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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