UK government funding of economic development in Scotland

Reading Time: 6 minutes

Scotland’s changing economic development landscape

As set out in this SPICe blog and more detailed briefing, Scotland’s economic development landscape is complex, and is undergoing significant change.

One part of this is an increased profile for the UK government, through a number of different initiatives.  As a backdrop to this Part 6 of the UK Internal Market Act 2020 gives UK Ministers broad powers to provide financial assistance to any part of the UK for the purposes of promoting economic development, providing infrastructure, supporting cultural and sporting activities, and supporting education and training activities and exchanges.

Since we published our SPICe briefing on economic development, more details have emerged about the Community Renewal Fund (the one-year precursor to the Shared Prosperity Fund), the Levelling Up Fund, and the Community Ownership Fund.  This blog takes a closer look at these three funds, and the questions raised for economic development in Scotland.

EU Structural Funds no more

EU Structural Funds have been a significant contributor to local and regional economic development in Scotland for the last 40 years.  Now the UK has left the EU, it will receive no funding under the European Union’s new financial framework (running from 2021 to 2027), although it can continue to receive some funding until December 2023, as long as it was committed under the 2014-2020 programme.   Under that programme, Scotland was allocated €872m (or around £782m in January 2014 exchange rates).

The Scottish Government (November 2020) has called for what it states is “the full amount of funding due to Scotland”.  The government bases this complex calculation on the total amount initially allocated to Scotland in the 2014-20 programme, indexing for inflation, and adding in replacement funding for the European Territorial Cooperation and LEADER programmes.  They calculate this “full amount” as being at least £183 million per year, equating to a 7-year replacement programme of around £1.3 billion for Scotland.

The UK government (for example in the 2020 UK government Spending Review 2020 (Box 3.1)) said it will “ramp up funding”, to “at least match current EU receipts”, calculated by the UK government as meaning, on average reaching around of £1.5 billion a year across the whole of the UK.

UK government support for economic development

The Scottish Government produced its own proposals for a Scottish replacement for the EU structural funds (November 2020), which included the Scottish Government playing a key management role.  However, the UK government has taken an increasingly active, and direct, role in economic development in Scotland. 

Community Renewal Fund

What is it?

The Community Renewal Fund (CRF), is intended to “help inform the design of the UK Shared Prosperity Fund through funding of one-year pilots”.  Its prospectus (March 2021) set out how “an additional £220m of investment” for the UK in 2021-22 could be accessed and what it could be spent on. The fund is also intended to enable the UK government to “work directly with local partners in each nation across the UK”. 

The prospectus flagged up what it says are some opportunities for improvements compared to EU structural funds including:

  • quicker release of funding
  • better targeting for places in need
  • closer alignment with domestic policies
  • reduced bureaucracy.
How was the CRF allocated?

The CRF involved a UK wide competitive bidding process, in which 100 priority places were identified in Great Britain “based on an index of economic resilience”, 13 of which are in Scotland, as illustrated in the map below. 

Map of Scotland showing the local government areas that are priority in the Community Renewal Fund

It should be noted there was a separate approach in Northern Ireland. In November 2021, it was announced that Scotland received funding for projects valued at just over £18 million, which accounted for 9% of the overall funding allocated, as set out below.

Multi bar chart showing the elgible bids assessed, bids selected, total vale of bids selected, precent of overall funding by UK nation.

Fifty six projects were allocated funding in Scotland in a variety of areas.  The largest in Scotland involved nearly £1 million for the Crichton 21st Century village in Dumfries and Galloway, and smallest for a project relating to Crail harbour in Fife, with an award of just over £25,000.

How did the allocations tie in with the prioritisation?

43 of the 56 project awards in Scotland went to the UK government’s priority places, accounting for £15.4 million of the funding (83% of the total).  Each one of the 13 priority areas received an award, alongside another nine local authority areas, not designated as a priority area.

Community Renewal Fund allocations in Scotland by LA area and priority categorisation.

Levelling Up Fund

The Levelling Up Fund is described as a £4.8 billion fund to support infrastructure projects including “regenerating town centres and high streets, upgrading local transport, and investing in cultural and heritage assets”.  The prospectus contains further details.

Again, there is a geographical process for prioritisation, in this case with three categories, and the UK government describes the methodology to generate the index.  This index generated 13 priority 1 local authority areas in Scotland.  Eleven of these are also priority places under the Community Renewal Fund.

A map of Scotland showing local government areas by Levelling Up Fund categorisation.


Over the summer of 2021, a total of 305 Levelling Up Fund bids were scored by UK government officials, whilst “officials in the devolved administrations were also invited to contribute to the assessment process on bids from their respective nations”.  UK Ministers made the final decisions

The Levelling Up Fund also includes a role for MPs “at the heart of its mission”.  Local authorities can submit one bid for every MP whose constituency lies wholly within their boundary, and “the expectation is that an MP will back one bid which they see as a priority”.  It is also worth noting that Local authorities can only have one successful bid for each of their allocated number of bids over the lifecycle of the Fund, and so some local authorities have held off their bids till later rounds.

The total value of funds awarded in the first round amounted to around £1.7 billion across the UK.  Eight projects led by Scottish local authorities received funding, worth just under £172 million (around 10% of the total value of all awards).  In this first round, five of the eight projects were in Priority 1 areas (accounting for around two thirds of the value of the awards).

Allocation of Levelling Up Fund in Scotland by local government area

Community Ownership fund

What is it?

Although it has a wider social focus than “economic development”, the UK government’s Community Ownership Fund (valued at £150 million) is focused on “local facilities, community assets and amenities”. The Fund will run until 2024/25 and there will be at least 8 bidding rounds. 

How is it allocated?

The UK government said that bids from across the UK were to be assessed against a common assessment framework, and scored using this framework, with final decisions on funding made by what is now the Department for Levelling Up, Housing and Communities (DLUHC).

Which projects received funding in the first round?

Twenty one projects, (valued at £5.3 million) were selected in this first bidding round across the UK. Five of these projects (valued at £1.07 million) are in Scotland

The Scottish projects awarded funding are listed below:

Offer (£’000)
Callander Visitor Information Centre
New Galloway Town Hall SOS Save Our Space
Rannoch Hub
The Old Forge Community Benefit Society: a community owned pub
Whithorn ReBuild Renewing the Old Town Hall

What does this mean for Scottish economic development?

SPICe’s recent briefing outlined a constant process of reorganising and rescaling of arrangements across Scotland’s economic development landscape over the last two decades. It would seem the funds for replacing EU funding and the ‘levelling up’ agenda have added back in another layer to a policy landscape already often referred to as ‘cluttered’, provided an increasing role for the UK government in Scottish economic development, and seen a continuation of the rescaling process. 

However, at this stage in the process, as further details on the Shared Property Fund (SPF) are awaited, there are more questions than answers on whether Scotland’s multi-government economic development landscape can allow opportunities for synergies rather than frictions.  These and other issues will no doubt be returned to by parliamentarians as they look to scrutinise this complex and evolving system:

  • Recent years have brought something of an upturn in regionalism in Scotland. This was given impetus by the development of City Region and Growth Deals, and the establishment of Regional Economic Partnerships. However, the CRF and the LUF are targeted at local authority areas. Do varying boundaries across initiatives create effective and efficient results? 
  • What role is there for Scotland’s economic development agencies – Scottish Enterprise, Highlands and Islands Enterprise, and South of Scotland Enterprise? How is collaboration and engagement ensured?
  • How to ensure the strategies and policy frameworks of both the Scottish and UK Governments are respected and complementary, rather than undermining and contradictory? Noteworthy is the forthcoming Scottish Government 10-year strategy for economic transformation – where will this fit? 
  • Both the CRF and the LUF are competitive funding models based on the perceived merit of an individual project rather than on general needs of areas, potentially leading to some areas losing out on funding. Will this competition between areas affect the relationships required to progress existing Regional Economic Partnership priorities? 

These are just a few of the unanswered questions prompted by the EU funding replacements of the CRF and the LUF, as we await further details on the SPF.  

Alison O’Connor and Simon Wakefield,

Senior Researchers, SPICe

Blog image by Nick Youngson CC BY-SA 3.0 Alpha Stock Images