LISTEN: The regions sit at the heart of this week’s Budget. With new freeports named, Leeds and Darlington set to become economic hubs, and £1bn from the Towns Fund allocated to another 45 towns, the chancellor’s spending plans signal a distinct shift away from London.
In particular, the approach to freeports as a driver for economic activity has struck a chord with the industry. Speaking in EG’s latest Property Podcast, British Property Federation chief executive Melanie Leech said it will be worth considering whether the model – which she hailed as a “significant” initiative – can be applied to town centre recovery, in terms of creating “investable zones”.
However, while the shift away from a usually London-centric Budget was regarded as a “positive message”, concerns were raised that the wider levelling-up narrative remained unclear. A critical disconnect between the government’s plans and local authority resources is at its core, according to both Leech and Walter Boettcher, UK chief economist at Colliers International.
Bringing local authorities from the sidelines
Sunak has pledged to advance the government’s push on levelling up the country with a variety of funding announcements and initiatives. But as Leech points out, the devil is in the detail. She highlights that “scattering” funding across too many areas risks not having enough concentrated in any one place to make a meaningful impact.
She posits that the best way to drive forward the levelling-up agenda would be to “focus slightly less on shifting people out of London, and more on shifting powers out of London, to devolved authorities and local leaders” to drive each area’s economic agenda.
“Local authority funding is still reducing – how are local authorities meant to deliver quite a lot of the ambition?” Leech adds.
“It would be great to see an investment in local public sector structures, more powers for local areas, alongside the significant investments that the government is making.”
Like Leech, Boettcher said he was “encouraged” by the “real shift of focus” to the regions. With Teesside winning freeport status and Darlington set to host HM Treasury’s new campus, Boettcher pointed to the “really interesting possibilities” in the North East in light of the region’s green agenda.
But he added that he was struck by the fact that projects in line for funding did not appear to be “linked as tightly” to combined authorities as he expected.
For Boettcher, devolution is key to pushing the regional development agenda forward. He cited the work Andy Street has done as mayor of the West Midlands Combined Authority as an example of how seed funding from the government can be channelled into transforming areas in need of regeneration.
“That’s the model that really needs to be pushed forward across the country… to actually achieve the levelling up,” he said.
Missed opportunities
For Leech, the government has also missed a “huge” opportunity in the Budget to incentivise investment in repurposing the UK’s town centres to aid recovery. Leech underlined that the super-deduction tax incentive applies only to new plant and machinery rather than investment in the structures of properties. She emphasised it is a case that the BPF will make to the government as it takes its proposals forward.
“It’s disappointing that the Budget doesn’t really seem to have thought about the essential role that commercial real estate is going to play in the levelling-up agenda,” she said.
A closer alignment between the green agenda and incentives for real estate investment, and the part that the industry can play in achieving sustainability objectives, is something that Leech is keen for the government to recognise – particularly as the UN’s COP26 event in November approaches.
“We know that most of the building stock that will be around in 2050 is already being built,” she said.
“There was a real missed opportunity… [for] retrofitting our homes, looking at our existing office and commercial stock, and really thinking about driving and incentivising us as individuals to use buildings differently, to expect different things from our homes and workplaces and so on, and incentivising investors to make it easy for people to be greener.
“I’m disappointed because in the run-up to COP26… I’d have expected to see more on that. Maybe this is a rabbit sitting in the hat until the autumn.”
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