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Government seeks list of "shovel ready" projects from LEPs and Mayoral Combined Authorities by Thursday 18 June

15 June 2020
The Financial Times reports that the UK Government is planning to unveil a significant economic stimulus package in July 2020.  As part of the preparation process, the country's Local Enterprise Partnerships and Mayoral Combined Authorities have been asked to submit lists of "shovel ready" capital projects by Thursday 18th June 2020.   The move comes with only 200 days until the transition period with the EU is scheduled to come to an end, raising questions about the long term replacement for the UK's EU funds, the United Kingdom Shared Prosperity Fund. 


Shovel ready infrastructure projects 


Robert Jenrick, Secretary of State for Housing, Communities and Local Government, has written to the country's Local Enterprise Partnerships and elected Mayors to request lists of  “shovel ready” projects by Thursday 18 July. A number of areas have already put forward proposals, including £1.5bn to create 1,800 miles of cycleways and walking routes in Greater Manchester, a £60m 'national innovation centre for sustainable packaging research' in Liverpool City Region and plans to retrofit homes, as well as install electric vehicle charging infrastructure, in the West Midlands.  

In order to be considered for funding proposals must demonstrate:

  • value for money;
  • drive economic growth and create jobs; and 
  • support a "green recovery" from the Covid-19 pandemic.  

Green Recovery

The focus upon a "green recovery" comes days after 200 leading businesses (including Engie, Peel, Lloyds Bank, Asda and BT) wrote to the Government calling for public funding to (1) drive investment in low carbon innovation, infrastructure and industries, as well as improve resilience to future environmental risks (2) focus support on sectors and activities that can best support sustainable growth, increase job creation and accelerate both the recovery and the decarbonisation of the economy and (3) implement financial support packages which ensure receiving businesses are well managed and their strategies are science based and aligned with national climate goals. The letter argues that these interventions are needed for the UK to hit its target of net zero carbon emissions by 2050.

It remains to be seen whether this investment will be an acceleration of the £100 billion previously earmarked to be spent on infrastructure projects over the five-year parliament or represents a new commitment.  Either way, the move shows that the Government is putting public funding at the forefront of its plans to protect the economy.  As with all awards of public funding it is necessary to meet the relevant legal requirements, including designing the project so that it complies with State aid law. Our experience is that the Ministry for Housing, Communities and Local Government expects applications to be able to demonstrate how they comply with the relevant laws upon submission (and plainly it is not advisable to seek government grants that cannot be delivered for lack of State aid compliance).  

UK Shared Prosperity Fund

There are now 200 days to go until the scheduled end of the transition period agreed between the EU and UK.  Whilst a member of the European Union, the regions of the UK have been allocated European Union Structural and Investment Funds worth over £2.1 billion per year.

With this funding due to end on 31 December 2020, there are concerns that details of the the successor fund, the promised UK Shared Prosperity Fund ("UKSPF") have still not been published.  The Government has previously stated that the UKSPF would at least match the EU Structural and Investment Fund allocation.  

According to analysis from CPMR, had the UK remained in the European Union then the UK would have received an allocation of c. €13bn (£11.4bn) in respect of the European Regional Development Fund ("ERDF") and the European Social Fund ("ESF") for the period 2021 - 2027.  Using statistical data, areas which demonstrated the greatest need (ie. lowest GDP per capita) would benefit from increased allocations, as has always been the case and which is consistent with the UK Government's "levelling up" agenda. 

On 22 May 2020, the House of Commons Library has published a briefing note on the UKSPF, which sets out the background to the fund and highlights issues which need to be factored into the design. On 5 June 2020, members of the Northern Ireland Affairs Committee, Scottish Affairs Committee and Welsh Affairs Committee called upon the Government to provide urgent clarity on the details of the UKSPF, stating that 'Given the impact of COVID-19 on the UK economy, a smooth transition to an effective Shared Prosperity Fund is now more vital than ever.' The letter also questioned whether the fund will be ready to go live on 1 January 2021, and whether there will be any interim arrangements in place. The letter also asked whether the cost of the COVID-19 crisis will be reflected in financial allocations of the fund. 

Post-EU funding within the devolved administrations

This is not the first time the devolved administrations have raised concerns about the UKSPF. On 28 February 2020, Wales' Brexit Minister, Jeremy Miles, reminded the UK Government of their promises and urged the Government to "bring forward a clear commitment that there won't be a penny less for Wales, and the devolution boundary will be respected", as the Welsh Government published its proposals on future regional investment in Wales to replace EU funds.

Currently, there are a number of Welsh projects which are supported by European Union funds such as:

Scotland has also been a major beneficiary of the ESIF, benefitting from over £780 million through the ERDF and the ESF under the current 2014-2020 programme. In its consultation, Scottish Ministers made it clear that they want to be actively engaged in the design of the UKSPF, and have set out five “red lines” on the replacement funding. These are:

  1. Scotland should not lose out financially compared with the current level of funding that it receives from the EU; 
  2. The devolution settlement must be respected and the UK Government must make no attempt to take back powers that the Scottish Government has rightfully executed to date; 
  3. The Scottish Government must be an equal partner in development of the UKSPF;
  4. The current level of flexibility in allocation of funds should not be reduced; and
  5. The replacement scheme should be operational in time to be implemented in early 2021, so that its stakeholders do not suffer difficulties as a result of funding gaps.

Conclusion

The new call for "shovel ready" projects offers a significant opportunity to many different businesses around the country, to enable projects to come forward as part of a national drive to kick-start and pump-prime the economy back into action. Many developers, inward investors, infrastructure builders and operators and others that have already been working up a variety of different projects could see the funding made available perhaps quicker than expected.  This is obviously to be applauded from the perspective of getting the economy moving and incentivising investment in the short term, in what is otherwise likely to be difficult times ahead.

DWF's specialist Public Sector law team has extensive experience of advising on all aspects of public funding, including working within the Central and Local Government. If you wish to discuss infrastructure projects, the UK Shared Prosperity Fund or any other aspect of public funding in more detail, please contact Jonathan Branton, Colin Murray or Alexander Rose. 

For more information on the UKSPF, please see our FAQs. Our UK Shared Prosperity Fund group on Linkedin also provides a forum for those interested the UKSPF to discuss the fund in more detail and share the latest news.

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