Levelling-up and Regeneration Bill

Written evidence submitted by SEGRO (LRB42)

Levelling Up and Regeneration Bill Committee.

SEGRO: Levelling Up & Regeneration Bill – Call for evidence response

Executive Summary

1. As the Government look s to ‘level up’ the country, geopolitical and global health events continue to cause concern about the resilience of supply chai ns. This is d riving a movement by business from a ‘just in time’ to a ‘just in case’ approach to supply chains . In addition, the UK is continuing to experience a rise in online sales across the economy , as the country recover s from the impacts of the pandemic .

2. As such, an industrial and logistics sector that is able to thrive and to grow is critical to the Government delivering on its ambitions to ‘level up’ across the UK, with over 70% of demand for industrial and logistics space in the North of England and the Midlands.

3. The Levelling Up and Regeneration Bill represents a prime opportunity for the Government to reset the current approach to industrial and logistics land allocation and create a more agile planning system that will enable the sector to help drive innovation, sustainable economic growth and job creation across the country.

4. Whilst the Bill has set out plans to reform the planning system, there has been a notable absence in how these reforms will support the industrial and logistics sector which is of central importance to the UK economy.

5. SEGRO are therefore keen to work with the Government to ensure the Levelling Up & Regeneration Bill allows for growth of the sector in the following ways:

· Creates a platform for a new National Planning Policy Framework (NPPF) and National Development Management Policies which:

o Introduce a presumption in favour of development of I&L sites, where key criteria are met.

o Give Local Planning Authorities the tools and support they need to facilitate cross-boundary strategic employment sites, including I&L sites. Supply chains are complex and cover regional, national and even international geographies. They don’t respect local authority boundaries, so guidance from Government is essential.

o Ensure that new Local Plans and design codes are I&L friendly and facilitate the provision of I&L sites across the country by creating an agile planning system that delivers sustainable development in the right locations.

· Ensures that a new Infrastructure Levy and associated changes to CIL and S106 enable the timely delivery of infrastructure which meets the needs of new I&L development and local communities.

The Industrial & Logistics Sector : Introduction and background

6. The Industrial and Logistics (I&L) sector is a vital part of the UK economy and can play a critical role in the country’s recovery and Levelling Up agenda. The resilience of the sector was tested like never before during the pandemic and demonstrated how reliant UK PLC is on its continued success.

7. 2021 saw UK industrial and logistics take-up surpass 50 million sq. ft for the second year running, achieving a record for the sector in the process. Prior to the onset of COVID-19, the three-year average for industrial & logistics take-up sat at just 32 million sq. ft. Whilst the rise of ecommerce – turbocharged by the pandemic – kickstarted the I&L boom, new hi-tech industries are also fuelling demand for growth, including creative industries and data centres, alongside traditional sectors such as manufacturing, distribution, R&D, food production, pharmaceuticals, life sciences and construction.

Industrial & Logistics: Key facts

· The sector currently provides 3.8 million jobs in the economy ;

· with an increase in jobs of 26% between 2010 – 2020 for logistics;

· generating £232 billion GVA ;

· which means the sector accounts for 14% share of the entire economy in GVA terms;

· and the sector expects to increase productivity by 29% between the years of 2025 – 2039 [1]   .

The challenge s facing the I&L sector

Growing online sales and a changing economy

8. The outbreak of the COVID-19 pandemic accelerated an already established trend in the economy, the growth of online shopping and last mile deliveries. Over the past two years, online sales rose by £45 billion [2]   . Looking ahead annual online sales are expected to increase by an additional £31 billion by 2026 2 . Knight Frank’s UK Logistics Market Outlook report notes that this increase in online sales, " could drive further requirements of c.10m sq. ft of last-mile fulfilment space over the next five years ."

9. Online sales increased during the pandemic as people couldn’t shop in store during lockdowns across the UK; an increase that is only expected to continue. Not only did online sales increase, but new entrants such as Deliveroo and Getir have created new sectors as the convenience and speed of on-demand shopping continues to drive consumer behaviour.

10. COVID-19 accelerated already emerging trends in the UK economy and in the I&L sector. But even before the outbreak of the pandemic, the I&L sector was crucial in ensuring communities across the country could easily and reliably access essential items for everyday life, from medical supplies to fuel and fresh food produce to essential household products.

11. Moreover, the I&L sector was providing space for essential pharmaceuticals companies and innovative life science companies to drive innovation pre-pandemic. In a world living with COVID, space for these companies is all the more vital for the country as new vaccines and medicines need space to be produced and stored in the UK. Additionally, as the farming and agriculture sectors continue to evolve, the space for innovative life sciences companies is also of paramount importance.

Lack of suitable land supply and supressed demand

12. This need for more space adds to an already supressed demand for I&L land across the country. A British Property Federation (BPF) & Savills report notes, " the historic lack of supply has restricted (‘suppressed’) demand by 29% nationally which should be provided for in the future. Future demand estimates should also consider housing, e-commerce and freight growth ." 1 Additionally, a report from the Industrial Land Commission released in January 2022 found that floorspace for industrial uses had decreased significantly across London, Greater Manchester and the West Midlands by 24%, 20% and 19% respectively [3] .

13. All these factors lead to the stark need for more warehouses of varying sizes and uses, in locations that enable the occupiers to service the needs of their market efficiently and sustainably. The need for urban warehouses for last mile deliveries who need rapid access to their own customers (businesses and consumers) as well as labour is becoming more apparent. But so too is the need for larger warehouses, located in regional or national distribution hubs for storing, processing and manufacturing goods. These warehouses are not only needed to satisfy the demand of consumers across the country but to create the jobs these warehouses will bring will help to support the UK economy as well.

Restricted growth

14. This supressed land demand, coupled with the acceleration of drivers of growth in the I&L sector, including the exponential rise in online sales, supply chains shifting from operating just-in-time to a just-in-case model resulting in more inventories being stored and the introduction of new growth sectors, means that the sector is currently unable to fulfil its potential to help support the Government’s aims for Levelling Up and for a high wage, high skilled economy. In order to achieve the Government’s ambitions it is essential that the Bill supports the growth of the sector which in turn also creates higher pay for employees. For example, the sector pays on average £4.6k p.a. more compared to the manufacturing sector 1 .

15. More I&L space is already desperately in need to manufacture, assemble and store high value products to help our export led businesses to succeed. So too is the need for SEGRO’s customers to have easy access to gateways such as ports and airports alongside appropriate and sustainable space here in the UK in order for SEGRO customers’ businesses to grow.

The opportunity the Bill presents

16. The Levelling Up and Regeneration Bill therefore represents a prime opportunity for the Government to reset the current approach to industrial and logistics land allocation and create a more agile planning system that will enable the sector to help drive innovation, sustainable economic growth and job creation across the country.

17. This suppressed potential for growth, if unleashed, will, in turn, help the Government’s ambitions to establish new international links, supporting its Global Britain agenda and its support of British-based businesses to trade overseas.

SEGRO’s recommendations for the Levelling Up & Regeneration Bill

18. SEGRO are keen to work with the Government to ensure the Levelling Up & Regeneration Bill allows for growth of the sector in the following ways:

· Creates a platform for a new National Planning Policy Framework (NPPF) and National Development Management Policies which:

o Introduce a presumption in favour of development of I&L sites, where key criteria are met.

o Give Local Planning Authorities the tools and support they need to facilitate cross-boundary strategic employment sites, including I&L sites. Supply chains are complex and cover regional, national and even international geographies. They don’t respect local authority boundaries, so guidance from Government is essential.

o Ensure that new Local Plans and design codes are I&L friendly and facilitate the provision of I&L sites across the country by creating an agile planning system that delivers sustainable development in the right locations.

· Ensures that a new Infrastructure Levy and associated changes to CIL and S106 enable the timely delivery of infrastructure which meets the needs of new I&L development and local communities.

About SEGRO

19. SEGRO is the UK’s leading owner, manager and developer of modern warehouses and light industrial property. Established in 1920, SEGRO own or manage 9.6 million square metres of space valued at £21.3 billion for major customers such as Mars, Amazon, DHL, British Airways, Netflix, Mitsubishi, Lonza, Hello Fresh, as well as hundreds of thriving SMEs. A commitment to be a force for societal good is integral for SEGRO’s purpose and strategy. Its Responsible SEGRO framework focuses on three long-term priorities where the company can make the greatest impact: Championing Low-Carbon Growth, Investing in Local Communities and Environments and Nurturing Talent.

SEGRO : Key facts

· 385 employees across UK and continental Europe;

· with a total of £21.3 billion of assets under management ;

· serving 1471 customers ;

· in buildings where carbon emissions will be reduced by at least 42% by 2030 ;

· and will engage 35,000 students about the world of work and support up to 10,000 people into employment through their new community investment plans ;

· with a customer base ranging from traditional transport and logistics companies , to innovative technology, manufacturing, media, pharmaceuticals and life sciences companies and those at the cutting edge of R&D.

· Collaborates to drive growth and innovation, including:

o Founder partner of the new East Midlands Freeport

o Partnering with Smart Parc to deliver a dedicated 2 million sq. ft food production facility in Derby

o Mayor of London’s industrial development partner in East London regenerating 86 acres of vacant brownfield land

o Working with residential developers to deliver co-location neighbourhoods that deliver homes and jobs for local communities

o Reacquiring Slough office portfolio in 2021 to create further opportunities for data centre operators, creative industries and life sciences

August 2022.