Property Lexcomm: Will infrastructure deliver growth?
30/11/2011Property Lexcomm : The Autumn Statement - will infrastructure deliver growth? (PDF)
George Osborne’s task was to prove that he has a credible plan for growth while confirming that UK economic forecasts were being cut back again. A tricky proposition to say the least. Proving the Government is serious about growth has been a challenge that ministers have struggled with since the Coalition formed. Recent months have seen that task increase and business grow more concerned.
The response was a Statement which promoted investment in infrastructure. And although a week of newspaper headlines left few surprises, there is much the property sector can welcome. The Government outlined commitments to deliver infrastructure that stimulates growth, business and job creation. Following the previous week’s Housing Strategy, the message was that large scale, popular projects will be given backing required to deliver the infrastructure they need.
Labour claimed that Government still needed a ‘Plan B’ with Ed Balls stating there was not enough cash to make a real impact. Many across industry will agree but the Chancellor’s attempt to harness investment from pension funds could be a useful way of delivering the vast sums needed for these critical projects to go ahead. However, some of the biggest initiatives may not make a mark until after the next General Election. That electoral fact will not be lost on backbench MPs keen to see growth supporting their prospects in the ballot booth.
Focus on infrastructure
So what was announced for the property sector?
Infrastructure was key. £5bn of new projects will be delivered in the next spending review. More immediate measures worth a similar amount included roads, superfast broadband and schools. A further £20bn of investments would be unlocked if new rules encouraging UK pension fund investment in infrastructure lift off. 35 new road and rail projects across the UK were named in anticipation of this new funding coming on stream shortly.
Osborne has previously used these occasions to emphasise the need for planning reform to deliver growth and there were more references today with a pledge to review the appeals procedure. In a move to help schemes underwater, there will be consultation on new proposals to allow reconsideration of planning obligations on stalled developments approved before April 2010.
There will also be a review of European ‘gold plating’ from the Habitats and Wild Birds Directive to remove excessive costs for developers. Again, more signs that the Government sees development as key to increased economic growth.
This comes alongside the aforementioned Housing Strategy, £1bn extra resources for the Regional Growth Fund and new powers for city mayors to raise money against future income from CIL where nationally significant projects can be delivered.
So has Osborne achieved what he set out to do?
Public funding for investment is limited under the Coalition’s strategy and it will be difficult to meet all the needs of capital-intensive sectors such as property. However, planning reform alone will not create growth from property if the finance to deliver is missing.
The Chancellor will be relying heavily on institutional investors to deliver cash and success; at the same time the performance of the wider economy will remain critical to progress of many development projects.