Wherever we live in the United Kingdom, we all want to see our local communities thrive and prosper. Attracting investment and delivering growth is essential if the government’s levelling up objectives are to be met, and pride in our towns and cities reignited and maintained for the future. 

Yet the current operating environment is bleak for local authorities, the key drivers of this process, with some on the verge of financial collapse. A survey by the Local Government Association (LGA), which represents more than three hundred authorities across England and Wales was conducted in late 2022, and there is now extreme pressure on local authorities to deliver on time projects that meet quality standards while remaining cost-effective.

Many councils have found innovative ways of responding to these challenges. They range from taking a more welcoming approach to SMEs in their procurement processes to streamlining services through collaboration with other local authorities and partners, and the wholesale digitalisation of processes. The London Borough of Harrow, for example, has worked to make its transactions entirely digital, saving over £1.5 million. There is little doubt council leaders and their teams will need to be ahead of the curve to continually identify ways to make use of digital technologies to drive efficiencies. Yet, despite these efforts, there are a plethora of issues to overcome, many of which are immediate or near-term.

Economic uncertainty, complexity, and the ‘brain-drain’

Since the financial crisis, austerity has brought a perpetual pressure on local authority finances, made worse in recent years by the Covid-19 pandemic, which saw income from council tax, commercial property, business rates and other sources fall drastically.

The macro-economic background of high and volatile inflation, which is sweeping through economies across the world, is now slashing the purchasing power of local authorities here in the UK. At the time of writing, inflation is at its highest level in 40 years, and unlikely to subside any time soon. This phenomenon makes fiscal management extremely challenging as previously viable projects become commercially unfavourable and ultimately undeliverable. 

So if the economy is challenging, what about the funding landscape? The reality is that it has become increasingly complex, with a proliferation in the number of small grants, which are often very specific and competitively accessed. Giving evidence to the Levelling Up, Housing & Communities Committee, Barnsley Metropolitan Borough Council made it evident that there were as many as sixteen competitive streams available to bid for over the last three years. There is recognition that this multiplicity of support for development is incoherent and expensive. The LGA estimates it costs local authorities on average £30,000 to apply for each competitive funding stream. 

Delays in the approval of applications to the £2.6bn UK Shared Prosperity Fund, a central pillar of the government’s levelling up agenda, have led to the LGA warning this could make it impossible to spend the funds by April. Tight turnaround times on bids are not uncommon, though. In certain cases, it can be worth councils investing in speculative business cases, so that strategically important projects are ready to submit to a funding bid at short notice.

Major workforce capacity issues are also hampering local authorities’ ability to navigate the funding process. Reductions in funding have resulted in a loss of staff as councils downsize and prioritise frontline services. Efforts to save costs in England and Wales have resulted in a ‘brain drain’, as employees leave through voluntary redundancies. There is also risk that further years of funding reductions will see a decreased graduate and apprentice pipeline. This has led to a lack of capacity and a paucity of skill sets in certain key areas. At a time when a greater knowledge of the funding landscape and the investments that will deliver most value is required, and with pressure from government for councils to strengthen audit and governance processes, local authorities are under intense pressure. With stretched teams in essential ‘back-office’ functions such as legal, finance, planning, and procurement, simply put, councils do not have the capacity to weather the storm.

So if the economy is challenging, what about the funding landscape? The reality is that it has become increasingly complex, with a proliferation in the number of small grants, which are often very specific and competitively accessed.

Angeliki Stogia

Senior Consultant

The way forward

All councils have emerged with ambitious strategies and bold plans to establish their recovery from the pandemic and have identified local opportunities to enhance their towns and cities. But how can they deliver with the financial constraints they are under?  Despite a remarkable agility in delivering services differently and adapting to this radical new environment, local authorities still have huge challenges ahead to coalesce investment and deliver the government’s ambitious recovery strategies.

This means having a deliverable and prioritised pipeline of projects, which identifies those sites that are catalytic. To achieve an integrated and cohesive approach, it is critical that local authority teams work well with strategic delivery partners from the public, private, community and voluntary sectors to coalesce investment and drive change.  

This cohesive approach is not easy, so how can local authorities involve the private sector in a meaningful way? Presenting as a credible and compelling partner to the private sector is important and requires the development of good negotiation, collaboration, and management skills. Council teams need to have a clear understanding of how the process of working with private partners works and, ideally, people with boots-on-the-ground experience of delivery to help guide the process. Every interaction with the market is an opportunity to reinforce credibility, and to present a robust and compelling vision for change. 

As government funds continue to shrink, a more commercial mindset will be increasingly important to sustain local services and development. Understanding a potential partner’s strategic priorities and commercial strategy is key to shaping how collaborations with shared goals can work. The ability to compose a cohesive, comprehensive, compelling and detailed brief and build time into the project planning process is important. 

A committed and visionary local leadership, prepared to articulate and support a clear path to the future, even when the political or financial challenges are tough, is essential. Time must be spent working on the vision. A strategic narrative that answers why an authority has decided to focus on particular projects will create a core, compelling argument when bidding for development funds. Local market knowledge is critical in this context too. Council teams should have a sense of property values and the local environment from agents before funding is announced, as this will help with specific interventions later.

The right organisational structure to manage and deliver projects is critical. This is certainly the case with Birmingham City Council, with who have worked seamlessly with private sector partners since 2018 to devise and implement a major regeneration programme for Perry Barr. In addition to redesigning Alexander Stadium and helping the Council to meet its housing growth goals, Arup has worked closely with the client to develop a masterplan ‘Perry Barr 2040: A Vision for Legacy’. The vision and objectives of the masterplan are founded on principles of deliverability and partnership, underpinned by a comprehensive approach to governance, planning, development, and stewardship. 

So, while appropriately skilled councils are key, great place shaping is often about working in wider partnerships including with the voluntary sector and companies. The private sector has a key role in developing and maintaining infrastructure and services; developing skills and existing businesses to expand employment. 

To help drive an ambitious and sustainable economic growth plan for the region, the Midlands Engine, a delivery group comprised of councils, combined authorities, local enterprise partnerships, academia and business has worked with a multi-disciplinary team of urban designers, planners and economists. This team is developing a strategic and economic case compliant with HM Treasury Green Book principles, that includes building a detailed understanding of the area’s socio-economic and planning context, which then informs the appraisal of development proposals for individual sites. As part of this process, Arup is creating a vision to maximise the positive impact of HS2 through practical development options.

The £3.6bn Towns Fund, introduced by the government to level up towns around the country, has offered great opportunity to achieve successful outcomes via highly effective collaborations between the public and private sectors. From the outset, the Department for Levelling Up, Housing and Communities (DLUHC) recognised specialist advice and support would be essential for towns to secure and deliver their Town Deals, and commissioned a delivery partner to provide that support. Arup is pleased to have played a pivotal role in the implementation of nearly 800 projects across England, between May 2020 and November 2021, by acting as lead agency in the Towns Fund Delivery Partner (TFDP) consortium.

Sourcing funding to develop our towns and cities and deliver much-needed change is more challenging than ever, but with the right collaboration great outcomes for local populations can be achieved.