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If given the chance to succeed, levelling up could transform the UK

Whoever wins the next election must commit to infrastructure and regeneration projects that tackle stark regional inequalities.

By Ian Baker

Most economic analysts predict that UK economic growth will continue to flatline in the first half of 2024, with the possibility even of a recession. In what will be a general election year the stakes are high on battling debt and nurturing national growth. Against this background, it is easy to forget the government’s stated long-term vision to “level up” the UK by spreading opportunity more equally across regions.

Addressing the issue of “left behind” or economically deprived areas has been an objective of successive governments but, in reality, initiatives taken have seen little success. The National Infrastructure Commission (NIC) still considers this to be a priority going into 2024, stating in its recent assessment that “the UK must address its persistent slow economic growth and entrenched regional inequalities”.

And it would appear that levelling up is here to stay. The Levelling Up and Regeneration Act became law on 26 October 2023 and aims to speed up the planning system, hold developers to account, cut bureaucracy and encourage more councils to put in place plans to enable the building of new homes, with the latter seen as a fundamental enabler to driving regeneration in left-behind communities.

Levelling up funding allocated so far

The government announced the creation of a £4.8bn Levelling Up Fund (LUF) in the 2020 Spending Review. The funding rounds allocated so far have been spread across the UK with a strong correlation to the levelling up prioritisation index.

In addition to the LUF, ministers created the £2.6bn UK Shared Prosperity Fund (UKSPF) to address a funding gap created by Brexit and future access to EU structural funds (funding pots set up to support economic development and reduce inequality between and within countries in Europe). This money is allocated by formula; every single area of the UK receives funding, with the largest allocation of £144m going to the Greater London Authority (the highest of the mayoral and combined authorities), and £129m to Cornwall and the Isles of Scilly, the largest unitary authority recipient.

[See also: Why the UK needs a major energy grid update now]

What progress have we seen so far?

It is perhaps unfair to expect to measure immediate benefits from this long-term policy, given that many of the transport and regeneration schemes aren’t yet built, and even when they are, the impacts won’t be realised straight away. Scheme promoters are typically asked to evaluate the stated benefits five years after completion, in recognition of this anticipated time frame.

The government itself hasn’t yet reported on any of the “measures for success” metrics outlined within the original levelling up white paper. Bloomberg has created its own levelling up score card to track the policy’s progress across a range of socio-economic metrics. The results in January this year weren’t positive, highlighting that the UK’s productivity gap has actually widened, with more than three quarters of UK constituencies falling further behind London and the South East since the policy was announced.

Analysis of LUF spending in March this year revealed that less than 10 per cent of the fund had been spent. The money will be “rolled over” to the next financial year but it can’t help to “level up” regions if it isn’t being used.

So, what’s hampering delivery? With construction inflation reaching as high as 10.4 per cent in May 2022, it becomes a delivery problem when local authorities can no longer afford their “match contribution” (typically 15 per cent of scheme costs). This is particularly problematic when central government LUF allocations are fixed and local authorities, not central government, are liable for any increases in the cost of schemes. As a result, many authorities have frozen LUF projects.

Then there are resource capacity problems and skills shortages, both within local authorities and within the construction industry. This problem isn’t the preserve of levelling-up funds. Other funding programmes are equally challenged: the £4.8bn City Region Sustainable Transport Settlements, the Major Road Network and Large Local Majors Funds are all behind on their delivery programmes.

What’s the potential of levelling up and regeneration funding?

On a macro level, the government cited the “transformational change” that occurred following roughly £3bn of regeneration investment in London’s Kings Cross in its levelling up white paper, suggesting it could be a template for other towns and cities to follow.

Perhaps one more representative of the scale of typical investment is the Lincoln Transport Hub. WSP was involved in this exciting project and it was used as a case study in the Levelling Up Fund first round prospectus. Here, the government invested £11m in a transport and regeneration scheme, with £16m of local authority match funding, to create a state of the art bus station, improvements to the public realm including a new pedestrian plaza, a new multi-storey car park, and retail space. This project has been transformational, and the investment also kickstarted wider regeneration in the city centre and helped to unlock retail, commercial and residential development in the city.

What does the future hold?

Levelling up is here to stay. Given the urgent need to reignite the UK economy, investment in infrastructure and regeneration projects to correct regional economic imbalances is an important piece of the growth jigsaw. Whoever is in charge at Westminster following the general election should stay the levelling up course, because if given the chance to work it could be one of the greatest policy successes of living memory.

[See also: Leasehold is the ultimate symbol of our broken economic model]

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