Guidance

Guidance for Local Enterprise Partnerships (LEPs) and local and combined authorities: integration of LEP functions into local democratic institutions

Published 4 August 2023

Applies to England

Executive summary

1. Since the publication of the Levelling Up White Paper, government has made strong progress on extending devolution across England and remains committed to empowering local leaders by integrating Local Enterprise Partnership (LEP) functions into local democratic institutions. The Spring Budget 2023 set out that government was minded to withdraw central government support (core funding) for LEPs from April 2024 and to transfer LEP functions to local authorities, where appropriate and where not already delivered by combined authorities.

2. Following an information gathering exercise led by the Department for Levelling Up, Housing and Communities, and the Department for Business and Trade, the government has confirmed its ‘minded to’ decision.

3. Government’s sponsorship and core funding of LEPs will now cease. As private enterprises, LEPs may choose to continue operating, but government will now support local authorities to take on LEPs’ functions as set out in the March 2022 LEP integration guidance and previously supported by annual core funding – namely, business representation, strategic economic planning, and responsibility for the delivery of government programmes where directed. Government expects these functions to be exercised by upper tier local authorities (working in collaboration with other upper tier local authorities as appropriate), where they are not already delivered by a combined authority, or in areas where a devolution deal is not yet agreed.

4. There is overlap between some of the functions being discharged by LEPs, local authorities and combined authorities, as well as a high level of integration of LEP functions in mayoral combined authority (MCA) areas. Government’s view is that there is likely to be scope for greater join-up, efficiencies, and clarity for the private sector by these functions being discharged within mayoral combined authorities, devolution deal areas, and upper tier local authorities, working together as appropriate.

5. Government will therefore provide some revenue funding to local and combined authorities in 2024/25 to support them to deliver the functions currently delivered by LEPs. Details of this support will be confirmed in due course. Funding beyond 2024/25 will be subject to future Spending Review decisions.

Introduction

6. Local Enterprise Partnerships (LEPs) have played an important role in supporting local economic growth since 2011. LEPs have brought together businesses, educators, and local government, locally and cross-regionally, working towards the government’s ambitions to support regional growth. LEPs have delivered large capital investment schemes and key projects and programmes on behalf of government. They have developed economic strategies for their areas and been a vital source of business support, particularly through EU Exit and the COVID-19 pandemic. We would like to thank them and their staff for their hard work and dedication over the last twelve years.

7. The Levelling Up White Paper set out government’s commitment to extending devolution across England, empowering local leaders, and integrating LEP functions into local democratic institutions. Government has made strong progress on our devolution ambitions and remains committed to agreeing a devolution deal with every place in England that wants one by 2030.

8. To continue empowering our local leaders, government set out at Spring Budget 2023 that it was minded to withdraw central government support (core funding) for LEPs from April 2024 and to transfer LEP functions to local authorities – where appropriate, and where these functions are not already delivered by combined authorities.

9. Between 17 March 2023 and 19 May 2023, the Department for Levelling Up, Housing and Communities, and the Department for Business and Trade led an information gathering exercise, engaging with LEPs, all local authorities including mayoral combined authorities (MCAs), and other relevant organisations. We received feedback from 253 institutions, organisations, and individuals through the online questionnaire. Government also conducted 6 roundtable policy discussions with LEPs, and a further roundtable with organisations and umbrella bodies that work with LEPs. A summary of the findings has been published on gov.uk.

10. Following the information gathering exercise, the government has confirmed its ‘minded to’ decision. LEP core funding will cease this financial year (2023/24). The final annual LEP core funding payment of £250,000 per LEP, or mayoral combined authority (MCA) that has already integrated LEP functions, was made in June 2023.

11. Government expects those LEP functions carried out under current core funding agreements (business representation, strategic economic planning, and responsibility for delivery of specific government programmes where directed) to now be exercised by upper tier local authorities (working in collaboration with other upper tier local authorities as appropriate), where those functions are not already being delivered by a combined authority, or in areas where a devolution deal is not yet agreed. This guidance provides further detail on next steps for LEPs and local authorities.

Transfer of LEP functions

12. As the March 2022 LEP integration guidance set out, the current role of LEPs as funded by government has been to:

a. Embed a strong, independent, and diverse local business voice into local democratic institutions.

b. Carry out strategic economic planning in partnership with local leaders that clearly articulates their area’s economic priorities and sectoral strengths. This should involve building and maintaining a robust local evidence base that identifies local strengths and challenges, future opportunities and the actions needed to support priority sectors, aligned to the relevant levelling up missions.

c. Continue to deliver a number of functions on behalf of government departments, shaped by the local business voice where relevant. This includes the delivery of Growth Hubs on behalf of the Department for Business and Trade, and Careers Hubs on behalf of the Department for Education.

d. Where appropriate, help broker and support new or deeper devolution deals, where requested by local partners.

13. There is overlap between the functions being discharged by LEPs and by MCAs and upper tier local authorities. For example, MCAs undertake growth planning and upper tier local authorities lead on transport planning, which is key to local growth. Some devolution deals have been brokered with the support of the LEP, but in other areas, this is not the case.

14. Since the publication of the March 2022 LEP integration guidance, government has supported the integration of LEP functions into democratic institutions sitting at Level 2 or 3 of the devolution framework: single institutions such as a (mayoral) combined authority ((M)CA), a county council or a unitary authority across a functional economic area with (Level 3) or without (Level 2) a directly elected mayor/leader. Integration has already taken place or is underway in all areas with an existing mayoral devolution deal, and in the Greater London Authority (GLA).

15. In areas where devolution deals have recently been signed but have yet to be implemented, the integration of LEP functions has been negotiated as part of that deal. Government expects integration to continue as agreed through these deals and will continue to work with areas with new devolution deals to deliver LEP functions.

16. In areas where there is not yet a devolution deal either agreed or under negotiation, government expects LEP functions as set out in the March 2022 LEP integration guidance and currently required under LEPs’ annual core funding agreements (business representation, strategic economic planning, and delivery of government programmes) to be exercised by the respective upper tier local authority or authorities. Wherever possible, government expects local authorities to work together to deliver LEP functions within potential devolution deal geographies (whole county geographies or functional economic areas with a minimum population of 500,000, in line with the geography principles set out in the Levelling Up White Paper). In areas where there is not yet a devolution deal either agreed or under negotiation, existing LEP geographies may provide a suitable starting point, and government will engage with local authorities on options in those areas as required. It should additionally be noted that government may choose not to support areas that intend to deliver LEP functions at a lower-level geography (i.e., below whole county or functional economic area).

17. Some LEPs may choose to continue operations without core funding, either until a devolution deal is agreed for their area or in perpetuity. Government will not provide any further core funding to LEPs in their existing form. If an upper tier local authority or authorities wish to continue using the LEP as a vehicle to continue delivery of these core functions, or if they wish in due course to pursue integration of a LEP, they are free to do so – the nature and status of such arrangements would be a decision for them to make. Any future contracting that is not in place before 1 April 2024 would, in most cases, be subject to normal commercial procedures.

18. Government expects that integration of LEP functions into areas with a devolution deal or into upper tier local authorities will be undertaken as quickly as possible, ensuring a smooth and orderly transition. Decisions, where appropriate, on the transfer of assets should be agreed by the LEP, its Accountable Body, and respective local authorities by March 2024, though government recognises that the practical integration and transfer process may stretch beyond that date.

19. LEPs and local authorities must pay due regard to the Public Sector Equality Duty when developing their plans.

The LEP Network

20. The LEP Network has played a vital role to date in supporting the whole LEP network, and specifically on the integration of LEPs into existing MCAs and in preparing LEPs to integrate into areas with a new devolution deal. Government will continue to support the LEP Network over 2024/25 so that it can work in partnership with areas to ensure this period of transition is planned and delivered as smoothly as possible. Details of this support will be confirmed in due course. Funding beyond 2024/25 will be subject to future Spending Review decisions.

Business representation – embedding a strong, independent, and diverse local business voice into local democratic institutions

21. Government encourages single upper tier local authorities, or local authorities working together across a prospective devolution deal geography or functional economic area, to create or continue to engage with an Economic Growth Board (or similar) made up of local business leaders and relevant representative bodies to (a) provide the view of local businesses as part of regional decision making and (b) work with local leaders to create a broad economic strategy for the area.

22. Business representative boards should follow the below guiding principles for ensuring business representation in local decision-making:

a. Involve business representative organisations, such as a local Chamber of Commerce, the Federation of Small Businesses; or the designated Employer Representative Body (ERB) developing the Local Skills Improvement Plan (LSIP);

b. Include a diverse range of businesses related to local economic strengths and priorities. This should include businesses of all sizes and businesses which are geographically diverse, e.g., urban, rural, coastal businesses as appropriate to the local area;

c. Ensure a diversity of voices; and

d. Have a clear conflict of interest policy.

Strategic economic planning

23. Government encourages areas to produce – or continue to update – economic strategies to support local decision making, building on the plans currently developed and overseen by LEPs. Areas should share data, intelligence, and analysis as appropriate to support the needs of current and future government programmes.

24. Areas bidding for local growth funding in future may be asked to demonstrate how their proposal fits into their local economic strategy.

25. Further guidance on LEP functions (1) and (2), namely business representation and local economic planning, will be provided to relevant local authorities by January 2024.

Growth Hubs

26. In areas with an existing implemented devolution deal (the existing MCAs and the GLA), the integration of Growth Hubs is already underway. Government expects that process to continue as agreed.

27. In areas where there is no devolution deal, government expects local authorities to work together to ensure seamless Growth Hub provision across the area, which will continue to support businesses and to provide a convening point for broader business support provision. From April 2024, the Department for Business and Trade expects that the gateway criteria to receive core funding to deliver Growth Hub services will be:

a. A strong and effective accountable body;

b. Where not possible to continue over the existing geography, the delivery area must be broadly related to the business and economic area footprint, with a minimum business (22,000) and actual population (500,000) size. It should take into account any planned devolution arrangements and likely future geographies;

c. A broadly-based business voice embedded in strategic advice and delivery arrangements; and

d. Commitment to put in place approaches for match funding, collective resourcing and/or direct funding from third parties (including sources such as UKSPF), to enable the Growth Hub service to be further enhanced and supported.

28. There is a requirement to demonstrate delivery of key Growth Hub priorities and abide by an agreed evaluation framework, which will be monitored by the Department for Business and Trade through scheduled regular reporting requirements and grant claim processes.

29. The level of funding for Growth Hubs beyond 2023/24 is subject to future government spending decisions.

Careers Hubs

30. Within areas with an existing implemented devolution deal (the existing MCAs and the GLA), the integration of Careers Hubs is already underway. Government expects that process to continue as agreed.

31. In areas where there is no devolution deal, government expects local partners, such as local authorities, to work together to ensure Careers Hubs delivery continues so far as possible over existing geographies.

32. The level of funding for Careers Hubs beyond 2023/24 is subject to future government spending decisions.

Assets

33. Management and transfer of any LEP assets should be agreed locally between the LEP and its Accountable Body, in line with any pre-existing arrangements and in accordance with any legal requirements. Where there are no existing arrangements, government expects that any reserves and assets built up using public funds will remain within the public domain (i.e. transferred to the relevant local authority or authorities). Government will work with areas to reach local agreement where the LEP and its Accountable Body are unable to reach a consensus.

34. Government expects that all decisions on the transfer and future management of assets will be taken by the LEP and its Accountable Body by March 2024 but recognises that the actual transfer process may stretch beyond that.

Growing Places Fund

35. The management of the ongoing delivery or closure of the programme, alongside existing assets, financial reserves, and loan books should be agreed locally, in line with any pre-existing arrangements between the LEP and its Accountable Body. Use of financial reserves established through the fund should be determined in line with the decision of the relevant Section 151 officer (or equivalent Section 73 officer in combined authorities).

Towns Fund

36. The current government mandate that a LEP representative sits on the Town Deal Board will be removed from April 2024.

European Structural and Investment Funds – European Regional Development Fund (ERDF) and European Social Fund (ESF)

37. Where the LEP is the Grant Recipient for a project and the LEP continues to operate, the responsibility remains to deliver outstanding contractual requirements and complete project closure, including the submission of Summative Assessment (for ERDF projects only), submission of final grant claim, and other closure documentation.

38. If the LEP ceases to operate, then arrangements should be made to maintain records in line with existing ERDF Document Retention Guidance (PDF, 153KB) and ESF Document Retention Guidance (PDF, 343KB) and work with the Department for Levelling Up, Housing and Communities (for ERDF) and the Department for Work and Pensions (for ESF) to ensure understanding of which organisation has responsibility for the records and any future auditing requirements.

Local Growth Fund

39. Where a LEP ceases to operate, its Accountable Body will subsume any loan books and be responsible for ongoing monitoring requirements.

Getting Building Fund

40. Where a LEP ceases to operate, its Accountable Body will subsume any loan books and be responsible for ongoing monitoring requirements.

Enterprise Zones, Freeports and Business Rates Retention

41. The future functioning, management, and governance of these should be agreed locally, in line with any pre-existing arrangements. Where LEPs cease operations, areas should reach locally agreeable and workable solutions to ensure a smooth transition of functions.

Knowledge management

42. Government expects LEPs to work with their Accountable Bodies to ensure an understanding of which organisation has responsibility for maintaining records and complying with relevant data protection legislation. LEPs should ensure that any data access requirements relating to specific government programmes (e.g., the content of Growth Hub Customer Relationship Management systems) are met and ensure data access for future needs of any other government programmes. Where the responsibility for data and information handling is transferred, the requirements and accountability should be clearly set out in that process.

43. As set out above, for European Structural and Investment Funds (ERDF and ESF), where a LEP ceases to operate, arrangements should be made to maintain records in line with existing ERDF Document Retention Guidance (PDF, 153KB) and ESF Document Retention Guidance (PDF, 343KB) and work with the Department for Levelling Up, Housing and Communities (for ERDF) and the Department for Work and Pensions (for ESF) to ensure an understanding of which organisation has responsibility for the records.

44. LEPs and local authorities should ensure that the businesses, employers, and other organisations they work with are kept informed of any changes in roles and responsibilities.

45. LEPs and local authorities must comply with the Data Protection Act 2018 when handling or transferring data.

Staff

46. Government recommends that LEPs and local authorities seek their own legal advice on issues related to staff, e.g., redundancy, TUPE.

47. Government also recommends that LEP Directors seek their own legal advice regarding personal liabilities.

Assurance

48. The Department for Levelling Up, Housing and Communities wrote to LEP Chief Executives on 18 May 2023 setting out its position on LEP assurance and associated requirements for 2023/24. As per that letter, a light-touch Annual Performance Review (APR) assurance cycle will take place in 2023/24 where LEPs are still operational.

49. The approach will continue the tiered structure implemented in the 2022/23 assurance cycle. The criteria for each tier will be set out in due course but will include a consideration of whether the LEP was awarded a “met” or “concerns identified” outcome for 2022/23. Assurance activities will consider any residual LGF and GBF spend, via freedoms and flexibilities, brought forward into 2023/24 by LEPs. In summary:

• For those LEPs on a lower tier for 2023/24:
  • Submission of an end of year assurance statement and Section 151 return; and
  • An informal end of year discussion with Cities and Local Growth Unit Area Leads to confirm that suitable provision is being made for transition/integration (e.g., that asset transfers are being appropriately conducted).
• For those LEPs on a higher tier for 2023/24:
  • An end of year assurance statement and Section 151 return;
  • An informal mid-year discussion, particularly focussed on outstanding LEP programme funds being managed under freedoms and flexibilities (where applicable); and
  • An informal end of year discussion with Cities and Local Growth Unit Area Leads, as above.

50. We do not propose conducting any further LEP “deep dives” or compliance checks this year (2023/24) unless circumstances require it.

51. The National Local Growth Assurance Framework (NLGAF) will remain in force and will continue to apply up to a reasonable point before integration. In principle, the LEP should adhere to the requirements for as long as they are applicable. For all LEPs that have integrated into local institutions, or do so in 2023-24, the English Devolution Accountability Framework (2023) applies to the integrated organisation.

52. Beyond 2023/24, if a LEP continues to operate without core funding, and is therefore not conducting functions for government, we do not expect to conduct assurance activities upon it. If the LEP is continuing to deliver functions on behalf of the local authority or authorities, the relevant assurance requirements for those functions would apply to the local authority or authorities.

Engagement and next steps

53. To ensure the integration process already underway continues to progress as smoothly as possible, government will set up regular engagement with the LEP Network. Individual LEPs are encouraged to raise any initial questions about this process via the LEP Network. LEPs and local authorities may also direct questions to their Area Lead within the Cities and Local Growth Unit. For further information, please contact lepinformation2023@levellingup.gov.uk.