The COVID-19 pandemic may have boosted the Government’s regional rebalancing strategy to benefit areas including the North West, according to the UK chief economist at global commercial property services company Colliers International.
Written on by
Speaking at a Northern Powerhouse Regional Economic Briefing webinar, which is part of a series around the UK regions focusing upon his paper ‘Regional Revolution III: Rise of Cross Border Investment’, Dr Walter Boettcher (pictured), said: “Regional rebalancing that lies at the heart of Government economic planning may have just received an unexpected, but decisive boost.”
The webinar was hosted by Michael Hawkins, Manchester-based director at Colliers International, and head of National Office Agency and Development UK Regions.
Michael believed that cross-border investment in the Northern Powerhouse cities of Manchester, Liverpool, Leeds, Sheffield and Newcastle will continue to be attracted by key factors including an educated workforce created by the quality of ‘international talent’ emerging from universities; foreign ownership of the region’s football teams from which follows investment; the ongoing appeal of infrastructure to overseas investors such as the Chinese and the ability of forward-thinking and proactive local authorities to secure private investment in developments across a range of sectors such as residential, hotels and logistics.
“These cities continue to attract investment from around the globe because they are cosmopolitan cities in cosmopolitan parts of the country – the cities have vibrancy and the intellect of their communities,” he explained.
Michael also believed the Government’s commitment to rebalance the economy by investing in Northern cities will ‘continue unabated’ – with further significant regeneration schemes started and completed before the next general election.
“I am upbeat because although we face great challenges, we also have great resilience and great UK institutions that continue to commit to regional cities alongside the global investment appetite in these cities. All of the cities and local authorities have continued to work during the pandemic and encouraged investment in their cities,” he added.
Explaining that while many investors viewed the coronavirus crisis as a temporary interruption of pre-pandemic trends, Dr Boettcher said others perceived ‘the beginning of a large-scale change in the patterns of commercial activity and use of real estate”.
Some London occupiers may seek to grow their existing regional footprints or establish new regional footprints altogether, in order to reduce the density of their existing office use.
Dr Boettcher, whose paper explores cross border investment into the UK regions and possible future trends, told the webinar audience that while Government investment in the regions would be an essential part of the Covid recovery, this could be ‘supercharged’ if supplemented with private investment, especially cross border investment. Furthermore, the positive signs are already evident.
He highlighted the fact that the COVID-19 emergency measures included a substantial fiscal stimulus designed to work in tandem with monetary stimulus, and that this was in addition to the £600 billion of investment over five years in the regions announced by the Government shortly before the pandemic reached the UK.
“In net terms, public investment is set to be the highest since 1955 in real terms,” he said, although he cautioned that until the delayed National Infrastructure Strategy was published, details of capital allocations would remain uncertain.
Dr Boettcher added: “Let us hope that the resolve to push these plans ahead is not dissipated by any further delays. In many ways, the years of austerity were years of lost opportunity. Now is the time to push forward. Regional Revolution!”
In his paper ‘Regional Revolution III: Rise of Cross Border Investment’, Dr Boettcher pointed out that prior to the coronavirus pandemic, the UK regions such as the North West were attracting increasing attention from commercial property investors, and in particular cross border investors.
He said: “In the early to mid-2000s, regional investment was the province of large UK pension and insurance funds, as well as the odd German fund, but by the late 2010s, the regional investor base expanded to include a wider range of investors, especially cross-border investors.
“While the COVID-19 pandemic suggests that these regional gains could be reversed as transactions decline and risk perception rises, in fact, the North West and other regions are well positioned for a post-pandemic recovery.”
Dr Boettcher added: “Clearly, UK government resources are limited and the scale of the necessary investment required to ‘rebalance the UK economy’ and to ‘improve productivity across the regions’ goes well beyond central government’s financial capacity to deliver.
“The heavy lifting in the regions, as contemplated by central government, can only be achieved in tandem with cross-border investors and UK institutions who have the required depth of capital. The task of central government is one of direction, seed funding and focusing on providing an adequate infrastructure framework to support the necessary development.
“Perhaps the most crucial and indispensable task is left to local governments and, especially local stakeholders, to envision and bring to market projects of sufficient scale to attract investors and to enable their engagement. It is in this way that the UK regions will benefit from the much vaunted regional rebalancing, that is at the least, one generation overdue.
“Furthermore, general investment in the UK, unlike Government investment, is not a zero-sum game. Given the weight of global and domestic institutional capital, there are sufficient resources to float all the boats across London and the UK regions without any region being left behind.”