Newcastle, Glasgow, Leeds, Birmingham and Manchester should be the focus of £3.5 billion of European Structural Funding according to a new report by the Centre for Cities at the Institute for Public Policy Research, published today (Monday).

Recent European enlargement means that the money the UK gets from the EU for regional development will decrease from £11.5 billion in 2000-2006 to £6.5 billion from 2007-2013. The EU has already set aside £3 billion for South Yorkshire, Merseyside, Cornwall and the Isles of Scilly, West Wales and the Valleys, and Scotland's Highlands and Islands.

The Centre for Cities report says that the remaining £3.5 billion should be targeted on a small number of city-regions – areas with strong growth potential - over the next seven years. It argues that this would be the most effective way to use EU funds to help tackle regional disparities, create jobs and promote economic growth.

Dermot Finch, Centre for Cities director said:
“Our share of European Structural Funds is about to fall by more than 40 per cent. We will need to do more with less. We should spend this last slice of EU money on high potential areas outside the South East. Concentrating EU funds in big northern cities, such as Newcastle and Leeds, will help to drive economic growth not just in those cities but across those regions.”

Last Orders! What the new EU budget means for Britain's cities by Adam Marshall and John Adams is available here

Notes for editors:

The Department for Trade and Industry are now consulting on the draft National Strategic Reference Framework (NSRF) – which will serve as the blueprint for the EU Structural Funds from 2007 to 2013. The consultation closes next month.

Over the last 20 years Structural Funds have financed major regeneration projects and critical urban transport projects in all UK nations and regions. Some examples include:

• Birmingham- International Convention Centre
• Glasgow- Science Centre
• Manchester- New East Manchester
• Tyneside - Gateshead Millennium Bridge
• Leeds- Carriageworks Theatre
• Sheffield– Supertram
• Liverpool- Kings Waterfront

The Centre for Cities City Leadership report (February 2006) argued that EU Structural Funds should be devolved to city-regions, along with other spending for regeneration, transport and skills. This would enable cities to combine funding streams and leverage additional investment.

The economic performance of British cities is uneven. According to the State of the English Cities report for ODPM (March 2006), cities in the North and Midlands have lower employment rates, lower levels of population growth, and higher levels of deprivation. On average, cities in the North and Midlands perform 20-30 per cent worse than cities in the South and East. Manchester and Leeds are exceptions, and are doing relatively well.

GDP per head in the north of England is substantially below the UK average, and disparities between the regions have increased over the last decade. For example, GVA per head in the North East is nearly £9,000 or 40 per cent below that of London, the richest region.

Total UK share of the EU Structural Funds: £6.5 billion

• Convergence objective: £1.8 billion: replaces Objective 1. Only Cornwall and the Isles of Scilly; West Wales and the Valleys; and Scotland's Highlands and Islands are eligible. No major urban area will benefit – a change from 2000-2006, when both Merseyside and South Yorkshire had Objective 1 status.
• Competitiveness and Employment programmes: £4.3 billion. This covers all other areas of the UK, replacing the old Objectives 2 and 3. Merseyside and South Yorkshire will receive ring-fenced funding of £310m and £275m, about one-third of their 2000-2006 EU allocations.The distribution of the remaining £3.5 billion has not yet been decided.
• Co-operation programmes: £0.4 billion.This covers cross-border collaboration.

These funds will be spread over seven years, equivalent to around £900 million each year for the whole of the UK. Domestic spending on enterprise and economic development alone amounted to £4.7 billion in 2004-05 (HM Treasury, 2005).