The FDI angle:

• Since 2010, local enterprise partnerships (LEPs) played a major role in shaping local economic development and investment attraction strategies across England
• Over the years, though, questions about their governance and accountability were raised 
• The government ultimately decided to terminate their funding on March 31, 2024. 
• Why does this matter? Most of LEPs will be absorbed by local authorities. The main risk is that their role will be diluted and limited by constrained budgets. 

The upcoming integration of local enterprise partnerships (LEPs) into upper-tier local authorities across England lays bare the tension between localism and the risk of disintegration of economic development functions. 

The central government will terminate its sponsorship and core funding of the country’s 38 LEPs at the end of the current fiscal year on March 31, and has provided guidance for the transfer of their core into local or sub-regional authorities. 

A few weeks ahead of that cut-off date, the LEP landscape is in flux. Some are being integrated into local authorities; others will continue to exist as autonomous, if not fully independent, organisations. Local authorities have typically welcomed this transition as it empowers their economic development responsibilities. However, within the LEP community there is a lingering feeling that excessive fragmentation, as well as the uncertain funding prospects, could bring years of hard work to an end.

Localism push

LEPs started out in 2010 as a major pillar of the push towards localism championed by the coalition government of the time. The government considered their predecessors, the Regional Development Agencies, scarcely effective and accountable, and decided to replace them with LEPs led by private sector leaders and tasked with fostering private–public partnerships to deliver economic development across their functional economic areas (FEAs).

“By shifting power to the right levels we will increase democratic accountability and transparency, and ensure that public expenditure is more responsive to the needs of local business and people,” then deputy prime minister Nick Clegg wrote in the white paper published in October 2010 that set out the blueprint for the creation of LEPs. A few months later, 39 LEPs were officially set up and launched – 38 survive to this day. 

That season is now coming to an end as the government’s levelling up agenda has furthered the devolution of powers to sub-regional and local authorities. In that context, London has withdrawn its sponsorship and core funding of LEPs and committed to integrating their functions into local democratic institutions “to continue empowering our local leaders”, reads the government’s latest guidance on the transition. 

Over the years, LEPs have been responsible for the delivery of major funding streams coming from central government. Overall, they received almost £12bn in public funding between 2010 and 2020, according to figures from the Institute for Government. 

Although their results vary across the 38 organisations, their activity has stirred up mixed feelings, particularly with regards to the quality of their governance. 

“There is still a long way to go for all LEPs to reach the rigorous standards we expect,” a 2019 review by the public accounts committee reads. “We remain concerned that LEP boards are not yet representative of their local areas and business communities, and that local scrutiny and accountability arrangements are not strong enough considering the significant sums of public funding that LEPs manage.”

The review added: “LEPs have also continued to underspend their local growth funding allocations every year since 2015/16, calling into question their capacity to deliver the complex projects they said were critical to economic growth in their areas.”

The LEP Network, which represents the 38 LEPs across the country, argues that LEPs have ‘leveraged’ £25bn of private investment to date, created more than 180,000 jobs and helped more than three million people develop new skills. Consultancy EY estimated that they leveraged £1.76 for every £1 of local growth fund spend, which is notably lower than the government’s estimated £4.81. However, the same review by the public accounts committee argued that the estimate was “unsubstantiated”.

Smooth transition

Council leaders, particularly in smaller geographies lacking devolved power, have welcomed the government’s plan to subsume LEPs into upper-tier local authorities. 

“For too long, councils in county areas have been hamstrung in their ability to drive economic growth, lacking the powers enjoyed by urban and city authorities with mayors,” councillor Tim Oliver, chairman of the County Councils Network representing 37 county and unitary authorities, said in a statement in July last year. “We need all the tools in our armoury to try and close the gap, and LEP functions would be another string to our economic growth bow.”

The ongoing transition shows that some LEPs have been able to leverage their public–private network to safeguard their activities in the new set-up. “It’s been really smooth for us, and that is in large part due to the work we put in over the years to build a strong relationship with the authorities,” says David Owen, CEO at Gloucestershire LEP, whose core activities and staff are being transferred into the Gloucestershire County Council. 

A similar integration is underway in the geographies of combined authorities with devolved powers whose boundaries coincide or contain those of local LEPs. The Liverpool City Region Combined Authority, for example, launched a new Business and Enterprise Board to replace its LEP and “provide a voice for business in the region”, its website reads.  Similarly, the Greater Manchester Business Board replaced the local LEP.

Other LEPs will continue to exist as autonomous organisations owned by local authorities. One such case is the Cheshire and Warrington LEP, where the three councils operating across its FEA are in the final stages of agreeing to turn it into a company limited by guarantee. They will fully own this new company and will continue to deliver economic development projects at a subregional level, as confirmed by its CEO Philip Cox.

Others still will continue to exist as fully independent organisations that local authorities choose to deliver the functions through, according to the LEP Network. One of them is the Berkshire LEP, which has existed as an independent company since 2011 and will continue to do so, CEO Alison Webster confirms.

Postcode lottery

Some LEPs will not survive. “The Marches LEP is winding down and it’s disappointing,” says Rachel Laver, CEO of the Marches LEP. The three local authorities operating in the area — Herefordshire Council, Shropshire Council and Telford & Wrekin Council — have formed a joint committee to oversee the management of the LEP assets, but how they work together on different initiatives “remains to be seen”. 

“There is a real fragmentation of support across the Marches and lack of consistency in support available to businesses,” she explains. “I’m concerned about the value for money, given that economies of scale won’t be the same when [business support and economic development activities] are delivered at such a local level. And for business, it becomes a real postcode lottery,” she adds, referring to the challenges for small and medium-sized enterprises to navigate a business environment that may now be changing from one county to another. 

Fragmentation is not the only concern, though. 

“Local authorities are on the cusp of bankruptcy, which is the case with one of our authorities here,” Ms Laver adds, referring to Shropshire Council. “The others are doing voluntary redundancies. There seems to be less and less resources.” 

One in 10 councils in England are at risk of issuing a Section 114 notice, indicating effective bankruptcy, according to a research by the Special Interest Group of Municipal Authorities (Sigoma) representing 48 urban authorities in the northern, midland and south coast regions of England.

“If we have hard-pressed local authorities, are we going to get the same level of focus [on economic development] that LEPs had?” wonders Mark Bretton, chair of the LEP Network. 

Another risk that runs the gamut of LEPs regards the voice of the private sector and other stakeholders in shaping local development strategies moving forward. By design, all LEPs must have a private sector chair, and the majority of their board members should be from the private sector. 

“Through the LEP experience, it’s been established that local businesses should have a say around the planning around economic development strategy,” says Adam Breeze, an economic development expert and consultant, who has personally worked with 13 LEPs over the years. “That is something we could lose if all the functions are integrated into council organisations. Business stakeholders are at the front line of what we do; keeping them away from the structure would be a monumental mistake.”

The die is cast and LEPs as we know them will cease to exist from March 31. Their legacy can still live on only if the funding is there, and the business sector can find a seat at the economic development table. 

Do you want more FDI stories delivered directly to your inbox? Subscribe to our newsletters.

This article first appeared in the December 2023/January 2024 print edition of fDi Intelligence