£5.3bn EU cash countdown: regional aid funding to run out in 18 months

Local areas in England are at risk of losing out on £5.3 billion in just 18 months if the Government does not act fast and put in place replacement funding arrangements once the UK leaves the EU, council leaders are warning.

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The Local Government Association, which represents councils across England and Wales, is urgently calling on the Government to work with local areas to set out a firm plan to replace the European Structural and Investment Fund (ESIF) 2014-2020 programme when it comes to an end in December next year.  

ESIF is currently earmarked to local areas to create jobs, support small and medium businesses, deliver skills training, develop rural economies, invest in critical transport and digital infrastructure and boost inclusive growth across the country. While a combination of EU rules governing ESIF and Whitehall’s management of it has resulted in a complex funding process, the investment acts as match funding to get vital local projects off the ground.  

Examples include:  

  • The Solent Jobs Programme is part of the Portsmouth and Southampton City Deal and match funded by ESF funding. The aim of the programme was to integrate health and employment support, assist small businesses to recruit from an untapped labour pool, and to help get people back into work. The Solent Jobs Programme has provided employment support to over 1,000 people across the Solent area over the last two years, 40 per cent of whom had been unemployed for more than five years. The project demonstrated that for every £1 spent, £1.70 was saved by the Government through a reduction in demand for welfare benefits, health and social care support.
  • Nottingham City and Nottinghamshire County Council’s Nottingham Jobs provides employment, skills, and careers support for local residents and employers. It has secured ESIF funding as well as match funding from the County Council, DWP and the National Careers Service. In the first four years of the programme, Nottingham City’s employment rate increased by 5.6 per cent, compared to the 3.7 per cent increase for England. 

With drastic reductions in national funding, ESIF funding is a life-line for local areas to make the investments that really make a difference to people and communities.  

The Government announced in July 2018 that they intend to consult on the design of the domestic replacement, the UK Shared Prosperity Fund (UKSPF), by the end of 2018. This has still not happened. 

The LGA says that ongoing delays and uncertainty on the detail of UKSPF is a huge concern for councils and communities who are set to face a £5.3 billion funding gap once the UK leaves the ESIF programme. Time is running out to design a replacement programme that works best for people and places, and does not repeat the bureaucracy that hampered the management of the ESIF programme. Research by Essex County Council has shown that, had ESIF been a single pot with greater local decision making, it would have delivered more support for small businesses, employment schemes and other programmes to support local economies. 

UKSPF should be a fresh opportunity for local areas to align funding to local priorities, increase productivity in their economies and tackle some of the largest inequalities in local communities.  

It is essential that Government immediately works with local areas and councils in the development and design of the successor fund. UKSPF should act as a springboard for further devolution and align other growth funds to deliver locally determined programmes that achieve the outcomes that really matter to local communities.  

Cllr Kevin Bentley, Chairman of the LGA’s Brexit Taskforce, said: 

“The clock is ticking for the Government to set out a firm plan to replace this funding into the next decade and beyond.

“Brexit cannot leave local areas facing huge financial uncertainty as a result of lost regional aid funding. This funding has been used by local areas to create jobs, support small and medium enterprises, deliver skills training, and invest in critical transport and digital infrastructure and boost inclusive growth across the country. 

“With 18 months until funding runs out, the Government needs to work urgently with councils to develop a fully-funded and locally-driven successor scheme. 

“With national funding for regeneration increasingly being depleted, all local areas have become increasingly reliant on EU money and local areas are desperate to get on with creating jobs, building infrastructure and boosting growth.”

Notes to editors

Government set out its broad principles for UKSPF in July 2018: 

  • a simplified, integrated fund>
  • driven by the local priorities set out in local industrial strategies
  • The subject of a Government consultation. This was due by the end of 2018, but it has still not emerged.

The LGA has proactively put forward key policy principles to underpin the UKSPF. These were set out in Beyond Brexit: future of funding currently sourced from the EU (2017) and the Moving the Conversation On: Brexit Paper (July 2018).  

ESIF monies can be spent within three years upon receipt.  

Examples of match funding include:  

  • The Solent Jobs Programme, which is part of the Portsmouth and Southampton City Deal agreement with central government, is supported by ESF funding and match-funded. The programme supports the long-term unemployed and people with disabilities and health conditions into work. 
  • Futures, a social enterprise jointly owned by Nottingham City and Nottinghamshire County Council that delivers Nottingham Jobs – an integrated model of employment, skills, and careers support benefiting local residents and employers. It has been secured ESIF funding as well as match funding from the County Council, DWP and the National Careers Service. 

The LGA has previously raised issues regarding the capacity of DWP to spend England’s allocation of ESF.  

Taking Back Control - Essex’s local solution to post Brexit economic growth Report was research by Essex County Council which found that had ESIF been a place based, single pot, the yield for Essex could have been 10 per cent or £33 to £50 million higher. This could have supported an extra 117 businesses to improve competitiveness, 60 business start-ups, 155 jobs and 560 people acquire skills for work or improve life chances. Moreover, with a freer hand to target resources to local needs, an additional 2,100 jobs could have been created and 700 in-work progressions secured through apprenticeships, augmenting the economic impact to Essex by £20 million by 2021.