‘Levelling up’ could cost £1 trillion over the next 10 years

The government’s flagship ‘levelling up’ agenda could require £1 trillion of investment over the next decade, according to a new report.

The report – Scaling up institutional investment for place-based impact report – published by the Place-Based Impact Investing Project (PBII), sets out its case for local government pension funds to adopt a ‘place-based lens’ over coming years.

According to the report, local government pensions schemes currently only invest around 1% of their portfolio in ways that could directly support local and regional economic development and positive place-based impact creation.

But if 5% of their funds were allocated to local investment this would unlock £16bn focussed on delivering both financial returns and responding to the needs and opportunities of specific places.

With the UK government’s ‘levelling up’ agenda expected to require £1 trillion of spending over the next 10 years, the report sets out a clear rationale and path for how private capital could be mobilised alongside public investment.

‘When we speak about place-based impact investing we no longer only talk about the need to address long-standing inequalities and support more inclusive and sustainable development across the UK,’ said the chief executive of the Impact Investing Institute, Sarah Gordon.

‘We now have evidence that shows that there are real opportunities for investors to secure financial returns while doing so. Connecting private capital to deliver positive impact, in the places that most need it, is not only crucial to building back better after the coronavirus pandemic, it also has the potential to unlock significant investment in local businesses, quality jobs, affordable homes and town centre regeneration that can bring us one step closer to a truly sustainable economy.’

Karen Shackleton, director at Pensions for Purpose, added: ‘We have seen a significant increase in interest in impact investment from the Local Government Pension Scheme over the past three years with a growing understanding that it is possible to deliver market rate, risk-adjusted returns alongside social impact. This research will allow funds to see what scope there is for such investment and should encourage them to consider introducing a more purposeful approach to their investment strategy.’