Paul Kelly 19 May 2021

Supporting local authorities to level up economies

Supporting local authorities to level up economies image

With a new Conservative MP in Hartlepool and newly elected councillors and mayors across the country, many of whom spoke about the levelling up agenda it’s time to figure out what this actually means and how the public sector can be supported to make the government’s ambition a reality.

The UK is one of the most geographically unequal economies in the developed world with deprived areas, largely focussed in the North and Midlands suffering historic underinvestment in physical and digital infrastructure, worse health outcomes and fewer opportunities.

Over the last year inequalities such as income, employment, health and education have been exacerbated and magnified by the COVID-19 crisis, threatening to widen the gap between regions and push entire generations further behind.

For many it will come as no surprise that 18 of the 20 most deprived neighbourhoods are in the North of England with productivity levels, a reliable indicator for the success of a region, falling well below London and the UK average. In fact, only the North East and Yorkshire and Humber, which have the second and forth lowest output levels nationally fall above the UK average.

The moral and economic case for levelling up has never been clearer. These inequalities need to be urgently addressed to improve people’s lives and deliver sustainable national economic growth.

That’s why at Mace we see the Government’s ambition to level up and return to the ‘new normal’ as a once in a lifetime opportunity to address historic inequality, creating a fairer, inclusive society that also helps the UK reach its ambition to be net zero by 2050.

With local authorities able to bid for Government funding through the £4bn Levelling Up Fund to invest in transport, the regeneration of brownfield sites and outdated infrastructure, the public sector and the construction industry must be prepared to seek radical solutions.

We can’t just build back as before, we need to 'build back better' and think differently about growth, infrastructure delivery and industrial development. If we don’t, the inequalities we faced before the pandemic will remain as they’re embedded within the system.

From the objectives of the new National Infrastructure Bank to the Levelling Up Fund its clear that growth and recovery driven by investment in the built environment is intended to address economic inequality across the UK.

But how can the construction industry support local authorities to level up economies?

The construction industry provides two vital functions, direct employment, investment and revenue to local and national economies and secondly enables important social, transport and fundamental infrastructure to be delivered.

In our recent Insights Report we outlined ten practical policy suggestions to accelerate levelling up from how our sector needs to change delivery to how services are procured. Three of these are particularly helpful to local authorities.

Firstly, target investment in ‘shovel worthy’ rather than ‘shovel ready’ schemes. Local authorities and the public sector can play a huge role in this by choosing schemes which will deliver the greatest benefits and outcomes for their communities. Homes, hospitals and schools for example unlock huge benefits for local communities.

Secondly, change procurement processes to focus on social impact and community outcomes. The recently published Transforming Public Procurement Reform Green Paper and The Construction Playbook set out new outcomes and propose a relationship-based approach for how public works projects are assessed, procured and delivered.

They signal a golden opportunity to do things differently. They propose moving away from procurement based on ‘best taxpayer value’, too often confused for the ‘cheapest’ to one focussed on outcomes and wider benefits to communities.

Procurement should look at an organisation’s commitment to social value, their impact on the levelling up agenda and how they will boost productivity and deploy real innovations on projects.

By prioritising social value through procurement, local authorities can ensure their investment is benefitting their communities. Social value outcomes and objectives can turn shovel-ready schemes into shovel worthy right from the beginning.

This step-change for construction productivity could make our industry more sustainable and resilient and aid economic recovery post pandemic. At Mace one successful way of achieving this is by moving from construction to production and championing ‘modern methods of construction’.

This can revolutionise on site project delivery by manufacturing and then sub-assembling materials and components at construction manufacturing hubs in the areas that need them most.

This type of approach can reduce construction time by 50%, boost regional production, level up and help the UK achieve its net zero carbon aims. Our modelling suggests a regional hub approach across the North West, East and West Midlands, Yorkshire and The Humber and Kings Lynn and West Norfolk could create 124,000 high quality green regional jobs and provide a £4.9bn economic boost.

By adopting greener, faster and more innovative production style approaches, our report suggests that the UK could save £2.8bn annually on our current pipeline of delivery - enough to triple the investment going into the North West region every year or increase tenfold the investment into the East Midlands.

Lastly, invest in both digital and physical connectivity infrastructure. By investing in low carbon transport and improved digital connectivity in the regions that need them most the UK government can significantly improve the economic productivity of the North and the Midlands.

Again, the new UK Infrastructure Bank will have a key role to play in facilitating joint private and public sector funding to drive infrastructure delivery.

Research by the Office for National Statistics shows a strong link between action taken to improve transport infrastructure, digital connectivity and investment levels and productivity and wage levels. Every 1% increase in productivity generates a 1.5% increase in real wage growth.

Raising the economic output per head in the North from its current £21,555 to the UK average of £26,625 would mean an extra £70bn output. That means levelling up productivity in the North and Midlands would produce an extra £110bn of economic output resulting in a collective pay rise of £8,400 per person per year.

Using innovative methods on construction schemes can act as a catalyst to supercharge the levelling up agenda and deliver more projects on time and on budget.

The last three decades have seen little innovation in how construction projects are delivered, productivity having only increased by 1% between 2000-2019 compared to 32% for manufacturing for example.

Many clients in the public sector like to stick with what they know and maintain a more transactional relationship with their supply chain partners. But local authorities have the opportunity to try new innovations, approaches and techniques.

By working together, we believe the public and private sector can make a meaningful contribution to levelling-up which we all hope will result in real change.

Paul Kelly is director for strategic advisory consultancy at Mace

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