UK: WHY INVESTORS STOP HERE - RELOCATION 2.

UK: WHY INVESTORS STOP HERE - RELOCATION 2. - The business of regeneration has created a patchwork quilt of measures which confuses everyone.

by Erik Brown.
Last Updated: 31 Aug 2010

The business of regeneration has created a patchwork quilt of measures which confuses everyone.

Imagine you are site-finding for a Japanese electronics company. The objective is to find a base for the firm's European headquarters. You have completed your tour of Continental Europe and you have puzzled your way through the various tax concessions and corresponding clawbacks. Now it is the turn of the UK.

On the face of it, Britain looks pretty good. Labour rates are cheap, the tax regime is relatively healthy, London is still one of the world's three major financial centres, and the natives speak English. All of these are benefits. The downside is that it is a group of offshore islands, and - in European terms - in the middle of nowhere. But communications are improving, so what have the British got to offer. At this point take a deep breath, because your life is about to become very complicated.

Relocation consultants talk of push and pull factors. The push factors are plain enough, although many of them have disappeared during the recession: high office rents, staff shortages, rapid growth leading to overcrowding, and so on. The pull factors are rather more wide-ranging, and include all of the incentives and relaxations associated with development corporations, enterprise zones, development agencies and the various boards, companies and organisations set up by towns, cities and regions anxious to attract new employment. For those able to afford a move, the pull factors still exist and must be taken into the equation.

This isn't as easy as it sounds. Relocation, job creation and regeneration have, for perfectly logical reasons, become intertwined. Inevitably, they have also become politicised. The result, according to one consultant, is an 'unco-ordinated mess'; another described it as a 'bugger's muddle'; and even the secretary general of the British Urban Regeneration Association, Gerald Cary-Elwes, admits that 'it is confusing'.

He adds: 'I had an interesting conversation with the chief executive of a development corporation recently. He made the point that every minister wants to be remembered for something and therefore he sets up an initiative of his own. All that happens is that it sweeps up the initiatives of a minister three or four years ago. And it uses the same money.'

Nigel Smith, partner in charge of economic consultancy at surveyors Drivers Jonas, has traced the history of these initiatives from the Urban Programme in 1968 to the latest - announced in November last year - which includes English Partnerships, the Single Regeneration Budget, unified regional offices for the six or so ministries involved, and a new cabinet committee, the ERD.

Others on that list are: the Urban Development Corporations and Enterprise Zones, which were announced in the wake of the Toxteth and Brixton riots of 1981; simplified planning zones, which Smith says 'haven't been overwhelmingly successful'; Urban Development Grants, supplemented by Urban Regeneration Grants; the Derelict Land Grant; garden festivals; City Action Teams; Task Forces; Mrs Thatcher's Action for Cities; City Grant; Technology Colleges and Training and Enterprise Councils, which reflected a switch away from physical development to training and education; City Challenge; Capital Partnership; the Private Finance Initiative; English Partnerships; and City Pride.

Five years ago, the Audit Commission described the plethora of initiatives as 'a patchwork quilt of measures which serve only to confuse'. But this is only part of the story. Jean Crawford, associate in charge of relocation at international property consultancy Jones Lang Wootton, reels off another list - of local and regional initiatives - which include: Business Opportunities on Merseyside; Sheffield's Partnership in Action; the East Kent Initiative; the Devon and Cornwall Development Company - and, confusingly, the Devon and Cornwall Development Board; the West Midlands Development Agency; and the Northern Development Company and the Exeter Initiative.

This is a game for any number of players: the CBI and local chambers of commerce are often involved; the property sector plays its part; even the church has had a shot at it - remember Faith in the City?

'I've been doing this job since 1987 and it takes me all my time to work out what's going on,' says Crawford.

If it is confusing for local professionals - and the consensus is that it is - just imagine what it must be like for the overseas investor.

'A firm from abroad doesn't differentiate much between 100 and 400 miles from London,' she adds. 'To them they are just UK locations.' Perhaps if we all pulled together, the consultants say, we'd stand a better chance of winning.

The picture isn't necessarily any clearer elsewhere in Europe. 'There are a whole series of grants and incentives across Europe that are individually granted or administered by the individual countries,' says Crawford. 'Then you have the EC regulations on top of that - there is a limit on the amount you are allowed to offer as financial incentives depending on the area. In addition, the EC has funds and grants of its own ...

'Another problem is that they're all taxed differently and they all have different clawback rates, different conditions ... the poorer the area, the more grants will be available from the EC and will be allowed by the EC. It needs a lot of guidance. Companies can be misled about what they're getting.'

Though the picture isn't clearer in Europe, the will to win may be stronger. Nigel Smith recalls a site-finding exercise for Galileo, the global computerised reservations and information service for the travel industry. 'The Dutch said, "How much capital, how many jobs, what's the largest grant we can give you, and we'll justify it after that. We'll give you this much if you go there." Locate in Scotland had to think about it over the weekend, as did the Irish. But the DTI said, "Put in a business plan and we should be in a position to give you an indication within four months." That was a long time ago, and the DTI tells me that it has got its act together now - but it does tend to play by the rules. In Holland, incidentally, all 12 people involved on their side spoke perfect English.

'In the end, Galileo settled in Swindon, where it built Europe's largest non-government data centre on the Windmill Hill Business Park. The principal attractions were low labour and taxation costs and the language. Swindon was selected because it had a site big enough, it was close to an airport and it was affordable. ' The truth is that, in spite of the confusion, Britain still has the power to pull in big international companies. 'In terms of net present value, we do pretty well if you look at the whole package,' says Smith. 'Our costs are pretty low ... Building costs used to be high, but they're not that bad now.' The North West has been especially successful. Simon Reynolds of surveyors Grimley JR Eve says there are more than 350 US companies and 100 Japanese in the region. Already this year, Manchester has pulled in a £2 million investment from Japanese electronics company Teco; the Maryland Bank of North America has moved into Chester; and Omega Engineering of Connecticut is investing more than £11 million in a new European headquarters in the region.

So, is the patchwork of initiatives really that much of a problem? The Government clearly thinks so. 'I think that finally they were hurt by everyone saying it was such a muddle,' says Smith. Its latest moves have been seen as an attempt to unravel the confusion in the regeneration business.

English Partnerships mops up the budgets and programmes for Derelict Land Grant, City Grant and English Estates (around £250 million); the Single Regeneration Budget pulls 20 regeneration and economic development programmes together and totals £1.4 billion for 1994-95; and the unified regional offices theoretically put the DoE, the DoT the DTI and the Department of Employment in one place in each of the regions.

Cynics may point out that a single budget for regeneration would make it easier to cut when times are hard: the Government says that the budget 'would mean that priorities are set locally, in the light of local needs, and not in Whitehall and would give local people more influence over spending priorities'. A new ministerial Committee for Regeneration will oversee the budget and bids will be invited from 'local partnerships', with local authorities and Training and Enterprise Councils expected to take the lead.

Oh, and a new initiative was announced - City Pride - which calls on the leaders of London, Birmingham and Manchester to 'get together with their private and public sector partners to define their vision and set out what practical steps can be taken to build on the strengths of their areas'. For those in the business, this latest move certainly has a familiar ring to it.

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