Local investment: lessons from Greater Manchester

Written By:

Thomas Parker
Lead Writer
LAPF Investments

As mayoral authorities gain more power, Greater Manchester’s 20-year partnership with its pension fund offers a blueprint for local investment under the new reforms

Manchesterism. It is a phrase that has risen in ubiquity in recent months (that has something to do with a certain Liverpudlian who has risen to the top of political ambition), with its definition easy to describe but – dare I say it – difficult to implement.

Defined as “business-friendly socialism”, at its core it pushes for private sector collaboration with the public sector – pairing policy making with urban development, and new industrial clusters to create good jobs.

Cut from the same cloth as this (although it may not be described as such) are the principles of local investment being pushed for by government for the LGPS.

Coming from the Fit for the Future reforms, the government expects administering authorities to work with their local strategic authorities – including mayoral combined authorities – to identify local investment opportunities.

As stated in the response to the consultation, many are already involved in this work, such as in Greater Manchester.

Respondents also suggested pools – rather than authorities – should be working with strategic authorities to identify investment opportunities, arguing a clear and consistent process for pools to evaluate such proposals would be important.

Issues flagged as concerns included resource pressures, arguing that pools and authorities should be allowed to decide where to focus resource rather than being compelled and to work with strategic authorities.

Additionally, some were worried the proposal could lead to the LPGS investing in projects that have failed to raise finance from the private sector and might be unsuitable.

In response, the government said it will be for pools and their partner funds to decide whether the fund will approach strategic authorities directly or work through their pool, adding that funds should work with their pool to agree criteria for determining which local investment opportunities will be prioritised for due diligence.

Rise of the combined authorities

The project of devolution has almost been the one consistent reform seen in UK politics during the 21st century – driven first by New Labour, and pushed yet further by both the Cameron and Johnson governments.

Devolution in the most modern sense of the word dates back to the first few months of the New Labour government when two referendums took place in Scotland and Wales on whether the two countries should get their own devolved parliament.

Taking place across two successive weeks in September 1997, both voted in favour of the devolved governments – with powers being transferred on 1 July 1999.

Northern Irish voters voted in favour of a devolved administration in May 1998 as part of the Good Friday Agreement, with the Northern Ireland Assembly starting up on 2 December 1999.

During this time, we also saw the first devolution of powers to a mayoral authority (sort of) through the formal establishment of the Greater London Authority – once again coming via a referendum. The first elections were held in May 2000, with the authority officially coming into legal existence in the July of that same year.

The devolution agenda, however, really kicked into gear towards the end of the 2000s to mid-way through the 2010s.

It kick-started with the 2009 Local Democracy, Economic Development and Construction Act, which – alongside giving local councils more power and improved public involvement – laid the foundation for devolved regional governance.

The first of these came in Manchester back in 2011, followed by the North East, Liverpool, Sheffield and West Yorkshire.

When these were first formed, they were run by council leaders working together – but their powers were still fairly limited.

That all changed in the mid 2010s when central government negotiated further devolution deals with local authorities, offering them new powers around things like transport budgets and skills and employment programmes, as well as influence over housing and governance.

In most cases, however, the government required for an area to have a directly elected mayor.

The first region out of the gate was, not totally unsurprisingly, Greater Manchester – agreed between then chancellor George Osborne and the Greater Manchester Combined Authority.

This saw control over transport, business support, social care, and housing and planning being managed by the Greater Manchester Combined Authority. The deal also resulted in shadow cabinet minister Andy Burnham, in 2017, being elected as the region’s mayor… I wonder what ever happened to him!

Other regions followed, although the powers, funding, and governance arrangements varied between regions.

There has been an influx of metro mayors popping up across the country since then however, including the likes of the West Midlands, West Yorkshire, the Liverpool City Region, and Tees Valley. This number also, of course, includes London’s Sadiq Khan – with the Greater London Authority having a mayor since May 2000.

Powers over local investment decisions

Of all the changes this has brought, possibly the most significant for the LGPS is the fact that these authorities are – more than ever – expected to be intermediaries between public and private ventures.

It means Mayoral Strategic Authorities are now expected to communicate with prospective investors about existing priority projects that could be attractive to them.

This does somewhat imply a more dictatorial approach to investment decision-making between an authority and a fund, but in practice of course this is far more collaborative in nature.

No better is this exemplified than in – and I’m afraid to repeat it again as it’s cropped up a lot in this article – Greater Manchester, where this close relationship between the public and private sectors has been in existence for around 20 years.

This includes close collaboration between the local governing authorities and the Greater Manchester Pension Fund (GMPF).

When assessing investment opportunities, its investment managers are asked to focus on two aspects.

Firstly, the project has to meet the fund’s fiduciary duty targets, and secondly that it generates a “measurable community impact” – which is tracked through several KPIs, including economic growth, regeneration, job creation or improving the wellbeing of those in the fund’s local area.

These priorities are based on a long-standing relationship between the fund and local authority – both when it was working with the local county councils, and later when it became a combined authority.

But this is not just simply collaboration between the fund and the combined authority, but also with other interested third parties. It comes from a key learning from its 20-plus years doing this sort of local investment: namely that funds shouldn’t try to be developers.

Instead, GMPF has come to see its role as one that convenes and coordinates – to bring together landowners, planners, occupiers, developers, local authorities and funders to find solutions where everyone moves a little so projects can proceed.

Those involved in these processes describe this as acting as a “ringleader” – conducting the orchestra rather than playing every instrument.

This role is ever more important as, with no commercial buffer, if any single party digs in – on land price, planning height, grant levels or funding terms – the whole project can collapse. Small movements from each stakeholder can collectively be the difference between a scheme proceeding or not.

However, while it would be tempting to assume making sure everyone is on the same page is driven by knocking heads together, that is emphatically not the case. The process is instead more gradual and consensual – pointing toward a shared end goal.

This collaboration has been so successful that GMPF runs regular (sometimes weekly) calls with the Greater Manchester Combined Authority to discuss potential new projects.

Obstacles

Despite its success, the programme has not been without its obstacles – the most significant of these being experienced in Manchester being that of viability.

Across the area, there were projects with planning consent already secured and infrastructure in place that still could not move forward because the development economics did not work as – because costs were outstripping returns – there was no commercial case for any party to participate.

This was exacerbated by the fact that there was a structural problem with the existing landscape of public funding programmes, primarily because a lot of these schemes were designed for a different investment environment.

And, while there has been some acknowledgement that these programmes need to evolve to meet today’s challenges, the team in Manchester sought a different solution altogether through the Good Growth Fund.

Coming after engaging directly with Numbers 10 and 11 Downing Street, the Greater Manchester Combined Authority decided to set up the Good Growth Fund – £1 billion of flexible public capital, deployable as either debt or equity across real estate and infrastructure projects in the area.

It’s a fund that is designed to be flexible in how it intervenes, specifically to catalyse developments that would otherwise remain unviable. For its part, the Greater Manchester Pension Fund has agreed – in principle to commit £300 million of its own capital to invest in ‘Good Growth’ projects alongside the Greater Manchester Combined Authority.

It’s already beginning to bear fruit, with the first announcement for the investment coming in November 2025, further tranches having since been announced. The aim is to have at least four to six of those projects on site in 2027.

A replicable model

And while the case can rightfully be made that the different mayoral authorities across the country will have different priorities, the toolbox of principles used in Manchester – whether that’s partnership structures or taking the problem-solving approach – is entirely replicable.

This extends further than might be expected. West Midlands is perhaps the most directly comparable region, but Leeds, Liverpool and London have all engaged in similar conversations.

London particularly faces acute housing delivery challenges despite its resources – and the question of how the GLA, London boroughs and LGPS partners can work together to meet that need is seen as a pressing issue in the sector.

So much is this being seen as the model to take that organisations that have been actively involved in the Manchesterism project are already in active conversations with a significant number of other mayoral combined authorities about how to develop their own versions of this model.

The geography will differ. The communities will differ. The specific challenges will differ. But the principles – partnership, long-term commitment, genuine flexibility, and a shared focus on delivery – translate wherever the will to make them work exists.