New funding for local growth

1. Interest is strong and widening

There is certainly real interest from many higher education institutions and other local anchor institutions wanting to learn about funding for local growth. All the initial workshops were heavily oversubscribed.

Many universities embedded in their local economy, especially in more deprived and peripheral parts of the country, are now making very good use of investment finance from a wider range of sources than those only available from central sources.

2. It’s not just about the North and Midlands

Understandably, the focus in the workshops was on the bigger cities in the North and Midlands. But this may change as the Government signals its intention to widen its geographical focus to decentralisation and growth.

3. From projects to programmes

Going are the days when an institution simply completes a grant application form for a single project, and then posts it hopefully to a central location or funding body.

Investment finance is moving away from individual standalone projects, developed with shorter-term perspectives by individual institutions, towards more strategic programmes led by local partnerships over a much longer ‘mortgage length’ perspective.

These trends require local anchor institutions, especially universities, to think differently and engage with other universities and external stakeholders in new ways.

4. From grants to loans

The days of non-repayable grants are not yet over and the rumoured government stimulus package may well prolong their availability.

Still, there is a very clear trend towards risk-based finance; where monies are repaid if promised outputs are not delivered, or indeed, repaid in full regardless of any outputs.  New internal cultures and capacities are increasingly needed.

5. Revenue is at a premium

Capital finance is abundant and available at historically low cost for good proposals, but the revenue funding needed to drive delivery of service is acutely scarce.

This places a very strong premium on integrated or mixed-use developments that generate a capital receipt and/or ongoing returns, especially where private sector investment and rents can be integrated.

The important new model developed by One Public Estate is of real interest regardless of its initial financial stimulus.

6. Localisation can be the real game changer

It is the gradual localisation of fiscal policy in relation to business property taxation that may have more fundamental strategic and financial implications.

Recent experiments with Enterprise Zones, Accelerated Development Zones and Combined Authority Investment Funds have targeted specific local places.

These use the ‘security’ of ‘guaranteed’ central funds and/or projected business rates retained locally over the very long term, to accelerate publically loan-funded, and de-risked private investment in local infrastructure.

They act as a physical basis from which to leverage much larger, revolving investment funds in the longer term.

A growing number of universities are now making investments in these local places

7. Business rates are not just a tax

Expected new proposals to localise 100 per cent of all business rates, though probably difficult to implement, could widen the geography to all places.

Regardless of the complexities and challenges in any such funding instrument, the purposes of localising such taxation are clear. It aims to accelerate investment in commercial development, influencing strongly and immediately through basic financial levers, what type and scale of development happens where, and especially so in urban centres.

Universities, combined or local authorities, and local NHS institutions are major land- holding anchor institutions.

They have a strategic and financial interest in setting out a collective and strategic vision of how these new forms of funding can be best designed, and how longer term returns can be reinvested on an ongoing basis.

Each therefore needs to build its individual and collective efforts to drive and benefit from local growth.

The next New Forms of Funding workshop on 27 October in Bristol will bring together all the learning from the first three workshops in the series. A limited number of places remain. Register here.