One of the common barriers cited in SME access to finance is regional disparities.

The Small Business Finance Market Report, published by the British Business Bank in March 2022, found that 70% of equity investment in Q1 to Q3 of 2021 went to London companies. It also found that 37% of London-based SMEs were happy to use finance to grow compared to between 29% and 32% in other regions.

Regional inequalities in funding lead to imbalances elsewhere, including reduced job opportunities in specific sectors outside of London, fewer options for customers and smaller local business populations.

Due to these imbalances, the government launched the Levelling Up Fund, created to promote equality across areas of the UK.

We explore what the Levelling Up Fund is in more detail and how it could benefit small businesses.

• What is the Levelling Up Fund?
• Who can receive funding?
• What is the impact on businesses?
• Potential barriers

What is the Levelling Up Fund?

The Levelling Up Fund was first announced in March 2021. In the first round of funding, £1.7 billion was shared across 105 towns, cities and areas.

The second round of funding launched in 2022, with applications closing on 6^th July. The fund amounts to £4.8 billion in total, due to be given out until 2024/25.

The scheme aims to finance high street and town centre regeneration, local transport links and cultural/heritage assets. It seeks to reduce inequalities across parts of the UK so that everyone has equal access to facilities and reap a fairer economy’s social, financial and ethical benefits.

Who can receive funding?

The Levelling Up Fund accepts bids from local councils and unitary authorities in the UK. Only successful applications are given the funding to conduct their proposed activity.

It is recommended that local authorities take a holistic approach to their needs in terms of infrastructure, transport, regeneration and culture when creating their bids. The application should show how any funding won will support their objectives and improve the local area. This includes enhancing the natural environment and improving better for quality of life.

What is the impact on businesses?

Although the Levelling Up Fund is available to councils, not businesses, there can be benefits if your local area receives funding.

Depending on the objectives outlined in the bid, councils will have to rely on local businesses and partners to conduct the improvement work required. This will drive work and revenue for your company while enabling you to have an active role in the area’s regeneration.

By improving local areas and creating a level playing field across parts of the UK, regional areas may witness improved opportunities through investment and tourism, translating to increased custom for companies.

It’s also likely to improve economic confidence in the area, especially if the improvements lead to more choice and stronger business links for citizens. Local spending may rise, with your customers more comfortable in making purchases.

The combination of local confidence and external opportunities can lead to rising sales and revenues for companies that fuels growth and resilience.

Alongside the sales potential brought by ‘levelled up’ areas, businesses will have better options to operate and grow successfully. Much of the fund’s focus is on improving infrastructure in regional areas, carving the path for technological advancements and innovation, which gives more types of enterprises the chance to flourish.

Another central focus on the funding is resources and training, including upskilling local people to improve talent supply and minimise labour gaps. With skills shortages still impacting much of the country, this can help to ease disruption in local areas while driving up employment rates.

It also means that more companies will have the skills and structures to flourish while bringing new propositions to regional markets and creating a diverse local business population.

As the benefits unfold, we will begin to see stronger regional economies, leading to increased consumer confidence, better prospects and driving entrepreneurial innovation across the country rather than just the capital. 

Potential barriers

Although the Levelling Up Fund offers benefits, some issues still need to be solved.

Since its inception in 2021, the scheme has already been criticised by business leaders. Many feel there must be a stronger emphasis on training to create a ‘high skill, high wage’ economy in the UK. With automation also threatening to reduce jobs in regional industries, such as manufacturing, this upskilling is necessary to avoid a more considerable disparity as changing skill requirements take hold.

There are also concerns about how the funding is given out. The BBC researched the first round and found that 28 councils had their bids rejected, 18 of which were based in areas on the government’s priority list. There needs to be widespread support, or regional imbalances will continue.

A further criticism is that the scheme doesn’t do enough to increase access to finance for SMEs. Small businesses often need support in maintaining cash flow, especially given current challenges like rising costs and supply chain disruption. Without it, there is the risk of business closures, leading to job losses and investment that could boost the regional economy.

Only time will tell the true impact of the Levelling Up Fund, but it must address the obstacles to bring equality to UK regions.

Conclusion

Although the Levelling Up Fund is not explicitly targeted toward companies, there is no denying that it could have positive implications for businesses based in regional areas.

With better infrastructure and increased talent available in local areas, SMEs could access the resources they need to grow. There is also the potential for higher revenue levels through improved economic confidence, tourism and other opportunities.

However, it isn’t necessarily the be-all and end-all. To encourage resilience, there still needs to be improved access to finance for SMEs outside of the Levelling Up funding. This will give more businesses across the UK a better chance at starting and growing ventures for more a robust economy.

If you seek funding to take your business to that ‘next level’, we will take you through the best options. Regardless of your location and needs, our extensive range of financial contacts will provide the perfect solution for you.

Speak to a team member to find out what we can offer.