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PROPERTY REPORT
THE BIG SQUEEZE Special report by Ged Henderson
Preston’s flagship Animate scheme
Soaring inflation and construction costs are building pressure on Lancashire levelling up projects and challenging the viability of commercial developments.
Preston’s flagship Animate scheme in the city centre is a prime example of the impact being felt on regeneration. The cinema and leisure complex will now cost £45m to deliver - up from the £41m estimated when it received planning permission last March.
The city council has also revealed the big squeeze being felt on other projects – forcing it to cut back on some, seek more funding and borrow money to keep Preston’s regeneration moving forward.
Leading figures in the county’s property and construction sector have also told Lancashire Business View how rising inflation and falling investor confidence has added to the strain of material price volatility.
Adrian Philips, chief executive at Preston City Council, says spiralling costs are a major challenge to its city centre regeneration work. That has meant cutting back on a Towns Fund scheme to improve the public realm.
He says: “We have had to reduce things significantly because of cost inflation. The price of some specialist materials has gone up 20-30 per cent.
“It was a case of biting the bullet and reducing the footprint of the scheme to focus on priority areas. It is disappointing but this is the real world.”
Tim Webber
And it has had to seek further funding for the refurbishment of the city’s iconic Harris museum, library and art gallery, with scaffolding among the rising costs. The council has also put more of its own money into the project.
In some projects ‘value engineering’ has been implemented to reduce costs. Adrian says: “Sometimes it can be quite brutal.”
The council has also had to borrow money for the regeneration of the Grade-II listed Amounderness House – part of its Harris Quarter vision – to ensure it goes ahead.
The £7.4m scheme is one of six major projects planned under Preston’s Harris Quarter Towns Fund Investment Programme, for which the city received £20.9m from the government’s Towns Fund in March 2021.
In February this year, Preston was awarded £20m of levelling up cash to regenerate its parks. It’s a substantial sum but the challenges of cost inflation remain.
Adrian says the government has made it clear that councils can’t go back for more money to mitigate the impact. He says: “We put the levelling-up bid last summer and things have changed a lot since then. It is a question of being as flexible as possible.
“Things are moving forward, it is just more difficult. The last thing we want is for things to falter, stall or be significantly delayed. It is about making pragmatic decisions.”
Tim Webber is managing director of Lancashire- based construction and development group Barnfield. He says: “There is no doubt 2022 was a challenging year for main contractors in terms of controlling rising costs from suppliers and subcontractors alike.
“Values within both the residential and industrial sectors continued to rise through most of 2022, which helped balance the increase in costs. However, within the last quarter of 2022, the end values dipped and flattened out causing a huge imbalance. It is vital to control costs as we go into 2023.”
Tim adds: “It is certainly challenging making projects financially viable in a market of rising costs, however in the early weeks of 2023 we have seen suppliers and subcontractors chasing work.
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