particularly Aberthaw power station. I was wondering if you could give us a bit of a timeline around the renewable energy hub—how long you think it'll take to get it off the ground and what impact you see that project having.
I love Aberthaw. I mean, every time I go there, it's overwhelming to see it. Those of you who know this site will know it's 450 acres, 70 acres of which is a nature reserve, so it is a really important asset locally as well, and there's a strong community dimension that I think is worth talking about here. So, as I say, we're in the process at the moment. We've spent around £8 million acquiring the site. We have put aside about another £32 million to go through the process now, which will take us through, as I say, razing the site to the ground, which will take a period of time, but whilst we do that, we equally have opportunities. So, for example, there's a large pulverised ash mound on the site, which has a real opportunity in terms of the circular economy, which is something that we're looking at. There's the potential that, as we demolish the site, we could be doing solar projects, battery storage. Green hydrogen is something that we want to be looking at for the future. But we're going through that phase at the moment, I think, of trying to set out the plan; the first business plan will come into regional cabinet very shortly.
I think one of the positive moves that we've made is that we've set up a special purpose vehicle, so a company limited by shares, which is owned by all the 10 local authorities in the region. So, that board that we've established of non-executive directors will now assemble, and they will drive forward the business plan now for the next few years. I think one of the things that I'm really keen to do quite quickly is establish some kind of research and development presence on that site. I think, because of its scale and because of its potential to demonstrate new things and its proximity to the Celtic seas, this is a unique research and development opportunity for UK Government and Welsh Government, in line with their innovation strategy and objectives. So, with Aberthaw, there will be a lot that happens. I just don't want to create the impression that we're going to have to wait years and years for it to be demolished before we can start. Some of these things will start to go on simultaneously, and the hope then is that—. Clearly, I mentioned the crisis in relation to energy supply and energy security, and I think making sure that we have a focus on generating domestic energy capability is going to be really important in the Cardiff capital region and Wales as a whole.
So, a lot of ambitions, but I didn't hear any specific timelines as to when you might see a lot of these projects get off the ground and ultimately come to their end. It was interesting, actually, you mentioned the ash pile, because I've read a fair bit around it, about some of the opportunities of extracting minerals from that pile. So, there's no specific timelines as of yet?
We're going through the process at the moment, so the business plan will come in. The company that we've set up is a company limited by shares, so we're going through a process of assessing some of the submissions that we've had at the moment. I would say in the next couple of years there will be definitely something on the pulverised ash mound. We're going through a process at the moment of commercially assessing some of the other potential that we have on the site, so that we can have a plan. It's attracted quite a lot of international interest as well, it's captured imaginations. So, once we have an agreed company business plan that the regional cabinet endorses, we can make that available and we can be more specific then about how we will twin-track certain things and the time frames that you can expect to see in terms of some of those projects going forward.
Okay, thanks for that. In terms of costs associated with Aberthaw, then, in terms of the costs of purchasing the site, which you've already touched on, the costs of redeveloping the site, can we just get some clarity on what the overall costs are, as it currently stands, and where you might see those costs going as well?
So, as I said, we've put aside about £40-odd million in terms of the acquisition, razing the site to the ground, preparing the land. There are some significant issues on that site, as you can imagine—it's sea defences, it's coastal, so we've got to think about all of that infrastructure as well. But as I've said, in our wider investment fund, we've only got about £70 million, £65 million left. The idea then is that this site is taken forward to produce green energy, to have a focus on renewable energy—absolutely we have to have domestic energy capability in the region. But we want to use that to leverage other funds in—commercial funds, UK research and innovation funds, which is something I think we're building up a track record in. We will be going to private markets, there's sovereign wealth capability here, such is the size and scale of this opportunity. So, I think what we're trying to do in the Cardiff capital region is seize something. It's about putting our investment in as a catalyst and then leveraging against the collateral that we're building up. So, there'll be a mixed-investment approach, and this will be set out in the business plan that's coming forward from the company limited by shares. But again, £40 million is a drop in the ocean—that won't even scratch the surface in terms of what's needed here. This is about a long-term investment plan and really understanding our capability in terms of going to the market and accessing—. We'll need hundreds of millions of pounds to make this a success and a reality that will benefit the region and local people in the Vale of Glamorgan as well.
So, in terms of the money spent on the project, then, what arrangements are in place to scrutinise and ensure that what's being spent is proving value for money? What are the scrutiny arrangements around the spend?
So, the Cardiff capital region scrutiny committee has looked at Aberthaw already in terms of the initial phase, the significant due diligence that went into purchasing this site. Obviously, the arrangements to purchase the site were done under private tender, given the land holding and given the company involved. So, that has been scrutinised. Now, because we're in the phase of committing further funds for demolition and potentially redevelopment, that business plan, then, will be subject to the same scrutiny mechanisms. But to give you additional assurance on this point, Aberthaw has been set up as a company limited by shares. So, CCR Energy Limited is the owner of this, so all the scrutiny that comes with being a company, information that goes into the public domain, the board of Aberthaw, the non-executive directors—all of that obviously goes through all of the appropriate external scrutiny processes, as well as the internal ones too.
Can I just ask you, why was it decided to purchase this particular site, given some of the challenges you've just mentioned to get the site up and running for some of your projects?
Well, there are huge opportunities in relation to the size and scale of the site. I think, in terms of the rationale, which regional cabinet was strongly behind, this is really ambitious, it gives us a set-piece project. This is something that is a 20-year, 30-year endeavour. We recognise that we have considerable deficits in terms of renewable energy generation in the region. We know that we have issues with fuel poverty, for example, affordable warmth. So, this is an asset that we can leverage for the future. And I think, given what we paid for the site, the value-for-money argument is about the value it represents for the future; it's being bold and ambitious. And I think the rationale behind it was, we're not here to asset-strip the site, or to break it apart and sell off its component parts; the public sector can be a long-term, responsible investor—we can be a good custodian of the site. As I mentioned, it's coastal, it's got communities close by, it's got a nature reserve, so huge opportunities for the circular economy. We're thinking about biodiversity in very different ways. So, yes, we're not here to do very small, minimal-impact projects that keep us safe; I think the idea is the public sector is here to take risk—for reward, but with a strong sense of responsibility. We're here to shape and create and stimulate new markets. We're not just here to meekly enable safe projects—we've got to be in the space of making big, transformative things happen, and I think that's definitely the kind of ambition that you'll see behind the acquisition of Aberthaw power station.
Diolch, Gadeirydd. Can I just come back to the mid Wales question that we had at the very beginning? I'd just like to ask about the funding breakdown in the final deal agreement, which refers to a contribution of between £75 million and £132 million from 'other public sector'. Can I ask the panel what contributions will Ceredigion and Powys councils each be making as part of this?
I'm happy to answer this initially in terms of the more detailed question. There's a range of things, really. The figures we've got in the final deal agreement are actually based on information that's coming through on the project. So, these aren't targets—these are projections. When we are developing the strategic outline cases with our external partners and sponsors, effectively the funding breakdown comes from figures that they're putting and committing to as part of their strategic outline cases. There's a mix in terms of other lottery funding, some Welsh Government, because a lot of the schemes we've got in the growth deal are adding value or complementary in terms of what's already happening. So, the growth deal has effectively been that catalyst or leverage, a word that Kellie refers to quite often. We see our mid Wales growth deal in the same way—it's ultimately a blunt instrument; it's £110 million of capital funding. It's very difficult capital funding to deliver, particularly in somewhere like mid Wales, so we've had to build organisational capability, capacity, ways of working and leverage, and make that £110 million sweat as far as it can. So, in respect of that figure that the Member of the Senedd referred to, effectively, that's where it comes from.
In respect of Powys and Ceredigion contributions, both local authorities have got capital reserves in respect of economic development, but their main direct contribution currently is in revenue terms, because apart from initial one-off support from the Welsh Government in revenue terms to help establish our portfolio management office, there is no revenue funding; we can top-slice an element of the capital funding to effectively run the portfolio management office, but being two local authorities in mid Wales, the local authorities carry that cost of running the growth deal and running the system, as it were, and that's to the order of about £200,000 to £250,000 per annum of revenue. But again, having all of the years of developing this, that obviously adds up to a significant contribution from two small local authorities in the context.
Thank you very much. And with regard to the private sector investment, the final deal agreement says it's between £92 million and £157 million. Can you help us understand how you will secure the investment?
I'll happily answer that one again. Again, that's what our project sponsors are confident of in terms of leverage. There's a few projects in there that are looking to partner with the private sector directly. In respect of a couple of projects, they are looking to, effectively, work with a major sponsor or private company in respect of the project that they're developing. In respect of the digital and sites and premises programmes, they are projections that we are estimating based on market intelligence and discussions with private developers and private partners in the region. We know circa what the gap is in terms of public sector funding, and that word Kellie used, 'market failure'. There's a lot of it in mid Wales when it comes to sites and premises provision and also digital provision, but, again, we've based those projections on quite a few years of work. Particularly in terms of sites and premises, our main issue is land availability and whether or not we can build things, and also ensure that we don't have a strategy of build it and hope people will come.
There's been a lot of engagement. We've got Savills working with us, particularly in respect of sites and premises now, so being the leading commercial property experts. We are quite confident that we're now starting to identify two strategic sites for development under that programme. The figures look commercially viable, and, again, looking to attract private sector partners to help build those out. And the secondary element then is obviously the nature of mid Wales. We don't want to try and use the growth deal just on a handful of small sites, either. We want to try and spread it because the nature of the businesses and the economy in mid Wales. So, again, we're possibly looking at some sort of local market intervention fund. But again, there are a lot of conversations with the Welsh Government to ensure that we're adding value and not duplicating—that we're complementing the offer and actually filling a gap in mid Wales.
Thank you, Chair, and thank you for joining us this morning. I have some questions on risks to delivery. Could you please set out the main risks and challenges affecting the delivery of your deals and how you are mitigating these risks?
The risks are around the general economic situation—the relatively anaemic economic growth generally across the whole of the United Kingdom. And inflation is a really big risk, obviously not just for the growth deals, but for the economy generally. Those things are causing problems for the private sector investors in particular. Obviously, they’re inflating the costs of the projects daily, so that is a massive risk, there’s no doubt about that, and the quicker that inflation can come down, the better it will be for us all, but particularly for the growth deals.
But we’re working flexibly. We’re in constant contact with the project sponsors and we have a really good economic advisory group now. They’re very challenging, but they’re very wise, too, and they’re helping us out in that respect. Again, that helps us in understanding how these pressures are impacting on potential investors. There are, no doubt, lots of other risks, but I would say the general economic situation and inflation is really the biggest problem, because it’s deflating the value of the deal daily. We have to be frank about that, and we’ll have to adjust our aims and objectives accordingly. I suppose that applies as much to every growth deal. You just have to adapt as time goes on and do what we can—do the best we can with what’s available to us.
Yes, if I could come in as well. I'd say 'ditto' to all of that. At the macro level, inflation and interest rates do affect supply chains and do affect the skills market. The skills market is really difficult. Recruitment at the moment, I just—. In all of my career I’ve never known a time like it, getting the right skills in at the right time at the right level. I think during the pandemic and the immediate aftermath we just lost so many people from the workforce. It really, really is a struggle.
One of the messages that we’ve had back from a recent study is we’ve got lots of knowledge growth in the northern Valleys, but we don’t always have the capacity to absorb some of that. So, it's thinking of that differently, about a skills strategy for the future—upskilling, reskilling, thinking about the generational gap. There’s probably an untapped workforce, and I think we need to think very, very differently about that. We're trying to do that with our venture methods, we’re trying to think about reskilling, and I think there’s just a set of skills now that is expected of every single sector or cluster. They all need people who understand data and digital in particular—that is hugely in demand.
The macro level stuff massively impacts us as well in terms of geopolitics. If you think about the compound semiconductor sector, which for us goes from Cardiff and Newport to Bridgend, with Philtronics in the Rhondda valley, there are huge issues when you’ve got, in North America, a CHIPS Act committing multiple billions of pounds. We’ve got £1.2 billion pledged in the UK, which is something, but we have to recognise the competition is not the rest of Wales, or the rest of the UK—it’s international.
We’ve made some moves in the last few days. You’ve seen on the creative industries we’ve just announced a deal with the Welsh Government, a £20 million deal on Seren Studios. Keeping that creative industry here in Wales is really important to freelancers, sole traders—that whole media industry. So, we can intervene, we can do things positively, but I think the biggest risk to us going forward is we’ve got to get more investment into Wales, we’ve got to increase productive capacity. Innovation investment has to come in. I think looking ahead to some of those big opportunities around innovation zones and innovation accelerators, and making sure that we secure some of these big investment tools, is going to be key to our future prospects.
There's something I should have mentioned. There's a renewed focus on skills, as Kellie mentioned. That's a really important issue. There's a renewed focus now in mid Wales on enhancing the skills base, and ruthlessly, if you like, reconnecting the skills delivery to the needs of business. Because there's been a bit of a disconnect, let's be frank, and it has never really worked terribly well. We've talked about it a lot over many, many years, but now the need is so acute. I have to say that I think we're making really good progress on that, and also reconnecting the work of the local authorities with the learning providers more broadly. Local authorities have tended to focus on their schools in the past; actually, that's changed now. We're all very much looking at reconnecting the work that we do with local FE providers, work-based learning providers and so on, and, indeed, community learning, and broadening out that collaboration. That's absolutely key, because if we don't get that right, this won't work. We fully understand that and we're absolutely determined to make it work. Thank you.
Thank you. I know we've touched on mid Wales, but I have another question on this. The Government assurance review in February 2023 identified that more needed to be done to formalise the mid Wales growth deal's action in respect of private sector investment. How are you responding to this?
As mentioned, the economic advisory group has now been set up and they're actively involved in the progress of the growth deal, which is great to see. It's a cross-section of different sizes and types of businesses that we have across mid Wales. They're experienced individuals and they provide constructive challenges on how the growth deal has been progressing, a lot of challenges in respect of the business case planning process and the hurdles we've had to jump in respect of the funding. They've been helping us and advising us on that. There have been good discussions and good scrutiny going on around that in terms of the details of the projects and the programme. In a way, we've created this space as well with the private sector and between the two authorities—this new space that we've created where we can actually have all these conversations. And there's additionality and adding value to it. It's really making an impact—not just on the finances, but there's a wider implication here, I think.
There's been developed now a private sector investment strategy in response to that observation. The assurance reviews actually have been positive; they're showing that, actually, we are addressing these issues and we're getting it right. So, I'm confident that—. It's a good question, because it's always a big problem. It's just a fact of life and has been for decades that, to get significant economic progress in rural Wales generally, but particularly in mid Wales, there has to be a significant level of public intervention. We've known that for a long time and it's as true today as it was back in the 1960s and 1970s, and nothing has changed in that respect. So, this is always a great challenge for us, there's no doubt about it—attracting private sector investment has always been a challenge and always will be, and it requires a lot of hard work. But I think we now have the strategies in place to make a difference.
Very quickly, just a final comment. Obviously, that private sector investment strategy really is there to set the parameters and expectations, ensuring that the project sponsors do sweat the amount of funding that they've got on the table as hard as they can. We're there to support them and work with them, but ultimately it's their responsibility. Because this is not a grant fund. We haven't set this up as a grant fund from the start. There's a lot of work that the projects have got to do to effectively demonstrate and justify the case. They've set their projections as part of their strategic outline case and now they've got to deliver them as part of an outline business case. But again, we've got some projects that do vary and are starting to probably look at reducing some of the outputs and figures, as James was referring to earlier, because of the investment climate. But some are looking to deliver more jobs, and that's the nature of the portfolio; we take a look again and see, 'Are these delivering what they were intending on delivering?'
The other point is around private sector investment and a lot of the space that Councillor Clive was referring to, in that, in conversations with a lot of businesses in mid Wales, there are a lot of issues, actually, that wouldn't be addressed by growth deals—things like skills, a lot of revenue support, business support, how we better integrate services, how we ensure that we've got a productive planning environment, all of these aspects. And the space that we have off the back of developing the mid Wales growth deal—a lot of the conversations that have stemmed from that actually have been very productive. Because from day one, we realised that we needed to build capacity and capability in various organisations in mid Wales. If we're going to do a transformational change, delivering £110 million of capital is not going to transform the mid Wales economy—it's what you do around it.
It's for another discussion in another committee, but in respect of the shared prosperity fund and other funding, we have aligned those to what we're doing in terms of the Growing Mid Wales strategy. That's sort of in lockstep with the Welsh Government's regional economic framework—their plans and strategies—and also the UK Government's ambitions. Because ultimately it's the mid Wales level and the local authority level where it all connects on the ground. So, we've made sure that we align things at source, effectively, so, when it comes to private sector investment and needs, trying to join the dots, because everyone has got a different part of the jigsaw and we need to try and bring it together.
Diolch, Cadeirydd. Good morning, panel. Starting with Powys and Ceredigion, as you're in the room, what's the current position regarding corporate joint committees with yourselves?
Thank you. I'll answer that question. So, the corporate joint committee in mid Wales has been established and it's operational. It's meeting four times a year. It's been established in accordance with the legislation. We've got delivery plans in place for the regional transport plan and the strategic development plan. In relation to the economic well-being sub-committee, we're still planning the scope and function of that committee. We're currently running our existing arrangements for the mid Wales growth deal alongside the corporate joint committee. We're working with the Organisation for Economic Co-operation and Development and the Welsh Government to scope out that work and our thinking as to what the possibilities of this sub-committee will look like, going forward.
We're proposing initially that the CJC economic well-being will adopt the strategy-only approach to the economic well-being, but this is still work in progress, and there's more thinking to be done around this sub-committee. There's been no definite decision to lift and shift the growth deal into the economic well-being at this point in time, which I know, potentially, other regions have done.
We are in the process of producing our corporate plan for the corporate joint committee. That will be out to consultation in the autumn for implementation in the new year, and that, hopefully, will give further details around the economic well being sub-committee.
Okay, thank you. Before I come to you, Kellie, I just want to come back on that, and maybe it's more of a political question than that. What's the rationale behind not lifting the deal into the CJC?
The thing is—. I think, when the CJCs were set up, what was good about the way that they were set up was that, actually, Welsh Government left it to the CJCs to make of them what they will, in a sense, and decide for themselves. So, for the Cardiff capital region, you've got 10 local authorities, is it? It makes huge sense for them to create a really powerful vehicle to deliver a lot of this stuff, particularly economic development, skills development and so on. For us, it's two authorities. We're already working really closely together on these issues anyway. So, there's no point in reinventing the wheel, if you like, if we're already doing this stuff, and there's no point in putting stuff into the CJC that doesn't need to be put in.
Now, there will be, in time, as things develop, undoubtedly, things that we will want the CJC to take responsibility for. But, given the really close and constructive working relationship we've developed over the last 18 months or so, in particular since the last round of elections, where—. I think it was fair to say that relationships between the two cabinets previously weren't as good as they are now; there's no doubt about that. I think we'll use the CJC in as pragmatic a way as we can, without creating an extra level of bureaucracy to things that we don't need to.
So, on that point of an extra layer of bureaucracy, if there isn't a lifting of the deal into the CJC, isn't there a risk of duplication there, given that the CJC exists, the growth deal exists? If there was a mirroring and if those sat simultaneously together would there be less duplication, given that you're not moving one into the other, or is it that those relationships exist anyway so that duplication is just—it's the same point of contact of one local authority speaking to another, regardless of CJC or growth deal?
I don't know how often Carwyn and Nicola talk to each over, but I guess it's more or less daily. So, the work that's going on jointly with the growth deal is—. They're so enmeshed now. Okay, put it with the CJC, but it's not going to make any difference to the way it's functioning, because the working relationship is so close anyway. But there will be plenty of other—. I think the sub-committees will be really important once they're fully up and running. They're fully populated now, the members are there, scrutiny arrangements are in place, so that will develop quite quickly now, and, undoubtedly, there will be an increasing role for the mid Wales CJC as time passes. But, as far as the growth deal is concerned, we don't see the need at this time to move it in, but that doesn't mean that that won't happen in the future.
It's a very quick one. I think that 'at this time' is an important statement, because I think, as Nicola was referring to, there are ongoing conversations with Welsh Government, UK Government, OECD, in respect of future funding landscape. Growth deal is just a funding vehicle for a capital programme, effectively. We don't see the risk of duplication currently, because the economic well-being committee effectively maintains and owns the strategy. We've got a cross-sector Growing Mid Wales partnership that's currently looking at refreshing that strategy document, again working with our stakeholders and partners in the region, and the CJC can adopt that as a strategy. The delivery of the growth deal, then, is about accountability and reporting to Government and ensuring that we invest the funds wisely. That needs its own space to deliver, but, again, we've got various other sub-committees underneath, with a dotted line, as it were, in respect of the shared prosperity fund and other activity, like the regional skills partnership, because we do need that space where everything elevates up to, so it does make sense currently that the CJC economic well-being committee has a strategy function, because that's where it all brings together.
But, yes. And just to—. I probably speak to Nicola more often than I speak to my wife. [Laughter.] Not to put that on record, but, yes, we do. [Laughter.]
We do, because it is important, because, particularly going back to the private sector investment point and partners externally in Welsh Government and how things join up, we do need to join up, and what Nicola and I have got responsibility of—. I line manage the growth deal portfolio management office, Nicola line manages the skills team. That doesn't make a difference; we all come together on every Monday morning, and all the teams integrate. So, again, we can make it work, because we're two local authorities.
Yes, okay. Helpful. Kellie, to move to yourself and Cardiff and the CJCs there, what's your take on the current setup of CJCs and the deal, the city deal itself?
Yes, so thanks very much for the question. The CJCs are really important to us, because our current way of working is ever more constrained. We're bolted onto a council as an accountable body at the moment. We don't have our own balance sheet, we can’t act direct, we can't hold or acquire assets, so having the autonomy of the CJC is really, really important; more freedom and flexibility, I think, to be interventionist, I think, as colleagues in mid Wales are saying.
So, with us, our context is very different. So, at the moment, we've got the Cardiff capital region city deal joint committee. Under that, we've got about 12, 14 other committees, skills partnerships, a brilliant economic growth partnership, a business council, a programme board. Every time we make an investment, we have to set up a governance structure to make sure that it's looked after properly, and that's starting to feel a problem. I go from committee to committee. That seems to be what I seem to do a lot of at the moment. So, we're taking the opportunity and setting up another joint committee to lift and shift, so we've got one integrated model of public investment. It enables us to rationalise some of what we have and to also really up the ante in terms of the contributions of the private sector—so, working across that triple helix of businesses, universities and the public sector. We've got so many people as part of our distributed governance network at the moment we have to keep on board, because we couldn't afford them if they were on our payroll. They give their contributions pro bono, because they've bought in to what we're trying to do.
So, where we're at at the moment, we're in a period of transition, we're using the economic well-being bucket, if you like, to put the city deal in. That will discharge the economic well-being function. We've got proposals in place in relation to the new corporate duties and how we fulfil some of those, particularly the strategic development plan and the regional transport plan. But we have to put those in the context of our regional economic and industrial plan. Otherwise, we'll start to work in silos. So, for us, there's this point of having one system of regional economic governance. As colleagues in mid Wales are saying, for us, it's 10 local authorities, I think, so having that sense of cohesion, strong governance, is really critical.
And I think, in terms of UK Government's support for us to bring across the city deal, I'm hoping that it will open up bigger opportunities around investment zones, innovation accelerators, making sure that we bring more funding to the region for things like net zero. We'd like to see many more financial levers and incentives, value-capture mechanisms. We've got organisations like the Office for National Statistics, the Intellectual Property Office in our region. So, tax incentives and levers that are tailored to really leveraging the contribution of those Government non-departmental entities have got to be part of the ambition set for the CJC.
So, I can take from your answer there, Kellie, and the written evidence as well from the Cardiff capital region, and the evidence from Powys and Ceredigion as well, that you're actually in two different locations, given the demographics and the locations of your growth deals as well. So, it's a little bit of horses for courses. You see the CJC as being a real enabler, but, at the moment, that CJC isn't necessary specifically for the delivery of your mid Wales growth deal, if that's a very simplistic look at it.
Just to move on to the accountability element of CJCs. We'll start with Powys and Ceredigion as well. When, through these committees, a representative from your cabinet goes forward, who or what is the cabinet representing? Are they representing a council decision? Are they representing a cabinet decision or are they there with delegated powers to put forward their own views and thoughts on something?
Yes, I think it's the views of the cabinet, with advice from the adviser and the officers. So, yes, that's what's put forward, but it does fit into the whole overall strategy of both local authorities I think, when we've discussed it at CJC level, really. There are sub-committees as well that put forward things to the board, and Bryan, not me, sits on that board, then, where the decisions are made with yourself, James, so, I don't know whether you've got anything to add to that.
Yes, that's the point. Is there a meeting, a full council meeting where the sort of decision is made and ratified through a vote and then the leader goes forward to discuss it, or does the leader take delegated powers to go, 'I think this is the best way forward'?
It’s interesting that—it’s a really interesting question, because one of the things that surprised me having, for the first time in my life, become a council leader a year ago last May, was how much executive power rests with a council leader. And indeed, cabinet members have significant executive powers as well to take decisions on their own without even reference to the leader if they wish to do so.
So, that’s the structure we have—it’s a cabinet system. And this is new for us. So, it’s a really good question and something we’re going to have to work through as to how we—. It’s the reporting back mechanism to our respective authorities, because that is really important. You make a really good point. And I'll be honest with you, I don’t think we’ve really given that as much thought as perhaps we need to because we haven’t had to yet, because we haven’t been in a position to make significant decisions at CJC level. But when we get to that point, you’re right. And when the sub-committees are set up—. I mean, I guess Kellie is much better able to answer how they work it for them. But, again, they’re in a different situation because of the scale that they’re operating on, but, I suppose the principles will be the same. And I’d be interested to hear what she has to say about that if she wishes to.
It's a work in progress, yes. And so the economic sub-committee, when it's up and running and has had its meetings, what will be the reporting-back mechanisms to the respective authorities, I guess we'll have to find our way with that. But, no, it's a really good point, and point taken, actually.
Kellie, I know you're not a politician in the sense of a council leader, but what's the mechanism within the Cardiff bay city deal region in terms of decision making around the CJC and the executive power a leader has? What's the mechanism there?
Yes, but we don't take decisions back through all of those 10 councils. It's very much like if you were a company director, I guess: you're in that context; when you're in that board room, your allegiances are to that company. So, in terms of our constitution, our joint working agreement and standing orders, the leaders are empowered.
The legal duty of CJCs actually sits with the 10 local authority leaders. The bit about the feedback loop, though, and how you engage—and I guess some of the new sub-committees are designed to do that—I suppose we've been quite fortunate really, and, again, it's just a fluke of context—our context is different to mid Wales—that we already have up and running a regional transport authority and they've got delegated powers, so, transport cabinet members sit on that group. We'll have the same now for the strategic development plans, because we've got companies: we've got CS The Foundry Ltd, we've got CCR Energy Ltd. We've got elected members that sit as part of that, in compliance with company law. We've got our scrutiny committees. But I think what we've tried to balance is that, though we get really good advice, feedback and input from local authorities and from politicians, part of the point that I made about having a distributed governance network is we've been able to bring the private sector, the third sector, universities in. They act as part of our investment panel. So, our regional cabinet, our CJC board knows that when they get a proposal, when they get advice on a business case or a new policy mechanism, it's been through the mill. It has been through more than just—
Okay. On that point, then, the element that I'm trying to get at, and I understand that you're not the politician in this, is the level of accountability in the decision-making process. You described it as being a company director. Well, company directors are responsible to the board but politicians are responsible to their electorate, and what I'm trying to determine here is the mechanism for someone who disagrees—a voter who disagrees with something, a decision. What mechanism is in place for them to show their disagreement, other than naturally at the ballot box? That's what I'm trying to get at in terms of a CJC.
Okay. So, I didn't say it was the same, I said it's almost akin to that model of company directorship. But the same mechanisms would apply in terms of how cabinet make decisions at the moment, or cabinets locally. You've got call-in rights, you've got the call back to scrutiny, if you've got particular concerns, there are a number of different levers and mechanisms. And around the CJC legislation and the role of the monitoring officer, all of that would work as it does work now in a local authority, except that you're right to highlight the complication that, in my case, there are 10 local authorities; it's huge to manage. But, as I understand it, the mechanism is that these things are set up to be on par with the running of the operation, the operating model, if you like, of a local authority.
Just to say, it's always open to a scrutiny committee in either local authority, the relevant scrutiny committee, to put this on their agenda and require a report from officers on what it is that the CJC is doing, how is the growth deal going, or whatever it might be. So, I think the mechanisms are there to make sure that there is that accountability, we've just got to make sure that they work properly. Scrutiny is always a challenge, but you make a good point and it's something I'm sure we'll give much more thought to.
Thank you very much. I'm afraid time has beaten us, so our session has come to an end. But thank you very much for being with us this morning. Your evidence has been very useful to us as a committee. A copy of today's transcript will be sent to you in due course, so if there are any issues with that, then please let us know, but thank you for being with us today.
We'll now take a short break to prepare for the next panel.
Welcome back to this meeting of the Economy, Trade, and Rural Affairs Committee. We'll move on now to item 4 on our agenda today. We're reviewing the progress with the city and growth deals. May I welcome our second panel of witnesses on this issue? Before we go to questions from Members, may I ask panellists to introduce themselves for the record? Perhaps I can start with Jonathan Burnes.
Thank you very much indeed for those introductions. Perhaps I can just kick off this session with a general question. Can you outline the main areas of progress that your particular deals have made since you or your colleagues last gave evidence to our predecessor committee, which was back in March 2021? Who would like to kick off with that? Jonathan.
From the Swansea bay city deal perspective, we've made excellent progress, despite the challenging economic climate that we're all working in. Within the city deal, there are nine headline projects and programmes, so we have business cases attached to those nine. Within those nine business cases, there are 35 components. So, to give a feel of where we are with those 35 individual projects, three are completed, which are worth around £113 million; 17 are in delivery—in other words, they're being built or activity is undertaken to develop them—and that's in the region of £450 million; and then the remaining 15 projects are in the more pre-commencement stage, and they're moving in towards delivery within the next 12 to 18 months. The value of those 15 is around £711 million. So, we're pretty advanced in terms of delivery. We've got a lot ahead of us. But we have some key infrastructure that we've built—things like Swansea Arena. You may have seen or been there. In the first 12 months, they had 240,000 visitors, just to give a feel for how many people have gone through the doors. We have the bay technology centre. That is actually providing more energy than it requires, so it's putting energy into the grid, which is great, and it's won a number of sustainability awards for the building. Yr Egin, which is the creative sector hub down in Carmarthen, S4C are the tenants. Even though that was built some years ago—it's coming up to its fifth anniversary in October—that is 100 per cent occupied by tenants. So, again, that just shows and reflects that that is working down there.
In terms of other things that we're doing, progressing, there are around £170 million of contracts that are currently being worked on across the region, things like Pentre Awel, which is a health and well-being site down in Llanelli. There's 71/72 Kingsway, which is an office block, where Oceana was on the Kingsway there. And then Pembroke Dock marine, which is down in Pembrokeshire with the leader, and that infrastructure is being worked on as well. So, there are lots of things in delivery, but what we're doing as well—there's one further project that we're hoping to get approved later this year. It's to support a programme that we already have in existence, and it will create a facility to house skills for the decarbonisation sector, and also economic development around Baglan energy park. And that is very synergistic with the Celtic free port and various other things around the Swansea bay city region.
Skills and talent—we have a skills and talent programme within the portfolio. That has just awarded its fourteenth pilot programme, and again, in the evidence we've provided, there's lots of information in there, but it's basically bringing that kind of triple helix that we heard in the previous session, with industry, academia and Government, and that's bringing those courses together with secondary schools, also colleges and universities, with industry. So, it's meeting the needs of industry. And that is all informed through what we call a skills barometer, a skills gap for the region. So, that's really working well. And to give a kind of feel for that, that's already induced around £0.5 million of private sector funding across those pilot projects as well.
Diolch yn fawr, Cadeirydd. So, for the north Wales growth deal, the last time we presented to you as a committee in March 2021 we had only recently secured our final deal agreement with both Governments in December 2020, so it was very much at the early stages. And while progress with our deal since then has probably been slower than we would have liked to have seen, we have made great strides in our ability to deliver the deal. That includes our—[Inaudible.]—project—[Inaudible.]—which is the digital signal processing centre project with Bangor University—a 5G research project that has already created six new jobs, and we've now approved two tranches of funding for that project, with a final tranche expected to be approved next year.
We've had four further outline business cases approved by the board, so the enterprise engineering and optics centre project with Wrexham University, our own The Last Few % digital project, smart local energy projects, as well as the Glynllifon rural economy hub project with Llandrillo Menai. Three of those projects have suffered some delays since the approval of the OBC, but the enterprise engineering optics centre with Wrexham University is on track for full business case approval in November, which will be our next project to move to delivery.
We spent a lot of time over the last two years building the resource and capacity in the region, so we now have a very mature, established portfolio management office to support the delivery—individuals who have a wealth of expertise and now experience in the processes required by Government to deliver these projects. And we have a very close working relationship now with our regional skills partnership, particularly within our staffing structure, and very much operate as one team, which is really important for us here in north Wales. So, you'll be aware, as a committee, that there's no revenue funding attached to the north Wales growth deal, so we weren't successful at securing that funding to progress the skills-based project we wanted to see. So, that close working relationship with the regional skills partnership is crucial for us.
There's been significant project scoping and development work over this period to move some of the projects forward, to address some of the risk and some of the challenges that we have experienced over the last two to three years with the unprecedented economic climate that we have gone through. We've also seen two projects withdrawn from the north Wales growth deal. The Bodelwyddan key strategic site and the Llysfasi net-zero farm were withdrawn. It became clear they couldn't deliver the benefits to the growth deal, or the other funding streams would be more appropriate, and we've now just completed the process to appoint new replacement projects. So, we've appointed five new projects to replace those. So, it's a really exciting time for us as a growth deal.
Thank you, Chair. Yes, progress has been slower than we anticipated. We have, obviously, been through unprecedented times over the last three years, with COVID, Brexit and the inflation crisis really impacting on the economy and the sectors that we deliver in. So, that has necessitated, in some cases, a need to pause and reflect and review some of the projects, which, given the nature of our deal, were at early concept stages in some cases, to make sure that they were still right and fit for purpose to move forward and address the challenges that those sectors face. The cost inflation crisis has resulted in some delays for projects, with the scale of cost that we have seen, and the fact that our growth deal funding is, obviously, fixed at the fixed amount of the 2020 deal. That's presented challenges that we've had to work through with some of our sponsors, and in some cases looking at where we secure additional funding, either from the sponsors or an alternative source, or how we look to reduce those costs and achieve the same outcomes in a different way, and in some cases the need to reduce the scope of those projects to fit within the financial envelope of what we can afford today.
Some of our other projects have experienced planning and consenting delays, and that's been fairly significant for a couple of our projects that we were looking to move fairly quickly to delivery. So, the Holyhead gateway project, for example, has been waiting for the approval of the harbour revision Order. That has now come through this summer from Welsh Government. So, we're working with Stena to progress that business case at pace now to take advantage of that decision. Another of our earlier projects, the Glynllifon rural economy hub, is on a site of special scientific interest and, unfortunately, some additional bat surveys were requested there, and they've resulted in a 12-month delay—[Inaudible.]—activities have to take place. So, there's a combination of factors, different reasons across different projects, but I think I've highlighted the main ones there for the committee.
A very similar story to Hedd. We have experienced timescale slippage. That impacts our investment forecasts. So, worst-case scenario: the slippage has exceeded up to 18 to 24 months, in some cases—not many, but in some extreme cases. The reasons are fairly similar to what Hedd has said—so, extended procurement time frames, particularly around the impact of the construction and the cost increases. So, what we've experienced is that tenders want extra time to respond, negotiation periods throughout that process. We've had lots of things around value engineering, so that's taken a little longer, and some issues around capacity around the construction industry, nervousness along the supply chain. We've experienced a lot of the—. If, for example, you take fitting out a building with glass, for a local supplier to provide costs in nine months' time is very difficult. So, again, those might prolong the time period to subcontract.
As we all know, the city deal funding envelope is fixed—that doesn't change. Hedd has highlighted the increased costs; we have experienced that at quite a magnitude across our portfolio. So, what we have to do then is the lead delivery organisations—that could be local authorities, the health boards, universities, or private sector companies—often have to go and seek further approval for additional funds, if it's from their own pots, within their organisations, or they have to seek external funds, which often has a lengthy lead time. So, that's created some delays.
If you've ever been involved in developing a business case, aligned to Green Book and better business case, it takes a lot of time. Some of those timescales exceeded what we planned them to be, and what we're experiencing now is that some of these business cases were written about five years ago, so there are changes to those business cases, with really good opportunities. One for Councillor Simpson was Pembroke Dock marine, with floating offshore wind. That was a massive opportunity that we moved from tidal more towards the offshore wind, and, again, that had to go through a change management process, which we have for the Swansea bay city deal. So, those changes take time, but we've had a number of those across the portfolio.
I don't think I have to go into too much depth about the COVID pandemic—that slowed up activity through that period, particularly around social distancing, availability of staff, resources, et cetera. And again, similar to what Hedd said, recall and procedural delays, for anything around things like planning, or we have funding agreements, to cascade down the funding and the risk associated with the deliverables. Those have taken quite some time. So, the good thing about all that, even though there are delays, all the strategic partners and deliverers are on board, they're all committed to delivering, and what they're reporting is that it doesn't affect the benefits of what they will deliver. And then there are other things around the recruitment of staff. That has been quite an ordeal in some cases—some instances would be going out to recruit on four occasions to try and get somebody in post. So, Chair, that's pretty much covered that.
Okay. That's great. Thank you very much indeed for that. Before we move on, I'm just going to very briefly suspend proceedings. We're having some sound and interpretation issues. Some of my colleagues as well are having problems. So, we'll very, very briefly suspend proceedings, just to try and sort those technological problems out.
Thank you, Chair, and good morning to our witnesses. I've got a series of questions on the Swansea bay city deal, so I'll direct those to Jonathan. In your initial introductory remarks, Jonathan, you talked about the fact that there's between a 10 and 15-year period for awarding the funding. The written evidence that we have for this meeting notes that the UK Government funding element of the deal is being accelerated so that it will now be awarded over a 10-year period, rather than the original 15-year period. Could you explain to us the reason for this change and how you feel it will affect the delivery of the deal?
Yes, of course. So, by way of background, the UK Government, it was their decision. They enabled the acceleration of the draw-down of funds from 10 to 15 years. Their reasoning for that was to enable earlier benefit realisation for our region for the city and growth deals. So, as you've explained, it's now over 10 years, but the portfolio runs for 15 years and that still is the case for the draw-down of funds with Welsh Government. So, we have a 15-year profile; 10 years of that is Welsh Government funding.
From a regional perspective, there are three key things and benefits of that, the first one being investment confidence. So, in terms of delivery, the earlier that we're in receipt of the funding—particularly when we're working with private sector companies—it does instil a lot of confidence that the money is flowing and it is happening, and we can realise the benefits quicker. That's the first one. The second one then is around borrowing costs. We can't underestimate how much it costs local authorities, universities, health boards and private sector companies to borrow for the upfront investment, bearing in mind that we would have the payback of that investment over a 10 to 15-year period. So, by having that money sooner, it means that we have to borrow less within that period. So, that has helped particularly local authorities, and it's probably important to say, particularly in this climate, where there are pressures on budgets, I think that's a really important thing. And then the third one, in relation to that one, there's also the rising cost issue that I've already highlighted. So, again, that hopefully tries to plug some of those gaps where we don't have to borrow as much, and that covers some of the rising construction costs. If you think of it, if all of the lead deliverers are investing their money in a building to build it and that payback takes longer, they have less capital to release for other things. So, by having that money sooner and not spending as much on the interest, they can then look to invest in other capital-related projects across the region.
So, those are the three logical reasons that we've shared with our boards, and it's important to note as well, the UK Government, even though we're in year 6 of our draw-down of funds, the UK Government are also looking at a further acceleration, which will take the remaining four years and front-load that, if possible, and we've provided a rationale as to why that would help us as a city region. So, there are those. And I've talked about the budgetary pressures, but in conjunction with that it's also dialogue with Welsh Government as to how and what that could look like from a Welsh Government perspective, but there are no decisions or no meaningful dialogue in terms of a two-way conversation yet. That is yet to happen.
Okay, thanks for clearing that up for us; that's really very useful. You talked quite a bit about construction, so I'll move on to that for my final two questions. So, again, looking at your written evidence, that identifies the pressure on the construction industry to meet the demands of the city deal and other public sector procurement as being a 'red risk' in 2022-23. How are you mitigating that risk?
Okay. So, I'll go through the mitigations, but in terms of context, I guess if the construction sector and the rising costs were a person, they'd probably think that the economy had something in for them, because between Brexit, COVID, the war in Ukraine, inflationary pressures, energy increases, there's a whole host of things that have happened either in parallel or in sequence over several years now. So, that's created that kind of instability in the marketplace, unpredictable rising costs and the supply of things, and capacity issues I mentioned earlier on.
So, at the request of our programme board and joint committee, we looked at forecasting the increase in construction costs, and what we identified through that process, with all the projects and programmes and strategic partners, was a £31 million funding gap. So, to deliver what we had already committed to, it would cost—. And these are known knowns, so it would be more than that when other projects go to procurement, or through the delivery process. But of the known knowns, we currently have a £31 million funding gap.
So, what we instigated then is a mitigation exercise in working with all the projects and programmes, and there are probably about three or four headline mitigations that have happened, or are happening. One is about securing additional funds, often from the lead deliverer, but it could seek external, additional funds, value engineering or revision of the construction brief. And, if I give a really simple example, if you have a glass façade on one of our buildings, and it was 10m high, and you did it 5m high and two panes, it might save about 20 per cent to 30 per cent of costs. So, that is an example of value engineering that doesn’t change the scope or the delivery of what will be in the building, it’s just how it’s constructed.
Then the one that creates that slippage is that dialogue with contractors. If you think of it, particularly from local authority to contractors, nobody wants anybody to struggle so much that they end up not being able to deliver the project, so there are ongoing negotiations up front through the procurement process, but also into delivery, just to make sure that, from both sides, we can deliver a successful project.
So, I think it’s fair to say that the construction sector is starting to stabilise, whatever that means. It is there. We are working with industry experts around that. But Gleeds have done a recent report where they’re looking at particularly the Welsh sector inflation estimates, and they’re still quite high, so you’re talking over the next few years between 4.5 down to around 3.5 per cent. So, that can potentially affect the viability of some of our schemes, but as I said, value engineering, re-tendering, redesign, will be some of those solutions.
Thank you, and I'm aware that time is pressing on, but is there anything that you'd like to add around the current impact of that pressure on the construction sector, in light of the fact that the city deal is expecting to award construction contracts in the region of around £50 million over the next year?
I don't think so. Covering off what I've just done, I think we are aware of the situation, and being aware of it is important, obviously, to make sure that we factor those costs in. Future procurements, we're going to look as much as we can at flexible approaches, with phasing or various things. Where we would have previously had some fixed-price contracts, I think those are a thing of the past; I don't think we'll get those now. So, we'll always be in that kind of negotiation. But, the positives: even in the construction sector, and hopefully there's a glimmer of light there that things will start to stabilise, they may be higher than what they were previously, but, again, we have to just deal with those funding gaps going forward, and identify sources of funding or redesign what we plan to deliver.
Diolch, Gadeirydd. I'll stick with the north Wales growth deal, so I'll direct questions towards Hedd and Dyfrig. So, the commitment that's been made by the growth deal is that all growth deal projects are going to aim to operate at net zero, achieve a 10 per cent increase in biodiversity and reduce carbon emissions by at least 40 per cent. How is this being factored into the growth deal projects at the moment?
Thank you for the question. I'll answer this, I think. You've referred back to the meeting that we had in March 2021, and we had just had the final agreement then and, if I remember correctly, we had, within a few days, just appointed our director, Alwen Williams, who isn't able to be with us today. So, we were at the beginning of our journey in March 2021, and we've gone a very long way since then.
It's clear that we as an ambition board are more than eager to contribute to the climate change agenda and the objective of reaching net zero. With such significant investments, it was a very important issue for us to consider, and we appointed Arup consultants to discuss this issue with our team, and we also have experts within this area in our team, to develop a methodology for our projects with targets for those projects to achieve. And as a result of that, all of our project sponsors have to go through that methodology as part of developing their business plans, and indeed, we have been recognised as having a methodology that is good practice.
And it is obvious to say that it's very possible that this will lead to higher costs for our projects, and this is a matter of ambition for us, to push the boundaries of what we can achieve. Being pragmatic and realistic, and we are trying to do more with less and with fewer resources, but it is important that we make every effort, as I've said, to contribute to this agenda to achieve net zero. Perhaps some of the projects will fail to achieve that, but at least the effort will have been made. Thank you very much.
Well, it's too early to say at the moment. As you've already heard, we're at the beginning of the journey in terms of the projects developing, but we will be keeping a weather eye on the situation. I think, at the moment, the ambition is what is important and we'll be able to measure our success against that ambition as the projects develop.
Thank you for that. I want to touch on the report compiled by WISERD, and they underlined potential tensions between the Welsh Government preference, namely to work with the regions, and what the UK Government is doing with the funding awarded to the deal where they work directly with the local authorities. How are those tensions being managed by the deal?
Just to provide a bit of context for this, from our point of view in the north, we have spent at least 10 years developing this partnership between the six councils, the two universities and the further education colleges and the private sector before we were offered a growth deal. So, the partnership has developed organically and has not been foisted on us, and it is a very robust partnership. And indeed, I was part of the discussions with the Welsh Government in developing the regional investment strategy that they intended to have in place.
Of course, the Westminster Government plans have cut across that—they have disregarded the Welsh Government's plans; they've left the Welsh Government out of the loop in that regard. And they have offered the funding to local authorities directly and I think that is to be welcomed. It has been a significant job of work for us as local authorities, but I am pleased that there is an element of faith in local government to make the decisions on what is a priority for them.
What has happened of course is that that contradicts the desire to work regionally, but it has also meant that it has been harder to have regional plans in place, where, in our case, the six authorities would be in agreement. So, it has been difficult to have those regional-level plans, and certainly it hasn't been possible to have a Wales-level plan. And that is contrary to the partnership that we have. We are determined that that isn't going to have an impact on the partnership that we already have in north Wales. But it's clear that it is contrary, as I said, to the partnership that we have. It has been difficult, therefore, to come to a plan that I would say adds value to the work of the north Wales ambition board on a regional level.
I don't think so, no. It hasn't had an impact on our work with the growth plan, I don't think. The work of the ambition board, I would say, is the issue here, namely the work that we hope to see being done beyond the growth plan. So, there has been a loss of opportunities, but in terms of the growth plan, we are on track, truth be told, in our work on that.
I agree entirely with what Councillor Siencyn has said on that issue. There hasn't been a specific impact on any individual project in the growth plan but it is an opportunity that has been lost to add value to the work that we're doing on the growth plan, particularly when you consider that there is no revenue funding part of the plan. It would have been good to be able to ensure that regional revenue funding for some of the areas that could have added value, for example in the skills area. So, we've lost an opportunity to add value rather than there being a specific impact on any individual project.
Diolch, Cadeirydd. I'd like to ask two questions in one, really. Both Swansea bay and Ambition North Wales have identified public and private sector risks involved in the project. Could you elaborate on what is being done to mitigate those risks?
Just to clarify, we have seven portfolio red risks. We monitor our risk register on a quarterly basis through our governance, but every project and programme has their own governance groups and they also have their risks. So, there are a lot of risks cascaded down, if you like. A lot of them that I've already covered around construction costs and slippage I'm not going to cover. The other ones out of the seven are private sector funding contributions, so ensuring that they are realised within the business case projections.
What we conducted as a portfolio office, and have shared through our governance arrangements, is an evaluation, if you like, of our private sector funding in terms of our forecasting: where the money comes from, when it should come in and what types of private sector funding comes in. What we identified through that—even though this is a portfolio red risk, and the important thing to stress is that it could happen—. In other words, half of the money from the city deal comes from the private sector; it's around £630 million. Through this effort and this report that we did, most of the projects and programmes classify theirs as either green or amber. So, we still identify it as a red. We could lower that to amber fairly soon, in the next quarter. But, that exercise that we did we are now reporting through our financial quarterly monitoring to make sure that we have templates populated and shared amongst all stakeholders, including both Governments, and then we'll do an annual private sector investment status report, just to make sure that we're on track for what we plan to do. So, those are the mitigations around private sector funding. The other important point to make is that we have around 5 per cent of our target already, which is on track, and that's around £30 million of private sector funding expenditure.
The next one is around the Welsh Government 2021 update on the technical advisory note, TAN 15. That's around the development of risk of flood and coastal erosion and the associated maps with that. That doesn't affect the whole portfolio but it does affect probably about two of our key projects, particularly around Swansea and Neath Port Talbot. So, this is out of our hands; this is a watching brief for us. But the last advice that we had was that a consultation concluded in April. The analysis of the consultation responses is now under way, and we're hoping to get some sort of response by the end of this year as to how and what those maps will look like. And it's not the maps necessarily, it's the coding of what can be built on certain zones within those maps. So, that's the second one.
And then the third one is around—. I've already mentioned it. The projects and programmes are delivering outputs and outcomes, so they're all stipulated within their business cases. The accumulation of that for us at a headline is 9,000 jobs. It's a £1.2 billion to £1.3 billion investment, but of that half is private sector funding. That's our second investment objective. And then it's the economic impact, the wider impact of the city deal. That's now estimated to be around £1.8 billion to £2.4 billion. So, again, what we're doing is working with all of the projects and programmes. We are being scrutinised regionally on these and our Government sponsors and also our regional partners are all taking an interest in our benefits realisation. We now have benefits realisation templates and are populating those on a quarterly basis, and we are reporting those through and feeding that into our annual report that you had as part of the evidence. So, we're monitoring against the targets that we have set, and we are ensuring that we're working closely with the projects to realise those. So, Chair, I think, other than that, the others have been covered through earlier dialogue.
Thank you. We have similar red risks to the Swansea bay city deal, as you can imagine, and securing investment is one of those. We have £240 million of funding from UK and Welsh Government towards the deal with the target to deliver a total investment of £1 billion in the region over the 15-year period. So, £760 million of that needs to come from other private and public sector partners, so it's a significant target for us to achieve, and given where we are at this point in the deal, with only one project in delivery, which is a relatively small project at £3 million, it is right for that risk to be flagged as red, because we have a long way to go to achieving it. A large proportion of that funding from other sources is identified through the project sponsors that we have on board, but it’s not contractually secured and won't be until we go through the business case process and enter into those funding agreements. So, it is a risk that will remain high and will continue to do so until we're much further along on our journey to securing that investment contractually. We have recently commissioned Savills to support us in this area, in particular on our private sector investment strategy. They’ve been working with us over the summer to provide some additional expertise and input into that process, which will help supporters to identify the remaining private sector investment we need to identify for the deal, but also we'll have a much wider remit to help us proactively look at other investments we can secure into north Wales and the economy.
So, that covers the investment risk. The other risks we have already touched upon in terms of planning consenting. Similarly to the Swansea bay city deal, we have to keep an eye on TAN 15 and see what impact that has on some of our projects. We have some projects that are impacted by the road review recommendations, which we're having to work through the implications there, and a lot of our energy projects in sectors such as nuclear, tidal and hydrogen have some fairly strict consenting arrangements that we need to work through to enable delivery. So, planning consenting remains at a high risk for us. We've touched on delay, and this is a risk for us, for the north Wales growth deal, particularly in terms of the delay to projects; it's essentially a delay to when the benefits are realised in the region, so it is something that we keep as a high profile, as we have to work through these challenges related to inflation, planning, the business case process. There are always justifiable reasons for why things take longer, but the longer it takes it does impact on when those projects hit the ground, when they're operational and when they create the jobs that we need in north Wales, and it has a knock-on ability on the benefits that we can claim within the 15-year period of the growth deal. So, that remains a high risk for us as a growth deal, and we're pushing to get our projects moving forward to minimise that.
Diolch, Cadeirydd. Starting with the Swansea bay city deal, as you're in the area, I want to talk about the CJCs—the corporate joint committees. What's the establishment of the CJC and its current position with regard to this deal and the CJC? I'm not sure if Councillor Simpson or Jonathan want to kick off.
Obviously, with the Swansea bay city deal, we've got a structure in process already. When the CJCs came along, it was seen as, 'You've got a structure there already, we can sort of mirror that, if you like, at the present moment in time', and so, the four authorities did that. We have regular meetings, and I must say, I think because of the city deal work we've done in the past—and that's been going on from my point of view for the six years now that I've been leader—we've got a very good working relationship on that Swansea bay city deal. So, that is transferred across, if you like, to the CJCs. It is an extra tier or structure, but, really, do you want the two structures? And in the future, we must look at the overlaps. We're looking at the overlaps now, but we must look at the way forward in the future. There must be a lot of collaboration that can be done between the two.
What would you base that on? Is that on the number of local authorities who participate in the CJC and the region, or any other factor? Because in the previous panel, we had Ceredigion and Powys, who are only two local authorities, and the Cardiff region, which has 10 local authorities, both operating differently, given the size and the number of local authorities.
Like I said before, we've got this structure already in process with the city deal, with four authorities. We're then going to another structure with the same four authorities. Wouldn't it make sense that it could work in a better way? So, you have to look at the future, and I know that, at this present moment in time, the chief execs are looking at ways forward where it can be integrated. I wouldn't say integrated full stop; one has to go hand in hand with the other, but there must be scale of efficiencies, and we have to look at that. Because, personally, I'm very conscious of the amount of time and effort that officers put in to this thing, and if they're duplicating it, why wouldn't you try and co-ordinate it all into one group in the future?
As you'll know, there was no great desire politically to establish these CJCs in north Wales. But having said, it's a statutory requirement on us, so we have forged ahead. Exactly as David Simpson said, we have spent a great deal of time and expended a great deal of resources on establishing a co-operation agreement between the six councils, the colleges and the universities already, and we have decided that we will transfer that partnership so that it becomes a committee of the CJC.
What strikes me, in terms of the efforts that have been made, is all of the work that has to be done to look at a new constitution for this joint committee. It appears to me certainly to be an example of duplication of work and a waste of resources and time. But, there we go, we are doing that work. But it's not an easy task. And we, the partners in north Wales, were very eager that the work of the ambition board wouldn't be undermined in any way by the creation of the CJC. So—
I was going to ask quickly: have these joint committees assisted the work of Ambition North Wales, or could the work have continued without having the CJCs?
The answer to that is simple. The work of the north Wales ambition board was forging ahead very well. We didn't need a CJC to add to that work, and it hasn't added to the work. If anything, it's created additional work, certainly from the point of view of the constitution and so on, and the financial arrangements. But in order to try to be as effective and efficient as possible, we have appointed, at the moment, Alwen Williams, who is the director of the north Wales ambition board, as chief executive of the CJC too for, I believe, two days a week at present. And as I said, the concern was that this new arrangement would undermine the work that we had already done, but we do believe that we are going in the right direction on this. To be entirely truthful with you, my personal view is that it is entirely unnecessary. We had robust arrangements in place already. We didn't need a CJC, and the CJC doesn't add anything to that, in my view.
Councillor Simpson, coming back to you, when you sit as a council leader on the CJC, are you representing the executive power of the cabinet, or the council itself? So, do you take forward a council decision, or do you take forward a cabinet decision when you represent Pembrokeshire on a CJC?
One of the things that we do in Pembrokeshire is that we have, obviously, the cabinet system. We have regular meetings, weekly meetings, where we discuss all matters arising that are coming forward. That includes parts of CJC. If there's anything in there that needs to be decided on that is contentious or whatever, it'll be discussed at cabinet level. It can be discussed in a formal cabinet decision if necessary, but there are times when we go back to full council and give them updates of what's happening. There are questions, members' questions, and they get regular updates as to what is happening. So, when I go forward, I like to think that I'm representing the whole of the council. Obviously, we make cabinet decisions, and that is only rightly so, but I think, with the interest that it seen by members, I represent the chamber.
But then there are opportunities as well where you use your executive power as leader to go forward and enact decisions, just as the leader of Pembrokeshire County Council.
I don't know in what direction this is going. One thing that is certain about the partnership that already exists is that all of the leaders in north Wales are very aware that they are accountable to their councils. Of course, the political situation within each council is different. I would be loath to make decisions in the CJC that would be contrary to the views of the cabinet and which, as a result, would be contrary to the views of the council as a whole, certainly. So, I understand that that could be done, but, as I say, ultimately, each leader is accountable to their members, and I don't think that it would be sustainable for a leader to do something that would be contrary to their wishes.
That's exactly why I asked the question—it's with regard to that accountability about these committees coming together. Is there an opportunity for you in north Wales—? If there is a decision that is contrary to what you want in your area, what would happen then if the people in your local areas expressed views against that decision that you'd made, and who is accountable then?
That's a very important point, and one major weakness of the CJC is that we are shifting political accountability away from local authorities. There is a possibility, of course, that the CJC could make decisions that don't follow the aspirations of the local authority, and that would put us in a very difficult position in light of the fact that it is a statutory body. It appears that our role as members of that joint committee is to make every political effort to reach consensus. That isn't always easy, as we all know; significant diplomatic skills are called for on all of our parts, but that would be the aim. But you're right—it does create that tension with local authorities, and certainly takes accountability further away from the members and the public, indeed.
Thank you, Chair, and thank you for joining us this morning. Thinking about the next 12 months, could you please set out the significant milestones that you intend to meet and outline how you intend to report on these? Also, what's the biggest impact that you expect your deal to achieve in that time?
Thanks for the question, and there's a very far-reaching part for the second part, with the impact. But if I deal with the first part in terms of milestones, what we'll be doing—. I mentioned the split of the projects across the nine business cases—we have 15 of those in delivery, 17 in pre-commencement activity, so we'll be doing a lot of the same. We will go through that procurement cycle, we will start building and continue to build and finish off some. So, just to give a flavour of those: the 71/72 Kingsway innovation matrix, the Pembroke Dock marine hangar annexes, and also the slipway, all of those within the next 12 months will be complete. Pentre Awel zone 1 will be nearing completion by this time next year.
So, what's important, then, is the more operational plans associated with them. So, in other words, filling them with tenants, looking at R&D collaborations, innovation, spill-outs from those. So, to give, again, a flavour of that, the innovation matrix, which is led by University of Wales Trinity Saint David, down in SA1 in Swansea, the steel work is up and they're starting to build, following from that. They already have heads of terms signed with around 75 per cent of the space with tenants. So, they've not signed on the dotted line, but they are interested; they've signed heads of terms. So, at 71/72 Kingsway, they're in the process currently of also securing tenants, even though the building's not open for business just yet. So, a lot of that is important, to make sure that we fill the buildings with the right type of tenants. So, it might take a little bit longer to fill those with the right types, but it's ensuring that that happens.
On the commencement of the next phase, if you like, of projects, we have a lot of activity going on. There's the South Wales Industrial Transition from Carbon Hub project, which is down in Baglan, and that is around decarbonisation of steel, particularly with the supply chain of steel. The campuses, which are led by Swansea University, their phase 1, which is in Singleton, is looking at sports and med tech. Digital infrastructure are going to look at a 5G subsidy scheme and awarding that to projects and programmes. Also, Homes as Power Stations have a supply chain fund. That will be announced very soon, within the next 12 months, and further roll-out—I mentioned 14 pilot projects—of the skills and talent programme. So, across the projects and programmes, there's lots of activity where, as I said, we'll be doing much the same in terms of delivery and procurement.
But the one that I mentioned earlier on was the additional £5.3 million of funds from the city deal—that's in relation to supporting innovation of the low-carbon growth programme, led by Neath Port Talbot Council—that will go through an approval process, hopefully approved by region and by Governments, within the next 12 months, and we can look at that infrastructure to house skills around decarbonisation and development of the local economy.
Thank you, Chair. We have a very strong pipeline of business cases over the next six to 12 months. So, we expect to make significant progress in moving the deal from that business case phase into delivery. These include some of the projects we expect to be in delivery over the next six to 12 months: the Enterprise Engineering and Optics Centre with Wrexham University; Holyhead Gateway project with Stena; our Last Few % digital project; our Smart Local Energy projects; as well as the next tranche of the Digital Signal Processing Centre funding and the Centre for Environmental Biotechnology project with Bangor University.
We expect to be in a position in 12 months where the majority of our projects have secured outline business case approval and are at least part way through that procurement exercise to move us into delivery. This also includes our new growth deal projects; so, the five projects that have joined the growth deal in July have all been given a condition as part of that decision that they have to bring forward their outline business case within 12 months. So, significant progress is expected.
We're also going to be appointing the sponsor to our hydrogen project, which is quite significant for us. We've been running a competition over the last couple of months with the private sector called our Hydrogen Sponsor Challenge for them to bring forward proposals. That closed on Monday. I'm pleased to say we've had significant interest in that, so we'll be going through that kind of assessment decision-making process to appoint that sponsor over the coming months. So, it's looking really positive.
Our governance and reporting arrangements are almost identical to the Swansea bay city deal, as you can imagine—monthly highlight reports for all projects, quarterly reports that go on to our board, local authority scrutiny committees and both Governments, and they're all public documents, as well as our annual report. We have monthly meetings with UK and Welsh Government officials as part of that assurance process as well. Thank you.
Thank you very much indeed. I'm afraid time has beaten us, so our session has come to an end. So, thank you very much indeed for being with us this morning. Your evidence has been very useful to us as a committee. A copy of today's transcript will be sent to you in due course. If there are any issues with that, then please let us know, but once again, thank you for being with us here this morning.
We'll move on, therefore, to item 5 on our agenda. I move under Standing Order 17.42 to resolve to exclude the public from the remainder of the meeting. Are Members content? I see that they are, therefore the motion is agreed and we'll move to our private session.
So, aside from our new regional economic and industrial plan, I think the other point that I would leave you with is some of the work that we're doing on the transition to the Newport joint committee. I know that will probably come up later, but that is a big piece of work that is ongoing, and hopefully, Chair, I can provide an update in a few minutes' time.
We probably can't go without saying how important the city deal has been for the collaborative effort across the region. We have four local authorities, two health boards, two universities, but also a plethora of private sector companies as well. So, we've seen collaborations grow and advance quite significantly over the last few years, which has been great. We've also had a lot of engagements with the private sector, and again, through various projects, through tenancy and collaborative research and development projects, innovation, we're seeing a lot of that kind of confidence, if you like, with the industry, private sector, grow within the infrastructure that we have and which will come online very soon.
More of a governance perspective—we do get a lot of scrutiny, we get audit, we get assurance reviews. We have had three portfolio-level assurance reviews, where we've been awarded green-amber status, and for a portfolio, that's pretty much the best we can get. An audit has been substantial, which is a green rating, so that's also been for two years. So, it looks as if we're doing the right things to a lot of the audit assurance et cetera.
Just a couple of other points, then, we have draw-down of city deal funds, as you're probably aware. We get that on an annual basis. We currently have drawn down £100 million. Half of that has already been distributed to the projects and programmes, but we have to be mindful of how we distribute the funds, because our funding period goes between 10 and 15 years across the portfolio life-cycle. So, we have to make sure that it's equitable how we distribute the funds down to the projects, simply because they have to borrow in the upfront builds of the infrastructure. So, in summary, that's a kind of a snapshot of the progress that we've made, particularly since 2021.
Similar to the Swansea bay city deal, we have a raft of governance and assurance activities that we go through as well, and our latest portfolio gave us an amber delivery confidence assessment. Thank you, Chair.
As a consequence of all that work that we did several months ago, we now have a construction impact assessment. Previously we had a COVID impact assessment and that’s updated on a monthly basis by all our projects and programmes, and reported through our governance committees, so everybody has sight of the magnitude of the issues, where they are and what they’re doing to mitigate those funding gaps.
What we also created, probably about two quarters ago, is a construction and community benefit sub-group. So, that brings all of our strategic partners across the region together. We share lessons learned about procurement, looking at how people are doing flexible procurement, anything around skills requirements for the delivery, but also bringing industry experts in to meet with the teams as well. So, that seems to be working really well. We’ve had positive feedback on that.
And there is an autumn review from Gleeds, which is probably worth mentioning, and they say that the challenging backdrop is going to persist, and it remains important for projects to be attractive and, again, it’s making sure that people will tender for these jobs. But they provide a load of mitigations and I can provide that. [Interruption.] Sorry?
So, just to run through a couple of those, it's all the things that make logical sense: proactive negotiations, the de-risking of projects, phasing or splitting projects—that's more the kind of flexible approach—providing as many early orders as we can, to know certainty around costs, and making sure that key resources or teams are identified and recruited as early as possible. There's a whole load of other things that they provide, but those are the headline ones.
And finally, the affordability position we have already covered today, but obviously we continue to work with our projects. I think Jon said earlier that the situation is stabilising, but it is still high in terms of inflation. With a fixed budget on the growth deal we're having to work with our sponsors to identify how those projects can still move forward to deliver their expected benefits, either through changes in design, changes to scope, or additional funding that's secured. I think those cover the key portfolio risks that we have. We also have to continue to adapt to a changing policy landscape from both Governments, which does impact on some of our initiatives, particularly in the energy and digital sectors, where we need to make sure that we are aligned to the latest Government advice and policies. Some of the decisions that the UK Government has a mandate to take in the nuclear sector, for example, and in the digital sector, do impact on us, and we have to make sure that our projects are able to adapt to meet any changing requirements, and to make sure that we don't duplicate any existing investment planned by either Government.
I think that covers the key risks from the north Wales perspective. Thank you.
I mentioned the importance of private sector funding. Our target for this financial year is £23 million of investment from the private sector; next year, it will be £124 million. So, again, it's realising those targets. We'll continue to do all the governance-related assurance audit and business case updates. So, all that will take place. And the part of the question you asked about how does it get reported, well, we have monthly highlight reports, quarterly monitoring and annual reports. They all go through our governance mechanisms, but also on to the Government's. And we have an annual session with both the Welsh and UK Governments, which is a Q&A session. And following that, as long as we made the progress that we planned to make, or as near to, then we get the next tranche of funding and release of funds. So, all of that mechanism is in place.
In terms of impact, there's lots of impact. The impact for us is at a local, regional, but also national level. A lot of our projects and programmes are supporting and influencing policy as well. But what we will hopefully have—we already have it; we have about 70,000 sq m of space already online available for people to move into—is quality space for businesses and innovation to grow and incubate. Employment opportunities will come behind that, particularly around the skills and talent programme. Businesses are interested in creating new courses—that's what our skills and talent programme is all about, and supporting economic growth through that.
Several of our projects are also looking at supply chain and the benefits of supply chain. So, if you look at Homes as Power Stations, and Pembroke Dock marine, there's lots of stuff around the supply chain that is really important. And in addition to that, if I just give you—. I always like to give a bit of flavour to these things. Pembroke Dock marine had three main contractors for part of its project. So, they appointed BAM Nuttall, they appointed Walters Group, and R&M Williams. Through those contracts, they subcontracted to local suppliers to the magnitude of around £10 million. So, that's just one example of one part of a project and the importance to the local economy, particularly around, in that case, the construction sector. But as these things get built and they're operational, the supply chain importance of that will grow in multiple sectors as well.
The green economy, I think, was also mentioned in the last session. A lot of our focus is around the green economy, decarbonisation, net zero. So, again, it's that drive towards that agenda, and improvements around digital connectivity. So, even within the first—this was the year before last—our digital infrastructure programme has already secured, through private sector funding, over £15 million of private sector funding for full fibre alone. So, we will continue on that trajectory and draw in that private sector funding. But it's that collaborative effort to bring in quite an innovative and new way of doing things for the digital infrastructure, where there are employed people now in the strategic partner organisations, and they come together, work together and work with providers around these sorts of things. So, that is starting to pay dividends.
So, what we would like to do in the near future is to look at quantifying some of the wider impacts. It's not the right time, and it hasn't been until probably now. But, specific areas of the city deal, we can look at evaluating them, and across the portfolio. So, within the next 12 to 18 months, we hope to start looking at some of those evaluations of the wider impacts—so, the direct and the indirect benefits of what we're achieving through the infrastructure.