1. Economics
November 23, 2015

What does devolution mean for British business?

By David Pester

In all the talk of metro mayors, city regions and devo-Manc, the views of one group have been largely ignored. So what does British business think of devolution, asks David Pester, managing partner of law firm TLT.

For those of us working in the private sector, the current debate about the government’s devolution agenda is marked by its lack of detail. Engagement with businesses has also been limited, which is perhaps unsurprising given where we are in the process.

But it’s vital that organisations operating in city-regions understand political developments that will impact their business. They also need the opportunity to contribute their views.

As a law firm that supports businesses across the UK, we wanted to understand how they viewed devolution and, working with Centre for Cities, start the process of giving them a voice in the debate. Part of the Centre’s research process for their report on this issue meant speaking directly with a number of business leaders about devolution. Their enthusiasm for seeing the cities where they do business grow and thrive was very evident – and, as we move to the stage where devolved powers are put into practice, business want to be more involved.

The publication of the Centre for Cities report, “Firm Views: The Business Take on Devolution”, is therefore timely. Built on polling and consultation with over 2,000 businesses across the UK, it helps to communicate business opinions on devolution to policy makers. It opens up the debate at a crucial time as more deals are agreed, with some clear recommendations on how business can be more involved.

And, broadly, businesses are supportive of the idea of devolution: they believe they will benefit if their local authority has more control over areas such as transport, planning and skills. Local authorities are clearly more knowledgeable about local issues. But equally, they are more accessible as a policy making body with which business can engage; whether that’s talking about how to solve the traffic issues at rush hour, or how to attract and retain investment or skills.

Devolving power over how local authorities spend money inevitably brings with it questions about more powers to raise money. There was some nervousness here during the research – businesses are understandably wary of the prospect of more tax or complexity.

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There is clearer support where monies raised are then targeted to a specific project: think London businesses funding Crossrail. But this would require active engagement with the local business community, and trust that the investment would deliver clear benefits.   

The chancellor’s business rate announcement earlier in the autumn was in fact the first move to allow local authorities to keep more of the revenue they raise in quite a long time, although with some restrictions. In the same announcement he also proposed that, in the future, combined authorities with directly elected mayors in place could have power to raise business rates by up to 2 per cent to fund specific infrastructure projects. What is certain is that, regardless of any new revenue-raising powers, demand for funds will always outstrip supply – devolution or not.

Interestingly, during the research process, business leaders talked of the options local authorities might have to generate more revenue outside of more traditional routes like business rates. This ranged from assessing the existing estate so as to understand how it can be used more efficiently (including generating revenue receipts), to pension funds investing in renewable businesses as subsidy cuts reduce the returns required by private investors. This is clearly an area where private sector partners could support.

Working with Centre for Cities over the last few months has shone a light on the many challenges involved in creating a united city-region headed by an elected mayor. However, it has also shown just how important it is for businesses to be involved in the debate. With the reinvigoration of regional economies at the heart of the devolution agenda, it makes sense to engage with the wider business community to benefit from their insight into what areas require to supercharge economic growth, while at the same time giving businesses a greater stake in the future prosperity of their local community.

The Centre for Cities has made several critical recommendations, including the need for clear communication that sets out what is happening and when, and local and national policymakers having a clear point of contact and strategy to engage. Businesses should support these and get more actively involved in the discussion. Importantly, policymakers will need to work proactively to engage business in the process in the right way – and at the right time – to ensure we make the most of the devolution opportunity.

David Pester is managing partner of TLT. The national law firm supported the recent “Firm Views: The Business Take on Devolution” research report, published by the Centre for Cities. 

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