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£1.6 billion Stronger Towns Fund – Something to get excited about?

Marketing / 7 Mar, 19

Simon Elliot, head of our national public consultancy team comments on the announced Stronger Towns Fund and the impact it will have on regions across the country.

As a part of the property and regeneration industry I always welcome new funding and of course I wish every success to our key local government clients not least in my home patch, the North East, as they enter yet another bidding round – this time for the Stronger Towns Fund.

Before we get too excited let’s take a look at the pre-Brexit regime and see how this compares. For individuals like myself that are immersed in public sector funding will know that in the regions, particularly in areas of deprivation we currently receive a large amount of funding from the EU. In fact, we received £5.5billion from EU funding in 2017.

The two main funding streams are the European Agricultural Guarantee Fund and the European Structural and Investment Funds (ESI). In property terms we are interested in ESI which had circa £15 billion allocated between 2014 and 2020, working out at £3.75 billion per year.

Of the ESI the most significant pot in terms of the development industry is without doubt the European Regional Development Fund or ERDF. This anachronism is probably the point at which most developers might take interest, or shudder at the memory of the funding application process and grant conditions they have endured in the past.

ERDF has played a key role in unlocking development for local authorities and private developers as often speculative developments cost more to build than their value when they are completed.

Between 2014 and 2020 ERDF allocated around £5billion (£0.83 billion per year), a significant tool for the regions in their quest to meet the economic need to deliver infrastructure necessary for their economic strategies.

Pre vs Post Brexit

The detail of the new fund is still in development but we do know that it is set to be a £1.6billion fund covering a 7 year period (2019-2026). This equates to roughly £0.23 billion per year, a altogether less eye catching headline figure. Compare this to £0.83 billion per year from ERDF funding and we can see the regions should be justifiably concerned that development funding will be significantly reduced in a Post Brexit world.

Unsurprisingly the message remains clear for all Local Economic Partnerships, they will have to constantly lobby for funding as future funding sources are announced by central government. They will however, have their work cut out to replace the ERDF funds which, whether you love them or loath them, have delivered significant development in the regions.

If we take the North East as an example we can see that pretty much all speculative industrial development has been delivered with some form of significant viability gap funding, from ERDF or in isolated cases the Local Economic Partnership. In the current regime the LEPs generally have to recycle their funds which would preclude them from viability gap funding. It will be interesting to see if the Stronger Towns Fund comes with a similar requirement to recycle and if not, the situation could in fact be far worse if it is only available in loan form.

We are undoubtedly experiencing a challenging period and the viability gap and different ways of addressing this will continue to be an area the Local Economic Partnerships will need to consider as well as embracing new and more innovative ways of working.

From our perspective it remains business as usual. There will be funds of some form moving forward, alongside a robust application process. Our national public sector consultancy teams across the UK will be able to assist applicants in successfully plotting their way through the process and provide due diligence to our existing clients and any LEPs which need our professional advice.

Topics: News

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