Time for a Good Domestic Economy

A historic day for the UK for sure. People have voted for change and the new Labour government has the mandate to create a Good Domestic Economy. We’re pleased that our place-based impact investing (PBII) thinking is included in their vision for ‘national renewal’, but now the work really starts.

PBII as a paradigm for rethinking and redoing investment as a driver of change should be central to how the new government goes about rebuilding the economy and communities. And in practical terms, here are four big ideas we can get moving with immediately:

Mass Flourishing Through Grassroots Innovation

As Edmund Phelps noted in his book Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change, widespread innovation, driven by modern values and grassroots dynamism, is essential for creating a society where people experience both material prosperity and personal fulfilment.

To get this right we need to find innovative financial solutions to getting institutional capital invested in ways that create level playing fields across the UK. Public procurement needs to be reformed so that it’s not just the same big players supplying our anchor institutions like the NHS and Universities… who in turn need to recognise the role they play in local supply chains.

More Productive Activity in Local Economies

Coffee is delicious, but our high streets do not need more overpriced coffee shops. Regeneration requires places and spaces where people can work, be productive, and in turn boost their local economies and communities. The creative industries are a prime example and if we are going to have coffee shops then make sure all food and drink businesses source locally. Knowledge businesses can be anywhere – the online world enables a move away from concentration in the cities. Even ‘manufacturing’ businesses should be in the mix… bring back the blacksmith at the top of the high street.

Not only must investors get innovative about investing in smaller projects and not just the big regeneration schemes, together with local government and the local community, they need to be intentional about facilitating productive activity. We must find ways of turning financial investment into economic investment.

Transformative Investment in Social Infrastructure

In our piece The Good Domestic Economy: A Vision for Place-Based Impact Investing we shared that one of the most critical elements of sustainable place-based economic development is an investment in social infrastructure – the foundational economy. Good places need good homes, good education and good healthcare – to achieve this we need transformative investment at world beating levels. All of us should be proud of our social infrastructure.

And, given the times, we need to today provide for the next long wave of economic growth – businesses related to holistic health with AI and climate change.

A New Social Contract in Every Place

Today’s election result was a vote for change and that new social contract needs to be forged from the bottom up. Trust in politics is at an all time low and even with a landslide result, one must keep perspective. PBII is a high trust model – successful PBII requires high trust between investors and all place-based stakeholders.

Future social contracts must provide the bridges at all levels for delivering for delivering social value. This requires true democracy and competitive markets. In practical terms this means we need more independent businesses, genuine devolution that includes a shift in power and resources, not just the risk, high levels of community development, and anchor institutions living up to their status.

PBII is a Universal Agenda

We welcome this overdue change of government and are ready to work with everyone to do what’s necessary to deliver on the promise of national renewal.

It seems that PBII now really is an idea whose time has come… Our market shaping, cross-sector PBII Network of investors and place-based stakeholders is expanding. We’re hosting an important forum on housing next week. We’re working with pan-regional partnerships on integrating PBII into their economic development plans. We’re working with investors to define their investment criteria to make it easier for local and combined authorities to attract the capital they need. And we’re bringing asset owners into our PBII room so that we can have the conversations we need to find the innovative financial solutions required to make UK pension money work for the UK by investing in our own backyard.

National politics is important, but the people in places all across the country are more important. By building from the bottom up using a PBII approach we can make a real difference.

Get in touch if you are interested in being part of this work