Memorandum by Speke Garston Development
Company (GF 11)
THE IMPLICATION OF THE EUROPEAN COMMISSION
RULING ON GAP FUNDING SCHEME FOR URBAN REGENERATION IN ENGLAND
INTRODUCTION
Speke Garston lies seven miles south of Liverpool
City Centre and was identified in the mid 1990s as an area in
need of comprehensive regeneration. It formed an important part
of the 1994-99 Objective One Programme on Merseyside and forms
a substantial part of a Strategic Spatial Development area (SSDA)
included in the new 2000-06 Objective One Programme approved recently.
Speke Garston has a unique tri-partite delivery
mechanism involving Speke Garston SRB Partnership, Speke Garston
Development Company and the South Liverpool Housing Company. Between
them, these three organisations are delivering holistic, comprehensive
regeneration and considerable success has been achieved.
BACKGROUND
Speke Garston Development Company (SGDC) is
a joint venture established by English Partnerships and Liverpool
City Council in 1996 to assemble land, develop sites to attract
investment and create employment. It is a specialist urban regeneration
delivery vehicle working in partnership with other specialist
organisations to bring about the comprehensive economic, social
and physical regeneration of the Speke Garston area. SGDC's key
task is to create a portfolio of high quality, fully serviced
sites for modern manufacturing and service industry use. SGDC
is not involved in direct development of floorspace for end users
and depends on private sector partners utilising English Partnerships
Partnership Investment Programme (PIP) funding to create appropriate
buildings. SGDC has direct experience of the effectiveness of
GAP funding and wishes to comment on the key points as follows:
1. Contribution of GAP Funding in Areas of
Market Failure
As a specialist regeneration delivery vehicle,
SGDC was most concerned when the GAP funding scheme was suspended
in December 1999. Gap funding has attracted local and national
developers to propose projects which are correcting the market
imbalance created in the 1980s. The absence of a GAP funding mechanism
could have an extremely serious impact on the momentum of regeneration
in Speke Garston and lead to a sharp reduction in the commitment
of private sector partners to key projects.
Gap funding has played a central role. Nine
out of eleven new buildings erected since 1997 have been assisted
with GAP funding and the two remaining developments were both
assisted in other ways by other Government Schemes. £21.3
million of GAP funding has attracted direct private investment
of £85 million, created 66,000 m2 of floorspace which when
completed will allow 1,869 jobs to be created and safeguarded.
2. Consequences of the European Commission
Ruling for Urban Regeneration
One of the major reasons that Merseyside has
been unable to capture new indigenous and inward investments is
that floorspace was not being created by the market. Even taking
account of the considerable progress made on Merseyside in the
last five years, there is still a gap between the cost and the
value of development which requires GAP funding. If the GAP funding
mechanism is not replaced by something similar, floorspace for
occupiers and end users will not be created and progress at Speke
Garston will slow considerably or even stop. SGDC's lifetime target
is to create or safeguard 9,000 jobs. Without GAP funding or a
satisfactory alternative this target will not be met.
The full impact of the suspension of the PIP
scheme has not yet been revealed. A number of applications were
approved prior to the suspension in December 1999 which are currently
being implemented. Over the next 12 months however, enquiries
for floorspace will not be accommodated and these potential investments
will move to prosperous areas and greenfield sites where the property
market encourages bespoke and speculative development and away
from defined urban priority areas like Speke Garston.
The Speke Garston strategy was based on producing
a high quality infrastructure for private sector led economic
development. If no solution is found to the GAP funding problem,
there is a danger that some of this investment will fail to produce
the intended outputs and the Objective One programme targeted
on helping local people into employment will also fail.
3. What alternative schemes should be considered
to replace GAP Funding and scale of funding required to replace
GAP Funding
GAP funding has worked extremely well in attracting
private investment to areas where market failure has occurred.
The ideal solution for Speke Garston would be to reinstate the
GAP funding scheme used up to December 1999. The main advantage
of GAP funding is that it helps the property market regain normal
market momentum which will allow Merseyside to move away from
the "grants culture" that has dogged the area through
the 1980s and 1990s. There is already clear evidence in Liverpool
City Centre as well as Speke Garston that GAP funding led development
has begun to correct market failures from the 1990s and a much
more robust property market is developing. Gap funding is therefore,
a temporary measure which is succeeding in restoring a functioning
property market at much less immediate cost to the exchequer than
direct development.
There are only two viable alternatives to GAP
funding. Either direct development by the public sector or substantial
tax incentives currently offered in Enterprise Zones and recommended
for urban priority areas by Lord Rogers in the Urban Task Force
Report.
Enterprise Zone status has raised property values
and succeeded in encouraging speculative development of floorspace
which in itself has resulted in substantial private sector investment
and job creation. The cost of Enterprise Zone status for Speke
Garston is not known.
Direct development by the public sector is the
other alternative. Taking Speke Garston as an example, it would
have required approximately £50 million of direct public
expenditure to create the buildings funded through £21.3
million of gap funding. The sale of developments to occupiers
and investors will release this cash but direct development will
transfer the risk from private to public funders and fuel demands
for additional public expenditure.
4. CONCLUSION
Speke Garston, as part of Merseyside, has had
full Assisted Area Status for some time. It is anticipated that
this status will be renewed when agreement is reached on the new
assisted areas map. If this is the case, the simplest solution
for the Speke Garston area is for the reintroduction of a GAP
funding mechanism which can be implemented within state aid limits.
Whilst this would represent a restriction on the situation prior
to 22 December 1999 it would still be hugely better than the current
situation where no GAP funding exists and the very precious momentum
generated over the last five years is in grave danger of grinding
to a halt.
It cannot be overstated that Merseyside is recovering
from a profound and acute period of market failure recognised
by the EU in granting Objective One status. The perception and
image issues have damaged its ability to compete and these are
slowly being remedied by the current regeneration initiatives.
If the current momentum is damaged, there is a danger that self
confidence will be harmed and the next stage in the regeneration
of the Merseyside economy will be even more difficult to commence.
It is, therefore, imperative that no momentum is lost and that
every effort is made to resolve the problem as quickly as possible.
Bob Lane
Chief Executive
30 June 2000
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