Strategic Alignment for Place-Based Prosperity: Integrating Local Growth Plans, Spatial Strategies, and Pension Fund Investment

A New Paradigm for Local Growth and Investment

A rare and time-sensitive confluence of government reforms spanning devolution, pension fund investment, and strategic planning has created an unparalleled opportunity to reshape local economic development in England. Landmark legislation, including the English Devolution and Community Empowerment Bill ii, alongside the government's Pensions Review, establishes a new paradigm for place-based growth. This model demands an integrated approach between newly empowered local bodies and long-term institutional investors. Places that fail to align these functions will prove uncompetitive in the race to attract the patient capital required for sustainable prosperity.

Success in this new paradigm depends on the strategic interplay and formal collaboration between three key actors:

• Strategic Authorities (SAs): Established by the Devolution Bill, these bodies including Mayoral Combined Authorities are equipped with a clear democratic mandate and significant new powers to shape place. Their responsibilities include producing Local Growth Plans (LGPs) and Spatial Development Strategies (SDSs), alongside enhanced capabilities in critical areas such as land acquisition (Schedule 15) and housing (Schedule 16), which enable them to create and de-risk the very investment opportunities this framework seeks to unlock.
• Local Government Pension Schemes (LGPS): With assets projected to reach £1 trillion by 2040, the LGPS represents a cornerstone provider of long-term, patient capital. Government reforms now mandate that LGPS Administering Authorities and their investment pools develop local investment strategies. This is reinforced by the Devolution Bill, which legally requires combined authorities to "co-operate with the scheme manager to identify and develop investment opportunities," cementing a formal partnership between local government and the LGPS.
• Central Government and National Bodies: Central government sets the overarching policy framework that enables this integrated model. National bodies, including the National Wealth Fund, Homes England, and the British Business Bank, act as crucial co-investment partners, collaborating with the LGPS and local authorities to address finance gaps, de-risk projects, and support strategic objectives in sectors like clean energy and housing.

The success of this new paradigm rests on the coherent integration of economic, spatial, and investment planning, which is orchestrated through a clear strategic hierarchy.

The Strategic Hierarchy: From National Ambition to Local Implementation

A coherent planning framework is essential for translating national ambition into tangible local action. The government’s new, devolved model establishes a clear planning hierarchy where national strategy informs local economic priorities, which are then articulated in a physical, place-based context. At the heart of this hierarchy are two key instruments: Local Growth Plans (LGPs), which define what a place aims to achieve economically, and Spatial Development Strategies (SDSs), which define where and how that growth will happen.

Local Growth Plans (LGPs): Defining Economic Priorities

Local Growth Plans are the primary vehicle through which a Strategic Authority articulates its economic vision. As outlined in Schedule 19 of the Devolution Bill, mayoral strategic authorities are required to prepare and publish an LGP for their area. The core functions of an LGP are to:

• Provide an overview of the area's economic conditions and characteristics that are likely to influence future growth.
• Identify shared local growth priorities that are agreed upon with the Secretary of State.
• Pinpoint key projects for achieving economic growth through both public and private investment.

By establishing these priorities, LGPs provide a clear signal to investors and government partners about the strategic direction of a place, forming the cornerstone of a coordinated, place-based approach to economic development.

Spatial Development Strategies (SDSs): Providing the Physical Framework

Spatial Development Strategies translate the economic ambitions of LGPs into a credible, place-specific physical framework. They are the principal tool for integrating policy agendas and providing the long-term spatial context for housing, infrastructure, and environmental sustainability. SDSs must be rooted in a bold and plausible vision for a place, underpinned by meaningful and measurable metrics. Crucially, they are also expected to adopt a 'Health in All Policies' approach, recognising that health outcomes are deeply connected to social determinants such as housing quality, air quality, and access to green space. By grounding economic goals in a tangible spatial plan, SDSs provide the clarity and confidence required to attract long-term investment.

2.3 Analysing the Critical Dependency

Local Growth Plans and Spatial Development Strategies are symbiotically linked; one cannot succeed without the other. An LGP without the spatial context of an SDS is an abstract list of ambitions, disconnected from the physical realities of the area. Conversely, an SDS without the economic direction of an LGP lacks strategic purpose. It is only through their tight integration that a Strategic Authority can present a coherent, long-term vision that is legible and attractive to institutional investors like LGPS funds, who require certainty and a clear strategic context to de-risk their investments.

However, even the most robustly integrated plans require capital to become reality. LGPS investment is the crucial catalyst required to turn this joined-up vision into on-the-ground delivery.

LGPS Investment: The Catalyst for Delivering Local Priorities

The mobilisation of Local Government Pension Scheme capital will also be pivotal to the success of this new framework. Local investment by LGPS is not merely a compliance exercise driven by pension reforms, but a strategic imperative for achieving the economic, social, and environmental goals set out in local plans. As providers of long-term, patient capital, LGPS funds are uniquely positioned to finance the priority projects that will build more resilient and prosperous local economies for the communities in which their members live and work.

The Mandate and Opportunity for Local Investment

The drive for LGPS local investment is supported by clear policy and legal mandates. The government’s 2025 pension reforms explicitly challenged the LGPS to develop local investing strategies to help close the UK's investment gap and support inclusive growth. This policy direction is reinforced by a legal duty enshrined in Section 41 of the Devolution Bill, which requires combined authorities to actively "co-operate with the scheme manager to identify and develop investment opportunities" appropriate for the pension fund. This creates a powerful alignment between the strategic priorities of local government and the investment potential of the LGPS.