The new Local Growth Fund: What do we know so far?
6th November, 2025
The government is poised to announce further information on the new 'Local Growth Fund'. This is a major programme of grant funding that will, in part, replace the £2.6bn UK Shared Prosperity Fund from April 2026 onwards.
In this article Alexander Rose looks into what is known at this time about the new Local Growth Fund and what we are likely to find out about it in the build up to the budget on 26 November 2025.
What does the Spending Review tell us about the new Local Growth Fund?
On 11 June 2025, the Chancellor of the Exchequer, Rachel Reeves MP set out a Spending Review for the period starting on 1 April 2026 and ending 31 March 2029.
On the subject of new public funds she announced that “the government is providing targeted, long-term local growth funding to support regional growth across the UK, completing the transition from the UK Shared Prosperity Fund. This includes establishing a new local growth fund, including a 10-year capital settlement from 2026‑27 to 2035‑36, for specific mayoral city regions in the North and Midlands with the highest productivity catch-up and agglomeration potential“.
She went on to explain “in Scotland, Wales and Northern Ireland, the Offices for the Nations will work with the Ministry of Housing, Communities and Local Government (MHCLG) to implement the new local growth fund“.
This confirms that the UKSPF (which was originally cast as a replacement for regional funds from the European Union, such as ERDF) will no longer be available after 31 March 2026. Instead UKSPF will be replaced by two funds, the Pride in Place Programme and the new Local Growth Fund with effect from 1 April 2026.
What is the Pride in Place Programme?
The Pride in Place Programme was announced by the Labour government on 25 September 2025 with the aim of addressing some the most pressing issues within 339 of the UK’s most deprived neighbourhoods. Stated to be worth £5bn the fund aims to give “communities the resources and tools to drive change themselves“.
What is novel about the fund is that “residents, local businesses, civil society and community organisations” will lead upon decision making whilst “working in partnership with their respective local authority”.
Therefore it will be local people who decide the projects that they think are best to “rebuild and transform their neighbourhoods“. Projects put forward will need to align with one or more of three core objectives:
- to build stronger communities – all places should have strong relationships and a collective sense of belonging to their community. This helps bring people together to build community cohesion and resilience, helping people to feel proud of their area and safe in their neighbourhood.
- to create thriving places – every part of the UK deserves to have vibrant neighbourhoods and communities with busy high streets, a good range of local amenities and high-quality physical infrastructure.
- to empower people to take back control – everybody should be empowered and in control of their lives and have a say over the future of their community.
They will also need to align with the eligibility criteria of the fund as well as satisfying the Managing Public Money requirements, including compliance with Subsidy Control law.
More information on the Pride in Place programme can be found in our article here.
The new Local Growth Fund in Wales, Scotland and Northern Ireland
The Local Growth Fund was described in the Spending Review as “targeted, long-term local growth funding“.
In respect of the funding allocations for Scotland, Wales and Northern Ireland, Rachel Reeves in the Spending Review provided an assurance the level of support “will be at the same overall level in cash terms as under the UK Shared Prosperity Fund in 2025-26“.
Only the allocation for Wales has been announced so far. On 13 October 2025 a press release was issued stating that Wales would receive £547m for the next three financial years.
This allows us to calculate the allocations for Scotland and Northern Ireland. The last financial year of the UKSPF saw £900m shared across the UK with Wales receiving 23.3% of the total, Scotland 8.4% and Northern Ireland 5.1%. That would point to Scotland receiving £197.2m over three years and Northern Ireland receiving £119.72m (noting that these figures might be impacted by Pride in Place programme allocations).
In terms of activities that will be funded, the press release for the Welsh Local Growth Fund allocation states that “decisions about how the money will be spent will return to Wales, honouring the UK Government’s manifesto commitment to restore decision-making on money that previously came from the EU“. It explains that “the Welsh and UK Governments have agreed a framework which will set priorities and processes for allocating the funds, with a delivery plan developed and led by the Welsh Government“, but this is not in the public domain at this time.
The new Local Growth Fund in England
England’s allocation from the new Local Growth Fund would be c. £1.497bn over three years if calculated in the same manner as has been applied to determine the level of funding for Scotland, Wales and Northern Ireland (but it should be noted that allocations could be reduced to take account of the commitments made to English neighbourhoods being supported through the Pride in Place Programme).
What is expected to be controversial about the Local Growth Fund is that it will be targeted to “the specific mayoral city regions in the North and Midlands with the highest productivity catch-up and agglomeration potential“.
From this it would appear that some parts of the country that previously received large public funding allocations under ERDF and UKSPF (for example Cornwall) will not be covered by the Local Growth Fund.
This is because the Local Growth Fund is very narrowly targeted. Grant funding appears to only be available for projects taking place within a ‘city region’ within the North or the Midlands and that benefits from a Metro Mayor. Even then, financial support will only be available to those areas showing the “highest productivity catch-up and agglomeration potential“.
Which areas are considered to fall within scope remains to be seen. It seems likely from studies (such as one published by Alexander Harvey of Oxford Economics this week) that Manchester City Centre will be held up as an example of an area which has in recent years demonstrated how to drive higher productivity, including taking steps to realise its agglomeration potential.
In the Oxford Economics report, Greater Manchester is praised because its “productivity has notably outstripped the rest of the country, driven by strong growth in the city centre and in some of the most productive sectors of its economy“. There are many reasons for this success, but one core element has been a willingness to use investment and development to drive growth creating an ecosystem that has attracted current and future knowledge-intensive industries such as AI, cyber, FinTech and genomics into the area.
Therefore it appears the government has decided to focus this programme on these areas because it believes that by doing so the public funding will have the greatest impact upon driving future economic growth.
It also seems likely that the focus of the funds will be upon those activities which nurture innovation and then assist the ideas to be effectively exploited in order to drive economic growth.
Conclusion
The announcement of the new Local Growth Fund has the potential to be controversial.
This is because it is a highly targeted. As a result it will automatically exclude otherwise deserving projects in other parts of England. This includes Lancashire and Staffordshire (both without Mayors) but also Cornwall (previously well-funded by EU and UKSPF). Whilst there is a clear rationale behind the fund, it is a stark departure from the logic which underpinned the European Regional Development Fund and UKSPF. We will have to wait to see whether Rachel Reeves will look to ‘sugar the pill’ for those areas in England which will not be able to access the New Local Growth Fund. Outside England, it is harder to assess whether the fund will be controversial because although the allocations can be predicted, the activities that will be supported cannot. Therefore we await further information as part of the budget announcement.
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Please note that it is anticipated that this article on the new Local Growth Fund will be updated once more information is available.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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