Why Brexit may mean less regeneration funding for deprived areas like South Yorkshire when details of UK Shared Prosperity Fund emerge

Areas like South Yorkshire will see a cut in the amount of economic development support they receive in the coming years even if the Government matches the funding they were getting from the European Union before Brexit, academics have claimed.

The new Plan for the North urges the Government to ensure that parts of the region that would have been in line for extra EU funding, such as South Yorkshire Tees Valley and Durham, should not be disadvantaged when details of the new Shared Prosperity Fund (SPF) are revealed.

The UK Shared Prosperity Fund is the planned successor to EU funding to the UK regions and was first trailed in the Conservative manifesto for the 2017 general election.

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The new Plan for the North urges the Government to ensure that parts of the region that would have been in line for extra EU funding, such as South Yorkshire, Tees Valley and Durham, should not be disadvantaged when details of the new Shared Prosperity Fund (SPF) are revealed. Pic of Barnsley by Scott Merrylees.

But report authors Steve Fothergill and Tony Gore from Sheffield Hallam University's Centre for Regional Economic and Social Research, say four years later, the details of the new fund remain sketchy and the intention is now that it will not kick in until April 2022.

The fund is the replacement to the funds which came from Brussels to the country's most deprived areas while the UK was an EU member and made financial contributions to its budget.

In the EU’s 2014-20 spending round, £2.4bn was allocated to the North of England, making the EU the biggest source of funding for regional and local development in many parts of the region and paying for investment in training, infrastructure, R&D, business support and green technology.

Last year Chancellor Rishi Sunak told MPs that the whole of the UK will benefit from the UKSPF, and the government “will ramp up funding so that total domestic UK-wide funding will at least match EU receipts, on average reaching around £1.5bn a year”.

But today's report argues that if Brexit had not happened the UK "would have received substantial additional funding because of the deteriorating GDP statistics for South Yorkshire, Tees Valley & Durham and Lincolnshire, which would have placed them in the same top-priority category of areas for EU aid as Cornwall and West Wales and the Valleys".

It adds: "Replacing EU funding from the 2014-20 spending round by a similar sized UK Shared Prosperity Fund, as the government intends, in fact represents a cut in the funding the UK regions would have received."

Setting out how they believe the SPF should work, the authors say allocations should be determined "by a formula, not competitive bidding, which is wasteful of time and resources, open to favouritism and poor at delivering better outcomes".

And the report says the fund should operate on the basis of multi-year allocations "of the longest practicable duration". It says: "EU funding to the regions operated on a seven-year cycle that was widely valued because it allowed for the proper planning and implementation of projects, especially schemes of a more ambitious or transformational nature."

And it adds: "The Government should exercise a light touch in defining priorities. The broad objectives set out in the 2020 Spending Review – investment in people, investment in communities and place, and investment for local business – are sensible and sufficiently broad to cover the interventions that are needed. Operational decision-making should be up to local players in the North and elsewhere who know their area best."

The report also criticises another key element of the Government's post-Brexit economic policy, freeports, which allow eight areas of the country to offer temporary tax breaks to companies including reductions to the tax companies pay on their existing property, and when they buy new buildings.

The Humber and Tees Valley have both been named as freeports but the report says the fact that three other winners are in the South East "rather gives away the fact that Freeports are not really about levelling up".

It adds: "Whether the North’s new Freeports prove to be a useful tool in growing the economy remains to be seen and, in truth, the concept has been tried before in the UK (in the 1980s and 90s) without much obvious effect.

"If the new Freeports do succeed, their spread around the country suggests that they are unlikely to make much difference to the North-South divide."

Earlier this month in Parliament, Minister Luke Hall said the UKSPF and the Government’s £4.8bn levelling-up fund were “core parts of our levelling-up agenda”.

He said: “I regularly speak to my ministerial colleagues about both funds, and those discussions will inform our levelling-up White Paper and the UK shared prosperity fund investment framework, which we plan to publish later this year.”

And a different scheme, the Community Renewal fund, will see some £220m invested to trial new priorities and projects ahead of the introduction of the UKSPF.