Emerging markets key to region’s growth

SECURING investment from fast-growing overseas investors will be key to the regeneration efforts of the North West’s towns and cities, according to a panel of  experts at an event held by law firm Addleshaw Goddard.

Mike Emmerich, chief executive of Manchester’s New Economy strategy body said that Manchester was “the one place outside London” that is currently experiencing growth during the current recession, which is due to the city’s ability to attract external investment.

“The BRICs will overtake us in 20 years and if we as a city are not making things or selling services to these markets – and gaining investment from them – we will fall behind,” said Mr Emmerich. “We need to make sure we have got a slice of that pie.”

He added that China currently creates a market the size of Greece every 11 weeks, and the size of Spain every year, but he pointed to the city’s success in attracting companies like Indian firm Aegis and Emirati airline Etihad to invest in Manchester, stating that the city’s share of foreign direct investment (FDI) has grown in recent years from 3.4% to 5.8%.

He also said that the city’s business growth rate that is above the national average, and that tourism numbers jumped by 15% last year.

“This recession is different for this city,” he argued, stating that for the first time since cotton market peaked it was experiencing a cyclical rather than structural decline. “It doesn’t look and feel like a slow, terminal decline.”

Mr Emmerich argued that the recently-announced £1.2bn City Deal with government “will make a real difference” to Greater Manchester’s prospects, allowing it to build infrastructure that will leverage existing assets such as Airport City (pictured) and its science base to grow GVA. He added that there is still European Regional Development funds and the new £100m Greater Manchester Investment fund for projects which can be proven to generate value.

“Funding is available – the challenge for us is to find the projects that appeal.”

Chris Brown, chief executive of Igloo Regeneration, argued that development funding from mainstream sources such as banks remained difficult, and that there is “virtually no risk capital out there for development”.

“We could have said that at any period over the last four years and I don’t think that has changed,” he added.

He said that funding tools which are available, such as JESSICA, Tax Increment Financing, Government-backed mortgage indemnity schemes and initiatives like Regional Grown Funds and the Growing Places Fund were a “confusing mess” for many developers.

“Every time some bad news comes forward there’s another initiative announced. But the amounts of money are minuscule compared with four years ago.”

Mr Brown, whose company is part of a consortium responsible for delivering Merseyside’s £30m Chrysalis Fund, argued however that political leaders in the North West were “a lot further ahead of the innovation curve” than in other parts of the country.

He said when the JESSICA funding for sustainable cities was first announced seven years ago, it seemed like “a solution looking for a problem” and then at the height of the crisis like the only method of gaining any funds for stalled projects.

“For a lot of developers, they should actually be the first port of call,” he said.

“They fill the gap between senior debt and equity. It’s a gap the private sector is struggling to fill at the moment and we’re getting a lot of positive feedback from developers.”

Mr Brown said the residential property market in key cities was also continuing to be hampered by the lack of available finance.

“The mortgage market may be in the doldrums for a while, and we are going to have to look at the private rented sector” (to fund schemes. “It’s a myth that there’s an oversupply of 1-2 bed flats in our cities. What there is is an under-supply of affordable mortgages for them.”

Mr Brown said that local authorities were becoming more adept at finding funding for regeneration through prudential borrowing and through tapping up trustees of local pension funds to invest in projects within their own areas – “which is something that’s always happened in Manchester”, he added.

“If you look at evidence from the United States, that’s something that has been really successful,” he said, adding that the trustees’ knowledge of the local market had helped them to make more discerning choices.

Simon Bedford, head of Drivers Jonas Deloitte’s Manchester office, argued that the region as a whole and Greater Manchester in particular need more homes. He said that economic forecasts suggests the city region’s population will grow by around 12,000 a year, and that last year only 3,000 new homes are being built.

Mr Bedford praised Greater Manchester’s recently-produced Growth Plan and a regeneration strategy that has “really evolved over the past few years”.

He said that other towns and cities were being forced to redraw plans that were developed in the run-up to the financial collapse, but praised towns such as Warrington, Macclesfield and Stockport that had already reassessed their offer and had already begun work on introducing more realistic schemes.

“There’s now a different approach to development, probably on a more limited basis driven by lower demand.”

Mr Bedford also said that Liverpool had pursued its own path, negotiating its own city deal based around key sites, setting up its own embassy in London and forging links with Shanghai to generate investment.

He added that its office market, though considerably weaker than Manchester, is being sold on the basis of its low cost and as a centre for nearshoring operations. For instance, the city is one of two final shortlisted destinations alongside Nottingham for standard Chartered’s plans for its new backoffice operations.

“On the retail front, Liverpool is also doing very well,” he said.

He added that approval for the Liverpool Waters scheme in March was a boost.

“It will happen, although whether it will happen in the shape or form that it took in the pictures produced by Peel is another matter,” he said.