Jeremy Hunt, HM Treasury, c Kirsty O'Connor, HM Treasury

Jeremy Hunt prepares the Autumn Statement. Credit: Kirsty O'Connor, HM Treasury via CC BY-NC-ND 2.0,

The Subplot

The Subplot | Autumn Statement, Leeds PBSA, offices

Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England and North Wales.


  • Groundhog day: how we can tell that regeneration spending is pork-barrel politics
  • Elevator pitch: your weekly rundown of who is going up and who is heading the other way


The same old, same old, again

Chancellor Jeremy Hunt delivered his Autumn Statement yesterday but for the property and regeneration business it’s Groundhog Day.

Freeports to get another five years of tax concessions, and 18 Northern towns awarded a slice of around £1bn government levelling up funds. That feels worth celebrating, doesn’t it? Among the lucky winners, all of whom lost out on earlier rounds of funding bids, are Wirral (£11m), Leigh town centre (£11m), Wakefield’s Ridings centre (£15m) Stockton and Billingham town centre (£20m), South Shields riverside (£20m), Holbeck (£16m) and Huddersfield (£17m). The full list of Northern wins adds up to about £340m. Yay! Wow!

Not so fast

But, bid costings date from the second round of Levelling Up Fund bids, which closed in August 2022. The Bank of England’s inflation calculator suggests prices have gone up by 8.5% since then and there’s good reason to suppose infrastructure costs inflate at about twice the normal rate. So there’s a risk that projects costed in summer 2022 are now undeliverable on the funding allocated.

But this is great news

Good news about the freeports, though? As things stood a suite of tax benefits – the main hook to reel in business – was due to expire in late 2026. Given that it takes time for a business to agree to move (or invest), then time to build or buy, the danger was hardly anyone would benefit. A cliff edge would remove whatever appeal the tax benefits had. The chancellor wants to add another five years, taking the reliefs to 2031. This moves the cliff edge, but doesn’t get rid of it. A similar extension – from five to 10 years – has been agreed for the 10 investment zones, the latest of which was launched on Monday in West Yorkshire. Note that Liverpool’s freeport only opened for business in January 2023, and if it’s signed any occupiers yet Subplot hasn’t heard the cheering. So this is slow work.

Slow learners

We’ve been here before, exactly 10 years ago, with city deals and enterprise zones and a Growing Places Fund plus a Regional Growth Fund to which councils bid for support, all to rectify uneven economic growth, and all eerily similar to what we have today. Are we living in the utopia they forged? No, because it wasn’t possible, and that in turn was because of a basic failure. Looking at this structure at the half-way point in 2013 the National Audit Office concluded: “There is…no plan to measure outcomes or evaluate performance comparably across the range of different local growth programmes. Departments cannot therefore…be sure about where to direct their resources to achieve the most impact.”

A reminder

This was the same NAO report that looked into the 2010-2015 iteration of enterprise zones and recorded that while 54,000 jobs were expected, by 2013 this hope had shrunk to 18,000 or to 6,000 (it depends how you count these things), and nobody was sure how many of them (if any) were additional and how many displaced. It was also the same report that showed £1.2bn allocated by government 2011-2012, but just £53m actually finding its way to recipients.

It’s all changed, though

No, it hasn’t. Last week the National Audit Office looked into the latest batch of regeneration funding and said almost exactly what it said in 2013: “In 2021 [the Levelling Up department] had a poor understanding of what had worked in its previous local growth programmes and was not well placed to manage the increase in grant-making required by its new £4.8bn Levelling Up Fund and £2.6bn UK Shared Prosperity Fund.”

Getting the idea?

By now, you can guess where this is going. Exactly the same complaint – that government has no idea what works – was made by the NAO in February 2022. “The Department for Levelling Up, Housing and Communities has not consistently evaluated its past interventions to stimulate local economies, so it doesn’t know whether billions of pounds of public spending has had the impact intended.” Compare with 2010 when the NAO noted that Regional Development Agencies might be having some useful impacts but added “weaknesses in project appraisal and evaluation mean the agencies might not have identified and backed the most effective projects.” Or try the same complaint from a ground-breaking report on regeneration of the inner cities in 1990 and an analysis of urban development corporations in 1988.

Everyone agrees

In case you were wondering, it isn’t just the NAO that found a problem. The same complaints come from outside, ranging from Brian Robson’s landmark 1994 study of the effectiveness of urban regeneration (not very) to the summer 2023’s official evaluation of the the effectiveness of coastal town’s regeneration (not very). The latter said – in words you will recognise – that the jobs numbers were peculiar because “lack of systematic evaluation” makes it hard to judge what really happened. The report concluded that if anyone does this again they “should consider ways to better support and assist projects, particularly small projects, to estimate their actual economic impact.” Same old, same old.

Follow the money

In truth, though, looking for outcomes is a fool’s errand. The sums of money involved are big enough to make local headlines, but aren’t big enough to tip the dial. The latest £340m round of Levelling Up spending needs to be placed against £1.2tn government spending this year, in a £2.6tn UK economy. Numbers like millions, billions, and trillions are hard to imagine – they all just turn into “very big” – but in this context, £340m is a sparrow’s fart in a hurricane. Even that might be overstating it, because the £340m will get dribbled out over several years. Fortunately, governments of all colours have relied on electors not noticing because electors are catastrophically clueless about public spending. See this 2021 opinion poll for eye-opening proof.

The NAO keeps hinting at an emperor’s new clothes truth everyone knows: nobody really evaluates urban regeneration spending because to look for results, or expect departments to learn lessons, would be to misunderstand why governments do this kind of pork-barrel spending. If you want to change the shape of the economy there’s plenty you could do – but this kind of regeneration isn’t it.


Who is going up, and who is going down this week

A troubling time for big teenage office blocks, as Leeds and Manchester landlords are discovering, but a good week to be spending yet more on student housing. Doors closing.

Noughties office blocks

The Noughties! What was that all about?! One Wellington Place in Leeds was completed in 2001, and One Tony Wilson Place in Manchester, in 2009. Two ends of the same decade, but with much in common: vast floorplates, located on the edge of the core city centre, 192,500 sq ft and 175,000 sq ft, respectively. Converting either of them into anything else – student housing, a hotel – may be impossible, even if that were a good idea. So what happens when the bottom falls out of the market for huge off-pitch office blocks from two decades ago? Are they stranded assets, so-called “dark star” offices into which money falls, but can never escape? Maybe not, with some imagination.

Empty space at Wellington Place could soon be transformed into a school for health and social care. A change of use application is now before Leeds planners from Global Banking School which already operates in Leeds and Manchester.

Empty space isn’t so much a problem at Tony Wilson Place. The trouble here is that values have collapsed as investors rethink their portfolios away from properties of this vintage. Since it’s £64.7m sale in 2015 (Patrizia to Abrdn), it was market tested at £73m in May 2022, and, when that tanked, offered up again at £52.3m. This got some nibbles but the best nibblers, Delancey and Lenrose, offered even less, and Abrdn has now decided to walk away. It will hold-and-invest rather than crystalise the loss.

The plan is to beef up the sustainability offer. This must hurt because One Tony Wilson Place isn’t a toxic hulk – it was close to top of class back in its day, boasting a BREEAM rating of Excellent. But these days excellent isn’t enough. Age really matters.

Leeds PBS-Yay

More reasons to love alternative asset classes. Subplot reported last week on the substantial returns investors were getting from purpose-built student accommodation. Now CBRE has produced more detailed regional analysis which shows why so many investors are circling Northern cities, Leeds in particular.

Rather than dividing by geography, which misleads because it averages, CBRE categorised on the more sensible basis of hotness. So “super prime regional” means places like Durham and Manchester, “prime regional” means Leeds, and “secondary regional” means Bradford and Huddersfield.

Total returns zig-zagged all over the place during the last three years for all classes, but “prime regional” has done best (8.6%, as opposed to 6%-7% everywhere else). Prime also shows stronger capital value growth than anywhere, including London (2.8%), and stronger net income growth than anywhere except London (8.3% prime, 16.4% London). But the real eye-opener is net initial yield which is ramping up fast in prime and secondary regional (5.2%-7.3%), and looking a bit flaky in super prime regional and London (4%-4.8%). Investors will quickly get the message about where to spend.

Get in touch with David Thame: [email protected]

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