Wed 3 March 2021

The Government has once again failed to live up to its ‘levelling-up’ pledge, reports Sam Bright

More than £880 million of a £1 billion Government investment scheme to boost new businesses in Britain has been channelled to London and the south of England, Byline Times can reveal.

Last May, as the economy was stung by the Coronavirus pandemic, Chancellor Rishi Sunak announced a gambit of policies to insulate companies. One scheme was the ‘Future Fund’, designed to provide equity investment to firms that were struggling to find private investors.

“The new Future Fund will support innovative UK companies with good potential, that are essential in ensuring the UK retains its world-leading position in science, innovation and technology,” the Government said.

It has since been reported that the UK economy was the worst affected among major countries between last April and June. During that period, UK GDP fell by 20.4% compared with the previous three months – the biggest quarterly decline since comparable records began in 1955.

Perhaps as a consequence, the Future Fund scheme has burgeoned. Initially planned as a £250 million ‘shot in the arm’ of UK business, it has now deployed £1.06 billion in convertible loans, according to the latest figures from the British Business Bank.

However, the vast majority of this money has been pumped into businesses in London and the south of England.

606 firms in London have received convertible loans through this scheme, representing £646.8 million in Government investment. The second largest beneficiary has been the south-east, with 122 companies based there receiving loans worth £130.5 million.

Future Fund investment in companies based in the south-west and east of England also amounts to £111.4 million combined – taking the total investment in the south to £888.5 million, or 83.2% of the scheme’s total output to date.

In contrast, such generous Government investment has not been extended to companies outside the gravitational pull of London. The total value of convertible loans awarded to firms in the north and Midlands is just £150.4 million – roughly a quarter of the investment given to firms in London alone.

This is despite the Government’s pledge to ‘level-up’ parts of the country that have suffered economically in recent decades, while other regions have boomed.

So far, this promise doesn’t seem to have played out during the Coronavirus pandemic. Last July, Byline Times reported that former industrial heartlands – including several areas in the ‘Red Wall’ that voted for the Conservatives in the 2019 General Election – were being disproportionately hit by the pandemic.

At that time, 15 of the 20 worst-affected local authorities were ‘Red Wall’ areas.

As cases began to peak again in the north last September and October – necessitating tougher COVID-19 restrictions – the Chancellor initially refused to extend business support, provoking a showdown with Mayor of Greater Manchester Andy Burnham.

Of course, London and the south hasn’t escaped the worst excesses of the pandemic. A mutant strain of the disease emerged in Kent and quickly proliferated in London towards the end of 2020 – causing hospitals to be quickly overwhelmed.

As Stephen Bush observed in the New Statesman last month: “London’s struggles now are a direct consequence of the decision to keep the capital open – in order to boost the country’s economy – and run its healthcare system as hot as possible.”

Perhaps unsurprisingly, therefore, new statistics show that London’s economy has suffered less than the rest of the country. Indeed, new data from the Office for National Statistics shows that London’s GDP shrank by just 2% from last April to June – a less pronounced reduction than in any other nation or region. The West Midlands, for example, was hit by nearly 5%.

The British Business Bank argues that the Future Fund spending is comparable to the regional breakdown of equity investment seen in normal times.

“The British Business Bank’s 2019/20 Small Business Finance Markets report showed that London received 66% of equity investment by value in 2019,” a spokesperson told Byline Times.

However, the Government should not be reinforcing existing regional inequalities – especially when the Conservative Party’s manifesto promised entirely the opposite.

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