City of London finance concept.

Economic development: delivering change

Prior to the general election, the Institute of Economic Development (IED), which represents economic development and regeneration practitioners working for local and regional communities, asked members the question: what is your single biggest ask of the incoming government to support economic development? Tom Stannard explains.

Beyond making economic development statutory in local authorities, the overarching call in our Grow Local, Grow National manifesto, five general themes emerged from responses: long-term strategic planning, guided by a UK Industrial Strategy, to allow for well-planned interventions over multiple years; through greater certainty, and commitment to local economic development, to encourage and enable planning and development of local plans; funding stability, removing competitive funding and allocating according to need, with greater investment/resource to support local economic development; a review of planning legislation and housing growth plan, both of which are seen to be impacting on local approaches to placemaking; and address public sector procurement reform, recognise the importance of robust business cases for development, and prioritise sustainability/the green economy.

We marked Labour’s first 100 days in government at an IED event in the Autumn, at which a straw poll of delegates found that 67 per cent felt “quite optimistic” about the prospects for economic development in this parliament. Much has happened of course in the past six months, and in fact things have moved forward at pace in many areas.

There have been promising steps towards refreshing the policy framework which is supportive of local government, and the economic development profession in its broadest sense. Momentum has shifted, including the appetite from ministers and civil servants to engage with the sector in supporting mission-led growth. There has been a more serious conversation about a needs-based funding formula for local authorities – which may yet prove to be a big impetus for local growth in deprived areas of the country.

Legislation

The King’s Speech set out a raft of bills to kickstart economic growth, and this emphasis is important for all IED members who are supporting delivery across the UK. Against this backdrop, we know the challenges facing local authorities, housing associations, universities, private developers, and others at the forefront of economic development, which themselves face ongoing financial challenge, must be fully addressed to support this wider ambition.

With the English Devolution Bill, we have seen a new government minded to do more business with mayors, and enable further devolutions. Strength in numbers is clearly the order of the day, but without being overly prescriptive on the mayoral structure. The Autumn Budget also signalled a greater appetite for council reorganisation. But through greater devolution, there is an opportunity for economic development professionals to play a central role in driving forward progressive place-based innovation, with greater regional leverage at our disposal.

Through the Planning and Infrastructure Bill, we have seen a renewed emphasis on housebuilding and affordable housing delivery, and an overhaul of the planning system. There remains a need to address the conditions that drive viability and therefore supply, but we are encouraged by the possibility of freeing up greater capital investment for essential projects. Housing and transport are essential for achieving local growth plans, especially outside of London, and they are needed as well as social and economic development infrastructure.

The Skills England Bill, meanwhile, has already led to a new arms-length body of the same name to boost and regionalise training, bringing together businesses, unions and mayoral combined authorities. This will help to equip regions with the skills they need. The government’s Curriculum and Assessment Review is another key moment for this administration, and it can also support the workforce development needs of the broad church of professionals serving economic development.

Hopes for the new government

Importantly, there is a consistency in message. At the Labour party and Local Government Association conferences in the Autumn, both the PM and Deputy PM restated pledges to national renewal, sustained economic growth, devolution, investment zones, rebuilding public services, and modern industrial strategy. The new Councils of Mayors and of Leaders are meeting, marking important commitments to serious and consistent engagement with local and regional political leaderships across the country.

And, of course, we now have Invest 2035, and a consultation which the IED responded to inviting comment on the subsectors the Industrial Strategy should prioritise. A final strategy and sector plans for each will be published alongside the Spring 2025 spending review.

The success of the Industrial Strategy will depend on a holistic approach that balances emerging sectors with foundational industries, addresses barriers to investment, and empowers local authorities. By creating a more flexible, place-based strategy, fostering innovation, and investing in skills and infrastructure, the UK can unlock the potential of its regions and drive long-term, sustainable economic growth. 

Public and private sector economic development professionals undoubtedly have a critical role to play in supporting the acceleration of growth in city regions and clusters of growth sectors across the UK. The IED, in representing practitioners who will be at the coalface of supporting the execution of the Industrial Strategy, is actively seeking a place on the Industrial Strategy Council or to be consulted as part of a taskforce reporting to Council on national strategy, local growth plans and other policy mechanisms.

Support for local authorities

However, in the short and long-term, a stronger financial footing is needed for local authorities. Sector sustainability is key for the Industrial Strategy, and delivery problems are not going away without solving council finances for the long term. The private sector cannot afford to see further council financial failures with the dramatic impact this can have on place reputation and the prospects for investment in local areas. So, we also look forward to a thorough debate on the government’s stated commitment to local government and fair funding based on need.

Whilst headlines in the Budget may have focused on tax raising, the Chancellor is hoping that her measures will restore stability to public finance and provide additional funding for public services. For local government, the immediate injection of £1.3 billion additional grant funding for essential services is welcome, but all eyes are on the Spring 2025 spending review which needs to address the precarious state of local government finances in the longer term. 

Despite this, there were also difficult decisions taken in the Budget. Some significant tax rises, amongst which the employer national insurance rise has caused consternation in some sectors of the economy. We now also know that the government intends to cancel levelling up projects worth £100m and scale back the UK Shared Prosperity Fund. The OBR’s growth forecasts remain pessimistic at best, which is where the IED must step in with grounded advice to help government achieve its top priority mission.

Given the direction of travel on Industrial Strategy, the case for economic development to be formally recognised as a statutory function provided by local authorities intensifies. It is a more compelling argument for deprived areas, especially places where the geography of economic growth and historical interventions have been so much harder. If economic development remains non-statutory in local government, then there will also likely be an inconsistency in approaches on statutory local growth plans. This is a serious risk and serious problem for No.10 and the whole “mission growth” endeavour.

We remain in a period of economic transition, and evolution, but it is the hard-working people we represent who can make the difference to our towns, cities and regions. The IED membership nationally has the capacity and the ideas to change sclerotic growth forecasts into bright economic opportunities for the whole country.

Tom Stannard is chair of the Institute of Economic Development.

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