Parkinson's law on funding

Author: Adam Marshall
Date: 26/03/2009
Publication: Municipal Journal

Professor Michael Parkinson ‘tells it like it is' - a rarity in the regeneration business, where facts and clear analysis are often overshadowed by sales pitches, bluster and jargon.

Parkinson's latest report, which reviewed the state of the regeneration and property development industry in the credit crunch, is no exception. The 80-page report makes for grim reading as it charts the impact of financial turmoil, falling asset prices and plummeting confidence on an industry which was lauded for more than a decade as the saviour of Britain's city centres.

With a few exceptions, regeneration projects in urban Britain have now ground to a halt. Developers have moth-balled plans for new commercial and residential schemes. Those with strong balance sheets are now attempting to ride out the storm - while the unlucky, saddled with large land holdings, are selling property at bargain-basement prices to avoid breaching their banking covenants.

In his report, Professor Parkinson charts all of these trends - and puts forward three incisive points which urban councils and their partners will need to take to heart:

• Some cities will fare worse than others. This may seem obvious, but far too many council leaders continue to insist that their areas are ‘well-placed' to get through the downturn and re-start regeneration activity. The reality is starker. Investments in urban regeneration areas in the North and Midlands are now underperforming those in the cities and towns of the South, where more projects remain viable. Thousands of construction jobs, and the skills needed to deliver regeneration projects, are being lost. Councils need to make a realistic assessment of their regeneration prospects over the coming years - and determine whether plans drawn up in the heady days of the early Noughties are still appropriate under today's economic circumstances and the post-recession economy.

• The public sector must take a long-term interest. Parkinson rightly suggests that public-sector intervention in regeneration must become more widespread, and that central, regional and local government will need to provide both long-term leadership and financial commitments. This will be especially challenging after 2011, when fiscal tightening will start to have a substantial effect on capital budgets. Just at the time that more cash is needed, regeneration will be facing the most challenging public spending climate in generations.

• Press bravely on. The report urges those involved in viable regeneration projects to press ahead, and help restore some levels of confidence to the industry. We agree. Councils, RDAs and the new Homes and Communities Agency need to work together to identify viable projects and ensure they are delivered. Councillors also need to consider viability in planning committees - where too many viable and economically-important projects, such as the Brighton Marina development, are currently being rejected.

Professor Parkinson's analysis of the challenges facing regeneration is strong. Unfortunately, however, his review concludes with a high-level set of ‘key principles' for the future, rather than concrete actions for Government, investors and developers.

These conclusions are rooted in the uncertain financial climate and the depth of pessimism currently afflicting the regeneration industry. Worryingly, they also reflect the Government's reticence to give cities the flexibility to come up with innovative new financial models for regeneration themselves.

Short-term fiscal stimulus measures aside, the era of generous Government regeneration funding and increasing capital grants is at an end. In future, councils will be required to rely more and more on their own resources.

Access to new and innovative financial tools - such as Tax Increment Financing, Accelerated Development Zones and urban infrastructure bonds - would allow British cities to kick-start development projects, re-build confidence and add new jobs. The potential benefits of Tax Increment Financing, used by cities across the United States and Australia to borrow against future revenue streams to fund development, outweigh the potential risks.

Council leaders, who have generally proven more effective in their stewardship of resources than many Whitehall departments, now need to use Michael Parkinson's analysis to convince Ministers that now is the time to introduce new tools for cities seeking to deliver local infrastructure and worthwhile property projects. Otherwise, there's a real danger that regeneration - along with the jobs it delivers - will remain off the agenda for years to come.

A version of this article first appeared in the Municipal Journal.