Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

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.


  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!


  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.

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