Urban regeneration: Can it continue under the same steam in this period of economic uncertainty?

The concept of urban regeneration is seen as one of the defining hallmarks of the previous New Labour administration. Ever since Deputy Prime Minister John Prescott set up the Urban Task Force in 1999, following Lord Rogers’ report into ‘Towards an Urban Renaissance’, the previous Labour government directed considerable resources towards regenerating our key towns and cities, particularly through quangos such as the Homes & Communities Agency, Regional Development Agencies and public-private Urban Regeneration Companies. 

While the inner sanctum of a number of cities and towns have seen marked social and economic improvement throughout this period, such as Liverpool, Sheffield, Salford and Derby, the wasteful nature of the organisations responsible, both in terms of the organisations themselves and the densely layered, ‘trickle-down’ structure through which they were funded, has been lambasted by the current Conservative-led government. The conclusion was the rather clumsy destruction of the RDAs, the drastic cutting back of funding to the HCA, and the resulting direct demise of URCs, with most winding up or continuing to run on skeleton staff.


A lack of gap funding

This left a number of important urban regeneration projects, including housing, commercial and retail developments, without the gap funding that they needed to continue. There is a strong argument that a large number of schemes were not designed to be respondent to market demand in the long term and did not survive because there was simply not the potential or current market for certain types of accommodation in certain areas. However a number of schemes simply required gap funding to ensure that complex urban brownfield development sites got ‘off the ground’, where difficulties presented themselves in the form of land ownership, ground contamination, demolition and remediation costs or, most crucially, the risks and difficulties involved in generating the finance required to invest in areas undergoing make-or-break social and economic transitions.

We are in an era where banks are likely to be, and already are in some cases, more selective and more cautious in their lending patterns and policies. Therefore, in order for these projects to continue in the storm of economic uncertainty, it is vital to reduce the perceived risk to the financiers of private sector developers and expanding businesses, both in terms of short term capital finance and the long term revenue potential of the development.


Short term financing options

In terms of the short term financing of regeneration projects, Deputy Prime Minister Nick Clegg has mooted the idea of Tax Increment Funding on a number of occasions, whereby local authorities can borrow from the Treasury against resulting rises in business rates from large development schemes. This could provide the funding required, reducing the risk for private developers in transitional areas to make schemes more attractive. However, this would place the risk firmly at the feet of local authorities, who in many cases have been accused of lacking the commercial awareness and ambition to enable development.

Funding for regional development that was previously provided by Regional Development Agencies now arrives through Local Enterprise Partnerships, under the guise of the Regional Growth Fund. While this arrangement is likely to be seen as a more efficient method for channelling funding towards regional and local job creation, a number of organisations have raised concern at the delay in establishing the LEPs and the resulting delay in accessing RGF funding. A large food-processing company in County Durham has recently entered into administration, having previously been promised funding from the Regional Growth Fund to expand its facilities. In the same news day, the Interim Chairman of One North East expressed concern that European Regional Development Funding for job creation and development is being lost with the inability to match it with local funding.


Long term viability

In terms of the long term viability of regeneration schemes, it is important for developers and occupiers to see the long term potential of the town or city, in terms of vibrancy, economic activity and most importantly, accessibility. It is therefore vital for the government to invest in making our towns and cities more accessible, making it easier and therefore more desirable to live, work and do business. After all, time is money.

In December 2011, the Secretary of State for Transport Justice Greening announced a £1.5 billion programme of investment in major road and public transport schemes, where schemes devised under the previous Labour administration were invited to submit revised bids for funding. This is undoubtedly a positive move for those places where transport schemes were approved, albeit with revised-down funding requirements, and will surely enhance the development potential of a number of towns and cities undergoing transformation change. However, the policy think-tank IPPR North recently noted a severe disparity in government spending on major transport projects, highlighting that £2,700 is spent on major transport schemes on average per person in London whereas only £5 is spent per head in the North East. If the government is to make a real commitment to regional growth and market-ready regeneration, it must reverse its policy of reinforcing the dominance of London as an economic centre and hence relieve the stress and strain placed on it in meeting the demands of Britain’s population.


Summary

Regeneration can continue and power through a challenging economic climate, but it needs the access to funding, whichever form it arrives in, and it needs it fast. It is difficult to argue against claims that Labour’s quangos have been inefficient and frivolous with the public purse; however, the current Government must maintain the momentum created throughout the last 15 years and quickly establish mechanisms to protect the future of regeneration schemes in the UK.


By Paul Erskine