BPF’s Melanie Leech: Necessity will be the mother of invention

At the turn of the year, as Covid-19 restrictions were eased and we started to move toward the new normality, focus shifted to the economic fallout and the shape of the recovery. Economists were divided; should we be braced for a sustained period of higher inflation, or will it be transitory? As I write this in April, the debate continues, with the Bank for International Settlements – known as the central bank of central banks – claiming recently that we have entered a new inflationary era, while the Bank of England has argued that a prolonged rising of prices is unrealistic. Over the past few weeks, I and my team have been on the road chairing our regional policy meetings, meeting members from Manchester, Liverpool, Leeds, Newcastle, Bristol and Birmingham. In these discussions the verdict was unanimous: in addition to the impact of wage inflation and soaring energy prices hitting all parts of the economy, developers are anticipating further steady materials cost increases over the coming months which is already affecting decision-making. Government must step in According to the Construction Leadership Council, the cost of some key materials has risen by 20% already this year and the Russia-Ukraine conflict will drive up the price of raw materials such as aluminium and copper, creating even more inflationary pressure. We know developers are having to reappraise projects, fix costs where they can and diversify risk, but there is no denying the macro-conditions make regeneration significantly more challenging, pushing more and more locations and products into unviability. The government should take note. It has committed to a series of bold “missions” in its Levelling Up white paper, including that by 2030 “local pride” and public satisfaction with town centres will have risen across all areas of the UK. As I have said previously, the transformation of regional towns and cities will only happen if we can unleash private sector capital. Our message to government is that we need to make towns and city centres an investable proposition, particularly when the real estate sector faces such economic headwinds. One of the levers government can pull is around planning. Long-term under-investment in planning departments means too many areas do not have a Local Plan, nor the resources and skills to contemplate major change, creating greater uncertainty for would-be investors. It now looks like fundamental reform of the planning system will not materialise, but we expect the government to press ahead with reform of section 106, with the proposed new single infrastructure levy. We await the details but urge government to think carefully about how it takes forward this proposal so that it is fit for purpose in wildly different economic contexts across the country. Material uncertainty Planning reform is unlikely to arrive soon enough to mitigate challenges developers are facing now. We need a radical and rapid system change in how we approach town centre development that creates immediate momentum, and our proposal is to apply many of the principles of the successful Enterprise Zones of the 1980s and 1990s. Town Centre Investment Zones would offer a mix of planning flexibility, tax breaks – including, critically, business rates relief – and greater local authority development powers to accelerate urban regeneration. At a time when development is looking increasingly challenging, this could be the catalyst for a new wave of investment. In the meantime, I fully expect necessity to prove to be the mother of invention. A challenging environment will mean the sector will need to employ even greater creativity and ingenuity in bringing forward projects, perhaps embracing modern methods of construction or finding alternatives for materials such as steel that are in short supply. And, with decarbonisation top of the agenda, soaring energy prices will also be an additional incentive in focusing minds on the need for more energy efficient, and resilient buildings. Melanie Leech is chief executive of the British Property Federation