‘Red Wall’ and other poorer areas lose £1bn of development cash after Brexit, despite ‘level up’ pledge

Exclusive: Anger over broken promise to replace job-creating grants – leaving local leaders fighting each other for scraps

‘Red Wall‘ and other poorer areas of England will lose up to £1bn of development cash this year because of Brexit, despite Boris Johnson’s vow to “level up” the country.

The government promised to match the grants – to build local economies by attracting businesses and jobs – when the UK left the EU, but has yet to set up a promised replacement fund.

Instead, just £220m is being made available across the whole of the UK for 2021-22, and no money has yet been handed out at all – even though the financial year is nearly halfway over.

Areas of the North and Midlands, many of which switched to the Tories at the 2019 election after the prime minister’s “levelling up” pledge, received £500m a year from EU Structural Funds, new analysis shows.

Now they will receive only a slice of the stopgap £220m Community Renewal Fund – amid further anger that councils had to put in bids, rather than be allocated cash according to need.

Some areas in the South have been made new “priority areas”, despite criticism that other funding pots have been skewed to Tory constituencies, including those of Cabinet ministers.

In total, English regions were awarded £1.12bn from the EU in 2018, the latest available figures – suggesting a loss of up to £1bn this year, depending on allocations from the stopgap fund.

The biggest likely losers are the Midlands (£190m in 2018), Yorkshire (£143m), Cornwall (£95m), the north west (£88m) and the north east (£80m), according to the figures obtained by Labour.

Wales will be even harder hit – having been in line to receive £373m a year in the EU – while Scotland received £125m a year.

Labour said the revelation “makes a mockery” of the pledge to tackle the gulf between rich and poor areas, while one northern business group said it suggested “levelling up will mean nothing”.

Some so-called ‘Red Wall’ areas are suffering potentially bigger losses than the figures suggest, because the Tees Valley, Durham and South Yorkshire were tipped to move into a higher funding bracket, but for Brexit.

The losses follow fierce criticism of Mr Johnson’s major speech on levelling up last month, which he himself admitted lacked worked-up policy measures.

James Ramsbotham, chief executive of North East England Chamber of Commerce, said the promised Shared Prosperity Fund – to replace EU money – was crucial to turning around economic deprivation.

“Despite being first proposed in 2017, we still have little indication of what it will do or how it will work,” he protested.

“Levelling up will mean nothing unless government acts quickly to replace Structural Funds in a fair and transparent way.”

Steve Reed MP, Labour’s shadow communities secretary, said: “This research makes a mockery of the Conservatives’ pledge to to fix the gigantic regional inequalities they have created.

“Not only is the government failing to fulfil its promise to match what these regions have lost, it is making them bid against each other for what little funding there is, prioritising rich areas over poorer ones.”

And the Welsh government’s economy minister, Vaughan Gething, attacked the situation as “chaotic”, undermining its worked-up development plan.

“Wales is now being denied jobs and investment at the worst possible time. You simply cannot do this work on the hoof and no responsible government would attempt to,” he said.

During the years of austerity after 2010, poorer regions of England lost almost all economic development funding from Whitehall – prompting fears that EU money would also go after Brexit.

The Brussels grant stream – £1.73bn across the UK in 2018 – funded scientific research centres and business parks, among many other schemes, levering in private finance to boost the public spending.

In response, the government promised the UK-wide Shared Prosperity Fund to replace it, but it has been dogged by delays and uncertainty over how it will operate.

It is due to start next April, but bids have not yet been sought – and there are doubts over whether all funding will be replaced, with the government committed to spending an annual “average” of £1.5bn.

With ministers and officials Whitehall making the decisions on allocations, there are also fears of a power-grab that will undermine the Union.

In the interim, £11m of the £220m Community Renewal Fund will go to Northern Ireland and £14m will be shared by 100 “priority places” this year – leaving less than £200m to be distributed.

The Ministry of Housing Communities and Local Government declined to comment on why the Shared Prosperity Fund will not start until next year, and did not address any criticism of the bidding process.

A spokesperson said: “Funding will ramp up so that total domestic UK-wide funding will at least match EU receipts, reaching around £1.5 billion a year.”