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Levelling Up Fund: Round 2 launched

The UK Government has launched the second round of the £4.8bn Levelling Up Fund, inviting applications for funding from Local Government bodies by midday on 6 July 2022.  Jonathan Branton, Alexander Rose and Alex Eaton focus on the key aspects of the Fund, including how local authorities can improve their chances of securing funding.

Levelling Up through targeted public funding

Almost five months have passed since the UK Government announced the first round of successful bids to the Levelling Up Fund (the "Fund"), which saw over £1.7bn of grants allocated to 100 areas in the UK. 

The second round of the Fund is expected to be equally competitive, with bids focussing upon the following investment themes:

  • local transport projects;
  • town centre and high street regeneration; and
  • support for maintaining and expanding UK cultural and heritage assets.

Competing for Funding

Importantly, the Fund remains a competitive "challenge" fund with the assessment of applications centred on:

  • characteristics of place: noting that "each local authority [has been] placed into" categories representing three varying levels of "identified need";
  • deliverability: demonstrating "evidence of robust management and delivery plans including a procurement strategy, project management…governance structures, risk management, project costings and monitoring and evaluation" as well as proposed spending for the 2022-23 financial year;
  • strategic fit: explaining how the bid will support "the economic, community and cultural priorities of their local area and…further the area’s long-term levelling up plan"; and
  • the economic case: including evidencing how bids "represent public value to society".

For the second round, the UK Government has expanded Category 1 to include "local areas whose levels of need have increased" since the Fund launched, whilst not prejudicing areas that "remain in longer-term need".

As with the first round of funding, applications will be evaluated via a three-staged assessment process comprising:

  • Stage 1: an initial pass / fail gateway;
  • Stage 2: an assessment and shortlisting phase based on the UK Government's assessment framework; and
  • Stage 3: a decision-making phase where "Ministers will make [the final] funding decisions". 

For this round of the Fund, "eligible applications must submit their full bids, with all supporting documentation" by midday on Wednesday 6 July 2022 via the UK Government's online application portal.

Avoiding common mistakes

Although the Government has not published a breakdown of the reasons certain bids were unsuccessful, our experience of delivering Government funds suggests that a significant number of bids will have not clearly articulated what they will deliver with the funding and clearly set out how their project will be compliant with the relevant law (see below for information on Subsidy Control compliance). Some bids appear to have fallen foul of the computerised application process, so applications should be submitted in good time.

Subsidy Control compliance

The UK Government has stated that all bids must "comply with all relevant UK legislation" including Subsidy Control "to be eligible for funding". 

EU State aid rules were largely disapplied with effect from 11pm 31 December 2020 and replaced by an interim Subsidy Control regime.  A guidance note from us on the subject can be found on the LexisNexis website and Frequently Asked Questions can be found on the UK Government's website.

For most local authorities, it will therefore be necessary to build a case against the relevant requirements set out in the EU-UK Trade and Cooperation Agreement and to consider wider compliance requirements set out in the Gov.UK guidance.

In addition, a Subsidy Control Bill is currently being considered by Parliament and is expected to come into force in Autumn 2022. Depending on timing, this may contain further requirements that applicants will need to comply with. As a result, we anticipate significant focus on Subsidy Control compliance in this round of funding, for which timing of commitments of funding is liable to become a very important issue depending on progress of the Bill and implementation dates (for example certain values of subsidy may become liable from a certain date to mandatory pre-notification to the Competition & Markets Authority prior to award).

Conclusion

The launch of the latest round of the Fund will come as welcome news, providing unitary authorities, county councils, combined authorities and London borough councils with an opportunity to obtain significant investment in places of greatest need in the UK. However, the "Fund remains a competitive fund [to be] distributed…on the basis of successful project selection" with Subsidy Control compliance remaining a key component of the application process. 

Jonathan Branton is a partner, Alexander Rose is a Legal Director and Alex Eaton is a solicitor at DWF.