The Senedd's Economy Committee is warning that Wales faces a significant reduction in funding and risks to job security due to changes in regional economic development funding.
Serious concerns have been raised about the Welsh Government's proposed arrangements for the new Local Growth Fund (LGF), according to a new report.
The Local Growth Fund (LGF) is a new economic development fund created by the UK Government. It is the latest version of regional economic development funding and is the successor to the Shared Prosperity Fund (SPF). It will operate across the UK.
Wales will receive £547 million from the fund this year and the next two financial years.
Andrew RT Davies MS, Chair of the Senedd's Economy, Trade and Rural Affairs Committee, said:
“We heard that Wales is about to hit the anniversary from hell, which is a century of relative economic decline. We need strong economic interventions to reverse this decline, support our most vulnerable communities and create economic, social and community growth.
“While the Local Growth Fund may not be a silver bullet, it is crucial the funding plays its role in reversing that economic decline.
“Wales cannot afford another period of underinvestment or uncertainty. The Local Growth Fund must be a tool for reducing inequality and raising productivity – but the significant reduction in funding, concerns about regional delivery, and risks to skilled jobs pose major challenges.
“The UK Government and Welsh Government must urgently reconsider its approach to ensure this fund delivers meaningful benefits for the communities that need them most.”
The Committee has expressed “deep disappointment” that Wales will receive substantially less through the LGF than it received via previous economic development schemes.
Committee members highlighted evidence that annual funding through the LGF will be almost half the level Wales received via the SPF in 2024–25, which it said would compound the long-term challenge of addressing regional inequalities and economic decline.
The report stresses the LGF will only be effective if funding is directed to areas of greatest need, ensuring resources target the most serious challenges in communities across Wales.
It recommends the Welsh Government should use the Welsh Index of Multiple Deprivation to target funding where it is needed, and it should give a clear indication to those delivering funds that this is expected of them.
The report warns that the shift from a predominantly revenue-based SPF to a capital-heavy LGF places skilled jobs at risk.
The Committee was told the change in funding structure could lead to the loss of vital expertise, undermining the capacity to deliver effective economic development in the years ahead.
It calls on the Welsh Government to set out how it intends to work with local authorities to minimise the loss of jobs and skills as the LGF is implemented.
The Welsh Government has proposed that Corporate Joint Committees (CJCs) will act as the main regional delivery bodies for the funding. The Committee has also recommended that the Welsh Government considers alternative models for regional administration of the Fund before finalising the LGF delivery plan.
