“It’s Budget Day. And it’s Strike Day. My kids watched approximately six hours of television instead of learning to read and my commute took me 3hrs instead of 90mins. So there’s a way to go to fix productivity and attainment yet.
But, it would churlish to ignore the good here. Affordable childcare is a silver bullet that can enable millions of people, and particularly women, to access work and opportunities. There are also signs, spelled out below, that the Sunak/Hunt budget is rather less hostile to London than other recent efforts. Perhaps they read a piece, authored by yours truly, in this week’s Estates Gazette on why, when the capital wins, everybody wins.
And as you read through this edition, it is clear that some wins are very much needed. HS2 could use one, the owners of Southend Airport (sorry, ‘London Southend’) could use one and LCA is gunning for one… we’re nominated for the PRCA Workplace Champions Awards 2023!
More in depth budget coverage will follow next week but in the meantime read on for the headlines and initial reactions.”
Jenna Goldberg, LCA Partner & Managing Director, Insight and LDN Editor
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THE BUDGET, FOR LONDON
It was a Budget that reflected a serious focus on the current Tory mission – earn back some of what Truss/Kwarteng lost, particularly in perception of the party’s creds as responsible money managers, stake a claim on some potentially election-winning centre ground policies and bank on hope for a brighter economic future. While most of the regeneration money seems pointed anywhere but here and ditto for the next stage of devolution, there are signs, if you look closely, that this Budget signals a dismount off the anti-London bandwagon. In his speech, the Chancellor promised to boost the competitiveness of the London Stock Exchange and he had high praise for London as an investment destination too. He also extended tax relief on theatres, orchestras and museums, all vital parts of London’s visitor economy. Jeremy Hunt even notably suggested that a portion of “a further £161 million for regeneration projects in Mayoral Combined Authorities” will go to the Greater London Authority. Looking to the future, Hunt additionally promised that greater “financial autonomy” to be given to the Mayors of Greater Manchester and the West Midlands is “something I intend to roll out for all Mayoral areas over time.” That, presumably, includes the capital. Also on the bright side, boosting childcare subsidies will be a huge boon to Londoners, businesses and the capital’s productivity. Certain tax measures, such as capital allowances and R&D tax credits for SMEs, should also encourage investment in some of the city’s most dynamic sectors.
Despite this, and unsurprisingly, the Mayor of London has branded it as “yet another disappointing Budget for London” arguing that it “won’t even touch the sides” in helping residents pressed by the cost of living crisis, also highlighting an apparent lack of additional investment in new homes and infrastructure in the capital – indeed housing is a notable gap overall, though as noted above London is actually getting some regen funds and we also spied a mention of £8.4 million for a project in Waltham Forest specifically. London Councils is also underwhelmed and while the headline of their reaction focuses on the capital’s homelessness crisis, the fine print also calls for “bolder devolution” in the capital. As for private enterprise, BusinessLDN and the London Chamber of Commerce and Industry have also signalled frustration on a number of grounds, including the exclusion of London from the Investment Zones programme (despite the 12 areas chosen being describe as "potential Canary Wharfs") as well as Government’s continued refusal to reintroduce VAT-free shopping for foreign tourists. Plus of course, there’s no getting away from the stark economic reality of the ‘worst drop in living standards since the Second World War.’
A BUDGET FOR BUILDING?
Looking more specifically at the built environment, well, it’s slim pickings. There was no new funding for affordable housing construction, but the Budget did promise unspecified ‘support’ allowing for the implementation of nutrient neutrality requirements in a way that does not stand in the way of housebuilding, ‘backed by a commitment to provide funding for high quality, locally-led nutrient mitigation schemes’. It was also confirmed that the Government (as reported last week in the Financial Times), has accepted recommendations made by the Migration Advisory Committee to add five occupations in the construction sector to the Shortage Occupation List (SOL), meaning that employers will be able to bring in foreign workers on a lower salary threshold to tackle labour shortages in the sector. Then there is a series of promises for funding for investment in places, including £200m for Levelling Up Partnerships across the country, a commitment to deliver a third round of the Levelling Up Fund with “a further £1bn,” over £200m “for 16 regeneration projects in England” and more but the Chancellor and HM Treasury are curiously vague about how much of this is actually “new money” and in some cases about how and when the money will be allocated. Industry reactions are understandably mixed. The social housing sector has expressed ‘huge disappointment’ with the statement, whilst the Home Builders Federation has called the budget a "missed opportunity," though the British Property Federation has focused on the bright side. LDN will follow up with further analysis and sector reactions next week, so watch this space!
HS2 OFF THE RAILS?
The debate around HS2 has been reignited following the Government’s announcement that the railway will be pushed back by another two years. Last week, it was reported that the Birmingham to Crewe leg of the project would be delayed in a bid to cut costs, which have increased to £71bn from the original £33bn. The Government confirmed the news, with Transport Secretary Mark Harper publishing a Written Ministerial Statement (WMS) which said that the Government will ‘rephase’ construction due to ‘significant inflationary pressure and increased project costs’. The WMS also set out that the Government’s priority for the project is now the delivery of services between the new station at Old Oak Common and Birmingham Curzon Street, while also stating that the Government is ‘committed’ to delivering services to Euston. However, just yesterday it was reported that internal Department for Transport documents show that the Government’s decision to delay the project will instead increase costs and put construction firms at risk of going under, while also suggesting that some parts of the project may not be complete until 2041. Shadow Transport Secretary Louise Haigh has called on the Government to ‘come clean’ about the decision to delay the project further.
LONDON PLANNING POLICYPALOOZA
This week, we’ve got a bumper crop of planning policies adopted, out for consultation or at earlier stages:
- The City of London Corporation has adopted an advisory planning note that will require developers seeking to demolish and redevelop buildings to show they have considered alternatives to demolition. The guidance applies to buildings with more than 1,000 sq. m of floorspace and those ‘which propose knocking down most of the existing structure’.
- Westminster City Council has launched a new strategy to crack down on empty homes in the capital – including measures aimed at encouraging owners to make empty space available for rent while discouraging the purchase of holiday homes or ‘buy to leave’ investment.
- Last week, Tower Hamlets Council concluded “early engagement” on a new Local Plan. This should be followed by a more formal Regulation 18 consultation sometime later this year.
- Waltham Forest’s draft Local Plan’s examination in public by planning inspectors concluded at the end of last week. MyLondon and Waltham Forest Echo have covered the hearings, with examiners now considering their response.
- Greenwich Council is consulting on an Urban Design Guide Supplementary Planning Document (SPD). The survey remains open until 11 April 2023.
- Havering Council has issued a Local Plan ‘Call for Sites,’ running from 3 March 2023 until 30 April 2023.
There’s also a few planning decisions to highlight:
- Southwark Council has approved Landsec’s proposals to redevelop Red Lion Court in Bankside into an 11-storey net zero office.
- Southwark Council has also approved Mya and Veld Capital’s revised plans for a 222-bed hotel at 160 Blackfriars Road.
- Wandsworth Council has approved Linton and Henika’s proposals for a 10-storey co-working space in Battersea.
And in other planning-related news:
- The City of London Corporation has reported 30% more major planning applications were submitted during the pandemic than in the three years before, demonstrating, per React News, “the continuing appeal of the City of London as a global business destination”.
- Data on neighbourhood planning across England collected by Planning and Development Control Services (DCS) shows only 27 hyper-local plans have been adopted in London to date – making it the region with the lowest number of ‘made’ plans. Just 25% of the 119 applications to prepare a plan in London have so far been successful.
- Westminster City Council has continued its campaign against US Candy Stores and Souvenir Shops on Oxford Street. The news has also been covered by the BBC.
- Colette O’Shea has been appointed to Persimmon’s Board as an independent non-executive director, as she prepares to stand down from her role as Chief Operating Officer at Landsec at the end of the month.
- Labour held a seat in a by-election in Haringey’s Tottenham Hale ward last week. Sean O’Donovan was elected, though with a reduced share of the vote for Labour and a swing to the Lib Dems.
- There was also a by-election in Heston West ward in Hounslow which saw Emma Siddhu elected, holding the seat for Labour. The Lib Dems also gained some ground in this by-election.
FROM DLUHC, WITH ❤️
The Levelling Up Secretary is continuing his crusade against unsafe cladding. In April last year, Michael Gove unveiled a Building Safety Pledge, asking major housebuilders to commit to remediating fire safety works in buildings over 11 metres that they developed or refurbished over the last 30 years in England. He then reported in August that 49 had signed. Crucially, it was promised that the pledge would be followed by a “legally binding contract” for each signatory. Whilst other efforts to improve fire safety have progressed at pace, the often acrimonious negotiations over these contracts have dragged on. Having delivered what it said was “the final text” of the contract to pledge signatories on 30 January and given them a six-week deadline to sign it, Gove’s department signalled that “those that fail to do the right thing” by this week “will be banned from the housing market.” Yesterday, Gove repeated that threat from the dispatch box in a Ministerial statement, in which he confirmed that 39 signatories of the Building Safety Pledge have also signed contracts, also naming the 11 who have not and threatening them with further sanctions, centred on the Responsible Actors Scheme, to be announced in more detail next week (by which point, Gove said, he hopes more will have signed their contracts, thereby avoiding the threatened consequences).
The figures suggest an uncertain landscape for the UK construction sector. According to the Office for National Statistics (ONS), the value of construction work in January fell by 1.7% compared to December 2022, falling to its lowest level since February 2022. The ONS has said general economic uncertainty was leading to delays, cancellations and less work being commissioned with the housing sector particularly impacted. In contrast, the purchasing manager’s index (PMI) compiled by S&P Global and the Chartered Institute of Procurement & Supply (CIPS) shows the sector experienced a “robust increase” in business activity in February, breaking a two-month period of decline and reaching the highest month-on-month level of growth since May 2022. The growth was supported “by a marked rebound in commercial work and a positive contribution from civil engineering activity”. Nonetheless, it is worth noting that the index also shows housebuilding activity fell for a third month in a row. The sector will, at least, take some solace in the Chancellor's announcement that certain construction jobs are being added to the Government’s “shortage occupation list”.
MERGERS AND ACQUISITIONS
Faltering Silicon Valley Bank UK’s buyout by HSBC has made headlines this week, but it isn’t the only story in town. Capco’s merger with Shaftesbury has now finally been formally completed, with the new combined company now trading under the Shaftesbury Capital brand. The merger creates a new big beast in central London’s property ecosystem, with the Real Estate Investment Trust not unfairly describing its portfolio as “impossible to replicate,” spanning as it does swathes of the West End and including iconic places from Covent Garden to Seven Dials. Elsewhere, the boards of Sovereign Housing and LCA clients Network Homes have approved their merger. Once completed in October, the newly-minted Sovereign Network Group will own over 82,000 homes, making it one of England’s biggest housing associations. Meanwhile, real estate advisory firm and longstanding LCA associate Gerald Eve has been acquired by US-based Newmark Group. Much of this activity is of course centred on London, underlining the attractiveness of the city’s wider built environment sector and there’s more news on this front than we can report in full, from Obayashi’s purchase of 60 Gracechurch Street and CDL’s Wapping (see what we did there?) £395m St Katharine Docks buyout.
All of which is but the tip of the iceberg, with BNP Paribas Real Estate estimating that investors internationally are marshalling £41bn total capital targeting central London offices and retail assets this year alone and separately, LCA clients London Property Alliances' latest Global Cities Survey forecasting that central London’s overall economic output will outperform global peers including New York, Paris, Berlin and Hong Kong by 2030
SOUTHEND FOR SALE
London’s Southend Airport has been put on the market by owners Esken. While Esken had hoped the airport would cater for 10m passengers a day, Southend has struggled to attract airlines and had just 18 scheduled flights a week last summer. To make matters worse, the capital’s “sixth largest airport” has no scheduled flights this winter and Amazon stopped operating freight services there in mid-September 2022. One potential buyer for the asset, valued at around £36m is American private equity firm Carlyle, which already owns a stake. Separately, Heathrow Airport’s Chief Executive John Holland-Kaye, who has already announced he will be leaving his role at some point in 2023, has promised the airport will be ‘hassle-free’ this Easter after the chaos of last year, which was related to staff shortages. Elsewhere, the cost of travelling on the Luton Direct Air-Rail Transit (Dart) has been criticised. The Dart, a 2.2km shuttle service that links Luton Airport Parkway station to the London Luton Airport terminal, is expected to begin its full commercial operation by the end of March and single fares will cost £4.90 – “more than double” the cost of the bus journey.
Formula One fans could be heading to East London in their masses in the next few years. Proposals by Dar and LDN Collective would see the Royal Docks transformed into a 5.9km circuit with floating grandstandsfor 95,000 spectators. The Times reports that talks have already taken place with the owners of Formula One as well as the Greater London Authority. The plans also include uses for the new ‘waterfront destination’ when Formula One is not in town, including as a ‘hub’ for sports and activities including cycling, running and tennis courts, as well as commercial, hospitality and hotel space. Dar and LDN Collective say that they hope to submit a planning application in the next 12 months if things go to plan, with the hope of a ‘Docklands Grand Prix’ taking place in August 2026.
For readers interested in the all-important intersection of health and the built environment, we’d highly recommend LCA client Ekkist’s upcoming seminar. Creating Healthy Buildings: How the Property Industry is Currently Supporting Health and Well-being is a CPD-certified half-day event on 29 March, which will bring together professionals from both the commercial and residential sectors “to explore how to create truly healthy buildings that improve lives, while also offering a financial and social return on investment beyond that of their competitors.”
We are thrilled to have been shortlisted in the Large Agency category of the PRCA Workplace Champions Awards 2023. The Awards celebrate the leading places to work, live, and thrive in the PR industry and this is the third consecutive year in which LCA has been a finalist. Highlighting the agencies and in-house teams that go the extra mile to establish positive and inclusive working environments for colleagues, the awards are also focused on showcasing organisations that practice what they preach, leading by example to deliver equal opportunities and positive experiences for all their stakeholders. Results will be announced on 22 March – we all have our fingers crossed!
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