Further details have emerged on the investment streams at risk following the Brexit vote, including the planned £60m extension to the Evergreen fund and Manchester’s £32m share of a Northern Powerhouse Fund, according to a report from Manchester City Council’s chief executive.
Sir Howard Bernstein has distributed a briefing note ahead of the council’s executive next week, outlining the “considerable uncertainty” following the referendum result on 27 June, and the impact of the decision on Manchester’s investment and development pipeline.
In the report, Bernstein said “it is clear access to European Regional Development Fund and European Social Fund will end”, putting Manchester’s receipt of £300m of EU funding, and another £300m of match-funding, at risk.
If the UK remained in the EU, Manchester had until 2022 to access the funds. According to Bernstein, the current grant programme is now expected to end midway, and while projects which have contracts in place are seen as safe, this only equates to £19m of ERDF and £17m of ESF money. The rest was due to be distributed through the second phase of commercial property fund Evergreen, alongside a pot to be shared across the Northern cities, a Northern Powerhouse Investment Fund. However, now “no new EU funding contracts” are expected to be signed.
The North West has £230m awarded under the European Social Fund for training young people, upskilling the workforce and tackle unemployment. Of this, Greater Manchester has more than £100m allocated. This would cover 50% of a £200m training strategy for the next decade managed through the Manchester Growth Company.
The Northern Powerhouse Investment Fund, announced by the Chancellor in the Autumn Statement, is worth over £400m with £50m coming from the British Business Bank, matched by over £180m from the European Investment Bank. Around £140m of Local Enterprise Partnership European Regional Development Fund allocations from the North West, Yorkshire & Humber and Tees Valley were being used to form this combined fund.
The EU’s Joint European Support for Sustainable Investment in City Areas (Jessica) programme has been used to establish urban investment funds for the North West, known as Chrysalis in Merseyside and Evergreen in the rest of the North West. The Evergreen fund allocated £60m under the last budget, which closed in 2013, and a second pot of £60m had been planned. Evergreen Two was discussed at the GMCA board meeting in May and had already been facing delays of six to 12 months due to operational issues at a national level, according to an officer’s report.
Projects funded under Evergreen 2007/13 funds included Muse Developments’ 70,000 sq ft One City Place office in Chester, Bruntwood’s Citylabs, Carlyle’s Soapworks office in Salford, Peel’s Protos energy park in Ince, Cheshire, Allied London’s XYZ and No.1 Spinningfields buildings, offices at MediaCity by Peel and Harworth Estates sheds at Logistics North in Bolton.
See below for an abridged version of Bernstein’s Brexit report
“There is considerable uncertainty regarding both the process leading up to withdrawal and the impact that withdrawal will have on the UK economy.
“Whilst the medium and long-term impact of Britain’s withdrawal from the EU is difficult to assess at this stage, there are some immediate implications that require urgent work over the coming weeks to understand. It is clear that access to ERDF and ESF funding will end, and that continued access to transnational funding will depend on the terms that Britain negotiates with Europe.
“There will be significant confusion and disruption amongst supported parties as a result of withdrawal at the mid-point of the current programme, and it is unlikely that funds will be available to draw down in full. It is also clear that Britain’s decision to leave the European Union is already having a negative impact on investor and business confidence
“European Structural and Investment Funds are vested through multi-year agreements at sub-regional level, with the current round covering the period from 2014 to 2020. Greater Manchester currently receives funding from the European Regional Development Fund and European Social Fund as well as from Transnational Funds. GM’s indicative allocation over the 2014-2020 period was £176m of ERDF and £145m of ESF. This funding has to be matched with a minimum of 50% non-EU funding, creating a programme of nearly £650m.
“To date only £19m of ERDF funding has been contracted, including £5m to the Graphene Engineering & Innovation Centre, together with a further £17m of ESF funding due to significant delays in the UK Government and EU agreeing the Operational Programmes. A significant proportion of GM’s EU funding was due to be contracted under two financial instruments, an extension of the Evergreen fund (£60m plus £10m of grant) and the Northern Powerhouse Investment Fund (£32m).
“The Department for Communities & Local Government and the Department for Work & Pensions have both now stated verbally that existing EU funding contracts will be honoured, that they will progress further applications as normal, but at this stage they will not be signing any new EU funding contracts.
“This has implications for the ability to deliver against a number of the priorities set out in the Greater Manchester Strategy and in the recently published Manchester Strategy.
“However early conversations and analysis already suggest that investors are nervous at this point, particularly those in the North American markets. Such investors have and are due to bring substantial investment to Manchester and GM and it is critical that we act quickly to offer reassurance and demonstrate that we are ‘open for business’.
“A clear way to provide that reassurance is to invest our own funding in key developments, giving those investors the confidence to continue with their plans, especially in relation to commercial property developments.
“It is now possible that we will not be able to access the ERDF funding required to extend the Evergreen Fund as planned. Even if EU funding were available until 2018 this may not give sufficient time to create and implement a meaningful fund. It is also possible that the Northern Powerhouse Investment Fund, supported by the British Business Bank will be in the same position.
“Urgent work is underway to identify resources required to respond to this demand.
“This analysis will then be brought together with the work already underway to implement the recently published Manchester Strategy to form the basis of an economic and fiscal management strategy to ensure that the priorities of Our Manchester can be delivered, despite the uncertain political, economic and fiscal climate we are now operating in.”