Institutional Investment for Place-Based Economic Development

The Good Economy and Localis, an independent, cross-party think tank that works to promote neo-localist policy, have joined forces to offer a major research programme on Institutional Investment for Place-Based Economic Development to support both public and private sector stakeholders.

  • The UK needs a step-change in investment to improve outcomes for left-behind communities across the UK
  • Delivering this will require action from across the investment ecosystem, within which Combined Authorities, County Councils and Institutional Investors are key stakeholder groups
  • All these groups face challenges in fulfilling their role in boosting impact-led investment, many of which are at least partly a function of limited knowledge of leading practice – not surprising in a rapidly emerging market sector
  • This research aims to fill these knowledge gaps through a collaborative, case-study led approach that addresses key investment themes applied in places across the UK – as well as learning from relevant strong examples from overseas
  • The Good Economy will use its Place-Based Impact Investing Network as a forum to test emerging findings from the research – both to help ensure the output is practical and relevant, and as a vehicle for deepening mutual understanding between stakeholders
  • Localis is well known for their high quality research and their experience in and understanding of local government will add great value to the project

Why is Place-Based Economic Development Important?

The UK needs to ramp up its investment performance across sectors and regions with the financial sector playing a key role. Far more institutional capital needs to flow into real economy investment projects across the country. We have historically invested at a far lower level than our international competitors, and this is increasingly reflected in the quality of our infrastructure and built environment.

Local government is in a particularly tenuous position, as the socio-economic impacts of historic underinvestment combine with a decade of underfunding of public services to create a vicious cycle of sluggish growth and rising demand.

Yet there is no lack of capital in the UK economy – the world’s 6th largest economy and home to London the world’s leading financial centre. The challenge is to connect this capital to communities through new investment pathways. Well-directed private investment delivered in partnership with local government has the potential to uplift local economies, grow tax bases and help to alleviate the overall service pressure on councils. This is at the core of our place-based impact investing work.

The capital allocations provided to combined authorities by government – most significantly, the single funding settlements for trailblazer combined authorities – represent a real opportunity for sub-regionally-coordinated leveraging of private finance to drive local transformation.

The big question is how do we take this opportunity to depart from present trends and make this happen? Institutional Investment for Place-Based Economic Development is a multi-phase research project devised by The Good Economy and Localis, aiming to find valuable answers to this complex question of ‘How’.

The Opportunity and Challenge for Combined Authorities and Counties

Combined Authorities are at a crucial stage in their evolution.

The trend towards increasing devolution of powers and consolidated capital funding streams provide new opportunities for more strategic place-based investment reflecting local priorities. However, the pattern is inconsistent across the country and there is a lack of institutional capacity in economic development. Overall, the volume of public investment available will not be sufficient to meet the Levelling Up challenge.

Therefore, Authorities need support to build a pipeline of investable propositions and establish the credibility to work with private investors – including capability building in key areas.

The Opportunity and Challenge for Investors

At the same time, investors increasingly have an appetite to invest in UK assets that have a demonstrable positive contribution towards environmental, economic and social goal but they often struggle to work out where best to engage outside the big cities to deliver acceptable risk-adjusted returns alongside meaningful impact. There is a lack of visible investable propositions and credible counterparties, and they lack knowledge of the true pattern of needs on the ground.

Investors need to find more effective ways to identify and build partnerships with the right people, identify and filter opportunities, co-create commercial models that work for all parties, understand local needs and articulate how you they can help address them.

Moving Place-Based Impact Investing Forward

Aside from some major, established market players, institutional investors tend to find the structure of local government and the nature of its finances complex. On the other hand, council officers can struggle to put together propositions which are attractive to investors. The situation calls for a greater understanding of the demands of each side and learning lessons from what’s worked – and not worked – in relation to public-private investment.

To advance PBII as a potential game-changer in markets and policies, we need to create a dynamic stakeholder ecosystem that is favourable to the adoption and diffusion of PBII, as with all significant innovations that bring about systemic change. The advancement of the Combined Authority model, as part of a wider turn to subregional governance also seen in the establishment of Integrated Care Systems, can become a catalyst for this transformation.

Get Involved

For more information on this research programme or to find out how you could get involved, please get in touch.

 

About The Good Economy

The Good Economy is a leading impact advisory firm working at the forefront of place-based economic development. From consultancy to collaborative field-building, The Good Economy is a recognised thought leader and the ‘go to’ firm for organisations looking to deliver and report on their impact.

The Good Economy works in partnership with economic development specialist, Mickledore, headed up by Nigel Wilcock. Founded in 2008, Mickledore works with public sector clients as well as funding and strategy work for private sector companies.

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About Localis

Localis is an independent, leading not-for-profit think tank that works to promote neo-localist ideas through research, events and commentary covering a range of local and national domestic policy issues.

Their research and policy programme is guided by the concept of neo-localism. Neo-localism is about giving places and people more control over the effects of globalisation. It is concerned by economic prosperity, but also enhancing other aspects of people’s lives such as family and culture. It is not anti-globalisation but wants to bend the mainstream of social and economic policy so that place is put at the centre of political thinking.

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