The Role of Development Corporations in Economic Regeneration
- Mar 27
- 9 min read
The concept of development corporations has been around for a long time, typically as a way to bring investment into a particular area that needs to be regenerated, often in some sort of joint arrangement with private sector developers. For many years, Local Authorities have established Development Companies as a means of achieving commercial objectives, but I their current form development corporations are relatively new and to date pretty rare. The government’s current focus on devolution and local government reorganisation is slated to include a huge increase in the use of particularly mayoral development corporations as a mechanism to address the need for housing growth and the delivery of the green industrial revolution. So what does this mean for those who are tasked with the deliver of this policy and where do they go to learn from the successes and challenges of the early adopters?
The current concept of a Development Corporation was first adopted by the government in 2012 in establishing what is now called the London Legacy Development Corporation (LLDC), to redevelop areas of east London following the 2012 Olympics. This is widely seen as a success but the unique circumstances of the Olympic legacy as well as the huge amounts of central government funding that went into it probably doesn’t provide a blueprint for others, particularly those outside of London to follow.
The ability to establish Mayoral Development Corporations (MDC) was granted to Regional Mayors as part of suite of powers granted to them as part of the establishment of Mayoral Combined Authorities, initially in 2016. Prior to the 2024 General Election, only four MDCs were established, the South Tees Development Corporation (STDC) in 2017 and the Stockport Town Centre West MDC (STCWMDC) in 2019, with the Middlesbrough and Hartlepool MDCs established in 2023 but still very much in their infancy, so the only well-established examples to date are STDC and STCWMDC.
As a sector, we are nowhere near establishing a shared understanding of what a successful MDC looks like, and how the roles of relevant stakeholders and democratic accountability works. Recent government policy may have resulted in a significant rise in the appetite for MDCs both by the government and Combined Authorities themselves, but with so few tangible examples to look at, how should Authorities begin to explore and understand the opportunities that an MDC may present?
The current devolution White Paper positions development corporations as a solution to problems with delivery of infrastructure that have inhibited growth and as such there is a lot of work going into establishing them in many areas of the country but is this work focussing on the real issues? Is it too much focus on getting the body established and not enough on what happens when it is? To make a crude analogy – are we putting too much time and money into the wedding and not giving any thought to the complexities of being married?
One thing is certainly true, successful regeneration is difficult and there are a multitude of reasons why brownfield sites in particular, are not being brought forward at speed to deliver the housing and industrial regeneration we need to drive growth and the level of industrial independence that the country needs, not least for national security reasons.
The market failure that inhibits redevelopment, particularly in the country’s industrial heartlands, now plagued with in places with crippling deprivation, is financial, regulatory and political and to imagine that simply establishing a new corporate structure will tackle these problems is naïve at best.
So much of the thinking to date seems to be about the process of establishing MDCs and the structures that they will use, and not nearly enough about understanding the challenges that they are looking to deal with and making sure that those structures are fit for purpose to actually deliver on their objectives.
There are some very key questions that need to be considered before drawing up the terms of reference of an MDC and deciding what powers and structure that it should be granted. Without real clarity over these issues at the beginning to allow processes and structures to be designed for the organisation’s needs it is being set up to fail.
What is the MDC’s purpose? What will it deliver? How will it deliver it? What is the role of public money? What is the role of the Private Sector? Where is the funding coming from? Who is providing risk capital and making profits? These may seem like obvious questions but without being very clear as to what the MDC is being tasked with doing and how it is going to do it, you are pretty much guaranteeing failure or at the very least very subjectively different views on the level of success. You cannot successfully establish a publicly accountable body to take forward such a scheme without being clear about these aspects so that appropriate transparency but also confidentiality where needed is maintained, especially when dealing with public money.
In any major regeneration project, it is likely that there will be a need to acquire land, there may be demolition of buildings, remediation of land, infrastructure to be built almost certainly viability gaps that need to be funded and all of this before a single thing is built. This may require the use of compulsory purchase powers, environmental permitting, new electricity substations, water connection, the combination of which involves multiple local and national agencies and can take years. The political cycle is short and the electorate’s understanding of and tolerance of long-term projects is limited so it’s highly likely that at some stage, the MDC is going to have to deal with questions about speed of progress and weather criticism.
Decisions will need to be made about who is going to bring forward the site and how whether the MDC is going to develop it or hand it to the private sector and if private sector development is envisaged, how the MDC ensures that the development is what it set out to deliver.
The role of an MDC in regeneration could be anything from a focussed convenor bringing together potential stakeholders to unlock obstacles to development through to being the owner and developer and directly delivering the scheme itself. The way that the MDC is constituted and staffed as well as its governance structures are likely to be fundamentally different depending on which end of this spectrum it sits. Certainly the approach taken by STDC and STCWMDC are fundamentally different in this regard and the way that the organisations are run and managed are very different as a result.
There cannot be a “one size fits all” approach to MDCs because they are being tasked with different delivery models. The optimum structure, such as there is one, probably has to concede that the early stages of development will sit with the public sector; there is little appetite in the private sector for true development risk where brownfield sites are concerned. Private financiers are looking for certainty of returns and therefore one way or another viability gaps, environmental risks and other unknowns end up being underwritten by the public sector. If this wasn’t necessary, the sites would be easy to develop and probably wouldn’t need public sector intervention let alone specialist development corporations in the first place.
Once there is a real understanding of what the MDC is going to be tasked with and the likely timescales it will need to deliver, it is possible to establish a structure that will allow appropriate governance and decision making. If the MDC is going to be more than just an advisory board that provides an extra layer of bureaucracy, it needs to be given the remit to actually deliver the scheme.
The first part of that is being clear about how it makes decisions. As a public body it is accountable to the Mayor who establishes it. The Mayor appoints the Board and this has to be done through an open and transparent process but before that process can be undertaken a clear skills matrix for the Board needs to be published. The balance of skills required will be determined by the scope of the project and needs to flow from the understanding of what it is being tasked to do and what issues it is expected to encounter.
Beyond the appointment of the Board, consideration needs to be made to democratic accountability and the relationship to the Combined Authority and its constituent Local Authorities. Clarity and transparency on where decisions are made and where democratic oversight and scrutiny of those decisions sits is essential. The legislation here is complex and in places not entirely clear, so it’s really important the these issues are considered and set out as part of the establishment of the MDC if itis not to become constrained later as projects develop.
Part of this is setting out and agreeing what powers the MDC needs, particularly in relation to planning and business rates. These are likely to be controversial but it’s important to reach agreement on these at the start or risk the scheme going off track. There is no right or wrong answer to which powers should sit with the MDC, it depends on the circumstances but clarity and agreement of the way forward with local authorities is crucial.
Equally important to ensuring the board composition is appropriate, consideration needs to be given to the executive functions, who is going to run the corporation and what staffing will be required? This starts with Statutory Officers. As a public body, the MDC needs three of these. The Monitoring Officer (MO), who is chief legal officer and by law must be the Monitoring Officer of the relevant Combined Authority. The s73 Officer or chief finance officer has legally prescribed responsibilities in respect of value for money and the Chief Executive Officer who as the accountable officer has delegated responsibility for the public money allocated to the annual running costs of the organisation. Other than the MO, there is no requirement for the statutory officers to come from the Combined Authority and, indeed, the potential conflicts of interest between the MDC and the Combined Authority inherent in the roles are likely to require independent officers.
Finding appropriately qualified individuals who have the skills to drive forward development, whilst operating in a public sector environment is challenging and the more regions look to establish MDCs the more difficult it will be. Add to that the potential requirement to staff a planning department as well as the governance staff needed to run a public meetings and manage open government requirements and the fixed costs of operating are significant. This is before you look to establish the operational staff, project management and delivery. Resource planning and recruitment will be essential early in the process to ensure that the MDC can get up and running but also to ensure that an understanding of the level of revenue costs and crucially where this is being funded from is a critical element. It is likely that the MDC will last beyond one political cycle to appropriate long term buy in to all of this is critical to success. This is not a cost-free solution – someone needs to fund it and it’s unlikely that will be central government!
As well as the funding of the organisation, thought needs to be given to be given to the funding of the project or projects that the MDC is going to undertake. Where public money is involved (and it’s difficult to envisage as situation where it won’t be), the interface between public and private funding is always going to be a key area of focus. This needs to include consideration of risk allocation, as very often the public sector is asked to enter into leasing arrangements to underwrite financial risk instead of, or as well as providing capital. The private sector will bring expertise and funding but getting the balance of risk / reward is complicated and is likely to change over time as projects develop. Being clear about what the relevant parties are putting into the schemes as well as what they are likely to get out them is very important if the MDC is going to take stakeholders with them on the journey. Is the public sector return economic, is it measured in jobs or other economic output? Is it measured in taxation through business rates or council tax receipts? Is it social through improvement in health and other life outcomes and whichever combination of these factors it is, how is it measured and compared to private sector outputs which will easily be measured in terms of profits.
Considering these matters at the outset in an open and transparent way is the best (and potentially only) way to manage against criticism and reputational damage along the way.
Establishing governance and reporting systems that track these metrics over several years is key to ensuring that the success (or otherwise) of the MDC is assessed and monitored throughout its existence.
There’s a lot to consider and having done so, for some projects it may be that alternative structures are more appropriate, but where an MDC is the right structure detailed and transparent planning of these issues may take a little longer but will be well worth it in delivery – don’t focus on the wedding to the exclusion of the marriage!
About the Author
Julie Gilhespie is the former Group Chief Executive of the Tees Valley Combined Authority, where she oversaw more than £1.5 billion of public sector investment across the region. With deep experience in economic development, complex regeneration, and public–private delivery models, Julie has led some of the UK’s most ambitious place‑shaping programmes. Her work continues to influence how regions approach long‑term growth, governance and strategic investment.
