Swansea is joining the city deal party just as the programme begins to come under scrunity. As councils across the UK deal with massive spending cuts, will the private sector deliver the funding needed? asks David Thame
Swansea’s city deal launch followed what is now the usual routine: a big ministerial visit (in this case, the prime minister), photo opportunities of people signing things, and a celebratory local paper headline with a huge number in it (in this case, £1.3bn).
So far, so predictable. Every one of the 28 English and eight Scottish or Welsh deals has started with the same fanfare, the same signing and more or less the same big number. However, Swansea joins the club as the city deal programme comes under scrutiny across the UK.
The Swansea deal is intended to open the door to 11 technology, health and advanced engineering projects in the Swansea Bay City Region over 15 years. These include a 100,000 sq ft digital waterfront office district in Swansea and a £200m wellness and life sciences village in Llanelli.
If all goes well, it will deliver a £3.3bn boost to the regional economy, adding more than 9,500 new jobs.
Funding is coming from three sources: £240m from the Welsh and UK governments, around £400m from other public sector bodies including Swansea, Neath Port Talbot, Carmarthenshire and Pembrokeshire councils, and roughly £640m from the private sector.
These are headline-grabbing numbers, but the public sector is pledging just £42m a year – roughly enough to build 4km of new road, although it could leverage more if cleverly managed. It comes as local councils grapple with big spending cuts – Swansea faces a £16m deficit this year, and is losing between £78m and £90m in the current three-year period. It’s not clear whether the city region could be a financial loser when the final sums are done.
This should be about encouraging long-term economic growth, but the possibility is that it will be a series of short-term plays.
Will it deliver? Lee Mogridge is head of the Wales team at Lambert Smith Hampton. He is both hopeful and sceptical.
“I’m not sure what it means. Half of the funding is from the private sector and isn’t yet there, and that ought to ring alarm bells,” he says.
“Property values in the city need a boost and, if it works, it could revive the SA1 office scheme which has been stalled for about 10 years. It could drive rents but they still won’t be high enough to justify grade A speculative office development. But it might work if they get the infrastructure sorted.
“This should be about encouraging long-term economic growth, but the possibility is that it will be a series of short-term plays.”
An outline application for the city deal’s first big output – a 3,500-seat arena south of Oystermouth Road – is likely to be decided early this summer. Rivington Land are managing the project.
Paul Ellis, partner at Cushman & Wakefield, and adviser to Swansea City Council on the city deal bid, says detailed business modelling for other projects are under way. But the deal does not include new council offices.
“The city deal obviously adds funding, but that’s not all – it helps join up the city region, and it shows the confidence of government support,” he says.
Ellis is convinced about the upsides of the city deal formula, but not everyone shares the feeling. The Scottish Parliament has begun an investigation in the city deal’s effectiveness under the title Are city deals worth the headlines?. The Welsh Assembly is also studying the way the city deal works.
Scotland is seeing the fastest growth of city dealing. Keith Aitken who is GVA regional senior director, Scotland, is by no means hostile – but he’s not popping the champagne corks either. The Glasgow & Clyde deal – now nearly three years old – has yet to deliver much, he says, admitting it is “slightly disappointing”.
What stops them doing more is money – councils lack revenue, and you can’t borrow without secure revenue streams to pay off the capital
“The Glasgow city deal has only been used sparingly thus far – only £100m committed out of a £1bn fund. Until the results of the local authority elections are in and a new administration is in place, we’re unlikely to know what projects the rest of the cash will be allocated to,” he says.
“2018 could see the public subsidy from UK government reduce, so the private sector will have to step up and provide innovative funding solutions.”
The big worry is: what if they don’t? The city deal is meant to support the market, but what if the market isn’t there?
Says Aitken: “If things aren’t moving fast, it isn’t the local councils’ fault – it is hesitancy from developers and investors in some locations.”
City deals open up land, but land costs money to develop. “And until someone wants that land… well, the theory of the city deal is fantastic, but actually spending the money seems quite challenging,” says Aitken.
It’s a similar story at Montagu Evans, whose evidence to the Scottish Parliament enquiry praises city deal plans for reviving much-needed long-stalled infrastructure projects. These include a £78m Clyde Bridge and Renfrew North development road, and the £51m intended to open up Glasgow Airport land and link it more firmly into Paisley.
But they warn that council spending cuts, the ordeal of compulsory purchase, meddling by central government and a failure to put key city deal objectives into the statutory planning documents slow things down.
Roderick Macleod, associate at Montagu Evans, says: “Maybe if the local councils worked with landowners and developers, we’d have quicker and wider benefits. They are solely focused on delivering the infrastructure, but not so much on what development goes on the back of it. If they got the developers and landowners on board, it would help realise the benefits more quickly.”
Dr Peter O’Brien, research associate with Newcastle University’s Centre for Urban and Regional Development Studies, thinks that’s a bit unfair.
“City deals are experiments,” he says. “On the plus side, city deals are providing a space for groups of local councils to come together with businesses and universities to agree sub-regional policy priorities. It’s a recognition that we need some kind of strategic planning.
“What stops them doing more is money – councils lack revenue, and you can’t borrow without secure revenue streams to pay off the capital.”
City deals are imperfect, says O’Brien, and even in well-organised cities such as Greater Manchester, getting the statutory planning framework to match the city deal agenda is tricky (as the newly elected city region mayor is about to find out). Even so, O’Brien is just back from a trip to Australia, which is expected to borrow the city deal model.
Edward Clarke, analyst at Centre for Cities, says the current city deal model is helping local councils handle adult decision-making.
“Instead of going to government with a shopping list of what they want, they have to make choices. And saying yes to one project probably means saying no to something else. So city deals are fundamental shift, a step on the route to devolution.”
Are city deals an experiment that seems to be working, or will they fade away, once their existing projects are completed, to be replaced by something quite different? The government has established an independent panel on the evaluation of local growth interventions to assess whether city deals are effective.
In the meantime, Clarke makes a familiar plea: don’t get obsessed with building things.
“Underperforming cities tend to be more in need of skills improvement, not infrastructure. But the attraction of a photograph of someone cutting a ribbon is substantial,” he says.
Upskill your workforce and the buildings will come: maybe that will be the motto of the next wave of city deals?
