Warnings raised over local growth fund as Wales faces job losses and service cuts

Amelia Jones

Serious concerns have been raised that the UK Government’s new Local Growth Fund could lead to avoidable job losses and cuts to vital services in some of Wales’ poorest communities, prompting growing criticism from local authorities and economic leaders.

The Local Growth Fund is due to replace the UK Shared Prosperity Fund (UKSPF), which currently supports a wide range of business support, employability programmes and skills training across Wales.

However, under current plans, the successor fund will be almost 50 per cent smaller than UKSPF funding in 2024/25 and will introduce a major shift in how money can be spent.

The Industrial Communities Alliance (ICA), an all-party body representing local authorities in older industrial areas of England, Scotland and Wales.

Estimates that around 1,500 local authority jobs in Wales are currently supported by the UKSPF, with at least the same number of roles sustained within third sector organisations delivering frontline services.

In addition to the reduction in overall funding, the UK Government has proposed a new 70/30 split between capital and revenue spending.

This represents a sharp departure from existing arrangements, under which around three-quarters of UKSPF funding has been used for revenue-funded activity such as business advice, training schemes and initiatives designed to help people into work.

Critics argue the new requirement will severely restrict the funding available for these services, with only 30 per cent of the reduced fund accessible for revenue-based projects.

According to the ICA, this approach risks dismantling programmes that are central to local economic development and undermines the Government’s stated ambition to drive growth and increase employment.

Frustration has also been expressed at the lack of progress in discussions with both the Welsh and the UK Governments, despite what the Alliance describes as clear advice and increasingly stark warnings about the damage the proposed model would cause.

Local authorities and delivery organisations say the impact will be felt immediately, with hundreds of job losses likely once the new arrangements take effect in April.

The ICA maintains that the problem is avoidable. It argues that, in the context of local growth funding, the distinction between capital and revenue spending is largely artificial and counterproductive.

Instead, the Alliance is calling for all funding to be treated as an investment in local economic growth, with the capital-revenue split either abolished entirely or, at the very least, restored to the balance used under the UKSPF.

In the absence of what it describes as a constructive response from Government, member authorities of the Industrial Communities Alliance have agreed to take a co-ordinated approach by writing directly to the heart of the UK Government to set out their concerns.

The letter has been opened for support from Welsh MPs, Members of the Senedd, local authorities, third sector organisations and other bodies directly affected by the changes, including further education providers.

The signatories warn that the current proposals, if implemented as planned, will take what they describe as a “sledgehammer” to business support, training and employability schemes across Wales.

They argue that the consequences will not only be economic but political, particularly in an important election year, with the issue having the potential to become a major flashpoint.

As the April implementation date approaches, pressure is mounting on the UK Government to rethink its approach.

For many local authorities and service providers, the concern is not simply about funding levels, but about whether the design of the new Local Growth Fund will support, or actively undermine, the very growth and jobs agenda it is meant to deliver.

The UK Government were asked for comment.