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BUILT ENVIRONMENT
don’t have the next generation of growing companies feeding into them.”
He added: “We need a pipeline of affordable, allocated industrial land – and we need to return to some form of grant funding regime.”
Michael Conlon, who chairs Lancashire based Conlon Construction, said the cost factor was reshaping the way projects were being delivered.
He told delegates: “Costs have been directly affected by the Ukraine war. I didn’t know before it started that most structural timber used in this country came from Russia.
John Chesworth speaking at the summit BRIDGING THE GAP
Innovative solutions are needed to close the viability gap preventing developments in Lancashire getting off the drawing board.
That was the strong message from the Lancashire Built Environment Summit, as developers and construction leaders shared the financial challenges facing them when it comes to getting the county building.
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#RRA26 Neil McManus Michael Conlon Simon Lock
John Chesworth, senior partner at law firm Harrison Drury and member of the Lancashire County Combined Authority’s business board, highlighted the growing impact created by the viability gap.
He said: “People wonder why they are seeing planning approval for projects and not so much action.
“Our developer clients are saying to us it is because they are getting caught between the teeth of rising costs and valuation stagnation.
“Costs have risen quickly over the last three to four years and the end value is not matching those costs.”
“The viability gap is something that is faced right across the North of England. We have got to come up with innovative solutions and that must involve the public and private sector both accepting a fair risk in the investment they are making.”
He added: “We have to look at how we fill this gap. Here in Blackpool, local authority support has helped bridge that gap.
“In Manchester, the devolved mayoral authority has a budget from Homes England that helps plug the holes.
He added that local authorities can take a longer view about funding and the returns they get. And
he said: “They see the returns not just in purely financial terms but in making lives better for their citizens, providing working opportunities, generating more business rates and making the environment and economy work better.”
Neil McManus, senior development executive at developer Northern Trust is part of its strategic land team and is responsible for identifying, acquiring and securing planning for new sites.
He described Northern Trust as probably the largest SME industrial landlord in the north and revealed: “We have the same gap problem. Small industrial costs a lot more to build than large industrial units.”
“That got banned. We then had to go to Scandinavia and North America to source, which is more costly. The cost of energy has also gone through the roof.
“You need energy to manufacture bricks and tiles. All those costs have also gone through the roof.”
Rising employment costs have compounded the problem. Michael said: “These are all real costs that affect prices and sometimes clients can’t go ahead with a scheme and that has a direct impact on the construction industry.”
Sometimes the solution was in redesigning projects using cheaper materials. He said: “The supply chain can come up with solutions and that’s the way we can help designers achieve their aims.”
Michael also called for the government to “use its power” to affect change when it comes to procurement – highlighting the need to ensure prompt payment for the supply chain.
He said: “Profit is like food; you can do without it for a little while but cash is like oxygen and when
We need a pipeline of affordable, allocated
industrial land – and we need to return to some form of grant funding regime
He added: “We haven’t bought a site for four years; we are now working through our landbank of small infill plots.”
Neil said the loss of gap funding from the European Regional Development Fund and earlier UK regional programmes had made things worse. “That support has moved into ‘levelling up’ pots, which are distributed in other ways. As a result, we’re having major difficulties delivering small units.”
Rising land prices and Biodiversity Net Gain (BNG) requirements were also adding pressure. “BNG is an additional cost – effectively a tax on development,” he said.
“Things keep moving away from us. Without small industrial workspace, the big projects
businesses are starved of cash they will go under. Smaller businesses are being affected by this.”
Simon Lock, consultant at heritage and sustainability specialist Woohoo highlighted the opportunity in Lancashire’s older buildings.
He said: “As soon as you have got these buildings in a good state of repair, they actually perform a lot better than you think, especially once you get people into them.
“The challenge is to find what the building’s purpose is going to be in the future. As soon as you get that buy-in things start to flow.”
He added: “People have to value what they have got in front of them. We want to make this a place where everyone wants to come to.”
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