As we approach the new financial year starting on 1st April 2024, we will see a familiar acronym pass into the policy archives. April marks the official closure of Local Enterprise Partnerships (LEPs), as central government core funding ceases and their functions transfer to Combined Authorities and local authorities (and to the Greater London Authority in London).
The demise of LEPs has, in reality, been underway for some time, but was formally confirmed at the 2023 Spring Budget last March. At that time, the Chancellor announced that the Government was ‘minded to’ withdraw core funding for LEPs. This ‘minded to’ was confirmed in August 2023, prompting LEPs and local authorities to set in motion plans for the transfer of their core functions – namely providing business representation, undertaking strategic economic planning functions, and delivering some government programmes such as Growth Hubs and Career Hubs.
Origins and mandate
It represents a very different era from when the first 24 LEPs were announced by the Coalition Government in the 2010 Local Growth White Paper[1]. LEPs were designed as replacements for Regional Development Agencies (RDAs) with the intention to, “bring an end to the top down initiatives that ignore the varying needs of different areas”. RDAs had been part of New Labour’s somewhat aborted policy of establishing regional government during the 2000s, and dismantling this became an early target as part of the Coalition Government’s austerity programme in 2010 and a key part of the localism agenda[2]. The Government’s ambition was to “rebalance our economy, ensuring that growth is spread and prosperity shared” and committed to a £1.4 billion investment in a Regional Growth Fund over 3 years which LEPs would help administer. However, by comparison, the RDA budget had been £2.3 billion annually.
The eventual 39 LEPs covered all areas of England and operated as non-statutory bodies to promote economic growth. They functioned as business-led partnerships with additional representatives from local authorities, as well as academic and voluntary institutions. LEPs were designed to be flexible partnerships whose geography reflected the natural economic areas of England. They were never defined formally in legislation, but most operated as corporate entities with a specified accountable body. This meant that local areas had considerable discretion about the composition of LEP boards, provided they were chaired by a businessperson and at least half of their members were drawn from the private sector.
Perhaps the high point for the recognition of LEPs came in 2012 when Michael Heseltine called for a significant devolution of funding from central government to LEPs so that, “government investment in economic development is tailored directly to the individual challenges and opportunities of our communities, and can be augmented by private sector investment.”[3]
But the inherent flexibility also brought complications. In 2018 LEP boundaries were reviewed and, as part of this review, it was determined that an individual district or borough local authority could no longer be within two overlapping LEP geographies.
Into a new era of devolution
It is somewhat ironic that LEPs have now become victims in the latest iteration of the devolution agenda, which has seen resources and responsibilities gradually shifting (back) to local government. The 2022 Levelling Up White Paper[4] promised that “by 2030, every part of England that wants one will have a devolution deal”. As devolution has progressed with successive ‘deals’ being announced across the country, the role of LEPs has increasingly overlapped with that of Combined Authorities, leading several to transform their LEPs into ‘business boards’ or similar structures.
In parallel, there has been a shift to government funding going directly to local authorities rather than through LEPs (e.g., Levelling Up Fund, UK Shared Prosperity Fund), and technical skills coordination now being delivered through Local Skills Improvement Plans (LSIPs) rather than LEP Skills Advisory Panels.
While core funding from central government typically formed just 10-20% of overall LEP incomes[5], the removal of this has now triggered the majority of the remaining LEPs across England to be wound up.
A review by Lichfields has found that, of the 36 remaining LEPs, 17 are to be wound up with all functions transferred to the relevant local authorities[6]. Eight LEPs have already been absorbed into the functions of a Combined Authority, with a further two expected to be transferred into Combined Authorities from 1st April. The Hull & East Yorkshire and Greater Lincolnshire LEPs are to become part of the Hull & East Yorkshire Mayoral Combined Authority and the Greater Lincolnshire Mayoral Combined County Authority, respectively, once their respective devolution deals are confirmed.
The Solent LEP will transition to become a private company[7] while Cheshire & Warrington LEP and OxLEP will become council-owned companies, still retaining many of their functions. The relatively small number of LEPs that will continue as a private or council-owned companies is in stark contrast to the 14 LEPs who had previously indicated their interest in continuing their functions as a private sector company during the Government’s information gathering exercise in 2023[8].
At the time of drafting, the West of England LEP had not yet confirmed its future plans, as the misalignment between the LEP and West of England Combined Authority geographies has delayed agreement on implementation plans between the parties[9].
Overview of LEP Transition Arrangements (at 25 March 2024)
Uncertainties ahead
As an increasing number of lower-tier authorities issue Section 114 (bankruptcy) notices amid spiralling debt burdens, an obvious concern is whether upper-tier authorities will have the capacity and resources to continue the work of LEPs over the years ahead. The Government’s information gathering exercise highlighted that one-third of local authorities “showed a high degree of readiness to support these functions with additional funding” – but two-thirds seemingly did not. Funding for previous LEP functions and legacy projects beyond 2024/25 is subject to future government spending reviews and therefore not confirmed. For areas without devolution deals in place, a lack of dedicated funding for economic development and strategy activities may impact their ability to deliver these functions.
Even in areas with Combined Authorities or other forms of devolution, the Government’s information gathering exercise found that half of the eight Combined Authority respondents felt the withdrawal of LEP core funding would negatively impact their operations and delivery, making it “harder for the MCA to maintain a strong business voice”. Further, at the time, the four upcoming devolution deal areas were working to an assumption that the LEP core funding would be available to them, and if this were to not be available this would “lead to reduced outcomes for LEP functions”.
Despite the replacement of many LEPs with ‘business boards’ designed to continue the involvement of businesses in local decision making, the LEP Network has highlighted concern that the changes could “significantly diminish or even silence the voice of local business and damage the unique convening power that gets projects delivered, acknowledged as the hallmark of LEP success for over a decade”.[10]
Ultimately it is clear that there is no ‘one size fits all’ approach to how former LEP functions are being carried forward in different parts of England, and it will take time for the new arrangements to crystallise (much like the wider devolution agenda itself). While the report by the Labour Party's ‘Commission on the UK's Future’ supported the integration of LEPs with Combined Authorities, it also called for economic growth and prosperity plans to be developed by ‘local partnerships’ for all parts of the country including those areas not currently covered by (or seeking) devolution deals[11].
But as the last LEPs disappear, much remains uncertain in terms of readiness and resources, while central funding for local economic growth and development activities is not guaranteed over the longer-term. The government’s own information gathering exercise found that LEPs had played a positive role particularly in assisting with local economic recovery from the Covid-19 pandemic, acting as brokers between local authorities, and supporting local net zero agendas. Given these ongoing challenges and the wider need to stimulate economic growth and productivity, the inboxes of economic development teams across the country are already full.
[1] HM Government (2010) Local growth: realising every place’s potential, 28 October.
[2] Ministry of Housing, Communities & Local Government (17 June 2010) Scrapping regional bureaucracy will save millions
[3] The Rt Hon the Lord Heseltine of Thenford CH (2012) No stone unturned in pursuit of growth.
[4] HM Government (2022) Levelling Up the United Kingdom, 2 February.
[5] Department for Levelling Up, Housing and Communities and Department for Business and Trade (2023) Local Enterprise Partnerships: information gathering exercise. Other funding sources have included the Regional Growth Fund, the Growing Place Fund, and European Structural Funds.
[6] The Lancashire LEP is to transfer to the local authority in the interim, before the devolution deal for the county is finalised and a Combined Authority created, which would then take control of the legacy LEP functions.
[7] Through Solent Partners, owned by the three upper tier local authorities in the Solent with an independent Chair, Vice-Chair and non-Executive Director from local businesses. Further details at: https://democracy.portsmouth.gov.uk/documents/s50132/Integration%20of%20LEP%20Functions%20into%20Upper%20Tier%20Local%20Authorities.pdf
[8] Department for Business & Trade, Department for Levelling Up, Housing & Communities (2023) Policy paper – Local Enterprise Partnerships: information gathering exercise, 4 August.
[9] West of England Combined Authority Committee (2024) Comments to the Combined Authority Committee from the LEP Chair on behalf of the West of England Local Enterprise Board, 15th March.
[10] LEP Network (21 March 2023) Silencing the voice of local business will cost money not save it.
[11] Labour Party (2022) A New Britain: Renewing Our Democracy and Rebuilding Our Economy. Report of the Commission on the UK’s Future.
Image credit: Benjamin Elliott via Unsplash
