Council / Island councils’ concern at ‘considerably decreased’ value of growth deal
THE VALUE of the £100 million islands growth deal pledged by government has decreased “considerably” since it was first announced due to inflation, according to the councils in Shetland, Orkney and the Western Isles.
The three island councils also say there are insufficient resources at the local authorities and other organisations for project development and delivery.
The Islands Growth Deal, first announced in 2020 and formally signed in January last year, will see the UK and Scottish governments commit a total of £100 million over ten years.
This money will be used to support a range of projects in Shetland, Orkney and the Western Isles designed to stimulate economic growth – with match funding expected to come on top from other parties.
Local projects include redevelopment of the former Anderson High School site, investment in the UHI Shetland campus and an ultra-deep water port at the Dales Voe decommissioning site.
The projects are being developed by the three island councils with public, academic, business, community and third sector partners.
But in a response to an inquiry by Westminster’s Scottish Affairs committee on regional growth deals, the three councils have noted challenges in a number of areas.
They say inflation has decreased the “spending power” of the deal considerably since the £100 million quantum was announced in July 2020.
They added that cost escalation is exacerbated in an island context.
“We are seeing the lowest tender returns for initial capital projects within the Islands Deal coming back at 40% over informed and up to date QS [quantity surveyors] estimates,” the councils said.
They added: “We anticipate there will be a requirement for significant changes across the deal project portfolio due to challenges with cost escalation.
“However, it is believed that even with significant changes, the overall strategic vision for the deal across its three key themes, will remain broadly the same.”
They also raise anticipated challenges such as:
- Difficulty in securing contractors
- Projects being unable to secure match funding in an “incredibly competitive environment”
- Inadequate resources or capacity within local authorities and other partners to support full business case development, project development and project delivery
- A lack of revenue funding
- Difficulties in recruiting and attracting people to the islands, including as a result of a lack of accommodation
The councils also said that while there have been “positive relationships with UK and Scottish Government”, the deal process itself has been “lengthy, time consuming and frustrating for local authorities”, whose staff and financial resources have become increasingly limited over the period.
They also called for change to the funding mechanism for growth deals to “enable local and regional partners being adequately resourced to meet expectations and successfully deliver”.
The three councils did note a number of positives, including the economic growth which is likely to follow once projects are implemented.
They also note some expected “transformational impacts” from larger projects such as the ultra deep-water quay development.
The councils further said the ten-year time period allows a “degree of future certainty”, while they noted “positive relationships” with the UK and Scottish governments in the delivery of the deal.
In response, a UK Government spokesperson said: “The Islands Growth Deal will see £100m invested by the UK and Scottish governments over 10 years.
“This will help to bring in up to £293 million in further investment from a wide range of partners from across the public, private and academic sectors.
“The governments are working closely with the deal partners to support the delivery of the deal projects, secure best value for taxpayers, and maximise the impact of this investment for island communities.”
A Scottish Government spokesperson added: “As part of an overall package of £100 million in government investment, the Scottish Government has committed £50 million to the Islands Growth Deal.
“As well as supporting island communities through Growth Deals, the Scottish Government is providing investment through the Islands Programme, which has already awarded over £1.1 million for locally developed infrastructure in the Shetland Islands.”
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