For those not well versed in the ways of Whitehall, it’s known as a starburst: a shower of carefully choreographed, simultaneous announcements delivered by familiar faces in different locations. A grand, logistical feat designed for maximum impact.
So on Monday, Dave and Greg headed to Birmingham. Eric was in Northamptonshire. Brandon was dispatched to the North East.
But it wasn’t just Cameron and Clark, Pickles and Lewis. More government big-hitters than that have to be rolled out to turn a mere launch into a starburst. And so it was that ministers and Tory MPs were on hand across the country to applaud the 39 local enterprise partnerships that will benefit from the £2bn first round of the government’s much-vaunted regional growth fund.
Sizeable sum
In all, £6bn of public money has been promised; ministers went further than expected, making additional commitments for future years as well. It’s a sizeable sum.
But it’s more than just the public money made available that makes this week’s announcement so significant. For one, the investment is fuelling public-private partnerships nationwide – and on quite some scale. For every pound promised by government, there will be an additional three invested by the private sector. Add in the 30-plus city deals that have been announced in recent months and there is £10bn being ploughed into cities across the UK.
More than that, for the first time in decades, Whitehall is devolving authority, not centralising it. This could be the beginning of a seismic shift in power and accountability from the centre to the regions.
The man who has made it happen is cities minister Greg Clark, who has devoted the past several months to cajoling other government departments into giving up pots of budget and persuading LEPs to take the process seriously.
“I’ve visited all the LEPs and had some pretty frank discussions with them,” he says from his office in the Treasury. “It’s competitive and they all know that. But as a result, the quality of the proposals has been immense. And it has really changed the weather in Whitehall. If you work in Whitehall, you tend to think you make better decisions than people who are some way away from you. You tend to think you know best. But now the penny has dropped that this is actually the way to go.”
In the first year, the fund was three-and-a-half times oversubscribed. Almost all the year-one deals involve investment in transport infrastructure. House building is prominent. Most involve investment in skills or business support. Broadband features strongly. Manchester, whose deal included £50m of investment in regional transport; London, where £55m will be spent boosting skills; and the North East, where supported projects include an oil-and-gas academy in the Tees Valley, were the big winners. But each of the 39 LEPs has benefited; every one persuaded Whitehall that they had a clear plan for delivering local growth.
“What we hoped and, actually, what has transpired is that you get multiple benefits from a single investment,” he adds. “So a road junction that might previously have been evaluated just in terms of congestion can actually unlock house building. There’s one in North Yorkshire, for example, where you’ve got 1,000 homes coming as a consequence of a road. And that’s the real advantage of joining up departments in this way.”
To get so far so fast, Clark has needed allies, of course. Lord Heseltine, whose report
No Stone Unturned last year persuaded the chancellor to create a regional growth fund worth £12bn over six years, has been instrumental. As has Jackie Sadek, the regeneration specialist who has served more time in the trenches than most civil servants and ministers – who are often confined to the officers’ mess.
Further commitments
Now Clark is determined to ensure that the process doesn’t stall. “I’ll be inviting all 39 LEPs to come and see me again to start the negotiations immediately for further commitments to be made over the months ahead. So we’re not going to delay. There’s real momentum with this. There’s big private-sector interest. We really want to get big investors now committing to these opportunities that are there and the more that we can show that there is momentum, commitments, that central government co-investment is there, the more that they can get on with it.”
Even before this week’s starburst, the commitment to devolve power and to rebalance the economy away from its over-reliance on London had begun. Cameron and George Osborne were in Manchester last month to talk about creating a powerhouse of the North and dangle the carrot of HS3, connecting big regional cities up there.
“National growth is the sum of local growth,” Clark says. “Power has been sucked away from the big cities. You can’t possibly manage everything from Whitehall and expect it to succeed if you cut out the vision and leadership of local people.”
Crucially, Clark is winning plaudits in the regions – from Leeds to Liverpool. In Manchester, the council leadership team of Sir Howard Bernstein and Sir Richard Leese are full of praise for the government’s commitment to devolve power, though they would like more – not least control over business rates.
The respect is mutual: despite his preference for city mayors, Clark is an admirer of Manchester’s capacity to work with the private sector to deliver investment.
But Clark recognises the real challenge lies is in rebalancing the economy, despite Osborne’s warm words. “There’s only one UK city outside the capital, Bristol as it happens, that has an income per head above the national average. In Germany, all of the eight bigger cities outside Berlin do. In Italy, I think, six of the eight do. In France, half of them do, but the others are just below.
“So we’ve got a real catching up to do, and it’s no coincidence that these places tend to have effective leadership of their cities.”
What role will property have to play in the development of the government’s local enterprise partnerships? Julia Cahill reports
Labour MP Rachel Reeves, shadow secretary of state for work and pensions, has described the current state of England’s regional, sub-regional and local structures of economic governance as a “patchwork quilt” – “Uneven and inconsistent, threadbare in some places and multi-layered in others.”
It is an image that no doubt rings true with many in the private and public sectors.
Yet while Labour hopes to improve it, the party has no more interest in tearing up this “patchwork” after the next general election than the Tories do. Localism and shrinking public-sector budgets are here to stay.
That includes the concept of local enterprise partnerships, the government’s flagship policy for delivering economic growth and decentralisation on a shoestring. There are 39 across the country, led by boards chaired by a businessperson and at least half of each board comprised of business people, with the balance coming from local government.
Until this week’s announcement of which slice of the £2bn Local Growth Fund they would receive, they have almost been stuck in start-up mode and reliant on local government for any capacity to take action.
Supporters argue that the devolution of power to spend this capital as local businesses and civic leaders see fit is what is really significant. Government hopes it will be enough to lure in private-sector investment – including from the property sector.
Putting aside the property industry’s general dislike for government initiatives, there are serious obstacles to tackle.
Resource restraints
One complaint routinely mentioned is that the LEPs lack resources in comparison with the nine regional development agencies they replaced and which were heavily focused on city regeneration. Mergers of some LEPs are widely expected – particularly for those without the resources of a large city council to tap into because of their geographic spread.
“However imperfect RDAs were, they did have teams of people who could engage with people in the property world and have reasonably sensible conversations,” says Stephen Nicol, managing director of economics consultancy Regeneris.
“LEPs are being given more and more things to do – such as looking after the allocation and delivery of the European Regional Development Fund – and they are struggling with capacity. They have staff, but that could be as tiny as two or three people. They rely on people being seconded from local authorities.”
St Modwen development surveyor Michael Murray, who has led the delivery of the Longbridge regeneration, in Birmingham, for the past decade, agrees, saying this means property companies need to adopt a new way of working with the public sector.
“The public sector isn’t there any more,” he says. “They have budget constraints and they have to provide a minimum amount of statutory services. The capital to help is not there. What are your options? You need to sit alongside the LEPs and join them. You have to get on with it. You have to help out by giving your knowledge, your expertise.”
Murray points to a fundamental shift in how public sector funds are awarded. “Historically, property developers would say ‘I need this infrastructure to open up this site’. Now, to secure public money, you have to show a wider economic benefit. That’s where property professionals are getting mixed up. It all has to be about jobs. If jobs come, then people will need more space eventually.”
Nicol also points to confusion over the role of the unelected LEPs in planning. “Government has said they should be involved, but it is not clear to what extent their views should be taken into account,” he says. “Should they be setting targets for councils?”
What seems likely is that LEPs will increasingly have an “enforcing, monitoring and progress-checking role,” says one source close to Whitehall. “Anything more will be locally negotiated.” That could include strategic planning authorities being set up across LEP areas.
From a property industry perspective, there is an inevitable wariness about “creating more talking shops”, says BPF chief executive Liz Peace.
She has also encountered some reluctance among members to seek positions on LEP boards because they don’t want to be perceived as taking part just to access the best opportunities.
Martin Curtis, former leader of Cambridgeshire county council and now an associate director at political consultancy Curtin & Co, bears this out.
“You cannot ignore the importance of property development alongside economic development. Should that mean you have a developer or house builder chief executive on the board? Probably not.”
Yet the strong message coming out of Whitehall is that LEPs must be private sector-led; conflicts of interest will arise and can be dealt with.
Growing interaction
What is certain is that, with LEPs here to stay in some form for the foreseeable future, property’s interaction with them is only set to grow. With this in mind, Greg Clark’s property adviser, Jackie Sadek, has just embarked on a road show to inform property consultancies about the benefits of LEPs and a property conference is scheduled to take place before MIPIM UK in October.
After all, this is the first year of the LGF and there are four more years of guaranteed LGF spending to lay claim to.
Developer view
“Public sector cuts and the abolition of the RDAs have created a void which the LEPs are trying to fill. Resource is a problem,” says St Modwen development surveyor Michael Murray, who has led the delivery of the £1bn Longbridge regeneration in Birmingham since 2003.
Yet despite the extra demands involved in dealing with a much leaner organisation and the crucial role played by the West Midlands RDA at Longbridge, Murray sees advantages in the new LEP approach.
“The positive thing to come out of this is that there is now a more joined-up conversation. It has allowed us to think about what is right for us as a city region,” he explains. “The LEP understands the fine grain.”
The RDAs were heavily focussed on individual projects and funding had to be secured from three or four central government departments. Now it’s a question of, “is the infrastructure necessary for the region or just for the development?”
“The LEP is putting forward a regional ask rather than working on a project basis. That’s quite difficult for property developers to adapt to because in their eyes their project is always the most important,” Murray says.
As a prime example of something that will bring wider economic benefit, he points to plans drawn up by St Modwen with transport body Centro and the Greater Birmingham and Solihull Local Enterprise Partnership to invest in a multi-million pound package of transport infrastructure improvements at Longbridge. This will include a rail station upgrade, M42 connectivity scheme and bus interchange. “It will allow better access to South West Birmingham not just to our scheme,” he explains.
The £8m Longbridge connectivity scheme has just been awarded £4.7m from the Local Growth Fund as part of a £357.4m award to the Birmingham and Solihull LEP. According to the LEP’s website, the connectivity scheme will help deliver almost 4,000 jobs and just over 1,000 homes.
View from within the Sheffield City Region LEP
“This region grew its public sector in the boom and its private sector shrank. We need to create more jobs and attract more investment and leverage off our strengths, particularly around manufacturing. That’s what the LEP is charged with,” says Martin McKervey, a partner in corporate law firm Nabarro.
McKervey leads the LEP’s property and construction sector group, one of nine sector groups acting as official advisors to the LEP. Each represents an area seen as key to future economic growth and job creation.
McKervey says the LEP’s initial focus was on building relationships with central government. Working closely with Harworth Estates, it negotiated one of the first enterprise zones, launched in 2012 at Harworth’s Wavereley site, and was one of the eight core cities in the first wave of the City Deal.
It has been successful in securing RGF money and has just been awarded £320 from the Local Growth Fund to support £600m of infrastructure projects, including improvements to Sheffield City Centre, transport links to new housing and employment sites in Dearne Valley and an extended airport link road to Doncaster-Sheffield Airport. What is needed now, says McKervey, is “a seismic game changer, such as a large corporate to come to the region”.
More than 70 companies are members of the property and construction group, which meets every five to six weeks. “I think by virtue of the size of the group that businesses are interested in working with the public sector to drive economic growth,” says McKervey.
julia.cahill@estatesgazette.com
damian.wild@estatesgazette.com
