Policy paper

​​Mayoral Revolving Growth Fund: policy statement

Published 26 November 2025

Applies to England

Introduction

The government has an ambitious growth mission, aiming to raise productivity and living standards in every part of the country. A critical part of this mission is to support the long-term growth and productivity of the UK’s major city regions, particularly those with untapped potential in the North and Midlands. These regions – and particularly the large cities within them – have significant growth potential. Lifting productivity in key regional cities to the national average would add billions to the economy and create thousands of good quality jobs.

At Spending Review 2025, the government announced that it was capitalising a new recyclable growth fund for mayors in the North and Midlands with an integrated settlement. The Mayoral Revolving Growth Fund (MRGF) is a new £500 million place-based investment programme designed to empower Mayoral Strategic Authorities (MSAs) to accelerate investment, unlock development, and bring confidence back to markets in some of our key city regions.

The MRGF devolves patient, recyclable capital to MSAs to invest in commercial projects that deliver long term growth. It is a strategic investment partnership between central government and mayors to support local economic development, utilising the public sector balance sheet to crowd in private finance and catalyse growth, in line with the Financial Transactions Control Framework.

The MRGF will devolve repayable finance to 6 established Mayoral Strategic Authorities:

• Greater Manchester Mayoral Combined Authority
• Liverpool City Region Mayoral Combined Authority
• The North East Mayoral Combined Authority
• South Yorkshire Mayoral Combined Authority
• West Midlands Mayoral Combined Authority
• West Yorkshire Mayoral Combined Authority

A short methodology note on place selection can be found in the Annex.

Recipient MSAs must aim to repay the capital and the associated borrowing costs, ensuring value for money for taxpayers beyond the economic benefits unlocked by investments made through the MRGF. However, the structure of the fund recognises that otherwise commercially viable development in many major cities is being held back by weak investor confidence, leading to inflated perceptions of risk and high financing costs. Alongside their other funding, MSAs will use the MRGF to tackle local market failures, derisk development, and take a patient and strategic approach to public investment.  

The MRGF intends to create a recyclable, long-term mechanism to finance growth. It will support our major city-regions in the North and Midlands to deliver their ambitious Local Growth Plans, increasing the supply of the commercial, innovation and employment space that businesses need to grow and thrive.

The case for action

The MRGF has been designed to respond to the persistent barriers to growth we see in city regions in the North and Midlands and the resulting regional productivity gaps. Despite their significant potential, these regions have long underperformed economically, limiting local opportunity and constraining national productivity.

Successful city centres need high quality commercial space: Grade A office space to attract and retain high performing businesses, cutting-edge lab space to house the country’s most pioneering firms, and innovation hubs for high-potential firms to grow. Despite many promising development projects and a growing demand from productivity-driving firms in our key cities in the North and Midlands, these regions face persistent challenges in bringing forward the kind of development that leads to productivity growth. Lower land values, higher remediation costs and risk-averse lending practices combine to make otherwise attractive projects commercially marginal. In these markets:

• Gross development values are often insufficient to offset the full cost of development. This is particularly impacted by high upfront costs driven by, for example, contaminated land, fragmented ownership, and poor infrastructure.
• High borrowing costs and yield expectations mean even some of the most strategically significant schemes risk being undeliverable.
• Developers are reluctant to build speculatively, and lenders reluctant to finance without pre-lets.

The result is a self-reinforcing pattern: capital flows to markets mainly in London and the South East with the highest profit margins while our other major cities suffer from underinvestment, constrained local fiscal capacity, stalled regeneration efforts and reduced economic dynamism. As such, investment in commercial space within London and the South East has vastly outpaced other cities in the UK. Between 2000 and 2020, investment by service sector industries grew by around 570% in London and around 360% across the South East. By contrast, investment growth in other cities has varied between 240% (Manchester) and 90% (Sheffield), with investment across the North East actually declining by 13%^{[footnote 1]}. Some of this will have been driven by increasing real estate prices in London and the South East, however this does not fully explain the regional disparities.

The Growth Mission and Industrial Strategy set out a clear ambition to reverse this trend through targeted public investment geared towards private sector mobilisation. Rather than providing only grant funding, the MRGF aims to address the challenge set out above by providing mayors with an additional sustainable financial mechanism to recycle capital and act as patient investors, unlocking confidence across the development ecosystem of their city regions. While grant funding remains an essential tool for tackling the early-stage costs of projects and delivering the longer-term interventions that stimulate demand and support productivity growth, the MRGF is an intervention intended to rebalance risk and return, building momentum in local markets and creating the conditions for private investment to flow in these cities.

The fund’s ultimate purpose is to help flatten the geography of risk premiums across the UK, narrowing the gap between where capital currently flows and where growth potential is greatest.

The policy offer

The MRGF is a devolved investment facility, providing the six recipient MSAs with autonomy over an allocation of flexible, risk tolerant capital to unlock growth and crowd in private finance. Through this fund, MSAs will unlock commercially-led development that would not otherwise happen. The fund will help places address the persistent financing gap that constrains high-potential projects in regional markets where viable schemes struggle to secure backing due to inflated perceptions of risk, weaker exit values, or limited access to patient capital.

Structured as a co-investment partnership between central government and mayors, the MRGF positions MSAs as prudent investors in their region. The fund aligns incentives and shares risk between central and local government in a way that encourages MSAs to back the right kind of projects – strategically significant, additional and commercially sound. This long-term capital, with return expectations below those of a commercial bank, should be deployed in a commercially disciplined manner alongside other streams of investment and private funding, where strategic risk-taking and a patient commercial approach by the MSA to bring forward projects will demonstrate that regional development can generate sustainable returns, and build market confidence over time.

Each recipient MSA will receive a multi-year allocation of repayable capital over the Spending Review period. The terms are designed to give MSAs the confidence to deploy the funding through the range of financial instruments needed to address the uncertainty that drives inflated risk pricing in investment markets and stalls development. Ensuring that this funding is used to address access to finance barriers that would otherwise cause projects to stall will be key to maximising its impact and leveraging private finance. MSAs will be expected to work closely with relevant Public Financial Institutions to ensure MRGF funding does not crowd out finance from those institutions. MHCLG will also work closely with MSAs and Public Financial Institutions to ensure alignment and that the right financing is applied to the right projects.

This approach aims to build on and scale-up the innovative repayable funding mechanisms already being delivered by these MSAs and their constituent authorities, including the North West Evergreen Fund and Greater Manchester Housing Investment Fund, the Chrysalis Fund in Liverpool, the North East Investment Fund, JESSICA in South Yorkshire, the West Midlands Commercial Investment Fund, and the Revolving Investment Fund in West Yorkshire. The focus is on enabling development and business investment that delivers a return, both financially and in wider economic terms. The fund is designed to operate over a long-term horizon reflecting the need for patient investment and allowing sufficient time for portfolios to mature and generate the returns required to meet the fund’s gilt-rate target. Because this is recyclable finance, the capital and returns should be reinvested by MSAs into future projects, creating a long-term, revolving source of capital for development. In deploying the funding, MSAs must aim to:

• manage the portfolio to achieve a return of at least the gilt-rate, with the capital and associated borrowing costs to be returned to government
• leverage private investment
• take a commercially disciplined approach, ensuring that investments are viable and strategic
• align their use of the MRGF with their Local Growth Plan and wider funding streams, investing alongside efforts to grow local innovation and enterprise ecosystems
• adopt a strategic approach to public investment, making each pound go as far as possible
• support high quality job creation

Next steps

The Mayoral Strategic Authorities selected for the fund are invited to work with government to finalise arrangements for implementation ahead of the next financial year. This will include:

• MSAs that have not already done so undergoing readiness checks ahead of receipt of their Integrated Settlement and implementing agreed actions in response to this.
• Additional targeted review of specialist capacity and capability required for successful use of repayable financing and agreement of actions and support to further develop this, ahead of funding being confirmed and deployed. This includes any plans to procure external fund management and support in the short-term and medium-term plans to recruit in-house expertise.
• Determining the exact funding allocation for each MSA based on both an indicative envelope set by government and the MSA’s confidence to deploy the funding on the terms offered.
• The MSA setting out their ambitions for their funding allocation:
  • The initial pipeline of projects to be supported through the fund and how
  • The economic outputs they will deliver through the funding, including commercial floorspace delivered and jobs created
  • The expected financial performance of funding, including expected deployment rates, repayment schedules and portfolio returns
  • The expected market impact of the funding, including investor sentiment, land value uplift and private leverage.
• Agreeing the MSA’s governance structure and assurance processes for delivery of their MRGF funding, including any short-term plans to procure external fund management and medium-term plans to recruit in-house expertise.

Government has written to each recipient mayor to set out the headline financial terms of the fund and their indicative envelope based on population share. Between now and confirmation and release of funding, MHCLG and HMT will work closely with each MSA to ensure necessary capacity and capability requirements are met, agree final envelopes and collaboratively design the finer detail of how the MRGF will be structured and delivered to ensure success. The final allocations and delivery details, including robust reporting and monitoring requirements and how MHCLG and MSAs will work with Public Financial Institutions in the implementation of the fund, will be formalised in a published technical document.

Annex: Place selection

Tier of Delivery

Funding is delivered through MSAs who have the strategic remit to coordinate investment and align it with regional opportunities aligned to national growth priorities.

Strategic Place Selection

To ensure the MRGF achieves its policy aims, places with both high growth potential and scope for productivity catch-up, and the strategic capability to deliver financial transactions funding were identified.

This was assessed in two phases:

1. A quantitative analysis of productivity to identify places with growth potential

• This step identified less productive regional economies that have scope to grow quickly by “catching up” to more productive economies through assessing gross domestic product (GDP) per head (ONS data) to measure distance from UK average productivity.  All MSAs with below average GDP were considered in scope for funding.

2. A qualitative assessment of delivery capability to ensure funds can be deployed effectively

• This step assessed whether in scope MSAs had the advanced capability and capacity required to be eligible for the MRGF. Two criteria were applied:
• Strategic capability: evidenced by agreed Local Growth Plan priorities aligned with national growth objectives.
• Financial and risk management capability: evidenced by readiness for an Integrated Settlement by 2026/27, covering competency in strategy, planning and governance; people and capability; financial and performance management; and reporting and evaluation.

MSAs meeting these criteria were considered eligible recipients of the MRGF. Based on this approach, the 6 MSAs eligible are:

• Greater Manchester Combined Authority
• Liverpool City Region Combined Authority
• North East Combined Authority
• South Yorkshire Combined Authority
• West Midlands Combined Authority
• West Yorkshire Combined Authority

Before funding is confirmed and deployed, MSAs will need to complete readiness checks and further targeted review of the specialist capacity and capability required for successful use of repayable financing. Release of funding will be subject to adequate performance in this review.

1. Experimental regional gross fixed capital formation (GFCF) estimates by asset type: 1997 to 2020 ↩