Is transport the driver of local economic development? November 2014
Executive Summary The recent Growth Deals unveiled by the Government have set out how up to 12 billion will be invested in local economies over the next five years. The first wave of Growth Deals was announced in July 2014, which will provide funds to Local Enterprise Partnerships (partnerships between local authorities and businesses) for projects that aim to benefit the local area and economy. Analysis of the 39 Growth Deals reveals that transport is set to be the driver of local economic development. Nearly two thirds of the key priorities and packages that have been agreed by LEPs and Central Government to co-invest in between 2015/16 to 2020/21 are for transport, representing 5.9bn of total investment. Within this, some 73% of projects are road-related. Related to this investment, the Growth Deals have set out ambitious plans for new employment and housing. In total the Deals aim to collectively create 288,000 jobs and deliver 158,900 new homes in the period up to 2020/21. If transport is to be the driver of local economic development and help unlock new housing, employment and commercial developments it will be important to consider the following implications: Demonstrating early delivery LEPs and local authorities need a mix of shovel-ready projects that can start to produce results relatively quickly, alongside longer-term projects that will take time to yield benefits. Making the economic case As projects begin to be implemented, these impacts need to be measured and evaluated to ensure that the new homes and jobs at the heart of Growth Deals are achieved. Taking a long-term view Whilst the focus of Growth Deals is on the next five years and supporting recovery from recession, economic development is also about improving the long-term competitiveness of places. Therefore more immediate short-term improvements to infrastructure need to complement longer-term, larger projects that will help local area geographies prepare for future patterns of demand and open up new opportunities for growth.
Growth Deals in Figures 474 2/3 9.2bn 73% 160,000 290,000 Priorities and packages agreed by LEPs and Central Government to co-invest in between 2015/16-2020/21 of Growth Deal projects are transport-related Potential investment on infrastructure up to 2020/21 of provisional funding allocated to transport is for road-related projects New homes forecast to be delivered from Growth Deal projects and packages by 2020-21 Jobs projected to be created from Growth Deal investments by 2020-21 Positive Preparations iii
Introduction Background In 2013 the Government announced plans to set up a 2bn Local Growth Fund (LGF) in response to Lord Heseltine s report No Stone Unturned, In Pursuit of Growth (2012). The LGF forms part (albeit a significant part) of the Government s Growth Deals, which also incorporate various other funding streams and allocations from Central Government to form a single pot of money destined to drive local economic growth the Single Local Growth Fund (SLGF). As part of the process to access the LGF and other funds, each of the 39 Local Enterprise Partnerships (LEPs) were required to negotiate a Growth Deal with Government, outlining their priorities and proposals for funding to support growth in the LEP area. The proposals were set out in a Strategic Economic Plan (SEP), which each LEP submitted to Government. In July 2014 the Government responded to the LEPs submissions with a series of Growth Deal announcements. Each LEP received a Growth Deal that set out allocated funding for 2015/16 and provisional funding for the period up to 2020/21. Approach to analysis The negotiation between LEPs and Central Government has resulted in a Growth Deal that decides how much funding a LEP will get and what projects and priorities the money will be spent on locally. Growth Deals are not the only source of funding for local economic development (others include the Regional Growth Fund, the Growing Places Fund and City Deals) but they are now one of the most important elements. The following analysis provides a detailed breakdown of all the funding that has been allocated in each of the 39 Growth Deals split out under the core infrastructure streams of transport, energy, communication/digital, flood and intellectual capital. This includes funding from various sources including (but not exclusively) the Local Growth Fund, of which 2 billion from across the transport, skills and housing budgets has been confirmed for 2015-16. The analysis also takes into account provisional funding from future SLGF allocations as well as other sources of funding provisionally allocated to LEPs through the Growth Deals up to 2020/21. The Growth Deal announcements were aligned with Government s goals across key infrastructure sectors set out in the National Infrastructure Plan that aim to respond to key macro trends and challenges such as: population growth and combatting congestion; technological progress; climate change and the transition to a low carbon economy; and global competitiveness - investment in growing the UK s intellectual capital through new schools, education and business hubs. Funding from the Growth Deals has been directed at the areas where local authorities can have more direct influence such as local roads, increasing broadband access, creating business hubs and investing in education and skills. 1
Growth Deals: Key priorities A review of the Growth Deals reveals that transport is high up the agenda for local economic development. Each Growth Deal sets out up front a list of jointly-agreed priorities and packages that the LEP and central government have agreed to co-invest in over the 2015/16-2020/21 period covered by the Deal. Of the 474 priorities and commitments identified in the 39 LEP Growth Deals, almost two thirds (62.7%) are transport-related (Figure 1). Through the Growth Deals that LEPs negotiated with Central Government, the majority of the projects and priorities that are committed to for the next five years will address transport issues. In 27 of the 39 LEP Growth Deals transport accounts for over half of the core priorities and commitments. In the South East LEP Growth Deal for example almost all of the LEP s priorities for the next five years can be categorised as transport-related. Most of the focus is around improvements to road networks to ease congestion and pinch points. The Growth Deal outlined 41 road-related projects. Transport projects have proved to be key part of the Growth Deal package for all LEPs to enable major new developments, address existing pinch points and congestion issues, and deliver new jobs and homes at a local level. Figure 1: Growth Deal Priorities and Packages Source: NLP analysis 2
Growth Deals: Funding allocation for infrastructure Analysis of the total amount of funding in the Growth Deals reveals a potential investment on infrastructure up to 2020/21 of 9.2bn (Figure 2). This covers the total amount of disclosed funding for both LEPs and central government that has been allocated to projects approved in the Growth Deal negotiation process, both committed (for 2015/16) and provisional (up to 2020/21). Transport accounts for just under two thirds of this funding ( 5.9bn), with intellectual capital investments (e.g. universities, colleges and business hubs) next highest at 2.2bn. The significant amount of funding allocated to transport in the Growth Deals indicates that the focus for economic development at a local level will be primarily on transport-related projects. Of the 5.9bn funding allocation for transport some 80% ( 4.8bn) is to be invested in road-related projects. In particular investment will be directed at improving road networks to ease congestion and pinch points as well as unlocking potential new viable developments. The range of projects includes both small and large-scale investments, for example upgrading main arterial routes in Shrewsbury, building new access from the A500 in Stoke-on-Trent to reduce congestion to investing 4m in the Connecting the City Bridge over the A63 in Hull. There are significant variances in the degree of funding that has been allocated to infrastructure across the LEPs. Leeds City Region comes out as the highest in terms of the amount of funding with a provisional allocation of just under 900m. By contrast Stoke on Trent and Staffordshire received just 48m worth of funding for infrastructurerelated projects. Figure 2: Growth Deal total funding allocation for Infrastructure 2015/16-2020/21 Road Rail Aviation Other Transport * 4,799m 545m 60m 501m Intellectual Capital Flood Transport Energy Communication Other** 2,214m 689m 5,905m 238m 62m 646m Total Growth Infrastructure Funding: 9.2bn Source: NLP analysis * Other transport consists of a range of sustainable travel packages such as implementing cycle paths and improving pedestrian walkways ** Other consists of investments that do not directly align with the core infrastructure sectors; this includes but is not exclusive to the redevelopment of land 3
Growth Deals: Investment in transport Growth Deal Funding by LEP The amount of funding allocated in the Growth Deals is heavily skewed towards transport. Transport accounts for over half of the total amount of allocated funding for 29 of the 39 LEPs. The proportion allocated to transport varies significantly across LEPs with transport accounting for effectively all Growth Deal Funding for LEPs such as Dorset, Thames Valley Berkshire and The Marches (Figure 3). Through the Growth Deals significantly more funding has been allocated to transport than other infrastructure packages. While Intellectual Capital projects had the second largest allocation in terms of Growth Deal priorities (accounting for 27% of the 474 priorities) in terms of overall funding more money has been earmarked towards transport-related projects than Intellectual Capital related projects (such as investing in higher education facilities and business growth hubs). Gloucestershire and West of England are the only LEPs where funding for Intellectual Capital related projects is markedly higher than funding allocated to transport-related projects through the Growth Deals. Figure 3: Growth Deal Funding 2015 / 16-20 / 21 ( m) Source: NLP analysis N.B. London LEP Growth Deal excludes transport projects which are managed and funded separately by Transport for London under the auspices of the Mayor s Transport Strategy. 4
Spatial dimensions of transport investment In terms of transport investment there is a heavy bias towards meeting the transport needs of the core cities and larger urban areas (Figure 4). Transport investment outlined in the Growth Deals for LEPs that cover the city-region areas of Leeds, Manchester, Birmingham, as well as locations around London has been identified as integral for improving connectivity and accelerating housing growth and unlocking development in these locations. Figure 4: Growth Deal funding allocation for transport 2015/16-2020/21 25 7 34 39 7 25 19 34 20 18 22 15 39 28 19 203 32 12 18 8 14 22 3 15 32 36 12 28 1 8 38 6 21 14 26 31 13 24 36 1 38 37 6 11 21 33 27 26 35 31 2 13 10 17 24 23 30 5 16 37 11 33 27 9 35 2 10 17 29 23 4 30 5 16 9 Growth Deal Funding Allocation for Transport 2015/16-2020/21 29 4 < 100m 100-199m 150-299m 300-700m > 1,000m Growth Deal Funding Allocation for Transport 2015/16-2020/21 < 100m 100-199m 150-299m 300-700m > 1,000m Source: NLP analysis N.B. London LEP Growth Deal excludes transport projects which are managed and funded separately by Transport for London under the auspices of the Mayor s Transport Strategy. NLP estimate of comparable funding for transport for 2015-16 to 2020-21 period based on TfL sources. 5
Unlocking new homes and jobs The Growth Deals set ambitious prospects for the number of new homes and jobs that are forecast to be created as a result of the funding across the five year Deal period. Homes Collectively a total number of 158,900 new homes are forecast to be created on the back of the Growth Deals (Figure 5). The largest number of new homes are expected to be delivered in the LEPs surrounding London including South East (18,000 homes), Hertfordshire (17,000) and Thames Valley Berkshire (10,000). Transport and infrastructure investment allocated in the Growth Deals for these LEPs will play a role in helping to unlock new sites for development with the aim of delivering homes in these areas. Infrastructure funding will also be important for the delivery of 4,000-6,000 homes across each of the Greater Birmingham & Solihull, Sheffield City Region, Coast to Capital and London LEPs. Figure 5: Growth Deal infrastructure funding and new homes Source: NLP analysis 6
Jobs Infrastructure is a fundamental component for supporting economic growth and vital for the basic functioning of an economy. The Growth Deals allocation of funding to support investment in transport, intellectual capital and other infrastructure ultimately aims to generate new local employment opportunities and boost economic growth in each LEP area. Each of the Growth Deals outlines ambitious employment creation prospects with 288,000 new private sector jobs to be created from all LEPs combined by the end of the Deal period (2020/21). Infrastructure investment will be a key element in delivering projected new employment for the South East LEP with 570m provisional funding earmarked to help deliver 35,000 jobs (Figure 6). The D2N2 (Derby, Derbyshire, Nottingham, Nottinghamshire), Coast to Capital and Greater Birmingham & Solihull LEPs are each to receive provisional funding for infrastructure worth around 0.5bn. This is forecast to help create between 10,000-15,000 new jobs in each of these areas. Figure 6: Growth Deal infrastructure funding and job creation Source: NLP analysis 7
Conclusions Growth Deals represent a major part of how local economic development will be funded over the next five years between 2015-16 and 2020-21. Importantly they have been assembled and negotiated on the basis of the types of priorities and projects that LEPs, and their local authority and business partners, regard as important to delivering economic growth in their areas. The analysis indicates that infrastructure, and notably transport, is the major focus for planned investment. This fits with the broader framework provided by the Government s National Infrastructure Plan. Perhaps surprisingly, road projects dominate the list of projects accounting for 73% of the entire funding allocation for transport. This may reflect a view at a local level of the types of practical measures that are required to unlock new housing, employment and commercial developments that can generate economic growth. Implications Demonstrating early delivery The way in which Growth Deals are structured effectively means that they are predicated on some early delivery in order to draw down the funding allocations for subsequent years. The Government has indicated some flexibility for longer-term capital projects that will take longer to come to fruition, however, deliverability is a recurring theme. This means that LEPs and local authorities need a mix of shovel-ready projects that can start to produce results relatively quickly, alongside longer-term projects that will take time to yield benefits. For transport projects, this implies balancing the smaller schemes that can make incremental improvements to the existing network (e.g. to alleviate congestion or bottle-necks) in a particular location with larger-scale initiatives intended to improve the competitiveness of an entire sub-region or region. Making the economic case As the name implies, delivery of economic growth is at the heart of Growth Deals. Most LEPs have made significant commitments in terms of new homes and jobs. It is therefore essential that as projects begin to be implemented, these impacts are measured and evaluated. Making the economic case for transport projects is particularly important, but they can be the hardest to measure because the inter-relationship between transport and the economy is a complex one and the impacts are wide-ranging (see Figure 7). In addition, standard appraisal techniques can have some limitations when trying to capture the wider economic benefits of transport investment and therefore making the best case. For example, this means not only taking account of the new development that could be directly support by transport improvements but also the wider market uplift to an area that might occur as the connectivity, capacity and reliability of transport is enhanced. Taking a long-term view Whilst the focus of Growth Deals is on the next five years and supporting recovery from recession, economic development is also about improving the long-term competitiveness of places. The transformational effect of new infrastructure should not be underestimated, but it has the opportunity to be most effective when it is not planned purely on a predict and provide basis but benefits from a critical assessment at the outset of the changing geography of places and business activity. More immediate short-term improvements to infrastructure need to complement longerterm, larger projects (e.g. high-speed rail, airport expansion) that might cut across particular local area geographies and open up new opportunities, but also be alive to longer-term trends in technology and consumption that might impact on patterns of demand. 8
Figure 7: The interrelationship between transport and the economy Transport Economy Connectivity SUPPLY Capacity DEMAND Reliability Direct Impacts Costs of journeys Costs of time Indirect Impacts Labour market flexibility Clusters and agglomeration Productivity Increased trade Welfare benefits Source: NLP analysis 9
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About NLP Nathaniel Lichfield & Partners (NLP) is an independent planning, economics and urban design consultancy, with offices in Cardiff, Leeds, London, Manchester and Newcastle. NLP is currently RTPI Planning Consultancy of the Year and Just Giving Company of the Year. We are one of the largest independent planning consultancies in the UK and we offer the broadest range of skills of any specialist planning firm. This includes services in economics, spatial analytics, heritage, sustainability, urban design, graphics and sunlight and daylight, as well as a full range of planning skills. Our clients include local authorities and government bodies, as well as developers, landowners and operators in the housing, retail, leisure, commercial, and infrastructure sectors. We prepare accessible and clear reports, underpinned by robust analysis and stakeholder engagement, and provide expert witness evidence to public inquiries and examinations. Our targeted research reports explore current planning / economic issues and seek to offer practical ways forward. Read More You can find out more information on NLP and download copies of this report at: www.nlpplanning.com/nlp-insight How NLP can help Securing Infrastructure Investment Evidencing Economic Benefits Assessing Economic Needs Assessing Housing Needs Contacts For more information, please contact us: Cardiff Gareth Williams 029 2043 5880 gwilliams@nlpplanning.com Leeds Justin Gartland 0113 397 1397 jgartland@nlpplanning.com London Hugh Scanlon 0207 837 4477 hscanlon@nlpplanning.com Manchester Michael Watts 0161 837 6130 mwatts@nlpplanning.com Newcastle Harvey Emms 0191 261 5685 hemms@nlpplanning.com This publication has been written in general terms and cannot be relied on to cover specific situations. We recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. NLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from acting as a result of any material in this publication. Nathaniel Lichfield & Partners is the trading name of Nathaniel Lichfield & Partners Limited. Registered in England, no.2778116. Registered office: 14 Regent s Wharf, All Saints Street, London N1 9RL Nathaniel Lichfield & Partners Ltd 2014. All rights reserved.
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