The Regional Development Agencies’ physical regeneration programmes have helped to generate additional regional wealth. However, because of Agency weaknesses in identifying the projects which would maximise regional economic growth, the National Audit Office is unable to conclude the Agencies have secured as much benefit as they should have.

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Since 1999, the eight RDAs outside of London have spent £5 billion on physical regeneration programmes. For every pound of RDA spend on physical regeneration, an estimated £2.80 is secured from elsewhere, including £1.51 from the private sector.

Using the measure of jobs created by RDAs to estimate generated Gross Value Added, there is evidence that physical regeneration projects have helped to generate growth. Independent evaluation suggests they have generated Gross Value Added of £3.30 for every £1 spent. Many of these projects will not realise their full benefits for many years and there is potential for a return over the lifetime of the projects of £8 for every £1 spent.

However, the National Audit Office has reported that RDAs have not been able to demonstrate they have maximized economic growth, because weaknesses in project appraisal and evaluation mean the Agencies might not have identified and backed the most effective projects for generating regional wealth.

The Agencies’ more direct support to business generates greater economic wealth, both in the short and long-term but physical regeneration projects generate other social and environmental benefits which are more difficult to measure.

Before 2009, RDAs reported to Parliament on the number of gross jobs they had created – 413,000. Attributing jobs that would have happened anyway or which have transferred from elsewhere within the region to the activity of the RDAs does not provide an accurate reflection of their impact on regional growth. Independent evaluation estimates the number of net additional jobs created by the RDAs was 178,000.

During the economic downturn, approximately 15 per cent of physical regeneration projects involving the private sector have stalled or slowed because developers are struggling to get finance or because of concerns over future yields.

"The Regional Development Agencies' efforts to encourage economic growth through a programme of physical regeneration have delivered real benefits. It is questionable, however, whether they could not have achieved even greater benefits from the £5 billion they have committed. It is important that the RDAs establish better appraisal and evaluation methods to identify the projects which are most beneficial and then target their funding accordingly.”

Amyas Morse, head of the National Audit Office

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