The UK is emerging from the post-global financial crisis environment as one of the fastest-growing developed economies, yet tempered by a position of fragility, based off low interest rates and quantitative easing measures. London is clearly a magnet for growth.
Only the imbalanced nature of UK growth, with the capital claiming four-fifths of new jobs created in the past four years, casts a slight shadow over this. In the run-up to the general election next May, it is the right time to ponder the vital stepping stones to economic growth and success for the wider UK, against the background of the key reviews that have been commissioned by those in Westminster.
While the general election result itself may be too close to call, one thing we can safely assume is the party or parties that next take up power will be looking to do so with a focus on how the real estate and infrastructure sectors can help deliver growth. There has rarely been such a forward-thinking period of political debate and enquiry around our wider asset class.
While there is some unhelpful political posturing, especially in areas such as mansion tax and immigration controls, there is also some consensus around themes arising from the four recent politically-backed reviews. In many cases, it will be most productive to depoliticise these reviews, giving the best chance of action post election.
The first to publish was Labour’s Armitt review, highlighting the need for independent long-term infrastructure planning for the UK. The Conservatives largely agree. Such a commission would consider how the wider UK’s future needs could be met in a targeted and efficient manner, with value for money being a primary consideration. So far so good.
Lyons Housing Review
The second publication is the Lyons Housing Review. Calling for a supply-side solution to the housing crisis (again, the Conservatives largely agree), it makes no bones about the delivery of more homes being the only way forward. Making more land available is raised as a key starting point, much of which will arise from empowering and motivating local authorities.
At Legal & General, this strikes a chord, as we continue to look only to work with those that take an enlightened, long-term strategic approach to public-private partnerships. As we have been saying for some time, Lyons states that long term/patient institutional capital will become a more material part of the solution, in terms of financing housing associations and providing purpose-built build to rent in the private rented sector (PRS), at scale.
However, there is a risk that misguided PRS regulation could potentially destroy a fragile emerging investment sector before it has become established. Making an explicit link between local and national infrastructure investment will be a key ingredient of success. Lyons and Armitt need to be connected, with a sufficient emphasis on ‘non-London UK’.
Explicitly addressing the London/rest of UK power imbalance and leading the government review into how to revitalise English cities, Jim O’Neill’s City Commission calls for Manchester, Liverpool, Sheffield and Leeds to create a northern powerhouse. Last but not least, the yet to be published Davies Airports Commission will strive to do the impossible - moving on the controversial but much-needed debate about planning for the future capacity growth of London’s airports.
What is clear from these reviews is the common view that the main driver of growth
will come from investment in infrastructure
and property. Public-sector indebtedness necessitates more private-sector involvement. With increasing political consensus about the scarcity of public funds and the need to encourage the private sector to step in, now is the time that our industry should have the loudest voice, willing public-sector partners and a flexible environment in which to invest.
Dependent on this vision, conviction, and longer-term thinking, patient private capital will be a large part of the solution.
Bill Hughes, managing director of Legal & General Property and president of the British Property Federation