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Northern PowerhouseInvestment Guide

A Region in Transition: The Northern Powerhouse five years on

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A Region in Transition: The Northern Powerhouse five years on experienceinvest.com

Where is the Northern

Powerhouse?

p.7

Discover why regional

property markets are booming

p.17

Which cities are driving the north?

p.11-15

Northern Powerhouse milestones –

where are we five years on?

p.9Will Boris

Johnson revitalise the Northern Powerhouse?

p.21

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A REGION IN TRANSITION: THE NORTHERN POWERHOUSE FIVE YEARS ON

In June 2014, former Chancellor of the Exchequer George Osborne

stood in the Museum of Science and Industry in Manchester

and announced the government’s intention to build a ‘Northern

Powerhouse’. Acknowledging that for too long, productivity in

the North of England had been lagging behind London and the

Southeast, Osborne called for a fresh injection of investment into

the region to ensure its cities and towns could pool their strengths,

in turn enabling the North to achieve its full economic potential.

“HOW DO WE BUILD THE NORTHERN POWERHOUSE?

By joining our northern cities together – not physically, or into some artificial political construct – but by providing the modern transport connections they need; by backing their science and universities; by backing their creative clusters; and giving them the local power and control that a powerhouse economy needs.” 1

Over five years since Osborne’s much-publicised speech, the Northern Powerhouse has since crept into the political lexicon. In 2017, the Minister of State (Northern Powerhouse) position was created to demonstrate the government’s commitment to supporting the North of England. What’s more, numerous fiscal statements by Osborne and his successor Philip Hammond have constantly recognised – in words at least – the need to improve productivity, build more houses and encourage private investment into rising regional cities like Liverpool, Newcastle and Manchester.

Yet with Brexit uncertainty dominating the political landscape since June 2016, there have been questions over the Conservative Party’s long-term commitment to the Northern Powerhouse. It raises some important questions: how successful has the Government been in boosting the regional economy? What investments have been made, and is the Government effectively fulfilling the objectives initially set out by Osborne over five years ago? And how have local property markets across the North fared as a result of the changing commercial and cultural landscapes?

As a business actively involved in the regeneration of key urban cities such as Liverpool and Newcastle, Experience Invest has seen first-hand the impact, challenges and benefits brought about by the Northern Powerhouse strategy. Our commitment to deliver modern, new-build residential and commercial developments means that we work closely with local councils, government bodies and community organisations in the region – as well as businesses, investors and professionals – to ensure our construction efforts are supporting the needs of these cities.

Experience Invest’s guide “A Region in Transition: The Northern Powerhouse five years on” provides a review of the region’s economic performance and growth since 2014. Analysing some of the key investments made, this guide also considers what Boris Johnson’s appointment as Prime Minister could mean for the future of the north.

1 George Osbourne, speech at Manchester Science and Industry Museum, 23 June 2014 (https://www.gov.uk/government/speeches/chancellor-we-need-a-northern-powerhouse 5


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DEFINING THE NORTHERN POWERHOUSE

Where is the Northern Powerhouse? The Northern Powerhouse refers to six core cities responsible

for driving the North of England’s regional economy –

Liverpool, Leeds, Manchester, Newcastle, Hull and Sheffield.

North of England

• Population: 15 million

• Jobs: 7.2 million

• Home to over one million private businesses

• Five of the UK’s top ten major urban areas

• 10th largest economy in the EU, at nearly £350 billion

• Seven of the UK’s 24 Russell Group universities

Objectives of the Northern

Powerhouse

• Improve connectivity and transport links between the towns and cities of the North

• Create a highly skilled and educated workforce

• Support enterprise and innovation

• Promote trade and investment

• Devolution of powers and spending to local councils

The Northern Powerhouse Independent Economic Review suggested that a higher-performing and more unified Northern economy could add more than £97 billion to the UK economy and generate 850,000 new jobs by 2050.

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Liverpool

LeedsManchester

Newcastle

Sheffield

Hull

10th largesteconomy in

the EU

7.2 million jobs

1 million private

businesses

15 million population

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NORTHERN POWERHOUSE MILESTONES – WHERE ARE WE FIVE YEARS ON?

Since June 2014, the government has been making targeted investments in the region, using the Northern Powerhouse as a framework from which to guide and monitor its activities. At the moment, much of this has been focused on promoting transport links between major regional hubs, supporting local businesses and promoting productivity through the creation of new jobs.

Between June 2014 and June 2019, the Northern Powerhouse has

achieved the following milestones:

• The economy of the North is now worth more than £339 billion – a £10 billion increase on 2014’s figures

• An additional 287,000 people have joined the workforce

• Northern Powerhouse Rail (NPR) network announced, totalling £39 billion

• Creation of Transport for the North (TfN) – the UK’s first pan-Northern Government body

• TfN has brought forward a £70 billion investment package

• £13 billion is being invested into transport, including:

• £3 billion investment into the TransPennine route

• £20 million of new funding made available under the ‘Made Smarter’ pilot in the North West to support 3,000 SMEs in adopting new digital technologies

• The creation of £15 million Northern Cultural Investment Fund to support culture and art projects

• The launch of the Northern Powerhouse Investment Fund (NPIF) to support scaling businesses

On top of these achievements, the government has also claimed that foreign direct investments in the north have nearly doubled since 2010.


Creation of Transport for the North (TfN)

TfN has brought forward a £70 billion investment package

£13 billion is being invested into transport

£39 billion Northern Powerhouse Rail network announced

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20192014

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THE CITIES DRIVING THE NORTH

The Northern Powerhouse

strategy is being driven by two

initiatives. The first is improving

connectivity and transport links

between the region’s major

cities and towns. The second is

promoting the regeneration of

these major urban centres to

boost the local economy, improve

infrastructure and housing, and

support businesses.

Working alongside developers

and investors, Experience Invest

has been actively involved in

the regeneration of the northern

cities. Below is a snapshot of the

investment that has been made

in recent years.

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NEWCASTLE

• £1.5 billion of planned investment

• £350 million regeneration scheme for Newcastle Helix

• £200 million investment into the Stephenson Quarter

• £250 million arena planned for Gateshead Quayside

• Rising student population

Our key project

Opto Newcastle

A £22 million purpose-built student

accommodation complex

LIVERPOOL

• £14 billion of redevelopment and regeneration projects in the pipeline

• Over £1 billion in new development projected secured each year

• £11 million invested into high-growth SMEs through the NPIF

• Second largest regional economy in North England

• £5.5 billion waterfront regeneration on River Mersey

• Home to 66,000 students, and five universities

• 5% year-on-year house price growth (May 2019)

Our key project

Infinity Waters

Three residential

towers being constructed

over the River Mersey

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MANCHESTER

• Fastest growing major city outside of London

• £62.8 billion economy

• 30% increase in house prices between 2013 and 2018

• House prices projected to rise by 22.8% between 2018 and 2022

• 10,000 new-build apartments currently under construction

• Population of 2.8 million people

Our key project

The Residence Manchester

Two residential towers in a prime

city centre location

LEEDS

• £1 billion growth deal to improve transport links, public buildings, the local

economy, businesses and innovation

• £350 million regeneration of Leeds South Bank

• £66.5 billion economy

• Fastest growing UK region for foreign direct investment

• Fourth largest urban area in the UK

Our key project

Victoria House

Completed and operational

development of buy-to-let apartments

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A BOOMING REAL ESTATE MARKET

HOUSE PRICE GROWTH IN THE 12 MONTHS TO JUNE 2019

MANCHESTERLIVERPOOL LEEDS NATIONAL LONDON

4.9%

4.1%

3.2%

2.1%0.0%

The Northern Powerhouse has played an important role in

fuelling the growth of the property industry. Large-scale

regeneration projects, complemented by the construction

of new-build properties, have made cities like Manchester,

Liverpool and Newcastle an attractive destination for both

young professionals seeking to get their first foot on the

property ladder, and experienced real estate investors.

By catering to the housing demands of the region, the Northern Powerhouse has naturally become a popular destination for investors seeking property assets that can deliver regular rental yields and long-term capital growth. With the rate of house price growth in London stagnating, cities like Liverpool, Manchester and Leeds are becoming renowned for their buy-to-let opportunities.

Impressive rental yields in these cities can be attributed to increasing demand for

residential property, which has, in turn, led to an increase in house prices. Hometrack’s UK Cities House Price Index revealed just how impressive house price growth has been in the north, particularly when compared to the national average. Moreover, while London has traditionally featured as the UK’s top spot for domestic and foreign investment, Brexit uncertainty coupled with the city’s high average house price has made real estate more difficult to access for an increasing number of prospective buyers.


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Marking five years since George Osborne’s Northern Powerhouse

speech, in 2019 the government took the opportunity to celebrate

the key policy announcements made, while at the same time

voicing its continued support for the project. However, a series

of independent reports have questioned how successful the

government has been in fulfilling its desired objectives.

An independent report by the Institute for Public Policy Research (IPPR) has been critical of the progress made, concluding that while there have been some notable advancements, the full potential of the Northern Powerhouse has been hampered as a result of the government’s austerity policy. Since 2009, it is estimated that the north has suffered from £3.6 billion worth of public spending cuts each year, while in the south-east and south-west of England, public spending has been rising on an annual basis of approximately £4.7 billion.

The disproportionate allocation of government spending between the south and the north has also affected public investment into transport. According to the IPPR, transport spending increased by more than £330

per person in London, while in the north, the increase was just £149 per person in real terms.

A separate analysis by Barbour ABI and the Construction Products Association also found that investment into infrastructure was losing momentum. Between 2017 and 2018, they revealed that residential and infrastructure construction contracts fell by 24%. Looking at infrastructure in particular, the value of contracts dropped by 59.3%, despite investment being made to upgrade the TransPennine Rail Route.

Notwithstanding these criticisms, the Northern Powerhouse has generally been praised for taking a constructive step in the right direction, recognising the

need to support the region and cities that once served as the industrial heartland of the UK. A project the size, scope and magnitude of the Northern Powerhouse cannot be delivered in a matter of months or even years; in reality, it will take at least a decade before we can properly measure both its successes and shortcomings.

Importantly, given the challenges posed by Brexit, the fact that significant investment commitments are constantly being made should not be overlooked. And setting to one side the specific role of Westminster in empowering its growth, the upturn in business activity and property prices across the North is something to be celebrated.

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SHORTFALLS AND CHALLENGES

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WILL BORIS JOHNSON REVITALISE THE NORTHERN POWERHOUSE?

Having been appointed the leader of the Conservative Party on

Tuesday 23 July, Boris Johnson was quick to introduce changes,

undertaking the biggest cabinet reshuffle in modern history. Sajid

Javid replaced Philip Hammond as Chancellor of the Exchequer,

and leadership contender Jeremy Hunt was replaced in his role

as Foreign Secretary by Dominic Raab. However, the Minister of

the State (Northern Powerhouse) Jack Berry retained his position,

allowing for consistency in this area.

2 Boris Johnson speech at Manchester Science and Industry Museum, 27 July 2019 (https://www.gov.uk/government/speeches/pm-speech-at-manchester-science-and-industry-museum)

On Thursday 25 July, Boris Johnson addressed the House of Commons for the first time in his official role as the UK’s Prime Minister. It was during his first PMQs that the new leader declared his government’s support for Northern Powerhouse Rail (NPR) – a £39 billion transport plan to transform the North’s rail network, facilitating high-speed connections between Liverpool, Hull, Sheffield and Newcastle. This initial announcement was met with cautious optimism from some business leaders who have been given little details about NPR (previously known as HS3) since it was first announced in 2014.

A few days later, the PM found himself in Manchester delivering a speech where he once again reaffirmed his backing for the Northern

Powerhouse, pledging to fund a new high-speed trans-Pennine rail link between Manchester and Leeds. This comes as part of his broader vision to rebalance power, growth and productivity across the UK.

“I want to be the Prime Minister who does with Northern Powerhouse Rail what we did for Crossrail in London. And today I am going to deliver on my commitment to that vision with a pledge to fund the Leeds to Manchester route. I want to stress it will be up to local people to decide what comes next, as far as I’m concerned that’s just the beginning of our commitment and our investment. We want to see this whole thing run.

I have tasked officials to accelerate their work on these plans so that we are ready to do a deal in the autumn.

It is the right thing to do, it’s time we put some substance into the idea of the Northern Powerhouse Rail, and that’s why we are here this morning.

We want to inject some pace into this so that we can unlock jobs and boost growth.” 2

It remains to be seen how Boris Johnson will be able to deliver a project of this magnitude. Council leaders have called for the Prime Minister to provide more details about the NPR, and in response, Number 10 has confirmed it will publish in-depth plans on the rollout of the Manchester-to-Leeds train link this autumn.

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EXPERIENCE INVEST REACTS

Reflecting on the latest

developments that have thrust

the Northern Powerhouse back

into the limelight, these are the

thoughts of Experience Invest’s

business development and

acquisitions director Jerald Solis:

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“The Northern Powerhouse strategy is an ambitious but much needed undertaking. Five years on, it has been positive to see the government remaining committed to the region, and this is reflected in the amount of investment being made into skills, innovation, transport and culture to boost the local economies.

“In the last 24 months, though, momentum has waned – Brexit uncertainty and austerity measures have reduced the number of policy and investment announcements concerning the Northern Powerhouse, while commitments to

improve transport links have yet to materialise. However, given the scale and complexity of the project, one must hold a long-term view.

“Most importantly, over the last five years developers have heeded the government’s call, injecting significant amounts of capital to support the residential and commercial real estate needs of the north. Experience Invest works closely with community groups and local councils to ensure we are delivering state-of-the-art properties in high demand areas, be it new-build apartments, purpose-built student accommodation or hotels. Importantly, with

the demand for property continuing to rise, Experience Invest remains committed to the north, partnering with developers and investors so that the full potential of the region can be realised.

“With Brexit scheduled for 31 October 2019, it is still unknown whether the Prime Minister will be able to fulfil his commitments to the North while at the same time managing Brexit. Nonetheless, the fact Boris Johnson has made the Northern Powerhouse one of his key talking points in his opening week in the role must be taken as positive news.”



Northern PowerhouseInvestment Guide



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