The current economic state of play will have profound implications for local investment in regeneration and infrastructure.
At a time when council staff and the communities they serve are under strain, there is already concern about further spending cuts, as well as inflationary pressures and higher borrowing costs. This follows years of restricted public spending that has hit councils harder than other parts of the public sector, in addition to the impact of the pandemic.
In the private sector a combination of further construction price increases (as a result of a weaker pound) and higher financing costs could affect the viability of projects.
So, what can councils and combined authorities potentially do to navigate these challenging times? I suggest five calls to action.
First, local authorities should emphasise their roles as anchor institutions for growth by embracing initiatives such as investment zones, planning reform, innovation districts and research and development investment. There is a real need to tackle significant shortages of good quality commercial space and housing. We are seeing a flight to quality in occupier demands, so it will be important to maintain a focus on quality of development, place-making, and environmental outcomes. In challenging financial times it is essential to seek to grow the top line of revenue from growth – central and local government should protect investment in capital projects, research and development, regeneration and infrastructure.
Second, as the National Infrastructure Commission has recommended, councils should work with partners to set out clear, long-term investment plans for their areas. These should cut across different funding streams and programmes such as Growth Deal funds, the Stronger Towns Fund, funds for regional investment, investment zones and freeports. It is essential places maintain a strategic perspective and do not get blown off course. Clarity of strategic investment plans gives comfort to private capital – especially at a time when there is such macro level volatility and uncertainty.
Third, now is the time for local authorities to build stronger, more strategic partnerships with private sector investors of patient capital. These could be pension and investment funds or developers that take a long-term approach, as well as the UK Investment Bank. We are currently working with long-term investors at Arup that are actively seeking opportunities across the UK, so we know these partnerships are available. Public bodies should take a lead in developing and taking investible propositions. There needs to be a sound approach to sharing risk and reward, and to developing opportunities (or packages of them) at sufficient scale to be attractive and to effect genuine change. Clear place-based plans, as outlined above, will help provide certainty. Public procurement rules should be applied to maximise long-term outcomes.
Fourth, councils should place social value and net zero at the heart of their plans for regeneration and infrastructure. There will be a need for public sector investment to work harder, and for social value measures such as skills and training and access to employment opportunities mainstreamed with projects and programmes. With the need to improve energy security and reduce costs, interventions such as energy efficiency, renewables and transport decarbonisation should be prioritised. We are seeing increasing investor interest in retrofit at scale.
Finally, devolution needs to go further and faster. As well as making the case for funding from central government, councils and combined authorities should also emphasise the need for greater freedoms and flexibilities in how they raise and spend money. Our towns, cities and places are facing complex, multifaceted challenges. Issues such as net zero, accelerating productivity growth and reshaping town and city centres require coherent investment across policy areas ranging from transport to housing, energy, regeneration, skills, innovation, and business support. Local leaders and Metro Mayors are best placed to provide the joined-up solutions needed. By bringing together different budgets and funding streams, investment can be focused and coordinated in a way which maximises efficiencies and returns. Additionally, fiscal devolution could help raise ring-fenced local investment in growth.
Despite the current turmoil, there is consensus on the need to accelerate growth. Now more than ever we need investment in regeneration and infrastructure, and local and combined authorities need the powers and investment to respond to the huge challenges we face.
Tom Bridges is director UK government and innovation leader, and Leeds Office leader at Arup
@bridges_tom @ArupUK
