When the Conservative Party gathered recently for its annual conference in Manchester, after running the gauntlet of protestors, chancellor George Osborne took the opportunity to examine one of his key policy initiatives.
The chancellor, to be fair, is a Cheshire MP, so no stranger to the northern powerhouse, but few visitors to the North West in recent months can have failed to notice that there is a distinct buzz.
On a series of recent trips to the region, and not just Manchester, I have noticed genuine belief and enthusiasm for the northern powerhouse concept among business people, where I had half expected scepticism. The powerhouse is not, of course, meant to be just for the North West, though Greater Manchester, where different local authorities have shown their willingness to work together for the common good, is clearly the pioneer.
Appetite for devolution
What might the northern powerhouse mean for property? The British Property Federation takes a positive view. Melanie Leech, its chief executive, says: “Over the past year we have found that there is a huge appetite for devolution from both the public and private sector, and a belief that it could lead to regeneration and growth. It is those who live and work in an area who know best what its needs are. We believe that giving them greater powers and incentives to overcome local barriers to growth would be a positive step forward.”
The BPF is putting its weight behind what is described at the official UK Northern Powerhouse International Conference & Exhibition, to be held in Manchester in late February. As well as senior politicians, it will include council leaders and businesses from across the North: Liverpool to Hull, Manchester to Newcastle.
A report from BNY Mellon, focusing on prospects for the Greater Manchester part of the northern powerhouse, has generated a lot of enthusiasm within the property sector. The company opened its global delivery centre in Manchester in 2005 with 50 employees. It has since grown to 1,200 staff, and opened a second office in the city’s Spinningfields area. Its report, Manchester 2025, set out a vision of a rising population, improved infrastructure and prosperity, with positive implications for property investment.
Too good to be true?
Is it all too good to be true? More than 25 years ago I wrote a book, North and South, about the growing concentration of economic activity in London and the South East.
That concentration has increased in the intervening period. In the period 1997-2010, only London and the South East increased its share of the UK economy; every other region suffered a relative decline. London and the South East pulled out of recession fastest and, although other regions have done better as the recovery has matured, the gap has not closed.
Knight Frank says M25 office take-up is rising at a 30% rate, with more than 2.7m sq ft due to be transacted in 2015. It says: “Investors continue to focus on the South East, given the increasingly compelling rental growth story across the region, which is resulting in healthy equivalent yields, despite relatively aggressive initial yields being paid.” If the North is simmering, the South East is bubbling.
Not a zero-sum game
Regional growth in Britain is not a zero-sum game. It is quite possible to have a strong market in the South East alongside improving opportunities in the rest of the country. The northern powerhouse initiative, we should remember, is still young. It would be unreasonable to expect it to turn back the tide of southern domination yet. Some regions are only just embarking on the devolution journey that Greater Manchester is pioneering.
The journey will generate plenty of property opportunities, as we are seeing in Manchester. With a fair wind, we could see some meaningful reversal of the regional disparities in Britain. But do not expect it to happen overnight.
David Smith is economics editor at The Sunday Times
