The North East is getting another economic growth plan – its fifth this century – and the hopes and ambitions of politicians that it will significantly improve the regional economy are high. But how much funding will be available to turn those ambitions into reality is still far from certain.
The ten-year Local Growth Plan (LGP) covering Northumberland, Tyne & Wear and County Durham has what it calls five key missions: to make the region home to a growing and vibrant economy for all; home of the green energy revolution; a welcoming home to global trade; a home of real opportunity; and a North East we are proud to call home
North East Mayor Kim McGuinness said: “We will be guided by an ambitious vision of what the next 10 years could hold for the region; not just what the [North East] Combined Authority (NECA) can do, but how we can work with partners to create real opportunity and to unlock the impact of our investments.
“We are a proud and active participant in the ‘Great North’ collaboration and will work at a wider northern level to maximise the collective impact from the opportunities outlined in this Plan – from extensive offshore wind supply chains to creative sector collaborations. We will steward private sector and inward investment by de-risking investment and deploying an entrepreneurial mindset.
“This approach is already bearing fruit, with current opportunities of over £14bn set to unlock thousands of new jobs, including through existing programmes, like the Investment Zone, and the new North East Investment Fund…
“We are working with the government to bring the benefits of further devolution to the region, including a new multi-year integrated funding settlement, which will not just bring together existing funding streams, but increase flexibility and unlock innovation in achieving outcomes.”
Ambitious
Some programmes have been costed: an ambitious £8bn for transport by 2040 and £4.4bn for 20 strategic new/largely undeveloped employment or mixed-use sites.
The sources of some of the money have been identified. The Combined Authority is investing £70mn to create a new North East Investment Fund. “This,” says the Plan “will help to provide regional businesses with the finance they need to start and to grow – unlocking growth, building confidence in our SME base, turbo-charging university spin-outs and ensuring that the region is a great place to scale a business.
“The Combined Authority’s investment will be re-cycled multiple times and it is anticipated that £390mn will be invested in regional SMEs over 15 years, including private sector co-investment of £170mn. As a result, the funds will support a minimum of 470 regional businesses with over £300mn of investment needed to innovate and grow and will support the creation of 2,300 jobs.”
In addition: “Our flagship North East Investment Zone is a £160mn programme over ten years to create at least 4,000 jobs and attract at least £3bn of private sector investment. Designed to benefit the whole region and launched with confirmation of up to £1.12bn of investment from Nissan, the Zone is focused on advanced manufacturing and green industries, building on the Arc of Innovation set out in the North East Devolution Deal.”
Investment Zones were introduced by the government to catalyse the development of high-potential industry clusters in areas that require levelling up to boost productivity and growth. The North East Zone takes in Blyth Energy Central, River Tyne economic corridor in Newcastle, International Advanced Manufacturing Strategic Site in Sunderland and South Tyneside, and NETPark in County Durham.
With the multiple re-cycling and the input of the private sector referred to, the value of investment in the region from the investment fund and investment zone initiatives amounts to £42mn annually during the peak ten years. What the final figure will be when all investment from the private sector and other partners is taken into account is not known.
At present not even the extent of government financial support is known which is why the current Plan is interim. A final version, says the Combined Authority, will be published in the summer “after the government’s spending review.”
The Combined Authority said: “We will work with the government on a clear plan for devolving power and funding to support regional delivery, and a joint delivery plan to support the national missions and National Industrial Strategy. We will demonstrate the value of regional leadership and political accountability, unlocking growth for decades to come.”
Previous plans
It is helpful to see the LGP in the context of the four previous plans of this century – two regional economic strategies by One North East (the regional development agency, including Tees Valley) a strategic economic plan by the North East Local Enterprise Partnership (NELEP), which was wound up last year, and a refreshed version of the last of these.
NELEP was awarded a total of £270mn Local Growth Fund over 10 years for its plans. With other sources available – including private investment and European Union funding, it ambitiously anticipated having £1.592bn available between 2015/16 and 2020/21 – an average of £265mn per year.
Actual investment on economic development by NELEP (excluding Tees Valley) turned out much less than this, averaging only £84mn a year over three years between 2015/16 and 2017/18, excluding Metro renewal (latest available). But this does not take account of all sources, including the private sector and other partners.
Complex funding
The funding of regional economic development is notoriously complex and open to interpretation, as attested by those who study it in both the UK and the United States. As Michael Storper and others put it in their comparative study of San Francisco and Los Angeles*: “It is a daunting challenge to get a handle on what has been done in the name of economic development…Local and regional economic development policies are carried out by a dizzying variety of government jurisdictions agencies, aided by innumerable private-sector subcontractors and NGO grantees.”
One North East, which served the entire region, including Tees Valley, between 1998 and 2012, was better resourced than the local enterprise partnerships that followed it (North East and Tees Valley). It invested £3bn over 13 years, an average of £230mn, and in addition managed the European Regional Development Fund, which brough £45mn a year to the region between 2007 and 2013.
Storper and his co-authors also cite research by the scholar Bent Flyvbjerg of Oxford University that sweeping claims about the benefits of economic development are made by politicians, who like to confuse any employment change with “net jobs created” and all enrollers in training programmes as as “workers trained.”
“More often than not,” write Storper and his colleagues, again citing Flyvbjerg, “local planners and administrators as well as some community or interest groups go along with the fictions that are propagated about local economic development policies and especially about construction projects.”
The Combined Authority said: “We will work with the government on a clear plan for devolving power and funding to support regional delivery, and a joint delivery plan to support the national missions and National Industrial Strategy. We will demonstrate the value of regional leadership and political accountability, unlocking growth for decades to come…
“This is an interim version of our Local Growth Plan and we will work with partners to consult on, and further develop, our propositions and delivery plans in the coming weeks before final publication in the summer.”
For more information about the Local Growth Plan you can sign up for a series of engagement events here.
*The Rise and Fall of Urban Economies. By Michael Storper, Thomas Kemeny, Naji P Makarem and Taner Osman (p.114). Published by Stanford University Press (2015).
