The north of England and the Midlands have been hit disproportionately hard by the Covid-19 crisis, creating unprecedented challenges for elected leaders and top civil servants.
Here, EG hears from four such figures – with remits covering Liverpool, Leeds, Manchester and Birmingham – about how they are handling the biggest challenges of their careers, and the impact of the pandemic on their real estate agendas.
This content and much more will feature in the forthcoming edition of UK Cities, out on 31 October.
LIVERPOOL
Tony Reeves, chief executive of Liverpool City Council, believes the coronavirus pandemic offers the opportunity to regenerate the city, writes Lucy Alderson
When prime minister Boris Johnson said in parliament on 12 October that he had reached an agreement with Liverpool, its leaders were quick to point out that there had been no agreement on financial support as the region grapples with the country’s highest infection rates.
As Liverpool becomes the first area to enter the “very high” alert level under the government’s new system, concerns are growing that Merseyside’s economy is on the brink of collapse as lockdown restrictions stagnate the recovery of local business.
There is increasing anxiety that if the Treasury doesn’t step in with a package of financial support, companies and public services could collapse, leaving a legacy of poverty.
The city remains on a knife edge, and with tougher Covid measures being enforced – including the closure of pubs, betting shops, casinos, gyms and leisure centres – Merseyside faces the very real prospect of being crippled by the strain of keeping the region afloat.
It’s a situation that no doubt keeps Liverpool City Council chief executive Tony Reeves up at night. Speaking just three days before the announcement that the Liverpool City Region would face the strictest rules under a new government “three-tier” system, Reeves says: “The issue is that we have significantly increased costs as a result of Covid, significantly reduced income and increased demand for a lot of services where people have needed more support. That creates a rapid financial gap.”
Currently, the council is ploughing its way through its cash reserves, but this pushes the problem into next year. “We will be able to balance the books this year, but next year the funding gap ranges from £45m [in a best-case scenario] to £65m [in a worst-case scenario].”
Considering the council’s net budget for the year is £400m, this cost gap could eat up roughly 16% of funds. With the council’s funding already stretched (the council has seen its net budget slashed from £800m in 2010), Reeves says it’s critical that government steps in to save the local economy – from supporting a hospitality sector fighting for survival to helping the city’s post-Covid recovery plan get off the ground, including a list of critical regeneration projects.
“Devastating” impact on hospitality
Hospitality and tourism is the lifeblood of Liverpool. As one of the UK’s most visited cities, the sector is critical to the success of the region – and contributes nearly 50% of all business rates.
But the sector is under threat. Liverpool City Region Combined Authority had to step in earlier this month with a £40m shot in the arm for businesses struggling to keep going. A statement issued by the combined authority said the emergency funds are a “stopgap” while the city region waits to secure further financial support from central government, and have been issued directly in response to the new restrictions that were rolled out on 3 October forbidding people from mixing with other households in pubs, bars and restaurants.
Reeves said that the council’s talks with central government with regard to clinching a support package for the sector are under way, but he is still waiting to hear the outcome of whether discussions have been successful. But if tough restrictions are still in place over the Christmas trading period, and the sector receives no funding from central government, the council is estimating that the sector could be decimated by Q1.
“Without support, the impact [on the sector] will be devastating,” Reeves says. “It’s very important we get the visitor economy, and the hospitality and leisure sectors in particular, through this crisis which is not of their making.”
The situation has also had an impact on landlords in the city, Reeves says. “Rent income is significantly down, and a lot of them have bank covenants with conditions to meet… The challenges for landlords are significant.”
However, as the country begins to recover post-Covid, Reeves says that there is an opportunity for landlords and tenants to “take a step back” and look at how to change the system for the better, which could include reviewing lease lengths and debating whether to roll out turnover-based rent models.
“There is an opportunity to review and consider: is there a more sustainable way of doing this that creates the right balance to incentivise growth but with a fair system of risk and reward?,” he says. “That’s not so much a job for government, but a job for the industry.”
Projects to catalyse recovery
Rebuilding the hospitality, leisure and tourism sector is only one part of Liverpool City Council’s plans to rebuild the city’s economy post-coronavirus.
The city has sent a £1.4bn, five-year plan over to central government, outlining how the city could recover and thrive post-pandemic. Regenerating the city plays a fundamental role, with the council asking for £200m to fund more than 25 shovel-ready projects that could begin before the year is out.
Projects include the Science & Tech Innovation Centre, part of the Liverpool John Moores University development at Copperas Hill in the Knowledge Quarter; a housing retrofit programme which could see modular homes built and up to 4,000 homes retrofitted to address climate change issues; and development schemes at Festival Gardens, Paddington Village and Upper Central.
Conversations between the council and central government over the finances needed for the plan are ongoing, Reeves says. “They’re really positive, in that of we’ve got the engagement we want.”
The council will have to wait until the spending review – the timing and timescale of which is still unknown – to see if it has been successful in securing the cash needed. But Reeves says there is a strong business case for the projects submitted, and strong private sector buy-in from developers and funders to come on board with the projects.
“The funding route for this is going to be through the comprehensive spending review,” Reeves says. “But if we don’t get the funding we want, we’re looking at alternative ways, with our combined authority and others, in which we can get the projects moving.”
Reeves says there are three flagship projects that the council is fighting to push over the line with central government. “If we can get Littlewoods Studios, Upper Central and Paddington Village off the ground in the next few months – and we think we can – then that will be a game-changer for Liverpool.”
Procurement options are currently being discussed for those three projects. “There is work we can do in terms of initial design, planning and surveys to enable the projects to move forward,” he says. “When we have a situation where we have funding from government or other measures to make sure the schemes are viable, then we can move at pace.”
It is clear that moving at pace is critical for the council in all areas of its fight against the pandemic, from lowering the number of cases to stepping in to support the economy. The question is, will its pace be quick enough?
LEEDS
Tom Riordan, chief executive of Leeds City Council, is calling for a government funding boost and an acceleration of devolution, writes Lucy Alderson
Leeds City Council chief executive Tom Riordan has been immersed in the need to firefight the impact of Covid-19 on the city’s businesses, places and people. And most recently, as cases have been rising again, he has been ramping up efforts once more to combat the virus.
Second-wave worries
The city was placed on the government’s coronavirus watch list at the beginning of September, after West Yorkshire recorded a spike in new cases. But another lockdown could be harmful for the city’s economic recovery plans. “We’ve all got to try and come up with a balance between public health and the economy,” Riordan says.
He believes this can be done through introducing earlier closing times for bars and restaurants, but he urges the government not to revert back to restricting travel as the possibility of tougher government regulations hangs in the balance. “In a city like Leeds, and in an economy like Leeds, if you were to restrict travel just to those people who live in Leeds, you would be taking away a huge group of people who would still be able to travel safely and securely in and out of the city,” he says.
“Just as London needs a solution which is more of a balance between the economy and public health, we do too.”
Breaching a cost gap
Striking a balance between health and the economy is critical for Leeds to achieve as the council struggles to handle the cost of the pandemic. When EG last spoke to Riordan in August this year, he was facing a £64m cost gap for the financial year.
Has he managed to narrow that gap? “We’ve managed to close it to about £50m,” he says, but stresses that Leeds still desperately needs backing from government if it is to emerge on the other side of this crisis.
“We still absolutely need help from the government to be able to spread the cost over future years,” he says. “We believe local government should have the same ability to deal with the one-off cost of Covid.”
If central government doesn’t dig deep for Leeds, major problems in terms of delivering public services and keeping people in jobs in the city will quickly arise, he says.
Office sector changes
One area in which Leeds’ property scene will see major change, Riordan says, is within the office sector. The government swiftly did a U-turn on its return to the workplace campaign last month when prime minister Boris Johnson urged people to work from home for the next six months – and Riordan thinks a rise in demand for home-working is here to stay, even post-pandemic.
During the summer, half of the council’s 15,000 staff were working from home, and 80% of the local authority’s workforce said they wanted a balance between office and home-working in the future. Riordan has spoken to large employers in the city which are seeing this demand too, and thinks a shift in the city’s office market is on the cards.
“I don’t think this is the end of the office market by any means, but I do think a correction is going to take place, where people appreciate that they don’t all need to travel in and out of the city at the same time every day and spend all of their time in the office,” he says. “I think organisations like ours, and lots of businesses, will be reflecting on what that balance should be.”
The “casualties” of this market shift are less likely to be the quality grade-A developments, and more likely to be the “tired, older office space that probably needs regenerating or changing anyway”, Riordan says.
“What will happen in time will be an increase in the quality of office space, more collaborative spaces and an ability to hold hybrid meetings with some people in the office and some people dialling in.”
Devolution agenda
But before the market can get moving again, Leeds must pull itself out of this crisis, repair its economy and rebuild the city. The way to do that, Riordan says, is through accelerating devolution.
“The more we can localise the approach [to coronavirus], the more it can be successful,” he says. “The government has got to keep driving that decision-making down to a local level, and the more it does that, the more effective it will be.”
He says that “a very strong partnership between national and local government” is essential, and should be based on giving local areas power to pave their way out of the pandemic in the way they see fit.
“Devolution to local areas is the way to be effective in running the local economy and local places, so I would be a very strong advocate of further devolution of power and resources,” he says. “We know we can make better use of things locally. We’ve shown we can run things more efficiently and more effectively at a local level, and we should be given more opportunity to do that.”
MANCHESTER
Andy Burnham, mayor of Greater Manchester, is pleading for a creativity revolution in our cities, writes Tim Burke
The coronavirus pandemic has taught communities and companies a lot. One lesson is that the traditional way of doing things is not necessarily the best. The way we live and work will undoubtedly change as a result of the crisis. That means the way the real estate industry thinks about the cities in which we live and work should change too.
It’s a message that Andy Burnham wants the property industry to hear loud and clear. Not simply as a challenge, but as an invitation to collaborate. The industry “stepped up” during the pandemic, acknowledged the mayor of Greater Manchester in an interview with EG in June, working on Nightingale hospitals, providing parking spaces to NHS workers and opening up hotels to the homeless.
In the next phase of the crisis, he added, property can help to shape cities in a way that reflects the lessons learned – with a little creative thinking.
“I need to say it: the industry needs to challenge itself and become more creative, more innovative, and think about places rather than schemes,” Burnham said. “And then it needs to work with people like myself and [West Midlands mayor] Andy Street to come together with more imaginative, ambitious plans, rather than going to the easier sites for development.”
Burnham was clear about what he wants: “New communities, built for people rather than cars, digitally enabled, zero carbon and connected to high-quality integrated public transport.”
Supporting the city
The mayor pointed to the Stockport Mayoral Development Corporation – set up to regenerate Stockport town centre – as the kind of initiative that can bring local stakeholders together.
“As long as we can bring the industry with us, you can see that as an exemplar for regeneration,” he says. “Not the government mandating its own development corporation and bypassing local councils – one that does it bottom-up with really strong support from all the players in the locality. I think Stockport could create a template for how a British town could move from a 20th century situation to a completely new future.”
Burnham wants further devolution to remain on the agenda, adding that he and his fellow “M9” mayors had a “positive discussion” with chancellor Rishi Sunak in late June about the government’s forthcoming devolution white paper. “This is a moment for devolution,” he said. “Recovery will always be better if it is led bottom-up rather than top-down.
“What we need first is more control of the public money already spent in places like Greater Manchester… Let us start to control what’s already there and get rid of the Whitehall silos, and then on top of that bring some extra financial firepower that we might be able to deploy,” he said.
“English cities outside London have been held back, certainly since the Victorian period. We’ve got so much potential.”
People, not infrastructure
Despite Burnham’s belief that placemaking is critical, it isn’t the starting point for change in cities. Instead, companies and authorities should put people first, he said. And that goes for the government’s goal of “levelling up” the regions as well.
“Levelling up has been code for concrete and steel so far,” he said. “I don’t think you level up places by simply laying new roads or rail. You level up when you give people hope, help and ambition. That has been missed out of the conversation.”
The distinction is particularly true as cities, communities and economies navigate the Covid-19 crisis, the mayor added, which has posed “a people challenge, not an infrastructure challenge”.
“This generation of people, potentially, could be more disrupted than any generation since the wartime period,” Burnham said. “The message I’m giving to government is that the people challenge this year is absolutely urgent.”
Burnham wants to see a Young Person’s Guarantee to help people into work, as well as government funding for conversion courses that would make it easier for people to move from struggling lines of work into areas such as green construction.
“Yes, it might be costly, but it will be more costly to let thousands and thousands of people go onto the scrapheap. If we’re not careful, the 2020s in the north of England could be worse than the 1980s, and we have to avoid that.”
If that sounds like a stark warning, that’s exactly how Burnham wants it to be taken. But, as ever, he returned to a note of hope for his region. Singling out what real estate can bring to the table, he offered a novel idea for empty offices.
“The return to the office will be a gradual process – there’s going to be a lot of empty office space around,” he said. “Is there a scheme we could work on to provide free or subsidised start-up space to people who have been thinking over lockdown that they might start their own business? Could the industry convert space to provide hubs we could use to incubate a generation of new businesses? Could the industry be at the heart of a drive to make this a moment of business creation?”
Burnham clearly thinks so. Real estate bosses – over to you.
BIRMINGHAM
Andy Street, mayor of the West Midlands Combined Authority, has planning reform, affordable housing and public funding in his sights, writes Emma Rosser
“I may well get a red card from my own party,” says Andy Street, as he races to defend planning and the West Midlands’ own strategies for development.
While prime minister Boris Johnson and housing secretary Robert Jenrick tear up planning, the mayor says he is sceptical. “The current planning system is not faultless, but it has done two things very well and we must protect them,” he says. “It has enabled very big regeneration schemes to happen and then also this very difficult call about the green belt.”
Street’s defence of the system echoes a similar argument at the start of this year. In January, EG sat down with Andy Street at Birmingham’s Mailbox. At the time, he pointed to planning as an integral part of the support from the public sector to enable development and investment. Months later, he reiterates those claims: “If you boil it all down, we’ve had a dynamic development industry over the past decade, working with the current rules,” says Street. “So, ‘be very careful about what we jettison’ would be my advice.”
In the time between EG’s original interview and his latest comments – speaking virtually on a panel for MIPIM – the Covid-19 pandemic has forced the world into lockdown and the economy into recession. Amid the early turmoil, England’s mayoral elections were postponed from May this year to May 2021. Now, the West Midlands mayor says the region’s recovery will rely on the public sector, and he isn’t afraid to break the party line and go it alone.
Public purse strings
Back in January, government investment in infrastructure, specifically HS2, was top of Street’s agenda. At the height of the pandemic the PM finally gave the nod to proceed with the £106bn rail project.
“Let’s be honest, that is a vast sum of cash investing in jobs and innovation in the West Midlands,” he enthuses, but there is still more to be done. “Then you ask: what are the changes to the property market that we are going to need to respond to as well?”
Street says that the West Midlands has a competitive advantage over other areas: “There are some very big publicly funded capital projects.” Take, for example, the £1bn ploughed into the Commonwealth Games.
Last month, Birmingham 2022 said it had scrapped the £500m athletes’ village, with construction delays forcing organisers to opt for accommodation at three university campuses. However, the development will still receive backing from the public purse.
“The regeneration of Perry Barr will continue; we will go straight to the ultimate use of housing,” says the mayor. “The £165m in government money that was on the table for it is still there. We had to fight to keep that, and that housing will still come about. I still see it as a huge catalyst for the regeneration.”
Rethinking residential
Many long-awaited schemes could face even greater delays, with a need for revised plans post-pandemic. The mayor points to Coventry City South, also backed with £95m in devolved funds, where the city has been forced back to the drawing board.
“That scheme was predominantly retail-led. It has been completely rethought during the pandemic, and it will move to housing and leisure,” says Street. “I’m much more confident that this scheme will now go ahead successfully, rather than a scheme that was designed in not just a pre-Covid world but a pre-retail-collapse world.”
The West Midlands Combined Authority is on track to hit its housing target of 215,000 by 2031 and has since shifted its focus to affordability.
In February, the WMCA launched its own tenure of so-called “genuinely affordable” housing, capping monthly payments at no more than 35% of the average earnings of the lowest-quartile earners. The tenure will be a requirement for 20% of housing on any scheme that receives grant funding, and it applies to rents and mortgage payments.
“Property costs go up and the government’s affordable definition went up, and people were not able to afford it,” says Street. “That was wrong and we’ve tried to change that.” Now, with that social criteria in place, he says the question will be over how the industry can ensure homes are sustainable and include outdoor green spaces. “We will be looking to the private sector, frankly, to think about innovation here.”
Battles with Whitehall
That doesn’t mean he is backing down from his demands from Whitehall. While Andy Street is happy to argue on planning and create his own housing tenures, he is still lobbying for greater support for initiatives such as modern methods of construction.
“It’s about how public land is disposed of, the skills that are there and investment in at-scale production,” says Street, adding that the region intends to build on its manufacturing heritage. Unemployment is already hurting the region, with claims up to the levels of 1992, says Street, and he is looking to the government for solutions.
Just earlier in the day, Street spoke to housing secretary Robert Jenrick on the much-lauded central government expansion to the regions. “There’s no question about it – since the Brexit referendum there has been a huge increase in civil service in London, and that’s wrong,” he says.
Larger cities such as Birmingham have done “reasonably”, but smaller second-tier towns are suffering. “This whole [move] out of London effect, post-pandemic, gives the regional cities and towns a real opportunity.” And, if that fails, the mayor won’t be shy about fighting for it.
