_Regeneration and levelling up: is this a once in a generation opportunity going to be wasted?

Above: Ian Tasker, Head of Public Sector advisory

This represents an unprecedented opportunity for towns and cities to accelerate their capital programs to ensure local communities and residents have the same experience and benefits in their local area as one would expect from any town across the country.

The Government’s overarching agenda is to level-up towns and cities across the country by building stronger and more resilient local economies, boosting prosperity and opportunity in our communities, and helping them build back better from the pandemic.

Without doubt this is a once-in-a-generation opportunity, and it is vital towns and cities across the UK make the most of what is on offer.

What we know so far

The first pledge dates back to 29 October 2018 when the then Chancellor of the Exchequer Philip Hammond announced his intentions to “renew and reshape town centres and high streets in a way that drives growth, improves experience and ensure future sustainability”. This, he said, would be achieved through the newly-launched £675 million Future High Street Fund.

Since then, much has happened, which it is worth briefly recapping over:

·       5 July 2019: The Parliamentary Under Secretary at the Ministry of Housing, Communities & Local Government (MHCLG) Jake Berry confirms 50 areas across the country are going through the second phase of the process to obtain access to the Future High Street funding – a £150,000 support fund to kick start the development of detailed proposals for capital funding.

·       27 July 2019: The newly elected Prime Minister Boris Johnson announces a £3.6 billion Towns Fund, including an additional £325 million for the Future High Street Fund. The latter taking the total number of towns in application from 50 to 100. This allowed towns to apply for up to £25 million of funding to invest in their local area.

·       25 November 2020:  The then Chief Secretary to the Treasury Rishi Sunak announces a new Levelling Up Fund worth £4.8 billion. This allows local areas to bid up to £20 million to invest in local infrastructure.

·       26 December 2020: The Secretary of State for Housing, Communities & Local Government Robert Jenrick announces that £830 million from the Future High Street Fund will be invested in 73 areas across England.

·       3 March 2021: The Chancellor of the Exchequer Rishi Sunak confirms 45 of the 101 Towns who made an application for the Towns Fund had their funding confirmed with the total amount equating to £1.02 billion.

·       19 May 2021: Confirmation is given that 72 places will share over £830 million from the Future High Street Fund; £107 million of the Future High Street Fund was allocated to the Department for Digital, Culture, Media & Sport (DCMS) to support the regeneration of heritage high streets.

·       8 June 2021: Robert Jenrick announces further funding of £725 million for 30 towns participating in the Towns Fund.

The funds’ objectives

•        Future High Street Fund – To renew and reshape town centres and high streets in a way that drives growth, improves experience and ensure future sustainability.

•        Towns Fund – To help increase economic growth with a focus on regeneration, improved transport, better broadband connectivity, skills and culture.

•        Levelling-up Fund – To focus on capital investment in local infrastructure thereby building on and consolidating prior program such as the Local Growth Fund and Towns Fund. The first round of the Fund focussed on three investment themes being transportation investment, regeneration and town centre investment and cultural investment.

Allocation and alignment of funds

The actual award mechanism for the Towns Fund was not disclosed, however we do know that MHCLG reported dividing towns into the priority groups high, medium and low based upon the Office of National Statistics’ (ONS) index of Multiple Deprivation (IMD), with an understanding that more deprived towns were more likely to be shortlisted.

The final shortlist of the 101 towns comprised all 40 high priority towns, 49 medium priority towns, and 12 low priority towns.

FIGURE 1

Illustrates the funding allocated to 75 towns (of 101) in the Towns Fund against the priority categories.

Looking at these Towns Fund allocations we note that larger towns were eligible for funding, despite previous suggestions that they should be excluded.

In addition, areas with high levels of deprivation did not automatically secure funding, as previously proposed by MHCLG. There were, however, many low priority towns whose funding was approved.

It is worth noting that the Levelling Up Fund has undertaken a separate assessment of local government need, and has published an index of local authority priority areas – this is based on a combination of metrics including need for economic recovery and growth, need for improved transport connectivity and need for regeneration. The first round of applications for the Levelling Up Fund were submitted in June 2021, with allocation of funding expected in the autumn.

We have also seen some towns consider applications to more than one fund – this is not unsurprising; however it does raise a few challenges.

Firstly, the interventions are complex in nature and seek to deliver on a wide range of objectives, such as a focus on economic growth through regeneration coupled with capital investment into local infrastructure. There could be a risk that a siloed approach to the application of these fund initiatives develops, which could create a gap for certain interventions.

Also, are there overlaps in the fund initiatives and is this intentional by the Government? If so, this suggests there is a need for a clear route map that allows towns to help decide on the most appropriate fund for their interventions, rather than feeling it necessary to apply for all funds in the hope one or more applications will be allocated funding.

Indeed, this lack of clarity and potential overlap of purpose between these government funds provides the opportunity for an unsuccessful application from one fund to be dusted off and reused in another fund. This begs the question: if an application doesn’t pass muster the first time around, is it fit for purpose for another fund?

There are a number of key considerations that arise from these initial observations.

Firstly, there is the opportunity for collaboration between neighbouring local authorities in order to deliver interventions that have the potential for wider, regional impact.

The Government has been explicit in its guidance and provided the opportunity for local authorities to submit joint bids for the Levelling Up Fund. We consider this to be a positive move, as it provides the opportunity to combine resources, such as government funding and public/private sector finance and expertise, for greater social and economic good.

In addition, it is important to make sure commercial realism is evident in interventions that assume the introduction of private sector investment. Not all interventions are appropriate for this purpose, but those that are will need to demonstrate they are capable of generating real-world market returns.

However, in our experience this is not always the case, and could limit the ability to secure the required private sector expertise and finance. Furthermore, a shift is developing in the strategic thinking from some of the institutional investors and developers who are seeking opportunities to partner with the public sector, where large-scale interventions are presented as a portfolio of schemes which have combined social, economic and financial benefits.

Finally, and most importantly, we believe the quality of the business case supporting any Government application is the key consideration in determining the likelihood of funding allocation – more so than town/local authority priority ranking. Indeed, the business case must have a robust options appraisal that arrives at the preferred funding and commercial delivery model. 

There is no one size fits all approach, but there is an ever-growing awareness of the types of structure that work well and the key issues that must be addressed to deliver an intervention – including traditional models such as local authority led, wholly owned companies, and joint ventures.

More recently, we have also seen interest in the use of locally-led development corporations where large scale, complex regional projects with political significance are undertaken.

To arrive at the appropriate funding and commercial delivery model for a given intervention requires a thorough assessment and understanding of a variety of factors, including resource and expertise, level of control, availability of funding, scale, and social value and community benefits.

Public sector business cases are complex and time consuming by their very nature. As a result, the capacity for all local authorities to produce high quality business cases, proportionate to the size and complexity of the interventions, is varied.

Because the quality of a business case is the single most important factor in determining government funding allocations, it is essential that all towns and local authorities equip themselves with the right expertise and capabilities – including engaging with the best consultants – in order to succeed in this area.

Government funding of £9 billion is a massive sum and we are unlikely to have this level of funding pledged by the Government again – at least in our working lives.

By leveraging private sector investment through commercial realism, collaborating across the public sector to deliver wider positive impacts, and producing strong business cases, we will be better placed to make the most of this once-in-a-lifetime opportunity for the benefit of generations to come.

Ian Tasker is the new head of Knight Frank’s Public Sector advisory team. He specialises in supporting the public sector with delivering regeneration projects, strategic and commercial advice and the production of business cases.

This essay first appeared in the ACES Magazine and is reproduced with permission.