Devolution can be a catalyst to unlock private finance

There is no hiding from the ambitious housing and infrastructure targets set out by the government. But with public finance under pressure, how these projects will be funded and financed remains unclear.

What is clear is that devolution – highlighted by the rise of elected mayors and combined authorities – has a key role in helping the government to meet its delivery ambitions across the country.

Devolution, when implemented effectively, offers a powerful tool to attract investment. While it is not a silver bullet for unlocking private finance, it can assist on several levels.

It builds strong regional leadership and provides the focus needed to create the conditions for success, helping locally led places stand out as competitive, attractive locations. With greater control over planning and delivery, devolved authorities, and their strategic place partners, can provide the certainty and alignment that investors crave – streamlining decision-making, improving visibility of pipelines, and reducing delivery risk.

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The resources unlocked through devolution – whether in the form of expertise, funding, strategic capacity or delivery tools – are also critical. Whether deployed directly or via local authority partners, these tools help create the conditions that underpin confidence amongst investors.

Looking ahead, models such as mayoral development corporations (MDCs) offer further potential. By combining ambition and dedicated resources with the powers and governance structures needed to deliver, MDCs can be powerful levers for transformative change.

The clarity offered by devolved leadership not only lowers risk but also makes capital deployment more efficient – a critical advantage in a market shaped by high inflation and delivery challenges

Stockport MDC, for example, has already attracted £600m in private investment, delivering 1,200 homes and over 150,000 sq ft of grade A commercial space.

For investors, the case for devolution is particularly compelling. Greater oversight of development pipelines at a local level reduces friction, improves focus, and supports faster returns.

The clarity offered by devolved leadership not only lowers risk but also makes capital deployment more efficient – a critical advantage in a market shaped by high inflation and delivery challenges.

The benefits of devolution are not hypothetical, and we have already seen them in action. Since securing devolved powers in 2014, Greater Manchester has implemented a place-based strategy that has created the right environment for investment. Political autonomy has enabled the region to identify six key growth locations expected to attract £10bn of investment.

With a devolved focus on transport and infrastructure, Greater Manchester now attracts more foreign direct investment than any other UK city region. The result? One of the UK’s fastest-growing economies.

The case for devolution driving private investment across the regions is clear, but let us be clear – devolution is still evolving and there is real scope for it to catalyse much more investment across the country. Regions newer to devolution can build on the lessons of places like Greater Manchester, the West Midlands and West Yorkshire, tailoring their approach to local context while accelerating their own progress.

Institutional investors are already broadening their focus beyond the South-east, drawn by the potential for scalable and long-term financial and social returns in the regions

At the same time, regions need to raise the profile and appeal of regional investment opportunities among the investment community. With clear pipelines, stronger leadership and reduced risk, regions are increasingly well placed to meet investor needs.

Institutional investors are already broadening their focus beyond the South-east, drawn by the potential for scalable and long-term financial and social returns in the regions.

We also need to continue evolving public-private delivery models (PPPs). While the specific three-letter acronym models that characterise this space may fall in and out of fashion, the need to attract and leverage private capital will always endure. What matters is getting better at making these models work in practice.

And then there’s the “big one” – fiscal devolution. At present, we still lack material fiscal devolution in the UK. That is to say that combined authorities and mayors operate under devolution deals that are essentially negotiated funding settlements. This limits the link between investment and returns.

While such a model can help to protect against under performance, it also weakens the incentive structure – decoupling regional economic success from future financial resource. A longer-term funding model that ties economic growth to income would boost mayor and combined authorities’ abilities to give private investors the greater certainty they crave, aligning capital deployment with long-term local returns.

To meet the UK’s housing and infrastructure ambitions, public and private sectors need to work together to kickstart a new cycle of development. With devolved powers both more widespread and evolving, and regional leadership structures, now is the time to engage private capital with clarity and confidence.