Following Prime Minister Boris Johnson’s New Deal speech yesterday, Colliers International’s Head of Research and Economics Dr Walter Boettcher shared his views on the outlook for the UK’s regions.
He said: “The Prime Minister’s Speech was, above all, an affirmation of the government’s commitment to its election manifesto with an added sense of urgency and the added context that the associated investment would be done in a free market context, that is, private investment will be part and parcel of the plan.
“In some ways, the PM may have been preaching to the converted. In Collier’s recent (June 2020) Regional Revolution seminars that discussed the outlook for real estate for several devolved regions, surveys suggested that there was already considerable confidence that the Government would deliver.
“The greatest confidence was expressed at the West Midlands seminar when 73 per cent of the attendees (mostly property investors, developers and property company operators) confirmed that despite the pandemic, they believed that the Government would keep their election pledges. The West of England Combined Authority area, including greater Bristol, registered a 62 per cent confidence level followed by the Northern Powerhouse audience, predominantly from Liverpool, Manchester and Leeds, who were also reasonably confident with 59 per cent percent confident. The surprise result was the confidence expressed by the Scottish audience, not typically understood as a Tory stronghold, which registered 71 per cent, just behind the West Midlands.
“It is interesting that the great confidence was expressed by the West Midlands audience which may reflect the singular efforts of Andy Street who as mayor of the West Midlands Combined Authority has over the last few years transformed the centre of Birmingham through the investment of government funds into a public private joint venture, a model that was perhaps not lost on the Prime Minister who ‘name checked’ Andy Street in his speech. His knowledge of Street’s endeavours is reason for great confidence that the PM remains deeply committed to regional investment and regional rebalancing. Andy Street certainly is!
“Also in the Regional Revolution seminars, the audiences in England were asked whether they thought that devolution and the new local combined authorities would make a difference in attracting investment. The answer was a resounding ‘yes’ with the West Midlands, once again taking the lead with 91 per cent believing that devolution would make a difference. The Northern Powerhouse, which given the historic leadership role of Howard Bernstein in Manchester might be considered the ‘cradle of devolved civilisation’, was not far behind at 85 per cent. The West of England Combined Authority which is also advancing its own devolved agenda was also high at 79 per cent.
“Unfortunately, the details of the major infrastructure push are still pending the release of the government’s Infrastructure Strategy which is delayed. The recent Heathrow legal ruling has resulted in the Government revisiting its Strategy to ensure that it complies with all the UK’s international treaty obligations. This delay may explain the passion that the PM displayed in emphasising reform of the planning agenda in order to begin to get his investment and development plans moving.
“Less information was offered by the Prime Minister on how and to what extent the Government would support the incipient economic recovery over the remainder of the year and beyond. The Chancellor will have this task when he offers a Budget Statement next week.
“Nevertheless, the Regional Revolution surveys also showed reasonable confident that the various regional economies will recover. When asked how confident the seminar attendees were that their local economies would recover from the pandemic most audience were generally confident the response was generally favourable. Despite its exposure to the aerospace industry 93 per cent of the West of England audience were ‘fully or somewhat confident’, with only a small minority (7 per cent) not confident at all. Likewise, 91 per cent of the West Midlands audience was fully confident even with its exposure to the automotive sector which is understood by many to be in the line of fire of both the pandemic and Brexit. The Northern Powerhouse was also confident at 88 per cent. Only in Scotland was there a discernible pessimism. While 80 per cent has some confidence, there was a substantial minority of 20 per cent expressing no confidence in an economic recovery.
“The Chancellor’s speech next week will be closely watched as uncertainty is still the watchword in this very early stage of the recovery that should accelerate as unlocking accelerates and new COVID-19 cases decelerates.
“The great takeaway from the PM’s speech is that the Government plans to borrow to invest at scale to take advantage of low interest rates. Arguably, this has been a tool in the investment arsenal for some time. That we are just that much closer to seeing this investment should provide some confidence going forward, especially for real estate, given that infrastructure provides the foundation and frame of development.”