Commentary Enterprise Zones
Wednesday, 23 March 2011
Stephen Hollowood, Senior Director at GVA:
"The Chancellor's announcement of 21 new Enterprise Zones is welcomed and we look forward to further clarity as to how these will progress.
"The first will be set up in Birmingham, Solihull, Sheffield, Tees Valley, Leeds, Liverpool, Manchester, the South West, the North East, the Black Country, Derby and Nottingham. A further 10 Enterprise Zones will be announced in the summer and the Mayor of London will also be selecting a suitable site in the capital which will be good news for the London economy.
"We particularly support the proposals to reduce planning controls in the new EZs, as well as the proposal that local authorities will be able to retain all business rates incurred in these areas over the next 25 years and to institute a new Capital Allowances scheme.
"It will be important however, to ensure that these Enterprise Zones deliver real potential for growth and job creation and that they don't suffer from the same criticisms as the 1980s schemes.
"A number of the former Enterprise Zones have been seen as failures as growth areas. Criticisms focus especially upon evidence which demonstrates that jobs and investment were largely shifted from other areas outside these zones, and the fact that their growth stalled immediately after the 'Zone' status was removed and did not, therefore, contribute towards long-term sustainable economic growth.
"It will also be interesting to see how the relaxed planning laws align with the Governments Localism Agenda. I think it is fair to say we would encourage the Chancellor to designate wider growth areas within which local authorities can pick from a range of incentives to stimulate local job creation. These measures can then be tailored to most suit the local economic circumstances affecting the area.
"We note that the Chancellor has made £100m available to set up the EZs however this will be spread pretty thinly between the 21 zones announced today.
"But despite the potential pitfalls the announcement is generally encouraging for the regions."
Commentary on Planning
Stephen Hollowood, Senior Director at GVA:
"It was announced during the budget that Councils across the UK are spending 13% more on planning permissions than they were five years ago - this is despite the fact that applications are down by a third.
"The Chancellor said in his Budget that he will be 'simplifying the planning system' and that 'all planning bodies will be expected to prioritise jobs and growth.'
"However the suggestions made by the Chancellor in respect to planning permissions are interesting but I wonder how this will sit with other Government proposals which called for greater engagement with local communities, as part of the Localism agenda."
"Changes to time limits in determining planning applications are also a worry. Targets requiring councils to access planning applications by a set deadline could be removed. This is potentially a retrograde step if it meant Local Authority's are not required to determine planning applications submitted to them within a defined statutory period.
"We also note that there is a budget proposal to allow auctions for planning permissions on land. This would involve local authorities acquiring sites from local land owners, granting planning permission on the land and then auctioning it to developers. This proposal raises major questions over how this process would operate in practise and whether local land owners would be willing to sell to the local authority at a reasonable value."
Commentary on economic growth forecasts
Stuart Morley, Director and Head of Research at GVA:
"The budget was heralded by the Chancellor as a budget for growth but there was very little to stimulate economic growth in the short term.
"As a result the Office for Budget Responsibility (OBR) has reduced its forecasts from 2.1% (as at November 2010) down to 1.7% for 2011 and from 2.9% (as at November 2010) down to 2.5% for 2012.
"This is clearly a large downgrading and even the figure for 2012 appears optimistic and much higher than the latest consensus forecast of 2.1%.
"The forecasts by the OBR for 2013 and 2014 are now very marginally higher than they were in the November outlook and barely reflect a new growth stimulus by the Government. They are also optimistic when compared to the latest consensus forecasts which are noticeably weaker at 2.5% pa compared to 2.8%-2.9% pa.
"In my opinion this budget wasn't a budget for growth in the short or medium term, but for the longer-term. Although some improvement in growth in the medium term is thankfully expected, even though it will be weaker than was expected six months ago.
"I think we can expect the economic upturn to be much weaker than the upturn after the previous recession in the 1990s and this will mean a muted response by commercial property occupiers. Take up of floor space will improve but only slowly and gradually. As a result rental growth below inflation will persist for some years to come."
Commentary on the housing market.
Dan Francis, Associate at GVA:
"The 2011 Budget introduced FirstBuy, a £250 million fund to provide equity loans to first-time buyers.
"First-time buyers underpin the mainstream housing market. But they are in serious decline and their problems explain why the housing market, as a whole, is now in a period of stagnation, with mortgage approvals currently flat-lining at around half the long-term average.
"They have not benefited from a sharp downward correction in house prices that might have been expected in a severe recession. Worse still they are faced with a toxic combination of high deposits and low salary multiples. The economic outlook for this year does not provide much comfort either, as unemployment and interest rates rise and disposable incomes fall.
"So the FirstBuy scheme should be welcomed. But I fear its impact will be limited. The Chancellor estimates that this will help over 10,000 buyers get onto the property ladder. That's a drop in the ocean compared to the long-term annual average of one million mortgage approvals.
"While it will help those struggling to find a sufficient deposit, it won't help those unable to obtain mortgage finance.
"Ultimately, the first-time buyer problem needs to be solved through improved affordability and to do this we need a major boost to the number of houses being built.
"The FirstBuy scheme will in itself provide some limited boost to the house building industry as it is exclusively for the purchase of new homes although it will be part-funded by house builders themselves.
"Additional measures announced in the budget should also help to increase development through encouraging a faster release of public sector land and investment in the private rented sector.
"Ultimately though, affordability issues will only be solved through a step change in the UK's housing output and this will require a broad range of solutions."
Commentary on Green Investment Bank
Miles Keeping, Head of Sustainability at GVA:
"The Green Investment Bank (GIB) is much needed. It must quickly get on with reducing the risk profile of green infrastructure projects so that investors can start providing the major finance for them.
"The GIB will have to provide direct finance and/or guarantees to bridge the risk gap between what investors can bear and the sums needed to deliver things like viable off-shore wind energy generation at scale.
"More than anything, investors in these schemes need a degree of certainty - we're currently witnessing the rug being pulled out from under the feet of many investors in solar PV by the government through Feed-in-Tariff changes.
"Whether or not the extra £2bn announced today is enough remains to be seen but I imagine that that sort of money could be used up very quickly on a few large projects. GIB leaders will have to ensure that their investments are very well targeted - politically, failure would be a disaster."
Commentary on the Green Deal
Miles Keeping, Head of Sustainability at GVA:
"The Green Deal potentially offers a lot in terms of home owners and small businesses being able to make energy savings in their properties with the assistance of long-term loans attached to the property being paid back through energy savings.
"There is a real opportunity for this scheme to give massive impetus to the 'green economy', which is likely to be one of the success stories economically over the medium and long terms, as well as making real carbon savings.
"But it will take careful management of the Government to make the scheme work and a lot of questions need clarity. For example how will the finance for the scheme be managed and where will default risks lie? Will the provision of energy efficiency services be viable for both large and small businesses?
"Most importantly, will the scheme be simple and cost-effective enough for homeowners and small businesses to feel interested enough to participate in?
"The detail on incentives for the Green Deal has not been revealed but it is likely to include council tax rebates or stamp duty exemptions. If take-up of the Green Deal is to be sufficient enough to make a difference, incentives will need to be strong.
"A recent survey by UKGBC and WWF found that even with a £500 council tax rebate, less than half of people asked would be even fairly interested in taking up the deal. It is also not clear at this stage whether or not these changes will apply to SMEs.
"The government needs to undertake some decent modelling to determine what the real carbon and cost savings are likely to be from the Green Deal."