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How to make chancellor George Osborne’s devolution deal work for your business

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He also reaffirmed the government’s commitment to allowing local authorities to keep 100 per cent of business rates by the end of this Parliament, and to granting councils the power to cut rates.

While the government and combined authorities around the country are moving forward with the devolution process at an impressive rate, the voice of businesses in the affected regions has been noticeably absent from the debate. 

A YouGov poll of 1,000 large and small UK businesses published in Firm Views – “The Business Take on Devolution“, a new report from think tank Centre for Cities in association with TLT – found that business leaders are broadly supportive of devolution. However, more than 79 per cent of those polled felt they had so far received little or no consultation from local or national government.

The lack of engagement with local businesses is in many ways understandable, in light of the speed with which the negotiations have taken place. However, from the discussions that we have been involved in while compiling the Centre for Cities report, many business leaders clearly feel uncertain what devolution will entail, and what impact it could have on their business.

With the publication of details of the recent devolution deals, it is safe to say that devolution could present a number of opportunities for small businesses to grow market share in the future.

The enhanced powers over planning and infrastructure offered in the deals for Greater Manchester and the Sheffield City region, for example, mean that those with a deeper understanding of the local area should have a far greater role in decision-making. This local control could affect where housing is sited, which road or rail links are improved, and where education and training investment needs to be made to benefit the economy, having a direct impact on businesses.

More importantly, as more decisions are made on a local – rather than a national – level, devolution should make it easier for businesses to voice their opinions on the issues that most affect them. As such, businesses would be able to ensure that investment is made in the areas where it will have the greatest effect on the local economy.

In addition, the devolution of business rates to local government could potentially offer benefits to small businesses by allowing business leaders to hold political leaders to account regarding where their money is invested. In the Autumn Statement, the Chancellor confirmed that city regions with elected mayors, such as Greater Manchester or Sheffield, will be able to raise business rates by up to two per cent for new infrastructure, provided they have the approval of a majority of business members of their Local Enterprise Partnership.

Overall, devolution has the potential to give business leaders the opportunity to voice their opinions about the taxes they pay to their local authorities. It could even give them a more comprehensive understanding of how their money is being spent and how investment will benefit both their own business and the regional economy. But in order for this to happen, businesses need to be consulted on the process.

As well as being supportive of devolution in general, the Centre for Cities research shows that businesses large and small are in favour of transferring powers over planning and tax. Some 57 per cent of respondents to the YouGov poll thought their firm would benefit from devolution of transport powers, and half said the same about strategic planning for projects like housing. A further 43 per cent favoured giving councils the ability to vary local taxes, compared with 25 per cent against.

Such positivity bodes well for the Government and local authorities as they finalise devolution deals, but in spite of their support, businesses are still unsure what to expect in the future. To benefit from this sentiment, it is time for politicians to engage with both the larger businesses and the SMEs in the city regions where devolution deals are being negotiated. In doing so, they can take advantage of businesses’ local knowledge to tailor the final settlements to the region’s specific needs and provide the best possible conditions for the local economy to grow.

David Pester is managing partner at TLT.

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