How Is Local Growth Shaping Up?

With round 3 of the Local Growth Fund (LGF) now upon us, Local Enterprise Partnerships (LEPs) need to be quickly reflecting on some of the challenges involved in developing a pipeline of successful projects.

LEPs have been the central component of the government’s aspirations to promote local economic growth since the 2010 White Paper, Local Growth, Realising Every Place’s Potential. They started out as largely strategic partnerships, since then their role has expanded considerably. Between 2010 and 2015, central government funding directed through LEPs ran at £300 million annually (or £1.5 billion for the period). From 2015-16 through to 2020-21 LEP investment funds are projected to rise to £2 billion annually (or £12 billion for the period). This eight-fold increase marks a real shift in the government’s commitment to LEPs.

As figure 1 below shows, Growth Deals are just the latest in a long and continually evolving line of initiatives to support local growth since the 1980s. It shows how little sustained stability there has been in local growth programmes, and demonstrates how successive governments have hedged their bets between local and regional approaches. One thing the diagram does not show is the total scale of investment in these programmes. Undoubtedly the sums invested are much lower now than they were prior to 2010. Even the substantial uplift shown in the Local Growth Fund (see Figure 2) is simply a transfer of budgets held by the Departments of Transport and Education. Nevertheless, LGF is a substantial responsibility for the LEPs to oversee.

So, what are the key challenges for LEPs delivering Local Growth Fund projects and, how can they be overcome? The recent National Audit Office (NAO) report  highlights that LEPs must have access to core resources to appraise and approve Growth Deal projects. Staffing levels vary widely between LEPs; some employ no staff but others have a team of up to 80 FTEs (the median number of FTE staff employed by LEPs currently at eight).  In order to oversee Growth Deal projects effectively, LEPs need access to expertise in areas such as forecasting, economic modelling, monitoring and evaluation. As a result, many LEPs are turning to consultancies such as ourselves to support them. But, only 5% of LEPs (according to research by NAO) felt that they had enough resources to meet the expectations placed on them by government, and:

• 69% of LEPs reported that they did not have sufficient staff
• 28% of LEPs did not think that they had sufficiently skilled staff.

The government initially intended that LEPs would be able to fund their own running costs primarily by drawing on the resources of local authorities and private sector partners, however, this has not fully materialised.

LEPs were initially presented as a shift away from RDAs towards more genuinely private sector-led partnerships and approaches. In our experience, although there are some positive examples out there, private sector involvement in LEPs varies considerably. Private sector board membership on LEPs is 58% (ranging from 45% to 80%). This however says little about the influence they wield and the commitment they have made. Although many people are putting in a great deal of their valuable time, in the majority of cases, financial contributions from the private sector have not been forthcoming.

Instead, LEPs are highly dependent on local authorities for staff and expertise. Yet even this is not secure; cuts in central government funding mean that local authorities’ net spending on economic development will have fallen by 68% (from £935 million to £300 million) between 2010-11 and 2015-16 (see figure 3).

The government’s recent confirmation of £12 billion in local growth funding up to 2021 and core funding of £500,000 will help, but is this enough to ensure the stable and sustained oversight that successful local economic development initiatives require?

The pressure to spend Local Growth Fund money in a given financial year puts further pressure on LEPs to concentrate on quick wins. There is a clear preference for projects which can be delivered quickly, potentially at the expense of due diligence and value for money.  The limited expertise amongst LEPs and the absence of systems to appraise projects may result in poor decision making and low value projects being supported.

Ultimately, LEPs will need to measure the impact of projects and demonstrate the value they have secured for the local economy. The NAO found only 21% of LEPs have arrangements for ensuring the quality and accuracy of their monitoring information. All of this suggests that LEPs could struggle to demonstrate the impact they are generating with the billions of pounds which are being invested.

With all of this in mind, the government needs to consider:

• More resources for LEPs, with a stronger commitment to longer-term sustainable core funding. This will ensure that they have access to the skills needed to deliver projects, foresee upcoming challenges and lever in private sector investment.
• Funding arrangements which encourage medium to longer-term projects to be supported instead of just those which are ‘shovel ready’.
• A greater commitment towards evaluating the impact of funding (with resources to do this), ensuring that LEPs have arrangements in place to monitor and co-ordinate their projects.

For further information on the services we can provide, please contact Simon Hooton s.hooton@regeneris.co.uk, Margaret Collins m.collins@regeneris.co.uk or Stuart Younger s.younger@regeneris.co.uk

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