Vital regeneration funding used to boost inclusive economic growth should be extended by a year to avoid a cliff edge in support for local projects, councils have urged.
The UK Shared Prosperity Fund (UKSPF), which was established as a replacement for EU regional funding, is due to run out in March 2025 and councils say an extra 12 months is needed to secure support for communities and local businesses.
The Local Government Association, which represents councils, says the fast-approaching deadline without certainty of an extension is starting to impact on delivery of valued locally-led schemes including on regenerating high streets, skills training and creating jobs.
The LGA is urging the Government to use the upcoming Autumn Budget to remove this cliff edge and provide fully flexible one-year additional funding, equal to the third and final year of the current UKSPF.
In its submission to the Treasury, the LGA said councils are also awaiting clarification on other growth funds, including the third round of the Levelling Up Fund so they can progress with other schemes to boost local growth.
Longer-term, councils want to see a simplified approach to growth funding which gives local leaders greater flexibility over where and how investment decisions are made locally, the LGA says.
It comes as a new report commissioned by the LGA says the current funding system for economic development is too short-term, fragmented and costly. The evidence-based analysis says councils have to bid for various pots and juggle other sources of funding, while dealing with changing government objectives which do not always fit with local circumstances and priorities.
For example, while short-term funds for one-off capital projects can provide an initial boost, the report says more complex and sophisticated challenges require investment of time, expertise and sometimes additional costs. These include for programmes supporting unemployed people back into work, or to recruit and train staff to provide reskilling, numeracy and literacy education.
Competitive bidding, where councils prepare business cases and bid against each other for certain funds, should also not be the main source of funding for economic development, the report says. Instead bigger fixed allocations, such as those used for UKSPF, would allow for better long-term capacity and delivery.
The report, ‘The Future of Growth Funding’, recommends a 10-point plan to successfully overcome these challenges and kickstart inclusive economic growth.
These include calling on government to produce a clear national economic policy involving greater devolution of powers; an increase in resources to tackle regional inequalities, including a long-term funding commitment of at least 20 years with funding cycles of 6 to 8 years; building capacity and capability in local and central government; and a single, simpler process for applying for funding, monitoring and reporting back to government.
Cllr Martin Tett, Chairman of the LGA’s People and Places Board, said: “Boosting inclusive local growth is the key to tackling some of our persistent economic and skills challenges, be it in improving high streets, connectivity and mobile infrastructure, or investment in people and businesses.
“UKSPF is one of the biggest growth funds which have helped get hundreds of local projects and programmes off the ground, but we are now approaching a cliff edge when this support will abruptly stop in just over six months’ time.
“The Government should use the upcoming Budget to provide stability and certainty to councils and local businesses, who want to invest in communities, by providing an extra year of fully flexible, additional funding for UKSPF.
“As our report recommends, this should be part of a wider review of local growth funding which means councils have the powers, resources and long-term funding commitments to tackle regional inequalities, promote regeneration and boost economic development.”
