Regeneris Consulting welcomes the Regional Growth Fund announcement in the Comprehensive Spending Review but cautions it should be allocated in a targeted manner. Regeneris has done a quick assessment of where needs and opportunities are greatest to see which locations are best placed to take advantage of RGF. Using our simple assessment framework, Liverpool, Sheffield, Blackburn and Darlington are in the first ranking tier. They each rely heavily on public sector employment and have a clear economic gap with the rest of the country, but they all have a reasonably strong base of private sector employment in nationally important sectors on which to build. Other areas are close behind and should be supported, but there is a risk of RGF making little real difference to conditions on the ground if it is spread too thinly.
The Government has committed itself to £1.4bn of Regional Growth Fund investment over the next three years. We can now start to look at which places might be best placed to take advantage. Regeneris Consulting has undertaken a quick ranking of locations across England to identify where the money might end up.
Exact details on the eligibility and assessment criteria are still thin on the ground and should become clearer once the Local Economic Growth White Paper is published in a few weeks time. The Comprehensive Spending Review announcement has confirmed early indications that the Fund will be used to “support projects with significant potential for private sector economic growth and employment, supporting in particular those areas and communities that are currently too dependent on the public sector”. Lord Heseltine’s panel will have the final say in who gets what. Clearly resources should go to areas which come forward with convincing investment propositions that command support locally, lever in additional resources and set out a compelling path towards economic growth.
After CSR, there will be a lot of interest in, and intense competition for, Regional Growth Fund. Given RGF’s lofty goals and the long standing economic challenges candidate areas face, Regeneris Consulting would urge government to ensure that resources are allocated in a reasonably concentrated fashion. Only through focussed and sustained attention will the challenges facing these areas begin to be tackled. Change is more likely to occur where there is a base of growth-oriented private sector businesses on which to build.
Regeneris Consulting has done some quick analysis of local areas to see which places might be best-placed to secure Regional Growth Fund based on:
- Need: reflecting the scale of the output gap and the degree of dependency upon the public sector employment
- Opportunity: reflecting the extent to which employment is concentrated in those parts of the private sector where BIS has traditionally focussed its attention
If the Regional Growth Fund is concentrated only on those places with the strongest dependency on lower value and public sector employment (high need) but where there is a reasonable base of private sector business upon which to build (high opportunity) then resources will be finding their way to just four high priority locations: Darlington, Blackburn, Liverpool and Sheffield.
RGF Needs & Opportuntities Framework
Focusing RGF in this highly concentrated manner is unlikely to create the scale and range of re-balancing upon which the Government has set its sights. The scope of RGF should certainly be opened up to a second tier of places. Areas with high levels of need but with perhaps a smaller private sector growth base on which to build. This would bring in places in the North East (South Teesside and Tyneside, the North West (Lancashire, St Helens & Knowsley (East Merseyside) and the Wirral), Yorkshire (East Riding and York, along with Bradford) and the South West such as (Dorset, Plymouth and Torbay). Both Leicester and Southend-on-Sea would fall into the group too. No doubt other places with clear levels of need but a more limited base of private sector employment on which to build will also put forward compelling proposals which command attention.
Ultimately it will be for Lord Heseltine’s committee to decide how widely to spread RGF. The table below illustrates the number of places falling into each of our identified categories.
|Number of Areas in Each Category
The more widely spread the RGF net is cast, the fewer resources will be available to each area. And, fewer resources will inevitably mean smaller impacts and less progress.
Assuming the RGF pot were be to evenly split, the average allocation could soon diminish to pretty small levels over the life span of the fund if it is not targetted. The table below shows how average allocations over the lifetime of the fund fall rapidly as the eligibility criteria are relaxed. If just the four high priority areas receive all the resources then each should benefit to the tune of £350M. This is arguably too much for these economies to sensibly absorb in the time frame available. At the other extreme, if RGF is spread evenly across all NUTS3 areas, only £15M will be allocated to each area – far too small to make a difference to these long-term challenges.
A balance needs to be struck which allows strong investments proposals to come forward from all areas while targeting attention on a realistic number of places where change can really be occur.
|Diminishing RGF Allocations As Net Widens to Lower Priority Areas
|| Low Need
For More Information on the approach and additonal insights, please contact Regeneris Consulting
or Simon Hooton email@example.com