The Chancellor’s Autumn Statement was the most positive so far in terms of driving UK growth and delivering greater autonomy to the country’s regional centres, while also investing in London to protect its Global City status in the uncertain times ahead.
Such signals of intent can only be a good thing when it comes to increasing productivity right across the nation. Balanced devolution is a huge plus for a country that is still subject to large amounts of market uncertainty in the wake of the EU referendum.
More specifically, improved connectivity and regeneration can only be a good thing when it comes to attracting international investment and creating jobs, thereby improving prosperity in parts of the country where it has previously been lacking.
However, huge question marks still remain as to how this will be achieved.
Giving additional political and fiscal power to authorities across the UK is heavily reliant on the ability of each administration to allocate funds accordingly. Without access to the appropriate skills and capabilities on a regional basis, local authorities will need greater guidance from central government if the Chancellor’s plans are going to have the desired impact in terms of building an economy that works for everyone.
Will Waller, Market Intelligence Lead at Arcadis, puts the Chancellor’s announcements into some immediate context:
“The Chancellor confirmed that the UK economy has weathered Brexit-related uncertainty extremely well and has achieved the position of fastest growing developed economy of 2016 – a testament to both the fundamentals of the UK economy and its people. Notwithstanding this, the Treasury is clear that economic challenges lie ahead in the face of unprecedented uncertainty.
“As a result of lower investment and weaker consumer demand caused by volatility and inflation growth, GDP growth forecasts are significantly down from March, with forecast growth to 2021 two per cent lower than it would have been with no vote for Brexit. However, the measures announced today have set the scene for both the public and private sectors to come out fighting; putting more money in people’s pockets and investing to boost productivity and innovation in order to promote growth and make the UK as globally competitive as possible. The built asset industries now have an important role to play in making many of these initiatives both deliverable and successful in the required timescales.”
What does this mean for specific sectors?
When it comes to housing, additional investment is naturally very welcome. However in some respects we have heard it all before. When it comes to delivering the homes the nation needs, the real issue is not one of finance. It is a perfect storm of too few people to build; punitive planning regulations; limited availability of land and party political in-fighting.
As Richard Jones, Head of Residential and Regeneration at Arcadis, said:
“While it is extremely encouraging that Government recognises the need to address a failure of the market to deliver enough new homes, it needs to stop paying “lip service” to the emergency. What we need is a co-ordinated approach to the problem rather than just rolling out initiative after initiative. We need to look at what building 200,000 homes a year would look like from a need perspective and ensure that any new policy helps deliver this. It will invariably show that a large proportion of new housing will need to be intermediate or private rent, so Government policy should help to support this through the prioritising of public sector land to certain tenure groups, buy-as-you-rent initiatives, planning amendments and a supportive tax regime.
“With rental products being counter-cyclical this should create an environment that encourages investment in “smart homes”, which will ease the skills shortage as well as drive efficiency into a sector which has historically been very inefficient. This, combined with the welcome increase in spending around essential infrastructure to unlock unviable sites, will begin to address the blight of insufficient housing numbers.”
This was echoed by John Carleton, Head of Housing at Arcadis:
“Any housing measures need to be part of a long term commitment that recognises that different parts of the country are facing very different issues and need more bespoke interventions. In the South and South East, numbers, type and affordability are the key challenges, whereas elsewhere - whilst there can be acute affordability issues - economic growth can be seriously undermined by an outdated supply of housing with concentrations of deprivation and contaminated land.
“Home ownership will continue to be the preferred housing choice of the majority of people, but the reality is that many will only access this much later in life, or not at all. We must continue to build new and varied social and affordable housing for rent. However, a simple focus on home ownership and low cost rented housing will not address the needs of an increasing number of people who may well find themselves locked out of both tenures. There is, for them, an increasing need to deliver homes of intermediate tenure – private rented, at market levels or sub-market, and shared ownership/shared equity options – as many people realise they are unable to access either end of a very polarised housing supply.
“Public Sector land, and the ability for this to come forward to the market ‘oven ready’ for delivery, will be a key element of success in increasing supply – as will encouraging the public sector, in all its guises, to embrace partnership working with developers, SME housebuilders and ambitious Housing Associations. Only with this coordinated response will we start to close the delivery gap.”
One of the biggest positives that came from the Chancellor’s address was the ongoing commitment to improving our national transport infrastructure. There was a good balance between major infrastructure investment and smaller interventions aimed at optimising and improving existing infrastructure. This may also be seen as a progressive Autumn Statement, as investments in R&D and digital technology were skilfully threaded into a broad range of interventions. Digitising our rail and road networks will ensure that we are competitive on an international stage, while high speed broadband and better connectivity across Britain can, if done well, have a significant impact on improving wider prosperity.
As Chris Pike, Development Director for Infrastructure, said:
“Investing £450m in starting the Digital Railway programme will take our country out of the Victorian era. It will totally revolutionise our railways, increasing capacity, improving the much maligned experience of passengers and improving punctuality and safety.
“Recognising the benefit that rail digitalisation has had across Europe, it is our belief that the digital railway programme will keep the UK at the leading edge of the rail industry and will contribute substantially to increasing growth and productivity across the country.”
“The government’s announcement to increase infrastructure spend to 1-1.2% of GDP from 2020 is a significant and hugely positive step. Unlocking prosperity across the UK requires a full spectrum approach to infrastructure investment and therefore a comprehensive £1.1bn package to increase the reliability of our transport networks underlines the commitment that this government has already made to investing in major infrastructure projects to drive growth and productivity.
“There is an impressive attention to detail in pinpointing specific initiatives such as those that will provide maximum impact at a regional and local level, boosted by giving elected mayors the power to attract inward investment. We must, however, translate these extremely positive commitments into action to gain the maximum benefit to GDP and provide a stability to the fragile UK economy.”
Announcing investment is one thing, but our recent research - “The Spiralling Cost of Indecision” - highlights that the critical factor in terms of benefit to GDP is actually delivering on these commitments.
Commenting on the two big themes of infrastructure and housing, Chris said:
“These two priorities must be intrinsically linked to close the productivity gap in the Midlands Engine and the Northern Powerhouse and provide affordable housing to safeguard productivity and prosperity in London and the South East.”
The subtle but significant difference from his predecessor’s statements is that this was a statement driven by a social, not economic, ideology. There was no fiscal dogma but, behind broad directional statements, lots of room to manoeuvre in uncertain times ahead.
Ultimately, the announcements around housing and better quality infrastructure mark a big step forward for the UK’s economic prospects. However, far greater clarity is needed around how these measures all fit together. Without a comprehensive plan linking people, place and productivity, these measures can only stand in isolation and risk failing to significantly address where the UK wants to be economically over the next five years.
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