Businesses support devolution, but there needs to be greater consultation

A recent poll of UK businesses has found business leaders are supportive of the Governments devolution agenda, although almost 80% of these have received little or no communication on the matter. The following article from Business Zone discusses this further.  

22/12/2015, news

The Government’s devolution agenda is moving forward at full speed. New deals have been announced for the North East of England, the West Midlands and Merseyside on top of existing deals for Greater Manchester, Sheffield, and Cornwall, promising the transfer of significant powers from Westminster to local government.

While progressing at an impressive rate, the debate has been light on detail so far, both in terms of the content of the deals and the schedule for the transfer of powers. Moreover, engagement with businesses – and small businesses in particular – has been extremely limited, despite potential implications of devolution for the way they operate.

Business leaders are broadly supportive of devolution, according to a YouGov poll of 1,000 UK businesses published in Firm Views – The Business Take on Devolution, a new report from think tank Centre for Cities in association with TLT. However, the research also found that more than 79% of respondents felt they have received little or no consultation from local or national government.

In some regards, the lack of involvement of businesses is understandable, given the speed of the negotiations. But, talking to businesses during the research process for the Centre for Cities report, it is clear that many businesses are unsure what is involved and, importantly, what the impact and opportunities could be for their business.

From what we do know about the devolution deals recently signed, it is evident that the process could have a significant and potentially positive effect on the future growth of small businesses in particular and on the city economy in general.

Bringing greater control over planning and infrastructure to local authority level, for example, should mean that those with a greater knowledge of a particular area can make more informed and, therefore, better decisions. This will impact decision around issues such as where housing is sited, what skills the local economy needs to develop and retain, and how road and rail links within the city can be improved; all issues that can directly impact business.

Devolution could also allow businesses a greater opportunity to input into the decision-making process, as it will be far easier for them to voice their opinions to local council leaders than to national government officials. Providing such input, businesses can make sure that local investment has the biggest possible impact on development and that of the local economy.

Terms announced by the Chancellor in this year’s Comprehensive Spending Review suggest that this is already part of the Government’s plans. City regions with devolution deals and directly elected mayors will be able to raise business rates by up to 2% for specific infrastructure projects, but only with the backing of local enterprise.

Devolving business rates to local government can offer significant benefits to small businesses. It offers business leaders the opportunity to hold local political leaders to account as to where their business rates are invested. In the case of combined authorities like Greater Manchester that will have the power to raise rates for certain infrastructure projects, council leaders will have to seek the approval of local businesses before putting up taxes.

All of this means that business leaders have a greater say over the contributions they are asked to make to local authority coffers. It also allows them to have a more in-depth understanding of where their money will be spent and the impact it will have on their own business and the wider regional economy.

A key finding of the Centre for Cities research is the support among business large and small not just for devolution in general, but for the transfer of powers over planning and tax. Some 57% of respondents to the YouGov poll said they thought their firm would benefit from local control over transport initiatives and half said the same about strategic planning for projects, such as housing. Another 43% said they favoured giving councils the ability to vary local taxes, against 25% who thought otherwise.

This sentiment is exceptionally good news both for national government and the local authorities pursuing devolution deals. However, while businesses are broadly in favour of the current devolution process, they still don’t know what to expect. In order to take advantage of this positivity, politicians need to engage with both the large businesses and the SMEs in the areas where the devolution process is in progress. By consulting with business leaders, they can take advantage of in-depth knowledge about the local commercial landscape and fine tune final settlements to create the optimum conditions to promote regional economic growth.

Source: Business Zone, 2015.