Improving the Local Growth Fund to tackle the UK’s productivity problem

How the Government can reform the Local Growth Fund to better support places to grow their economies

To boost lagging productivity, cities will need to invest to reduce the barriers that hinder the attraction and growth of more productive businesses. Given the lack of fiscal freedom that would allow cities to raise this money themselves, they have had to look to central government to provide the money for such investment.

The Local Growth Fund (LGF) is the most recent in a number of policies to boost economic performance across the country, following on from the Urban Regeneration Grant in the 1980s to Regional Development Agencies in the 1990s. The current round of funding is due to expire in 2021. This briefing sets out how the LGF could be improved for any future rounds to allow it to play a more effective role (alongside other policy interventions that will be required) in improving the UK’s poor productivity performance.

It recommends five changes to the LGF to give places greater certainty and autonomy to make policy and investments:

  1. Set a clearer focus on supporting exporting activities
  2. Allocate to combined authorities where possible
  3. Extend the funding period to 10 years, and award funding on a per capita basis
  4. Give greater autonomy to places to decide where best to invest the money
  5. Build evaluation into the process