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Spending the Levelling Up Fund: what are we funding and will it bring growth?

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Yesterday’s announcement of the second round of Levelling Up Fund allocations has provoked the usual debates about which places will benefit most and what that will mean for ‘levelling up’. Noticeable in the Government rhetoric has been a greater focus on economic growth as the purpose of the investments than for the first round of funding, or for other levelling up funds which put pride in place or public spaces front and centre.

It’s hardly surprising that in the current economic and political context, the Government wants to emphasise the potential of the Levelling Up Fund (LUF) to deliver local economic growth. Whether it will do so depends on how the money is being spent, and we can get a feel for that from the brief project descriptions published yesterday alongside the funding announcements.

But how do we know whether these projects are likely to deliver local growth?

As always here at What Works Growth, we turn to the evidence. When the LUF was first announced, we summarised the evidence relating to its three Investment Themes – transport, regeneration and town centres, and culture – looking specifically at the impact on economic outcomes. As with all interventions, context is crucial, but there are some general lessons to be learned.

Evidence on transport projects

Transport projects are the ones for which the evidence on economic outcomes is most positive. However, even for transport projects, impacts depend greatly on context. For example, in places where congestion is a barrier to growth, well-targeted transport investment can make the difference. But in many struggling places, low skills levels are the primary driver of poor economic performance. In these places transport projects alone will not address the underlying issues and so will be limited in their impact.

Evidence on physical regeneration projects

There is also some good evidence that physical regeneration projects can improve local economic outcomes, but this tends to be for major projects such as the London Docklands redevelopment, which can fundamentally change the nature and composition of local firms and residents. LUF-funded regeneration tends to be on a smaller scale, and more limited investments in the built environment appear unlikely to deliver significant economic improvements unless there’s a mechanism by which they can have a lasting impact on skills, employment, or demand for locally supplied goods and services.

Evidence on cultural projects

The evidence on cultural projects is limited, but what there is suggests that cultural events or facilities should not be expected to have economic impacts beyond the jobs that they directly create. This is not to say that they can’t deliver other important outcomes, but they will rarely be the best bet if the objective is economic growth.

Reviewing the projects announced yesterday in the light of this evidence, we see some projects which intend to address skills and employment issues alongside provision of new infrastructure, increasing the chance of a positive local economic impact. Other projects, which focus solely on cultural infrastructure, for example, are unlikely to have significant economic impacts, even if they meet other important local needs.

Of course, it’s unfair to criticise LUF projects for not being targeted enough at local economic growth if that was not the primary goal of the fund when designed. But we also can’t assume that investments designed to improve local cultural capital or boost civic identity will now deliver economic growth, just because growth has moved up the political agenda.

To deliver local economic growth, future levelling up investments need to be allocated in a way that builds on the evidence of what has worked before and target the barriers to growth that individual places face.

Explore our resource library to find out more about the evidence on local growth.