Local place-based insight will remain key to the success of levelling up

Regional disparities in economic and social performance are deep rooted in the UK, and large by international standards. The problem is complex. It is not for instance simply about a north and south divide. Former industrial regions in the north have underperformed economically and socially, but so have coastal and remote areas in the south. London too, while the most affluent region in the UK, also suffers extreme inequalities and higher poverty rates than any other UK area.  

The Levelling Up Fund 

The UK Government emphasised its commitment to the Levelling Up agenda through the launch of the Levelling Up Fund in the 2021 budget. The Fund, worth £4 billion up to 2024/25, will be open to bids from local authorities, with the first round of funding in 2021/2022 focussing on local transport projects, town centre regeneration, and culture and heritage-related investment schemes. 

For the purpose of the Fund, every local authority in the country has been placed into one of three levels of priority group, with preference being given to bids from higher priority areas considered most in need of Levelling Up.  

The methodology and metrics used to determine each local authority’s categorisation are centred around three broad principles of economic growth, transport connectivity and regeneration. They must also align with the UK’s goal of achieving Net Zero Carbon by 2050, something that is set out in updates to the HM Treasury Green Book and in the National Infrastructure Strategy in 2020.  

This is pertinent. Investing in projects that will help the UK meet its net-zero carbon emissions target will generate employment in the near term and create sustainable and resilient longer-term economic growth. It will also create opportunities to develop green innovation and production capabilities across UK regions leading to significant (and inclusive) growth benefits further down the line. 

Levelling up will not address everything 

The Levelling Up Fund is by no means a silver bullet solution to a long-standing issue. The complex nature of the challenge, which varies across and within regions, means levelling up should also consider a suite of socio-economic factors. This includes physical and mental health, access to local services, digital connectivity and infrastructure, affordable housing, and deprivation in general.  

The requirements to level up differ across the country to such an extent that a ‘one-size-fits-all’ approach might miss areas in need of critical intervention. For example there is a greater need for high value employment opportunities in the north east given the weaker market dynamics there, but in London there is a greater need to focus on accessible housing and community safety.  

So while the Levelling Up Fund is a good starting point to tackle the UK’s long-standing regional disparities and address intra-regional disparities, an opportunity to evolve the methodology to incorporate more detailed place-based analysis will be required to truly level up. Local authorities will need to factor their circumstances when considering how to use the money they bid for. 

Guarding against a ‘K-shaped’ recovery 

Place-based analysis will be even more important following a pandemic that has exposed and exacerbated inequalities, leading to concerns of a K-shaped economic recovery. The concept of a ‘K-shaped’ recovery (Figure 3) has risen in prominence following the sharp recessions that have accompanied the pandemic across the world. It describes a diverging economic recovery across different sectors, industries, groups of people, and ultimately areas across a country.   

Areas and communities where the dominant employment industries have been able to adapt and shift to online and remote working are likely to recover quickly. Conversely tourism and hospitality dependent communities are more vulnerable to the economic fallout from the pandemic. They could see output continue to decline as restrictions remain in place, inhibiting recovery but also resulting in long term scarring to their economies.  

Some of these communities may already have been deemed to be ‘left behind’ prior to the pandemic, resulting in a two-pronged negative effect. Intra-regional impacts may also exist with cities with home-working office-based sectors adapting quickly also being home to large populations employed in hospitality sectors that have remained closed for the last year.

Conclusion 

In the UK, the places that we live and work remain the biggest determinant of opportunity, mobility and inequality. Levelling up provides a framework for starting to address these inequalities. But we should not underestimate the impact of the pandemic.  

COVID-19 has created a new dimension to the levelling up agenda – creating new inequalities and/or expanding existing ones. If we are to truly level up, we cannot simply focus on issues of connectivity, regeneration and economy. 

Local authorities will need to draw on their local insight, data and knowledge to underpin their bids for the Levelling Up Fund, hold off the threat of K-shaped recovery and to go on to create thriving places that will deliver upon the aspirations of their communities.    

Martyn Jenkins, Senior Economist, WSP 

[email protected]