Date: Fri 7th November, 2008
Venue:
To mark the launch of the 2009 edition of UK Business Insider, we invited property and investment professionals from across the country to an Investment Forum at
London’s Hotel Andaz to discuss what regional cities need to be doing to create competitive advantage.
Centre stage was Professor Michael Parkinson (right) who used our keynote address to unveil the findings of a major study into the effects of the credit crunch on UK regeneration projects. His address was then followed by a panel discussion.
During the day we also hosted two round table debates, one on buying opportunities in the slowdown, and the other on prospects for further public sector relocation out of London.
Regeneration crossroads
These are tough times for urban regeneration schemes. The government will need to step in to rescue many of them if the transformation of our towns and cities isn’t to grind to a halt.
Professor Michael Parkinson, director of the European Institute for Urban Affairs based at Liverpool’s John Moores University, was a busy man in 2008. Little could he have known when he took a call in the summer of 2008 from local government minister John Healey asking him to write a report into the effects of the credit crunch on UK regeneration projects, that the document would become all-consuming as the UK economy sharply deteriorated.
As Parkinson began in his presentation to Insider’s Investment Forum: “This report has not been easy to do because it has been such a moving target. I started in July when things were much calmer in the world. Everything then changed and got far worse. Markets went from apprehension to blind panic to some way back again.”
Parkinson stressed throughout his address that in many respects he was simply stating the “blindingly obvious”. “This report is not about ten things the government can do to save the world. I was asked to do a short, sharp study on the impact and implications of the credit crunch on England.”
He said there had been terrific interest in his report. “A lot of people have been keen to tell me their stories because of how hard things have got. It is a snapshot of the tough, tough issues which everyone is facing.”
However Parkinson stressed that there was a consensus about what has happened and “what should happen” to reignite the stalling property market.
He stressed that everyone in the industry needed to be thinking right now about the upturn. “We need to be thinking about what we are doing over the next two to three years. We must remember that it’s quality stuff that will work and win through. At the same time we are going to have to be much more flexible and creative.”
Parkinson stressed it was vital that the public sector underpinned key regeneration projects. “These are dangerous times. In property there are only two kinds of people at the moment. Those who remember the last recession and lived through it, and those who didn’t. Right now this is a chance to draw breath. A time to build long-term partnerships and maintain momentum. When there is less money around you have to use it more wisely. We have to be using the public sector to take investments and returns.”
He added that public sector projects would be less affected over the next few years. “I think that is going to be the big message of the next two to three years. The government cannot afford to turn the tap off and cannot afford to blink.”
Meanwhile he added that it was the sheer speed of the downturn that had so destablised everyone in the industry.
So which parts of the UK will be hardest hit? Parkinson warned that nowhere was immune from the slowdown, although money could still be made in London because values remain high and developers can still make money on margins. “The North and Midlands are having a tougher time. Core cities such as Manchester, Leeds and Birmingham are probably better protected because they have more robust economies, but I fear more for the impact on smaller cities and one-horse towns in the regions. In difficult times, difficult places and projects are most vulnerable. But principles that are good in good times are even better in bad times.”
Parkinson felt the upturn wouldn’t arrive until 2010 at best. “Between now and then there is worse to come. In any development it is the end-users who are crucial and this is where the impact of the recession in the real economy will spill over into property.”
Meanwhile he added that a lot of regional agencies would be fearful of not hitting targets and outputs. “The fear will be that the government will start cherry-picking schemes which it knows will work and starts going for easy hits. The wider risk is then that we lose momentum and you see projects mothballed.”
Parkinson also voiced concerns over the hidden social consequences of the downturn. “Another big risk is that housing associations will be asked to bail-out the private sector and end up taking on all these empty apartments we have in city centres. But too much of this housing is frankly not of good enough quality. We run the risk then of segregating communities and creating the slums of tomorrow.”
Talking more widely about the regeneration of UK cities over the past 20 years, Parkinson said many great things had been achieved. But now it was time to look again at the whole model.
“In many ways the business model of urban regeneration is fractured. We need new models of finance to build on what has already been achieved.”
