Analyst Insight: Trends in Smart City Project Funding

Funding is the single most important factor determining smart city progress with constraints on local government spending remaining the primary barrier to the scaling of projects. However, despite ongoing financial impacts from the COVID-19 pandemic, there are positive developments regarding national government stimulus funding, new approaches to financing, and a drive by city leaders to invest in post-pandemic recovery programs.

Guidehouse Insights tracks three broad categories of funding: public, private, and public-private partnerships (PPPs). Public funding accounts for roughly 60% of these smart city projects, whether wholly from municipal funds or assisted by regional or national investments. However, cities are limited in their ability to fund new investment, particularly for technology-heavy projects. PPPs are seen as the most attractive way to bridge this funding gap but also come with challenges of protecting data and government autonomy. Private funding drives a small proportion of smart city projects, typically seen in greenfield developments or large-scale regeneration projects. This type of funding remains a small if often very visible part of the market.

This Guidehouse Insights report focuses on historical and anticipated smart city funding trends as well as factors that might affect funding in the future. Drawing on data from Guidehouse Insights’ Smart Cities Tracker, this report considers 619 tracked smart city projects from 2010 to 2020. Discussion on this data includes regional market drivers, barriers, and emerging opportunities.