Are we set to level up enough?

At the start of February, Levelling Up Secretary Michael Gove unveiled the Levelling Up White Paper, an ambitious plan by the government to spread opportunity and prosperity around the UK. The government have described it as a complete ‘system change’ to how the government works, but the plan has already come under heavy criticism.

We took a closer look at whether the UK is set to ‘level up’ enough.

What is on the government’s White Paper?

The White Paper sets out 12 levelling up missions which aim to address geographical inequalities in several distinctive ways. Each mission is quantifiable, and the aim is for them to be achieved by 2030.

According to a statement from the government, the first mission will see pay, employment, and productivity grow everywhere, and the disparities between the top and worst-performing areas narrow.

The government’s Research & Development (R&D) mission will also see domestic public R&D investment outside the Greater South East increase by at least 40% by 2030, with these funds leveraging a huge increase in private investment in these areas too.

Other missions will see the rest of the country’s local public transport systems become much closer to London standards; most of the country gain access to 5G broadband; and illiteracy and innumeracy in primary school leavers effectively eliminated, with the government focusing its education efforts on the most- disadvantaged parts of the country.

The ambitious White Paper also includes plans for hundreds of thousands more people to complete high-quality skills training every year, to reduce gross disparities in healthy life expectancy, half the number of poor-quality rented homes, to rejuvenate the most run down town centres and communities across the country, and to significantly reduce serious crime in the most-blighted areas.

Another significant part of the plan includes an option for every part of England to get a ‘London-style’ devolution deal if they wish also.

At first glance, it looks like the plan has some good ideas to address some of the UK’s regional inequalities, but renowned business consultant and private equity specialist, Neil Debenham, provides an overview of some of the inequalities that are in desperate need of addressing.

He comments: “Across the North of England, sectors and businesses which have been given more support in London and the South East are suffering. One area in which this is prevalent is in the property industry. This is a prime example of how the levelling up strategy is vital amongst these communities.

“Start-up cost is one thing, but the cost of bidding on and gaining public sector contracts is entirely another. These contracts are traditionally dominated by firms within London or the surrounding areas. In applying greater funding to firms in different areas of England, they can gain a competitive advantage. They may have the skills and talent required amongst their workforce but no scope to ‘level up’ themselves. It is important to ensure firms in London/SE don’t hold an exclusive oligopoly for contracts.

“Furthermore, the need to increase the amount of high skilled workers is paramount. There are many people in areas with less access to resources who are capable of training to a high skill level. ‘Lack of resources’ is one of the main restrictors when considering how stifled the labour market can be in areas who cannot secure the funding.

“The UK is one of the world’s most geographically-unequal major economies, a statistic that, on the surface, may shock. An economy which is one of the largest and most-developed across the world still suffers from significant issues.”

Does the plan to level up go far enough?

To put Neil’s comments into context, a study from the Institute of Fiscal Studies in 2020 found that London gets £565 more investment per person every year than the rest of the UK. The biggest disparity in investment was between Yorkshire and the Humber, which received £694 per-person a year, compared to £1,456 per-person for London.

So, does the plan go far enough to address such overwhelming disparities? Neil is not so sure it does.

He comments: “Whilst the government’s pledge for improvements to transport links, education services and broadband networks is a welcome investment and consideration for these areas, it is not enough.

“For example, improving transport links could, in fact, drive people in cities such as Manchester to be able to commute to London with greater ease and speed. What may look like a ‘regional improvement’ may, in fact, decrease economic growth and business development in areas outside of London/SE. Monetary injection is important, but overall support to the community is as, if not more, important. Revamping these areas in a more holistic sense, such as building a community for SMEs to thrive as well as keeping incentives to remain where they are, is just as vital.”

Luke Davis, CEO of IW Capital, agrees that more needs to be done.

“I think the levelling up strategy is a step in the right direction to address the regional inequalities across the UK, but more is ultimately needed to grow businesses throughout all regions of the UK. There are impressive and exciting small businesses in all areas of the UK, but they still may not get all the opportunities available to small businesses in London, so more is ultimately needed.

“I think that the strategy needs better definition for how it is going to meet the objectives it has set. At the moment, it seems to be ideas, but no real information and specific details for how they are going to achieve those ideas. Increasing regional business throughout the UK is vital but the government have not defined how they’re going to achieve this.”

However, the UK Shared Prosperity Fund is one way that the government plans to meet its levelling up agenda.

The UK Shared Prosperity Fund

Described as a ‘central pillar’ of the government’s levelling up agenda, the fund will provide £2.6bn of new funding for local investment by March 2025, with all areas of the UK receiving an allocation from it via a funding formula, rather than a competition. This could help get funding to the places where it’s needed most, but Caroline Norbury MBE, Chief Executive at Creative UK, says it won’t fully mitigate the impact of Brexit.

She comments: “At Creative UK, we strongly believe that whilst talent is everywhere, opportunity is not, so it is welcome to see the UK Government taking action to address this in its Levelling Up White Paper.

“However, the fact that the UK Shared Prosperity Fund won’t fully replace the money received from the European Union is a major concern. European Structural and Investment Funds contributed more than £400m to projects supporting the Creative Industries in England, Wales and Scotland, providing vital cash injections that improved living standards in areas with the greatest need. Significant investment will be necessary to realise
the Government’s ambitions and ensure
no-one is left behind.”

Since exiting the single market in January 2021, the Centre for European Reform estimated that by October 2021, UK goods trade was £12.6bn lower than it would have been if the UK had remained in the EU’s single market and customs union. And whilst there’s no guarantee that this money would have gone directly to addressing the UK’s geographical inequalities, the amount lost to the treasury in nine months is nearly five times higher than what the UK Shared Prosperity Fund is pledging to invest over the next three years.

Will funds even go where they’re needed?

As mentioned earlier by Luke Davis, the government’s levelling up agenda is currently missing much definition for how it plans to fulfil its aims. Once this happens, we will have a clearer idea on whether the plan will achieve its targets and how much funding will be provided.

Based on the government’s current track record, however, we should not rule out the possibility of its proposed aims going unmet.

A Guardian investigation published earlier this year found that under the Levelling Up Fund, one of the government’s current schemes for addressing inequality amongst the UK’s cities and regions, Central Bedfordshire, an area partly represented by the Culture Secretary, Nadine Dorries, has received £26.7m – £91 a head – despite being among the top fifth of local authority areas in affluence.

In contrast, eight local authorities that are among the poorest in England have received less than £10 a head from the four funds announced to date. These include Swale in Kent, Tendring in Essex, Barking and Dagenham, Southampton, and Knowsley in Merseyside.

So, what needs to happen to address the inequalities seen throughout the UK?

Neil Debenham offers some suggestions.

He comments: “Direct funding, such as loans, offer a cash injection which can help SMEs kickstart a spurt of growth. However, it is prudent for support beyond purely monetary to be supplied. Monitoring of different schemes, beyond the minute they are implemented, is of high importance. Throwing money at a business is a mere fraction of what makes it tick. Ensuring the infrastructure, personnel and competitive advantage are maintained can help to address regional inequality.”

However, Caroline Norbury MBE says the plan cannot overlook the importance of the creative industries.

“The creative industries play a huge role in unleashing opportunity, prosperity and pride in places throughout the UK, and have the potential to achieve much more. Creativity is an essential catalyst for regenerating our villages, towns and cities, drawing people and investment into local places and binding diverse communities together.

“With the right investment, the creative sector is set to produce 300,000 new jobs and generate an extra £28 billion for the UK economy by 2025, throughout the regions and nations.

“Guaranteeing access to creative education and ensuring security for freelancers must be in place to help realise this ambition. This will sustain and grow a diverse talent pipeline to not only fuel our world-leading creative industries, but to boost entrepreneurialism and future-proof local industries and jobs with the high-level skills needed to support UK growth and innovation.

“The significant impact that public investment into the creative industries delivers for people and places must be reflected in the Government’s plans. Investment in public service media fuels growth in areas across the UK, as will continued spending on creative R&D: The Creative Industries Clusters Programme is set to have leveraged £201m in investment into key parts of the country and we urge the Department for Business Energy and Industrial Strategy to back its successor.

“By empowering people and communities in all corners of the UK to unlock their creative potential, we can develop the skills and abilities essential to the UK’s economic and social recovery.”