MIPIM UK: The Northern Powerhouse and the Midlands Engine might make the headlines when the UK talks about devolution, but a debate at MIPIM reminded the industry that this is not enough. Devolution should help rebalance the economic gap between London and the rest of the country as a whole, and, in a post-Brexit world, that might be more possible than before.
Estates Gazette’s “Devolution revolution: the challenges and opportunities in post-Brexit regional UK” debate heard Liz Peace, chairman of the Curzon Urban Regeneration Company, praise the government under prime minister Theresa May for being “far more focused on developing everywhere in the UK”.
She added: “The great swathes of the UK that aren’t in the Northern Powerhouse or Midlands Engine are important as well. Regional devolution is about bringing economic growth everywhere, not just the bits that we give a title to.”
Phillip Davies, leader of Wirral Council, and Stephen Barter, chairman of real estate advisory at KPMG, argued that Brexit had intensified the opportunity to rebalance the economy because the vote showed how divided different local communities have become.
Barter said: “What the Brexit vote revealed were a lot of broken communities: a lot of anger and a lot of displacement. By regenerating the kinds of places we want to live in, we will play a very valuable role in improving our communities and bringing the economic growth that we want to see.”
Meanwhile, investors have started seeing more reasons to pursue the North. According to CBRE, City of London office values fell by 6.1% in the first full month following the vote, whereas falls in UK commercial property overall were just 3.3%. Add to that the fact that the Midlands Engine has accounted for 33% of all industrial investments in the past 12 months and the Northern Powerhouse
has been responsible for 11% of all office and retail investment over the same period, and the regions look like an impressive place to invest.
Differences like these across the UK should be embraced, the panel argued, and that will help close the gap between London’s economic output and the output of the rest of the country.
But, as many panelists have pointed out throughout MIPIM UK, the regions cannot reach their potential if they lack the infrastructure to connect them to workers with skills and connect them to each other.
Davies said: “The Northern Powerhouse has to be more than just a soundbite. We have great opportunities around the port of Liverpool, particularly in trade, but we have an antiquated rail system going west to east. HS3 is absolutely critical for our economic future. That requires the government to be bold in providing funding like it has for other projects. We need real capital investment to unlock the opportunities.”
The question of investment has been on everyone’s minds since the referendum, particularly as the pound plummeted in the weeks following the result. While London has seen large deals from opportunistic private equity lured in by 15-20% discounts, that is in no way limited to the capital.
Davies, speaking about his experience with overseas investors, said: “I have never had so many investors knocking on my door saying there are great opportunities in my area.”
However, Reda Khatim, managing partner at Palm Capital, reminded the panel that for the whole of the UK to benefit, rents need to go up outside city centres. Overseas investors looking for attractive rents are only going to find them in Birmingham, Manchester and “some places in the South East”, he said.
That is just one more reason we should start thinking about broad developments outside London, agreed the panel, as focusing on the Northern Powerhouse or Midlands Engine leaves out swathes of potential for investment and economic growth.
