What Are Key Characteristics That Foster Sustainable UK City Growth?

Simple economics of wealth and productivity do not indicate which urban areas can sustain healthy growth. What’s clear is the action is outside of London.

Anyone looking to make money in real estate naturally looks for growth. Farmland and urban brownfields generally do not provide as good a return on investment as they might if the land is granted a change-of-use to residential or commercial zoning.

That’s why individuals who work through such schemes as joint venture land opportunities typically are drawn to areas of growth. And while that typically correlates with job growth, there are other factors to consider, according to the City Growth Commission, a 12-month enquiry into how UK cities can be empowered to drive local economies. While conducted to inform voters in the UK General Election.

The Commission’s report, “Metro Growth: The UK’s Economic Opportunity” (February 2014) takes a critical look at the allocation of the country’s political economy. It contends that with so much centralised power in London, the other, very capable cities in the north and west (in particular) are too dependent on public sector funding. Instead, the Commission argues for complementary growth outside the Capital City. The process is one of devolution, allowing policy-making powers to be held by the cities and to emphasize the assets that these cities already have.

To be clear, it is well known that a certain degree of organic growth has been happening in places such as Edinburgh, West Yorkshire, East Midlands, Bristol, Merseyside, Greater Manchester and Belfast. A large per cent of the tech sector, for example, exists outside of London. The report notes that mid-size cities (population 200,000 to 2 million) are projected to create the greatest degree of GDP growth through the year 2025.

One of the core characteristics of healthy growth – another word is sustainable, in the social and economic sense – is housing. The Commission findings on this include the following:

Increasingly urban population – Already, about half the UK population lives within the 15 largest metros (the Commission preferred use of metropolitan area measures, which go beyond official city borders). There is little reason to expect this trend will not continue.

Planning and housing are fundamental – Firms based in city centres, London as well as others, feel the planning policies that historically constrained outward growth are now responsible for higher costs related to transport and housing. While providing due credit to the country’s preservation of Green Belts and heritage sites, the Commission argues for better local flexibility in planning – including and especially toward the goal of increasing the inventory of homes. Social housing needs to be in the mix, as well private housing being built by joint venture investors.

Devolve planning – The previous administrations effectively created national governments for Wales, Scotland and Northern Ireland. The same process is underway in allowing greater latitude and decision-making powers to local authorities in the cities.

Economic policy focused on networked cities – Instead of planning and allocations of resources that bolster the country as a whole, a redistribution of economic powers from Regional Development Agencies (RDAs) to Local Economic Partnerships (LEPs) was a first step. But ultimately, a successful UK economy might instead involve a network of mutually reinforcing, complementary and connected metro regions.

The entrepreneurial nature of private investors and land development specialists is enhanced when they can work with less bureaucratic local planning authorities. When several acres can become much needed housing that allows people to live closer to their places of employment, the benefits are far reaching. The employer is less constrained in its growth, an important tailwind to growing the local supply chain and the overall local economy.

Would-be investors in real estate need to focus on macro and microeconomic factors, not the least of which are their own wealth-building strategies. That is information that should be discussed with an independent financial advisor.

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