C&W Perspectives

Unlocking private sector development through public sector funding D uring this Parliament, Government has already allocated over £9bn to Local Enterprise Partnerships (LEPs) to support local economic growth, with much of this focused on land, property and infrastructure investment. However, there is still often a misunderstanding around the availability of and access to public sector funding to unlock private sector development. What’s available and how do you secure it? In this article, Ben Pretty looks to address the myths and realities around this subject. State Aid prevents public sector investment in private sector development schemes. Firstly, the public sector can legally invest in enabling on/off site infrastructure to support the unlocking/delivery of development. Anything to the contrary is a myth. State Aid legislation is an important consideration but through the General Block Exemption Regulation (GBER) and various case law, there are a plethora of exemptions and opportunities for the public sector to support delivery. The 2014 revised version of the GBER not only increased aid thresholds but also introduced new categories of exemptions such as Article 56 ‘Aid for Local Infrastructures’ which allows aid up to 100% of the viability gap towards local infrastructure to a limit of EUR 10m, with total costs not exceeding EUR 20m. The definition of “local infrastructure” is helpfully vague and the key factor is demonstrating the viability gap. The 2014 German Land Development Scheme case has also enabled the public sector to invest in essential site preparation works on publicly owned land without this being considered Aid, subject to it then being transferred at open market value. Regional Aid exemptions also still apply in EU Assisted Areas. Brexit may affect the way in which public sector can intervene in funding development. Whilst Brexit raises questions about our longer-term UK State Aid position as it is an EU legislative function, the existing EU State Aid principles are likely to remain for the foreseeable future but governed by the UK Competition and Markets Authority. Longer term, who knows?! Due to austerity there are very limited opportunities for public funding development. Despite common perception, there is often public funding available to unlock commercial and residential development schemes nationally. Moreover, this is often in the form of non-repayable grants and not just loans. Any perceived lack of funding availability is typically a myth for the best schemes with the strongest cases for support. Funding is available for on and off-site infrastructure as well as the direct delivery of floorspace where there is a demonstrable financial need, economic case and State Aid compliant route. Overage clauses may be imposed but why shouldn’t the public sector have the opportunity to receive a share of any uplift in projected values as a result of enabling scheme delivery? SECTOR FOCUS By Ben Pretty, Associate, Development and Planning The Myths vs the Realities PERSPECTIVES 08 SECTOR FOCUS