Supporting the integration of Local Enterprise Partnerships

Purpose of this document

The Local Government Association (LGA) commissioned Shared Intelligence (Si) to provide support for councils and combined authorities undertaking Local Enterprise Partnership (LEP) integration and to share good practice/learning.

This commission flowed from the Levelling Up white paper and subsequent ministerial letter in March 2022. This went to LEP chairs, combined authorities and Greater London Authority setting out pathways for LEP integration into (mayoral) combined authorities or institutions with devolved powers for the purposes of hosting a county deal. 

This note summarises key themes from engagement with several areas in the first tranche of integration and a selection of other areas.

Timing and impact of March 2023 budget announcement about future of LEPs

This note focuses on learning from research between November 2022 and mid-March 2023. The majority of this research was conducted before the 15 March 2023 budget announcement in which the chancellor stated that he was ‘minded to’ end funding to LEPs from April 2024 and for their functions to be delivered by local government in the future. This is now going through a consultation process.

For many who had not yet started to consider integration because they were not yet on a devolution pathway, the government’s announcement will create an urgent need to consider options for future arrangements. At the time of writing (March 2023), local authorities are still at an early stage in considering the implications of the budget announcement and this may change the emphasis of the findings described. Nevertheless, this note aims to provide insight for all areas that now need to consider how existing LEP functions will be delivered in the future, drawing on the learning from the winter 2022/23 fieldwork.

Background and context

LEPs were established in 2010 and originally conceived as local business-led partnerships between the private and public sector that would drive local economic growth. Routes for engaging locally with a business voice had existed before the creation of LEPs, through local partnership arrangements and through predecessor local organisations. While functions and geography do not map directly, these included Training and Enterprise Councils (1990 to 2001) and regional development agencies (1998 to 2012).

Thirty eight LEPs were established on functional economic market areas (FEMAs). Boundaries were reviewed in 2018, resolving some overlaps, but it remains the case that there is variety in their size and how they mesh with local administrative boundaries. While some are coterminous with county or combined authority areas, several cover adjacent upper-tier local authority areas.

The role of LEPs increased significantly in 2015 when they were handed responsibility for £12 billion local growth deal funding over six years. They also led the development of strategic economic plans and then local industrial strategies, with mayoral combined authorities in relevant areas, under the government’s national Industrial Strategy. 

During this period, there have also been several reviews of the governance frameworks for LEPs and more recently of their roles and responsibilities. Following a review in 2017 by Mary Ney, a Non-Executive Director of the then Department for Communities and Local Government, the Government published Strengthened Local Enterprise Partnerships which covered various changes to arrangements for LEP leadership and accountability (July 2018). This also proposed closer working between LEPs and MCAs. A further review was undertaken by the government between early 2021 and the publication of the February 2022 Levelling Up white paper. This led on to the ministerial letter proposing LEP integration.

The recent period of review; the post 2019 election transition from the national Industrial Strategy to the Plan for Growth; publication of the Levelling Up white paper; and the last year’s changes of prime minister and ministerial teams has created uncertainty about the future role of LEPs. Well before the latest budget announcement, funding had been declining, for example with a 50 per cent reduction in funding for growth hubs in 2022/23. The integration announcement was also couched as an incremental change: “LEPs will eventually fully integrate into local democratic institutions in line with our mission to offer a devolution deal to everywhere that wants one by 2030”.

This recent history sets an important backdrop when considering LEP integration. LEPs saw a rapid expansion of their role, followed by an incremental tailing off of central support and funding. In 2016, a National Audit Office (NAO) report noted that: “funding uncertainty has also made it difficult (for LEPs) to recruit and retain skilled staff.” That theme has continued, and ‘uncertainty’ is a word that has been integral to the LEP experience. Several of the themes identified in this note reflect the impact of an incremental central approach to LEP reform. This learning note however, is intended as a practical guideline for areas through LEP integration, including those who would not have expected to for this to be a short-term priority prior to the March 2023 budget.

Pre-budget

There is a distinct first tranche of active LEP integration projects covering MCA areas and London: Greater Manchester; Liverpool City Region; Greater London; South Yorkshire; Tees Valley; West Midlands; West of England; and West Yorkshire. These areas submitted integration plans between summer 2022 and early 2023 and are on course to establish business boards. Cambridgeshire and Peterborough integrated its LEP into the combined authority and established a business board in April 2018.

The March 2022 ministerial letter indicated that the pathway and timing of integration in other areas should depend on the level of devolution adopted locally, as per the Devolution Framework in the Levelling Up white paper. Very broadly, integration required areas to adopt either level 3 or level 2 arrangements from the Devolution Framework so would need a (mayoral) combined authority or county deal.

From our research, we found that Integration streams have been initiated in areas where county deals have recently been signed. In other areas, corresponding to those in Pathway II or Pathway III as described in the Government’s March 2022 letter, there was a mix of approaches. In some areas there was some pragmatic work in place ahead of devolution deals to promote joint working with secondments or to refine existing LEP board structures to match emerging priorities. Other areas were at an early stage of thinking – contingent on their wider approach to devolution or assessing the potential implications of devolution applying to different parts of an existing LEP geography at different timescales.

How has the context changed with the 15 March 2023 Budget announcement?

While still a ‘minded to’ announcement, the budget is necessarily creating a new and urgent focus for all non-Tranche 1 areas, irrespective of their likely future devolution arrangements. All areas now need to consider the future of current LEP functions within a 12-month timescale. For those pursuing devolution, but not expecting a deal to be agreed in this period, this may create the further complication of requiring a short-term, interim arrangement for the handling of current LEP activity after April 2024 but before any new devolved institution comes into being. Those not yet on course to agree a deal will now need to develop and accelerate integration plans over the next 12 months with a pace not previously anticipated.

Integration was seen by the areas we engaged with as a chance to reconfigure strategic and operational arrangements for services that exist to serve the interests of the area. Arrangements vary from place to place and in some areas, local authorities have been playing a strong role alongside LEPs in supporting their delivery work.

There is an important policy question about where accountability for local economic growth should sit and the budget announcement was couched in terms of an opportunity to empower democratically elected local leaders. However, it is also helpful for areas considering the future of LEP functions to consider, in purely practical terms, the work that LEPs currently deliver. Councils told us that they recognised a number of capabilities, closely associated with LEPs, that they consider important to safeguard in an integration process. In addition to separately funded functions, including growth hubs and careers hubs, these include:

Data

Being a single source of business data and intelligence, and labour market intelligence. This links to a strong role in evidence-based strategy making, for example leading on local industrial strategies. Other business support organisations (Chambers of Commerce, Federation of Small Business for example) and local government do not often have a similar offer.

Quality apolitical decisions

LEPs over time have developed strategic priorities with strong business influence as well as assessment frameworks in order to assess funding bids, for example local growth fund, regional growth fund etc. While local government does a similar role with competitive business case development, LEPs have been seen to make decisions based on technical evidence, embracing private sector challenge. There were cases where it had been helpful to be able to explain decisions when they were not politically based.

Functional economic geography

LEP geography is not ideal in all cases and has been the subject of debate and reform in the last five years. However, it was intended to be rooted in functional economic geography and does offer an institutional focus to working across local authority boundaries which may be at risk (for those pending progress with devolution deals). There is also the question of economy of scale – breaking down cross authority functions may require more aggregate resource to replicate them at local authority or devolution deal level.

Continuity

LEPs are not governed by the same four-year local political dynamic as local government. This can help to provide practical momentum and continuity to economic support. This can be complementary to the vision and convening legitimacy of political leaders and so gives confidence to businesses and investors.

Expertise in bidding

Many LEPs have strong expertise in driving funding bids. They have managed the bidding process for programmes such as regional growth funding and local growth funding. Many LEPs have also supported local government with recent bidding rounds, for example Levelling Up Funding and UK Shared Prosperity/Rural Prosperity Funding. Allied to this is experience in providing the infrastructure for the distribution of EU funding. This is an important capability area for linking technical evidence and place-marketing.

Assurance function

LEPs went through a process of designing and developing a National LEP Assurance Framework in 2014 with the then Department for Communities and Local Government (DCLG). This resulted in a guide to support local decision making with accountability, transparency, and value for money. While local government has strong governance and processes, LEPs built in the business voice to their assurance through, for example, a public annual review. LEPs have also developed a strong monitoring role and understanding of HM Treasury Green Book requirements. These are all capabilities that are beneficial to an area – whether they sit in a LEP or elsewhere.

Engagement of business

LEPs have been recognised as strong deliverers of inward investment. This has been made easier by the fact that the Department for International Trade (DIT) has been able to work with 38 LEPs covering the entire country. They also have proactive and ongoing engagement with a large scale of businesses and across sectors most relevant to local growth ambitions.

Ability to attract people with business understanding

The part private sector make up of LEPs was seen as a factor in helping them to be successful in attracting senior executive talent with commercial experience. This is important in a context where local authorities continue to face recruitment challenges for their economic development work. This appears to be linked to the non-statutory nature of the council function at a time of funding pressure and less-well defined career paths than other local government professions.

Lobbying

LEPs are proactive in lobbying, delivering business briefings and do have good access to MPs. The LEP Network plays a role in lobbying for the economy. How this works alongside other institutions does vary according to local circumstances – the changing role of lobbying and creating dialogue with central government will be different in areas with and without devolved mayoral authority.

The way that these capabilities are exercised and experienced will vary between current LEP areas. A key aim in the integration process should be to understand what capabilities are delivered with a benefit to the area and to consider how they can be delivered in the future and in a way consistent with enhancing local democratic accountability.

What arrangements are emerging?

For most, where geography is coterminous, integration means a re-focusing of the business voice role for a context where there will no longer be a LEP actively engaged in making decisions. They are taking the opportunity of integration to focus the new business board to advise on areas that are priorities for the mayor and combined authority. This is the main strand of activity in areas where many operations and staffing were already well integrated. In some areas, there are also operational streams of work to do with integrating functional parts of existing LEPs, notably growth hubs.

One exception in the first tranche is the West Midlands where specific functions within each of its current three LEPs will integrate into the WMCA. There is an added complication in that Warwickshire (part of one of the current LEPs) is not part of the combined authority area. The overall approach will be ‘hub and spoke’, notably for careers services and business support, for example a regional business support hub will lead on commissioning activity with the local areas acting as the delivery spokes.

London has also adopted a slightly different approach. The LEP’s work is being folded into the London Partnership Board, a cross sector board of senior London leaders, including the mayor, business representatives, other senior public sector and civil society members. Sub-groups with business representation will facilitate integration with related agendas including skills and UK Shared Prosperity Funding (UKSPF).

Opportunities identified

A number of opportunities have been identified by tranche 1 areas which are beginning to form models of delivery, and which could be applied to other parts of the country:

Focus

Focusing the role of the business board to fit closely with strategic priority areas for their city region and its key investment themes. For example:

• Greater Manchester CA – creating a proactive focus for board members on city wide strategic priorities and future business needs.
• Liverpool City Region – creation of thematic cluster boards to drive competitive advantage.

Simplification of the economic support landscape

Setting the agenda and clarifying responsibilities in areas where there is a risk of overlap or challenges of co-ordinating the work that LEPs and local authorities deliver, such as:

• Business support, including inward investment.
• Career support. 
• Integration of employment and skills with adult education budget work and taking a lead in connecting the business voice to this.
• Transport – a chance to more closely integrate strategic advice on transport requirements with the delivery role of a combined authority.

This would provide an opportunity to introduce more consistency across the whole business board area.

Cementing the relationship of (M)CAs with central government on the growth agenda

As a consequence of the removal of the LEPs’ role in allocating central funds, there is an opportunity for (M)CAs to lead and steer dialogue with the centre about the direction of economic growth policy.

Reassert the importance of strategic advice from a business board

Areas are planning to develop the local business voice as a strong role, in the context of devolution budgets and potentially in articulating further devolution asks:

• South Yorkshire CA – expecting to call the business board the “Mayor’s Economic Advisory Council”.
• Liverpool City Region – expecting the board to articulate the demand side for major cross cutting themes such as such as net zero, equalities and skills.

Challenges identified

Funding

Delays to funding announcements, on growth hubs and the general trend of reduced funding and short-term settlements has made it very difficult for areas to plan with certainty. This also sits in a context where:

• There is increased competition for funding across more funds which support a growth agenda.
• There have been challenges with the UKSPF timescales (production of investment plans; time for approval; and late change to allow use of theme 3 in 2023/24).
• CAs themselves have their own funding challenges, so making up shortfalls from previous funding at short notice would be very challenging.

Staffing

Funding uncertainties have created very uncertain employment conditions for staff, and have done since the LEP review process began, with a resultant loss of staff and knowledge. This will also now be a key point for non-Tranche 1 areas who will need to work quickly to identify new team structures and retain key staff in new post-LEP arrangements.

Business voice

while the advisory role is seen as an opportunity, there is recognition of the challenge of maintaining board member motivation for an advisory role. This requires care, and areas recognise:

• The importance of showing the business board how its advice is acted on.
• The need to adapt secretariat arrangements with shorter papers and less bureaucracy.

Messages from Tranche 1 areas for others

Based on discussions with Tranche 1 areas, we identified some messages for other areas focusing on LEP integration. This was based on discussions prior to the March 2023 budget announcement. Nevertheless, these may be helpful considerations during the government’s period of information gathering and as other areas consider their own way forward.

It is, however, important to note that much of the Tranche 1 learning is linked to the role of a metro mayor – as a convenor who can encourage businesses to continue to engage in the context of devolved funding. Experience may translate differently to areas not pursuing a mayoral devolution model.

• Build a vision of the big picture for the future operating model for former LEP functions: This will be important in order to drive a clear path through the complexity of practical issues to resolve. This includes a clear remit for a business board, and a view of what success would look like.
• Importance of CA/local authority early engagement with existing LEP members: It is important to recognise the time that individual current LEP members have given and not present them cold with a proposed new priority focus. Existing members should be engaged early, offered one-to-one opportunities to give their input, and there should be an emphasis on explaining the expected benefits of a new focus or set of arrangements.
• Business voice: A business board is not the only source of business voice. A board of c15 members does not automatically constitute a representative voice for a community of thousands of businesses. Consideration is needed to how it can operate as a focus for wider dialogue with businesses and other business groups.
• Communication to existing LEP and future business board members: In the context of a move to more advisory focused business boards as planned by most Tranche 1 areas, communication to current members is very important to set the strategic context. For new members, a strong induction will be important. Work will also be needed to ensure the business board members and politicians have, as far as possible, a shared understanding of the overall CA / local authority vision.
• Diversity: Related to this is the importance of moving the business boards to be more representative of the diversity of the areas they represent across people and business demographics. Integration is an opportunity to consider board make up and the opportunity for political leaders to champion improvements where they are needed, in line with wider equality programmes.

Opportunities identified

Areas identified a range of opportunities from the LEP integration agenda, which resonate with those from the Tranche 1 group, including:

• Clarity of economic vision: Some areas highlighted that integration is an opportunity to bring together a single economic strategy for the area (if coterminous) rather than have LEP owned and local authority owned versions.
• Efficiency gain: Some areas highlighted that there was an opportunity to deliver some efficiency gain, particularly in areas where there may be overlap of activity or an artificial divide.
• Pro-active working with business: Without funding being passed through LEPs, this is an opportunity to frame a proactive rather than 'sign off' relationship.

Based on discussion, there are a number of themes about how future arrangements could be set up. While this is a high-level representation of emerging 'models', these points aim to highlight some of the considerations.

Integration of economic growth levers

• This is an opportunity to create a more integrated economic growth/levelling up structure locally. This could draw in and help to develop, for example, town deal boards and the partnership groups convened for the purposes of UK Shared Prosperity Fund and UK Rural Prosperity Fund planning.
• It could also be an opportunity for local authorities to work more closely with sector boards that are currently LEP convened to ‘hear an unfiltered message’.

Role and structure of business voice

 Some options for business input include:

• A fully business led advisory board (an important role where more resources were devolved). Several areas expressed a wish to create an advisory role that allowed for meaningful early engagement with business – without funding being passed through LEPs. This is an opportunity to frame a proactive rather than 'sign off' relationship for local government in the future.
• Having two levels of business voice – overall economic strategy, supported by specialist groups that oversee levelling up and ensure various funding is coherent and its impact consistent.
• A business board working alongside a partnership-based growth board.
• Questions remain about whether a business board would or should have a role in decisions about strategy and resource allocation. Options include having a nominated voting business member on any new devolved institution with influence over strategy but not funding allocations.
• LEP boards often involve larger businesses – but the on the ground voice comes from elsewhere (eg business representative organisations, such as Chambers of Commerce and Federation of Small Business). Some areas have stressed a wish to include more small business and social enterprise voices.

The balance of considerations will be influenced by:

• The vision and geographic coverage of any devolution settlement and in a mayoral model, would depend on the view of the mayor.
• Current structures and partnerships, and whether a local authority area has established a growth board or equivalent (separate from the LEP).

Taking integration forward

Risks and identified issues in relation to integration to date include:

• Delivery within local government: It is important to recognise that LEPs have always received substantial support from councils in the form of resource, funding, and expertise. It is also noted that there is a mix of approaches to economic development in local authorities, and significant variations in where focus is placed.

Simplified typology of economic development services

• Solo act: up to 1 full-time post, focused on influencing and collaboration.
• Small hands-on: focused on business support and skills.
• Large strategic: little, or no direct delivery, large, commissioned programmes, wide range of strategic capabilities (influence, data, policy).
• Large hands-on: multiple projects delivered directly and with partners.

To integrate LEP functions that build on these different models of existing local economic development work will require a transition, and the nature of this will vary from area to area. This will also need to take account of factors such as:

• Understanding the resource demands of current LEP functions.
• Recognition that continued pressure on local government budgets affects non-statutory services like economic development the most.
• Addressing the current difficulty of recruiting economic development professionals into local authorities.

Staffing

Long-standing questions about funding and future responsibilities for LEPs had created very uncertain conditions for their staff. The budget announcement has exacerbated this in the short term, but this presents an opportunity to close any expertise gaps in council economic development teams. This will need to be balanced financially and will depend on what government funding may or may not come forward from 2024. 

Transition of initiatives, structures, and assets

LEPs are still leading with initiatives such as Enterprise Zones and Freeports as well as growth hub assets, such as offices and websites. This will take some time to decouple from current governance models as well as from delivery and finance arrangements. This is likely to become a key challenge as the timelines have been reduced by the budget announcement. 

Coordination with other sub-regional structures

There is a range of other geographic boundaries that link to LEPs’ work, such as Local Skills Improvement Partnerships, Jobcentre Plus districts, and Integrated Care Systems. While some match LEP boundaries and some do not, removing LEPs risks complicating the dialogue with these entities / partnerships on economic growth matters.

Maintaining business engagement

Several areas have expressed concern about how to maintain the interest of unremunerated senior business representatives in being a business voice, with no influence over funding, that is much closer to the public sector. This risk may be mitigated in areas with devolution deals. However, it is important that consideration is given to keeping business board agenda strategic – focusing on priority not fine detail.

In order to support local government to consider their own bespoke approach, this research has identified a number of self-assessment questions for self-reflection. While there are no right or wrong answers to these questions, they will help to understand where planning needs to focus.

The integration of LEP functions to local democratic structures is a great opportunity for local government, combined authorities and new devolved entities linked to devolution deals. It allows for democratic scrutiny of a range of economic growth functions, for tighter linkage of these to other policy areas, and to focus the voice of business to provide strategic advice on priorities.

However, there are challenges associated with this. LEPs have been a construct that business has been comfortable engaging with, and this has been demonstrated over time by the significant presence of industry representatives from well-known national and global companies. As this research heard from Tranche 1 areas, early engagement with existing board members to explore how to secure the business voice going forward is critical.

This early engagement should also be extended to councils across existing LEP geographies and beyond those boundaries. Functional economic market areas have shifted over time with growth in housing and industry and Covid accelerated this balance with travel to work patterns being disrupted. Open dialogue at this stage will encourage new models of delivery and create an opportunity for joint economic visions and action plans.

The LEPs have also developed a range of capabilities that support their areas which, even setting aside funding challenges, will be difficult to replicate in local authorities. The March 2023 budget announcement means that the time is now to develop detailed plans for transition irrespective of the appetite for devolution. The insights from Tranche 1 areas presented in this document, along with the opportunities identified and the self-assessment tool, aim to offer a starting point framework for developing a vision for what to consider going forward. This tool can be found in Appendix 1.

This tool is split into five sections:

• vision and commitment
• business voice
• capacity and capability
• transition
• funding.

It is designed for local authorities who are beginning their integration journey and wish to explore options. It is not designed for every question to have an answer, but as a way for places to consider what is relevant in their own local context.

Vision and commitment

• Does your council have a vision and strategy for its economy?
• Is this vision consistent with the vision and strategy already held by the LEP?
• Have your council and partners identified the potential benefits and challenges of LEP integration?
• Is there a shared understanding of what successful integration of the LEP would look like among partners and stakeholders?
• Is your LEP seeking to continue as a separate organisation and what would be the implications of this for your area?
• At what geography should future strategy take shape?
• Where a LEP is not coterminous with upper tier local government boundaries, is your council discussing geographic options for LEP functions with your neighbours. Can this be considered alongside future devolution deal planning?

Business voice

• Has early engagement with current LEP board members taken place to explore the business role and vision going forward?
• Have you considered the make-up of the current LEP board; does it reflect the local business community for example in demography, sector, and geographical terms?
• Is there an existing local authority convened structure that already involves a voice of business? What would an integrated ‘business board’ add to this?
• Has the role of future business voice been clearly defined in partnership with the business community?
• Has the business voice been involved in developing the future vision in collaboration with other important stakeholders?

Capacity and capability

• How would your council articulate the value that the LEP brings to the local economy? How important is it that this continues?
• What activity does the LEP deliver? Is there a clear understanding of current economic activity, such as business support, inward investment, partnership working and monitoring and evaluation?
• Is there a clear understanding of all the roles played in the LEP and the specialisms they bring?
• Has a staffing structure or organigram been shared which sets out employment terms for example numbers of staff (FTE or PT) who are directly employed, under contract to provide services (contractors), temporary staff and secondees?
• Is it clear how all LEP staff and contractors are funded for example on fixed-term or permanent contracts, or part funded by different funders?
• Has the council identified gaps in their own economy or wider teams which could be used to secure staff early to prevent loss of core skills under integration?

Transition

• What assets does the LEP have? These could be physical (for example a building or furniture in an office) or virtual (for example a brand, campaign, website, or data packages).
• Are these assets solely owned by the LEP or is there a partnership structure to consider?
• What geography do these assets cover? Does that map across coterminous boundaries?
• Is there a plan in place for each asset held or activity delivered? For example, loan funds, Enterprise Zones, Investment Zones, contract novation for growth or career hubs, asset ownership etc.?
• Have the risks of LEP integration been documented?
• Have the end users or beneficiaries of LEP services been engaged?

Funding

• Is it clear what the LEPs current operating costs are? Are there any current budget gaps for 2023/24?
• How are these costs broken down? What is the proportion or government/local/other funding sources?
• What are the timescales on all of these funding streams?
• Has a transition budget been established to ensure an action and governance plan can be developed over the next 12-months?
• Have conversations with other authorities in the LEP area commenced to understand future funding considerations?