From Strategy to Deals: How Local Growth Plans Can Become Deal Platforms
A New Settlement for Regional Growth
In June 2025, the Comprehensive Spending Review marked a watershed moment for England's devolved growth strategy. The Chancellor announced that the Local Growth Fund (LGF) would replace the fragmented UK Shared Prosperity Fund, delivering targeted, long-term funding to city regions in the North and Midlands with the highest productivity catch-up potential. This was not simply a funding reallocation. It represented a fundamental shift: from short-term competitive bidding pots to multi-year certainty, from central prescription to local flexibility, from project-by-project grants to integrated settlements.
Ministers described the LGF's purpose clearly. It would move away from "inefficiencies: short-termism, duplication, and wasteful competitive bidding" towards a system where mayoral authorities could "plan and deliver transformative change with confidence." The fund would help assemble sites, deliver enabling infrastructure, and create attractive propositions for private investors. The Budget in November 2025 confirmed the detail. Eleven Mayoral Strategic Authorities would share over £900 million across four years.
The question now is what happens next? James Dowling sets out how funding certainty can open the way to negotiated deals aimed at regional economic transformation.
A New Industrial Strategic Approach: The Cluster Deal Model
The answer requires moving beyond traditional industrial policy tools. What's needed is a negotiated partnership approach that combines public funding, private investment and shared commitments to deliver measurable outcomes. We call this the cluster deal model.
A cluster deal is a negotiated growth pact focused on a specific industry or ecosystem. It brings together anchor private investment, public enablers like planning certainty, land assembly, infrastructure and skills provision, and shared governance tied to measurable outcomes.
The Local Growth Fund is designed precisely to unlock these partnerships. Its capital component provides the public investment needed to de-risk sites, upgrade infrastructure, and build the enabling conditions that attract private capital. Its revenue funding supports business engagement, skills programmes, and the coordination capacity needed to structure and deliver deals. Crucially, LGF gives mayoral authorities multi-year certainty, allowing them to negotiate long-term commitments with private partners rather than operating on annual funding cycles.
This approach has three defining characteristics that distinguish it from traditional industrial policy.
First, it is mission-led. It aligns national priorities like net zero and innovation with local sectoral strengths. This creates political buy-in across government levels and reduces delivery risk.
Second, it is deal-driven. It creates investable propositions rather than fragmented projects. Private investors understand the terms of engagement. They know what public support is available and what commitments are expected in return.
Third, it is outcome-focused. Public money is linked to measurable delivery and private leverage. This matters for accountability and for demonstrating value for money. It also creates a mechanism for iterative learning and adjustment.
Crucially, this approach is open to private initiation. Businesses do not need to wait for an invitation. If they see an opportunity aligned with local strengths and national missions, they can bring forward a proposal and shape a deal. This inverts the traditional model where public sector defines priorities and private sector responds. Instead, both sides are active partners from the outset.
The theory is clear. But can it work in practice?
NECA: Testing the Model
The North East Combined Authority (NECA) offers a compelling test case. Under the LGF, it was awarded £53.8 million in capital and revenue funding over the period 2026-30, sitting within a total integrated settlement worth over £1.7 billion covering transport, skills, housing, and economic development.
NECA has set out five missions for the next decade: home of the green energy revolution, a welcoming home to global trade, home to a growing and vibrant economy for all, home of real opportunity and a North East we are proud to call home. Behind these missions sit sectoral strengths with national significance: offshore wind and hydrogen, advanced manufacturing, digital and AI, logistics and health innovation. The plan explicitly signals intent to work through public-private partnerships and attract foreign direct investment.
This is not aspirational language. It is a framework for negotiated deals. The Local Growth Fund provides financial backing for coordination, site preparation and enabling infrastructure. But the real value will come from structuring agreements that align those national missions with local strengths and crowd in private capital at scale.
What Cluster Deals Look Like in Practice
Here is how cluster deals could work across NECA's priority sectors, recognising that LGF funding alone cannot deliver major infrastructure but can catalyse private investment through strategic enablers.
Clean energy offers the clearest opportunity. The North East has the ports, the Offshore Renewable Energy Catapult and supply chain potential to lead the UK in offshore wind and hydrogen. A cluster deal would see energy majors commit to turbine assembly and hydrogen production facilities. LGF revenue funding supports sector coordination, supply chain mapping and investment promotion. LGF capital funding provides strategic site assembly and planning support, while major port and grid infrastructure is funded through Transport for City Regions capital within the integrated settlement or direct private investment. The outcome: jobs, export contracts and carbon savings that can be measured and reported.
Advanced manufacturing builds on existing anchors. With Nissan and Hitachi already present, the region can develop an electrification corridor for EV and rail supply chains. LGF capital funds strategic site assembly and remediation to create investment-ready propositions. Major transport links are delivered through the Transport for City Regions settlement. LGF revenue funding supports supplier engagement programmes and R&D partnerships. Private suppliers commit to localising components and investing in facilities. The result is supply chain resilience and new inward investment.
Digital and AI represent high-growth potential. NECA's AI Growth Zone, backed by Investment Zone funding within the integrated settlement, can become a commercial cluster spanning applied AI for energy, manufacturing and creative tech. LGF capital funds workspace retrofits and supports compute infrastructure access. The Creative Places Growth Fund (£10m over three years within the integrated settlement) backs studio space and cultural infrastructure. LGF revenue funding supports coding and data science bootcamps through Adult Skills Fund integration. Private tech firms and studios co-invest in hubs and shared facilities, creating start-ups, exports and inclusive jobs.
Health and life sciences complete the picture. With strong research assets, NECA can build a translational pipeline from university labs through NHS testbeds to global markets. LGF capital provides matched funding for flexible lab space development. LGF revenue funding supports partnership coordination and NHS procurement pilots. Medtech firms co-fund clinical validation facilities and commit to scale-up investment. Outcome: R&D growth and improved health outcomes.
From Proof of Concept to National Model
The North East example demonstrates how Local Growth Plans can become deal platforms, not just policy documents. But this approach is not unique to NECA. Any combined authority with an integrated settlement and LGF allocation can structure similar partnerships.
The critical factors are: strong sectoral assets that align with national missions, mayoral leadership able to convene private partners, and the capacity to structure and negotiate complex deals. Where these factors exist, the LGF provides the financial foundation to turn local growth plans into bankable propositions.
If this approach succeeds across multiple combined authorities, it will establish a new template for industrial strategy: mission-led, deal-driven, outcome-focused, and open to private initiation. It will show how devolved growth funding can catalyse private investment at scale rather than simply replacing it.
The Comprehensive Spending Review set the policy framework. The Budget has provided the financial foundation. The question now is whether combined authorities and private partners can build the negotiating capacity and deal structures to turn that foundation into real economic transformation.
For businesses, the message is clear: do not wait. The Local Growth Fund creates a structured route to turn ideas into deals. Identify where your investment aligns with sectoral strengths in the North and Midlands. Bring forward a proposal which plays effectively into shared interests. Engage early with mayoral authorities.
For policymakers beyond these initial eleven authorities, this is the proof of concept for the next generation of industrial strategy: cluster deals, co-investment and shared accountability. It requires moving away from traditional grant-giving towards negotiated partnerships where both sides bring resources to the table and both sides are accountable for delivery.