The Local Industrial Strategy and the UK Shared Prosperity Fund

  • By Jenny Gulliford

Overview

The government’s Industrial Strategy aims to create a coherent framework for the UK business, across all sectors, in response to the challenges and opportunities created by Brexit with the objective of improving and re-balancing economic growth in the UK. As part of the strategy, local areas, including London, will expected to have a Local Industrial Strategy in place by 2020. London’s strategy will be developed with the London Economic Action Partnership and will set out the economic strengths and priorities in local areas. They will also influence how future funding decisions are made, including the EU funding replacement the UK Shared Prosperity Fund. 

Analysis

The Industrial Strategy and the Local Industrial Strategies

The Industrial Strategy aims to help build growth into the UK’s economy as it leaves the European Union. It hopes to establish better, higher-paid jobs in every part of the UK through investment in the skills, industries and infrastructure of the future. A White Paper was published in November 2017 setting out the government’s vision, including the five ‘pillars’: 

  1. Ideas: encouraging the UK to be the world’s most innovative economy
  2. People: ensuring good jobs and greater earning power for all
  3. Infrastructure: driving a major upgrade to the UK’s infrastructure
  4. Business environment: guaranteeing the best place to start and grow a business
  5. Places: creating prosperous communities across the UK.

Since then, the government has used the strategy to shape its business and research agendas. The government is now asking local areas to develop Local Industrial Strategies (LISs). These are to be developed by the Mayor (as in all combined authorities) in partnership with the London Economic Action Partnership. They must be agreed by national government. These should set out clearly defined priorities for the area and explain how these will maximise UK productivity through making the most of their distinctive strengths. The government is taking a phased approach, and the next wave of places to develop a LIS are the North East, Tees Valley, West of England, Leicester & Leicestershire, Cheshire & Warrington and Heart of the South West. Government will aim to agree Local Industrial Strategies across England by early 2020. A recently published policy prospectus sets out what the government expects to be contained in the LIS. 

While there is no funding currently attached to the LISs, they will help inform future choices and priorities at a local and national level, and will inform LEP’s approach to any future local growth funding. The government has also stated that they will: ‘help local areas in England decide on their approach to maximising the long-term impact of the new UK Shared Prosperity Fund once details of its operations and priorities are announced following the Spending Review’.

The UK Shared Prosperity Fund (UKSPF)

Following the UK’s departure from the European Union, the government has confirmed that European Structural and Investment Funds (ESIF) will be replaced with a UK Shared Prosperity Fund. ESIF monies in London are significant – worth £580 million for the 2014-20 programme. Consultation on the UKSPF has so far been informal, but we anticipate that a full consultation process will be published towards the end of the year. 

London has historically used and delivered ESIF differently to the rest of the country, and we want to preserve and build on this. Examples of how London currently works differently include:

  • London currently has greater control over setting priorities and delivering the fund than elsewhere in the country, with the GLA acting as an Intermediate Body.
  • London currently has a significantly greater focus on skills and employment spending. While most LEPs split their ESIF allocations equally between ESF and ERDF, London has a 75:25 per cent split in favour of ESF. This reflects London’s below average employment rate and its share of some of the most deprived wards in the country, while still achieving good economic growth.

The government has committed to tackling regional inequality through the UKSPF. While this is welcome, we are concerned that this could lead to funding allocations being based on regional Gross Value Added (GVA), which would obscure the deprivation existing in relatively wealthy areas. For example, Tower Hamlets has some of the most deprived wards in the country but is in close vicinity to two of the UK’s most productive areas – Canary Wharf and the City of London. London Councils and the GLA support the use of the Index of Multiple Deprivation as a fairer system for measuring levels of inequality in the UK. London Councils and the GLA have already written to government outlining our four principles for the fund, arguing that:

  1. London’s share of the UK SPF be fully devolved to London.
  2. Allocation of the UK SPF be based on a fair measure of need, not regional Gross Value Added.
  3. London to receive at least as much funding as currently via EU programmes.
  4. UK SPF administration be much simplified by comparison with EU programmes.

The government has also stated an ambition to make the UKSPF a ‘simplified, integrated’ fund that is less complex than current EU funding. The value of the UKSPF has not been confirmed.
The government has not fully confirmed how the fund will be administered or governed, although there is an expectation that it will be delivered through LEPs. London Councils is pushing for a formal route through which local government can influence the UKSPF’s priorities and for the ability for boroughs or sub-regional groups of boroughs to administer the fund at a local level.

Commentary 

The Local Industrial Strategy in London and the UK Shared Prosperity Fund will fundamentally shape the way in which national government work with local areas regarding their economic, business, employment and innovation policy. Government has confirmed that that the LISs will be developed with LEPs and combined authorities but have not stated publicly how London’s unique geography and governance will be taken into account. London Councils is working with all stakeholders to ensure that borough and sub-regional priorities are reflected in the LIS, and that boroughs have a clear route through which they can continue to shape London’s economic strategy. We have begun to work with boroughs and Sub-Regional Partnerships to identify their local priorities for London’s Local Industrial Strategy and the UK SPF.

Local government is expected to be a ‘key stakeholder’ in the development of the Local Industrial Strategies alongside other bodies such as universities, and London Councils will be working to ensure that the views of the boroughs are reflected in the final document. However, the Mayor and the LEAP are under no obligation to consult with the boroughs. Therefore boroughs should take every opportunity to engage with the GLA to make sure that their voices are heard, given that the LIS will influence the focus of future funding streams. 

The UKSPF consultation will be launched shortly, and London Councils will be submitting a response. There is a risk that London could receive less funding than under the current system due to changes in the way in which the funding allocation is decided or to a reduction in the total amount available. The fund could have narrower priorities than ESIF, and could have a greater focus on infrastructure and science and research. It is also possible that London, which currently has greater control over how funding is spent than other areas, could lose some of this control.

Boroughs should consider how ESF and ERDF are currently used in their areas, and what they need out of the replacement fund. Boroughs could also begin to collate evidence, including data and case studies, to submit either individually, or as part of the London Councils’ submission.

 


Annex – LIS and UKSPF Workshop notes

London Councils held a workshop on 1st November with boroughs asked to consider how their priorities need to be reflected in the Local Industrial Strategies and the UKSPF. The day focused on four of the Industrial Strategy’s ‘pillars’ and took a sub-regional approach.

1. Ideas: encouraging the UK to be the world’s most innovative economy

  • Universities identified in all areas as key ‘anchor institutions’, which could be linked to boroughs, business and Further Education colleges.
    • West London Alliance: Noted exiting links with Middlesex, University of West London and Brunel and they work that the currently undertake with them as training providers.
  • Construction sector offers big potential to improve low levels of productivity and tackle wider social issues (eg housing, workspace etc). Clear need to take localised approach to this in line with different sub-regional needs. All areas noted conflict between workspace/industrial space and need for more housing.
  • Focus on inclusive innovation was welcomed, sub-regions recognised need to build on existing innovation areas and benefit from agglomeration, while also encouraging innovation in small business in outer boroughs.
  • Need to support tech clusters identified – both exiting agglomerates and new cheaper spaces in outer London, such as areas in South London.
  • Argues that innovation needs to be used to tackle other London/borough/mayoral priorities such as housing . Examples from sub-regions included:
    • West London Alliance: Health and social care.
    • Local London: Service economy.
    • Central London Forward: Culture, fintech and medtech.
    • South London Partnership: Digital, medtech (via the Sutton Cancer Hub) and life sciences.

​​2. People: ensuring good jobs and greater earning power for all 

  • Issues to consider here included:
    • Skills shortages caused by Brexit.
    • Lack of large employers in some areas (particularly in areas of Local London) should be appreciated.
    • Gig economy not fully understood.
    • Recognise the challenges of automation/disruptive technologies
  • All sub-regions identified skills as an area in which they have significant ability to influence and contribute to the LIS, and argued that where appropriate funding and future activity should be devolved and delivered at a sub-regional or borough level.
    • Need to focus on in-work poverty and groups with complex needs not in work, inc ESOL.
    • Use LIS / UKSPF to develop enhanced careers offer.
      • Funding should be devolved to a sub-regional or borough level
    • Devolve the apprenticeship levy.
    • Include a focus on labour market discrimination in future activity. Need for a sub-region borough approach here – types of labour market disadvantage ‘cluster’ and the barriers to work that different groups experience are not the same everywhere.
  • UKSPF could be a useful tool to tackle issues in this category.
    • Continuity is key: 80% of ESF projects in West London are delivered by voluntary organisations and charities. These could be at risk if there’s a big funding gap and this would be a loss of important loss of infrastructure.

​​3. ​​​​​​Infrastructure: driving a major upgrade to the UK’s infrastructure

  • Digital infrastructure focused on town centres and key economic growth areas.
  • Transport and housing infrastructure.
    • Need research on travel to work patterns, inc across GLA boundaries.
    • Buses.
  • Electricity grid infrastructure.
  • Need to ensure sufficient industrial land across London
  • Importance of ‘soft’ infrastructure underpinning innovation identified.
  • Place-making key – people have to want to work/live there.
  • Child care
  • Air quality
  • Parking

Priority infrastructure projects referenced in meeting
West London:

  • West London Orbital
  • Central Line to Uxbridge
  • A315
  • Regeneration of Staples Corner
  • Golden Mile Station (Hounslow)
  • New Southgate Opportunity Area

Local London:

  • New River Crossing
  • DLR Extension to Thamesmead
  • Orbital connectivity ( North South links poor)

Central London:

  • Hackney and Islington borough-led energy companies

South London:

  • Sutton Decentralised Energy Network

4. Business environment: guaranteeing the best place to start and grow a business

  • Focus on enabling business to business mentoring.
  • Affordable workspace and place making issues here.
  • Workspace a key issue.
  • Need to think in terms of London as a whole – outer London provides many central London workers.
  • Strategic planning powers and policies needed. Develop standard methodologies and learn from others.
  • Need to retain business in London
  • There needs to be a safety net for business and innovators – need to be able to fail.
  • Central London recommended taking a ‘cluster’ approach, looking at the following areas in CLF:
    • Biomedical
    • Finance
    • Tourism/heritage
    • Creative sectors.

 


Links 

Industrial Strategy: building a Britain fit for the future White Paper

Jenny Gulliford, Principal Policy and Project Officer

T: 020 7934 9756

E: [email protected]