Summit & UKREiiF Spotlight – How to unlock investment in the Midlands

In the next of our five Summit Spotlights, we’re distilling the expert perspectives from, not only the Midlands Economic Summit, but also the sessions that took place across UKREiiF 2024. The two events echoed each other in many ways. Here we reflect on the takeaways, connect the key themes and try to identify the solutions that only working together in collaboration can deliver. 

• Paul Faulkner – Chief of Staff & Operations, RCL Partners 
• June Matte – Managing Director, PFM/UK Municipal Bonds Agency 

• Andy Cunningham – CEO, Geopura

• Jason Longhurst – UK Head of Sustainable Investment & Partnerships, Prologis  

• Daniel Campion – Co-Founder and CEO, Sitenna

The current public sector finance model is failing to deliver infrastructure investments

During UKREiiF, speakers from a range of panels repeatedly expressed dissatisfaction with bidding requirements highlighting the uncertainty and resource-intensive nature of the process at a time when public funds are scarce. Alongside frequent match funding requirements, there were concerns that the system reinforced inequality by favouring richer authorities. The competitive nature of bidding was also felt to undermine collaboration between local authorities.

Short-term funding cycles and a lack of flexibility and fungibility were also highlighted as major impediments to continuity and effective, strategic long-term planning. Inflation has added further challenge; even where projects don’t encounter delays beyond grant spending deadlines, some are no longer deliverable due to price increases between the application and delivery stages.

There is also, quite simply, the scale of the challenge: across the country, there is a massive, pressing need for new housing, transport infrastructure and investment in a green transition, which the public sector is not financially/technically equipped to tackle alone.

What stops the UK from retaining inward investment?

Our universities, ease of doing business and an innovation-friendly regulatory environment were both cited as draws for inward investment.

However, skills shortages were repeatedly raised as a significant barrier, with many speaking of the need for regional or national skills strategies addressing specific gaps to meet private sector demand. There is, for instance, a nationwide shortage of 200,000 construction workers – the very people needed to build the infrastructure essential for growth.

Other big, recurring themes were the challenges caused by lack of infrastructure and transport connections, as well as the complexity and uncertainty of the planning system.

Short-termism, landscape complexity and lack of strategic planning were some of the barriers discussed stopping projects from progressing in a timely and effective way.

So, what are the solutions?

There is a need for innovative new finance models, particularly in ‘green’ sectors where higher risk levels dissuade traditional investors. For example, in Coventry, £650 million annual investment is needed to reach Net Zero.

Initiatives like, for instance, the Midlands Green Bond which could be a transformative model to provide cheap, longer term finance for local authorities and businesses to decarbonise.

June Matte, who is working alongside the Midlands Engine to see the Bond become a reality and who spoke at both events, articulated that such a mechanism would allow pension funds and insurers to invest locally, and as already identified, would end the competition for government funding. The value of regional development funds is in how they bring local government together to invest together, as is the case in other countries.

June hopes the Bond, currently in a pilot stage having already gained the attention of several interested local authorities, can be in the capital market by the first quarter of 2025.

Another initiative explored at both UKREiiF and the Midlands Economic Summit was the Invest in UK R&D campaign. Launched at UKREiiF, the campaign looks to be the first of its kind in the UK to showcase the collective investment opportunities that Midlands universities offer investors.

It is this public-private partnership that is essential to unlock the economic growth the UK and its regions need.

Emerging sectors present opportunities for investors

As the UK’s largest property conference, the need for housing was a well discussed topic at UKREiiF. Affordable, social or single-occupancy housing will be a large growth market for the coming decade providing investment opportunities across different sites.

The Midlands Engine Partnership Pavilion hosted panels explicitly discussing the new, brownfield developments at the heart of towns and cities like Telford’s Station Quarter, Worcester’s Shrub Hill and Derby’s Nightingale Quarter.

From the Midlands Economic Summit, the investment panel discussed the energy transition as another opportunity. Andrew Cunningham, CEO of Geopura, UK’s largest producer of green hydrogen, gave his assessment that collaboration is key for a small company to attract investment – demonstrating to investors the scale-up potential.

The role of combined authorities, clusters, freeports and investment zones

Combined authority mayors from the UK regions attended UKREiiF and it is these regional champions who can act as a ‘front door’ for investors, enabling a distinctive regional ‘brand’ and narrative that, alongside their convening powers, can help simplify the investment landscape and provide a compelling international offer to investors. They also have funding powers and the ability to shape strategy around transport, planning, and skills.

However, they are constrained by current funding frameworks, different scales of devolution (with varying powers), and political considerations stemming from the need to build consensus between constituent councils (each potentially led by different parties).

This is where the important role that the Midlands Investment Portfolio comes in – an all-in-one tool containing all the priority propositions from across the region, designed specifically for the ease of an investor.

There was also an emphasis on developing clusters to foster sustainable growth, centred around hubs of high-paying high-skilled jobs, which in turn support the local economy. These clusters can be extremely globally competitive; for example, the East Midlands Freeport referenced Space Park Leicester as benefitting from low taxes and university links to attract space partners to the UK, rather than going elsewhere.

What’s more, the ability of freeports and other economic zones to reduce the risk and cost of business can provide compelling offers to investors. They can also facilitate digital frictionless trade and speedy entry into markets. For example, the Thames Freeport, which helps bring in small companies from South Korea to access the London housing retrofit market by accessing intellectual property for products such as air source heat pumps from Korea at speed, to be assembled and installed by local UK workers. Similarly, the Humber Freeport is accelerating the green transition through green corridor work and freight innovation.

The Midlands Economic Summit is the Midlands’ largest pan-regional business forum. Convening over 500 business, academic and public-sector leaders, the Summit provides a unique space to celebrate the region’s strengths and discuss its strategic priorities.

This year’s summit, held on 10 June at the Vox Conference Centre Birmingham, explored the theme of ‘Driving Investment, Powering Growth’ through a diverse programme of expert speakers and panels.