Property Sector Unsure If UK Budget Really Will Deliver 12 New Canary Wharfs

Chancellor of the Exchequer Jeremy Hunt's spring budget gave a relatively minor slice of new cash to schemes that might boost regional real estate growth.

Twelve new investment zones, a new £400M pot for Levelling Up Partnerships and a third round of Levelling Up Fund allocations totalling £1B represent small change in the UK budget. A single measure — the freezing vehicle fuel duty — will cost the Treasury £4.8B in 2023-24, more than three times as much as the combined total of new regeneration pledges.

The budget's regeneration centrepiece was the introduction of 12 investment zones, eight of them in the north of England, which had been the target of efforts to improve economic competitiveness.

The Chancellor likened the new investment zones to 12 Canary Wharfs, recalling the status of London Docklands as an enterprise zone in the 1980s.

A long list of 20 potential locations will be drawn up based on what the Treasury called “a place-led approach” focused on functional economic areas with a promising and improvable labour market and growth potential.

But bidders must also “aim to identify those areas which also have significant pockets of deprivation within them, that an investment zone could help alleviate,” government guidance said. It is not clear how both objectives can be achieved simultaneously.

The government is offering £80M over five years in targeted support to each zone. There will be one each in Greater Manchester, Liverpool, West Yorkshire, South Yorkshire and the North East Tees Valley and the East Midlands.

Funding will come directly as a grant or in the form of tax tweaks including full reliefs from stamp duty land tax on sales of commercial property, business rates on new or extended properties, employer National Insurance Contributions on the first £25K of pay for each new employee and enhanced capital allowances. 

Separately, the Chancellor announced that a new £400M pot has been created for Levelling Up Partnerships.

The winners — City of Kingston upon Hull, Sandwell, Mansfield, Middlesbrough, Blackburn with Darwen, Hastings, Torbay, Tendring, Stoke-on-Trent, Boston, Redcar and Cleveland, Wakefield, Oldham, Rother, Torridge, Walsall, Doncaster, South Tyneside, Rochdale and Bassetlaw — lost out in early rounds of bidding for previous Levelling Up Fund support. The £400M funding will be divided over two years.

After some uncertainty the budget statement also disclosed that a third round of Levelling Up Fund allocations worth £1B will be made later this year.

The property industry's response to the budget's regeneration and levelling-up elements was lukewarm.

“We welcome the new investment zones and are pleased to see business rates relief and retention included in the measures," CBRE Senior Director Andrew Round said. "It is more questionable whether the overall investment is sufficient given the potential size of the zones, but the commitment to targeting key growth sectors is a positive step. Measures to improve investment mobility and reduce business costs are much-needed in the current climate and should boost productivity in the area providing the right businesses are attracted to them.”

“The re-ignition of investment zones in certain parts of the UK will stimulate regeneration but keeping alight the drive on other policies is needed alongside this," the Royal Institution of Chartered Surveyors said in a statement. "Updated planning rules, a business rates discount for new builds, and the need to maintain a focus on sustainability and quality are important for these zones to support communities in what they need and want while driving growth, because not everywhere aims to be a copy of Canary Wharf.”

Paul Johnson, director of the Institute for Fiscal Studies, a thinktank generally friendly to the government, said that the investment zone policy was similar to the freeports already being rolled out bv the government, with some of the same problems. 

"There is a real risk that a large part of the activity in the freeports would have happened somewhere in the UK even without support, that such active industrial policies can pick ‘losers’ rather than ‘winners’, and that we might never be able to tell if the freeports are successful," he said. "The same issues apply to the investment zones.”