Memorandum by St Paul's Developments (ERF
22)
I write as Managing Director of St Paul's Developments
plc, a medium-sized development company based in South Yorkshire.
St Paul's Developments' business activity is
the acquisition, reclamation and redevelopment of "brownfield"
sites. The largest project undertaken to date by the company is
the regeneration of the disused Cortonwood Colliery (200 acres)
located between Barnsley and Rotherham.
St Paul's has benefited from gap funding support
through City Grant, PIP and Objective 1 (the first major award
to a property developer within the South Yorkshire Programme area).
My comments, below, relate to those elements
of the new European Union schemes which impact directly on my
company, namely direct development and speculative/non-speculative
gap funding.
1. DIRECT DEVELOPMENT
It is acknowledged that direct development by
the public sector, in appropriate circumstances, is an integral
component of the UK (and EU) approach to economic regeneration.
However, one is also advised that it is both
government and European Union policy, whereever possible, to lead
regeneration activity through encouraging and supporting private
sector investment. Or, to put it anther way, the role of the public
sector (the Regional Development Agencies) is, first and foremost,
to create the economic environment in which the private sector
can lead development investment activity.
If I am correct in this view of the role of
RDA's, then I am unfortunately not convinced that strategies are
being developed to support such a role. I consider, admittedly
only from my limited business experience that RDAs are frequently
more interested in devising strategies and utilising their resources
to undertake development projects themselves.
By way of example, from my company's experience,
I can comment on an ex-Coal Board site in Rotherham. The site
was acquired by English Partnerships (subsequently Yorkshire Forward)
and thereafter put to the private sector as a "development
opportunity". A number of organisations submitted proposals.
My own company proposed to reclaim and redevelop the site without
any public sector financial support. Nearly four years later,
the site remains unreclaimed and undeveloped.
Despite asking on numerous occasions why the
original "competition" had not been completed, I still
do not know a reason for the delay. I am now currently advised
that Yorkshire Forward wish to undertake the project themselves.
Why such direct development by the public sector
is the preferred route for this site I also do not know. The cynic,
I suppose, would say the public sector is staffed to undertake
such work, therefore opportunities must be found!
Another example to support my view regarding
the RDA desire to promote direct development is their commitment
to a (at least in Yorkshire) complex plethora of plans and forums
upon which "real on-the-ground action" should be based.
Briefly, these plans are (I think) in hierarchical order: the
Regional Economic Strategy; Objective 1 Programme; Yorkshire Forward
Corporate Plan; Sub-Regional Corporate Plans; Sub-Regional Action
Plans; and Borough Strategies for Strategic Partnerships. This
list, of course, does not include the statutory Development Plans
(planning controls)!
How the private sector is meant to be supported,
advised or encouraged to invest through this mix of documents
I do not know. What I do know, and am concerned about, is that
at the output level (Borough Strategies) these "strategies"
are managed by a local grouping of public/private sector "worthies".
Nothing can put off business investment more than to know that
there is a "with knowledge" group (possibly of competitors)
overseeing what is to happen—and hence be conditioned by
it.
From a developer's standpoint, I consider that
the most important "direct involvement" role for the
public sector should not be on the supply side of the development
equation (ie providing land or space); but it should be in creating
the demand for such space.
Private sector investors will, even in low value
areas such as South Yorkshire, provide most of the required sites
and properties. What the private sector cannot do is "market"
the area in a creative and proactive manner and by marketing I
do not just mean the securing of inward investment; but it is
also about the stimulation and encouragement of indigenous business
growth. This role should be the priority for the Regional Development
Agencies—dare I suggest they should look more closely at
the successes of Scotland and Eire in this respect!
2. GAP FUNDING
Firstly, within South Yorkshire, at least, I
am not aware of any gap funding regime currently being utilised
in a geographically open manner outside of Objective 1. From what
I can understand of the region's proposed system, funds are being
targeted at "specific projects" (direct public sector
or joint venture developments) created from the aforementioned
family of plans.
Moving on, the following are more general comments
from my experience of dealing with gap funding regimes:
(i) City Grant—this was a valuable
and flexible system for providing gap funding. Its implementation
was straightforward and uncomplicated. From St Paul's standpoint
in undertaking major land reclamation projects such as Cortonwood
(three plus years of earthworks) City Grant could take cognisance
of this timeframe and accommodate the year on year accumulation
of debt charges. This was achieved through calculating an overall
level of gap funding support (against a project appraisal) and
thereafter front-loading the support through having different
levels of percentage support available at different stages in
the development timeframe.
The current Objective 1 approach does not provide
for such a degree of flexibility. This may cause difficulties
in its use (and hence value) for longer-term brownfield reclamation
projects where substantial "pre-development" costs are
involved.
(ii) Objective 1—in South Yorkshire
this regime is still in its infancy. However, the experience of
St Paul's to date, has been exceptionally good. The support and
guidance received from both the co-ordinating team and the local
authority (Sheffield) was excellent. In terms of getting through
the "process" I would first comment that every effort
should be made to reduce the application timescale. Given the
amount of liaison necessary, it is doubtful whether a start to
finish programme of less than six months can be achieved.
Secondly, the requirements made on developers
to illustrate how local community benefits will be secured through
their project is ill thought out. An application form has been
devised in order to secure the necessary answers—for example
to obtain confirmation that local people will be employed in a
new development. Of course, like many other questions, the answer
will be positive! What is far more important, in terms of economic
and social regeneration, is for the public sector to help developers
set in motion the necessary programmes to actually achieve the
aim of optimising local access to new employment opportunities.
Make the application more straightforward with regard to what
a developer can do (and where they need to be monitored and controlled)
and then "tell them" (though having the systems available)
how they must work with a local community (and vice versa).
And thirdly, the system should not be so obsessed
with open competitive tendering. It is always in the developer's
mind to keep costs as low as possible. Therefore, if the process
(and hence the award) caps the level of assistance that will be
made in terms of quantum and percentage of expenditure incurred,
who gets a contract, and more importantly the process through
which a contract is awarded (ie negotiation or tender) is irrelevant.
In conclusion, my principal comments are:
1. Direct Development—is it the principal
role of the RDAs to encourage, through joint working, the economic
activity of the private sector? If it is, then far more thought
and effort should be put into securing this objective.
2. Development Support—more involvement
and effort should be made by the public sector to stimulate market
demand. With demand the supply side can (admittedly with some
exceptions) be catered for.
3. Strategic Planning—the overall process
should be less bureaucratic and more open. A hierarchy of six
or more plans (South Yorkshire) is not conducive to securing the
proactive involvement of the private sector.
4. Gap Funding—the manner in which
the new regime is to be used and promoted should be made far more
widely known. If gap funding is to be very precisely targeted
in Yorkshire then let's say so and acknowledge that it is not
an openly accessible grant support regime.
5. Gap Funding Procedures (Objective 1)—make
these less complex and less time consuming; but ensure, through
joint working, that the community and regeneration benefits are
actually achieved.
|
