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Regeneration Community must stick to its guns - Parkinson Report

COMMUNITIES AND LOCAL GOVERNMENT News Release (020) issued by COI News Distribution Service. 30 January 2009

The impact of the credit crunch on regeneration is serious but with the right sort of long term leadership and resources it can come through the downturn, finds the Parkinson report published today.

The report is clear that regeneration is a long run game and it must continue to have that outlook. Regeneration has made a real difference across the country in the past decade because of a strong national economy and extensive public investment.

Professor Michael Parkinson, from the European Institute for Urban Affairs at Liverpool John Moores University, was asked by Local Government Minister John Healey to assess the impact of the credit crunch on the commercial property sector, the housing market and the regeneration sector.

The independent report "The Credit Crunch and Regeneration: Impact and Implications" found that the financial crisis is impacting on a financial model that has underpinned regeneration in recent years and pressure on the sector is likely to get more intense.

It concludes that the impact is mixed. Many projects already underway are continuing especially where the public sector is involved. Projects yet to begin were at risk. Economically marginal projects are increasingly less attractive and the north and midlands have been affected more than the south east.

Professor Parkinson is clear the system will not recover quickly and everyone - from the private sector, councils, regional agencies and central Government - has a part to play in getting through the downturn and preparing for the upturn.

Michael Parkinson has made the following overall assessment:

* The financial crisis is severe and not over yet. The pressures will get more intense.
* Long term regeneration activity is continuing and must be sustained. Need to retain capacity to keeps skills in sector.
* Regeneration has and will continue to move from risky to quality investments. Deprived areas will need most support.
* Real long term leadership and commitment is needed to keep the wheels moving and prepare for upturn.
* Sector needs more financial innovation, more genuine partnerships and more quality schemes.
* Public resources and programmes are keeping regeneration going as much as the private sector. This contribution will be even more crucial in the coming months.

Professor Michael Parkinson CBE said:

"Regeneration has had a very good ten years, but the credit crunch has shaken the sector. If the regeneration pipeline dries up - the investment, confidence, momentum, skills and capacity, which has been built up in last decade, may face even greater pressure.

"Simply put, development and property industries - including the regeneration sector - need end users to buy their products.

"But, however difficult the market is now it is not dead. Many schemes are continuing especially those that are financially sound or have government backing.

"The successful principles of regeneration are even more important now. The challenge is doable. Now is the time to take stock, make the right long term decisions and re-gear ready for the upturn. Everybody must stick to their guns, not panic and keep their eye on the longer term horizon."

Professor Parkinson's key analysis found:

The Housing Market has undergone a sharp downturn. Between 2000 and 2007 the top ten lenders reliance on deposits declined from 77-55% whilst gross lending trebled from £119bn to £364bn. This is impacting on regeneration areas, which are perceived as a higher risk. City centre apartments and buy to let properties have been especially hit.

The major national survey of the regeneration community showed over half (57%) reported a 50% reduction in residential led regeneration activity in the last 12 months. Other sectors were lower - 41% for mixed use; 33% for office led development; 22% for retail; 18% for industrial and 20% for leisure based regeneration. Similar reductions were anticipated in the future.

The commercial property sector has been affected quite seriously by the credit crunch, after six years of growth. Confidence is low because of expected lower returns and the unavailability of investment capital. In 2007 the total return for all property in regeneration areas fell by 6% compared to an average of 3.4% across the UK.

Looking to the future the country has been through crises before, in the 1970s and 90s. Life would go on but recovery would not be quick or the same. There were opportunities for partners to review current commitments; make strategic land acquisitions rather than begin new schemes; focus on long term place making as well as house building and create longer term relationships between developers and the public sector.

Notes to editors

1. The full independent report "The Credit Crunch and Regeneration: impact and implications" can be found at http://www.communities.gov.uk/publications/citiesandregions/creditcrunchregeneration

2. In May Local Government Minister John Healey commissioned Professor Michael Parkinson to assess the impact and implications of the credit crunch upon regeneration in England http://www.communities.gov.uk/news/corporate/821761

3. During the past six months Parkinson's team from IPD, Oxford Economics, the University of Reading and City University collected a wide range of evidence from across the country based upon interviews with many key players in the regeneration community, a major national survey, and analysis of work with many regeneration agencies.

ISSUED ON BEHALF OF PROFESSOR PARKISON BY COMMUNITIES AND LOCAL GOVERNMENT
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