Editors note: The following article was written by Mark Burns, Managing Director of Manchester-based estate agents; Indlu – specialists in both residential and commercial property lettings.
Taken as a whole, the UK property market is generally strong enough to manage on its own two feet regardless of the prevailing political winds. That said, it is certainly fair to say that political decisions can most certainly have an impact not just on the UK property market in general, but on the property market in specific regions.
Possibly the most obvious example of this is the way the Northern Powerhouse initiative has helped to transform the north of England in general and Manchester in particular.
The start of a new decade seems like a good time to reflect on the current state of the political landscape, especially since the UK is fresh out of an election (which presumably means that it will be five years before there is another one) and Brexit is on the horizon.
This means that the immediate future will almost certainly raise many important economic questions to which politicians will have to find answers.
A Conservative majority
A Conservative majority suggests a preference for free-trade, especially with the EU – Boris Johnson has already indicated that he would prefer the UK’s future relationship with the EU to be based on a free-trade agreement. At the current time, however, it is far too early to say if this will happen at all and, if it does, what form it will take.
In particular, it remains to be seen whether the EU will accept the free movement of goods, services and/or capital without the free movement of people.
At the same time, the UK will presumably also need to up its game when it comes to trading on the global stage and for that, it will need world-class infrastructure.
Planes, trains, automobiles – and the internet
The UK is an island which means that it needs effective communications channels with the rest of the world and, even though it is a fairly small country, it needs robust (and preferably quick) internal transport.
Over recent years, the government and local authorities have both invested heavily in expanding and improving airports (most notably Manchester airport), the road network(again Manchester is a good example of this) and access to broadband internet.
The one area of communications where the UK is notoriously weak is, of course, its railway system.
Legacy infrastructure and modern needs
The UK’s rail network was once one of the most advanced in the world; however, the legacy infrastructure is simply no longer fit for purpose and just cannot cope with the demands being placed on it.
This fact has long since been recognized by just about everyone from politicians to members of the public (especially rail commuters) and there is little dispute that action needs to be taken to address the issue. As is often the case, however, there are many different opinions on what this should mean in practice.
The origins of the HS2 project
Although the HS in HS2 stands for High Speed, it has now been over 10 years since HS2 was first conceptualized as a way to slash journey times between London and the north without using air transport. It was marketed as a way to continue the rebalancing of the UK’s economy, helping the north to continue its growth.
This is reflected in the choice of route. Phase one of HS2 is planned to run between London (Euston) and Birmingham, with phase 2 to run in a Y-shaped route, one from Birmingham to Leeds and the other route from Birmingham to Manchester. Phase one was initially planned to launch in 2026, but a recent report by HS2 Ltd stated that this could be pushed back until 2031.
HS2 was never universally welcomed
For all its grand billing, HS2 was never universally welcomed. Right from the start, people were questioning the value it could deliver as compared to the cost of simply upgrading existing infrastructure. As time has gone by, these concerns have only increased, alongside the predicted costs of HS2.
When the project was first suggested, the estimated cost was £50.1bn, now latest estimates by HS2 Ltd (the private company in charge of the project), but according to Lord Tony Berkeley former Labour transport spokesman and former deputy chair of the Oakervee Review into HS2, independent analysis arrives at a figure of at least £107.92bn.
The government appears to agree with Lord Berkeley’s analysis. During last year’s election campaign, Boris Johnson admitted that he expected the figure to rise above £100bn, of which £7.5bn had already been spent, some of it in a very controversial manner.
Environmentalists and businesses infuriated by HS2
Two groups of people who were supposed to have been the most pleased by the development of HS2 are now amongst its staunchest opponents. Environmentalists are utterly livid about the destruction of ancient habitat along the route of HS2, some of it undertaken in very questionable circumstances, such as the destruction of trees in the Calvert Jubilee nature reserve.
This eradicated habitat where bats could roost and which happened at a time when all non-essential work was supposed to be suspended while HS2 was under review. Campaigners have also said that the destruction appears to be targeted and intended to discourage the return of bats which are protected under law and could have created a legal impediment to the work.
Business people, meanwhile, are unimpressed by the negative impact on commercial property. In short, the compensation scheme for property-owners impacted by the construction works is heavily biased in favour of residential property.
Commercial property only qualifies for any form of redress if its rateable value is a maximum of £34,799, which would be a severe limitation in any part of the UK and is particularly low for the areas covered by the HS2 route.
In principle, if HS2 meets its goals, this negative impact should be more than counterbalanced by the economic stimulation it brings. For example, KPMG predicts that a fully-connected HS2 with integrated local transport upgrades will generate around £1.5bn annually to the Birmingham/West Midlands economy. This is in addition to the benefits it is expected to generate in other areas, principally Manchester and Leeds.
The future of HS2
The Conservatives have always been the driving force behind HS2 and since they are fresh out of an election with a workable majority, the chances of HS2 being abandoned now seem slim.
That said, by any standards HS2 is a long-term project which could have a significant impact on the next election, a fact of which the government must be aware. They may, therefore, decide that it is best to pull out now rather than to push on and risk electoral disaster in 2025.
Images courtesy of Grimshaw Global – Photography by Alastair Hudson