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The not quite there Budget…

21 March 2024

Logistics Matters Property editor Liza helps considers the budget and the upcoming election.

NONE OTHER than the UK PM Rishi Sunak with support from conservative MPs Robert Buckland and Justin Tomlinson representing Swindon were on hand to break ground at Panattoni’s 7.2 million ft2 industrial and logistics scheme on the former Honda factory site in Swindon the same week as the Chancellor’s spring budget.

Calling the scheme ‘groundbreaking’ and ‘a huge vote of confidence’ for the UK economy - and Swindon in particular - it seemed that the Prime Minister was keen to ensure that everyone should be well aware of the ‘huge investment’ in the locality in time for the budget announcement a mere 48 hours later and of course as a pre-cursor to the much anticipated general election.

“I don’t think this would have happened without the efforts of everyone involved including our two MPs here and what it means is that everyone here can look forward to a brighter future. The economy has been through, of course, a tough couple of years but I believe we have turned a corner and announcements like this show that our plan is working,” he said.

For many that is debatable.

But what is clear is that this is going to be a hard fought general election with seemingly very little in it economically to prise apart the two major contenders. Already the Chancellor has ‘stolen’ Labour’s policy to scrap ‘non-dom’ tax rules to raise funds for his national insurance cut announced in the spring budget.

With that move it is not surprising that all political parties are keeping ‘schtum’ regarding exactly how they will fund policies to grow the economy, fix the NHS, the housing crisis, and increase defence spending - to mention but a few issues facing the UK right now.

For the business community though one area that all political parties should be looking at very seriously is how to boost productivity – the easiest way has to be the provision of a supply of employment space to allow companies to expand and upgrade their premises not only to reduce operational costs, become more efficient but also to drive sustainability and reach the Government’s own target of carbon net zero by 2050.

It’s all very well to make a commitment to provide £4.5 billion of investment for manufacturing over the next five years if you can’t provide the accommodation for those very same manufacturers. Savills research noted that in 2023 manufacturing-related take-up reaching its highest level ever, 73% ahead of the long-term average, at 11.4 million ft2. 

This is critical for the logistics industry as well with both sectors facing a major shortfall in consented land for warehouse development.

Despite announcements such as Panattoni’s 7.5 million ft2 redevelopment of the former Honda site in Swindon, securing planning for industrial and logistics space in the UK is a lengthy and often contentious process even for brownfield sites. It is not unusual for sites to take up to a decade to secure approval.

It was good to see the government making moves to tackle the problem in the Spring Budget with promises of consultation on an “accelerated planning service” for major commercial applications, speeding up the Local Plan process with by piloting artificial intelligence, and committing £3 million to train up planning officers but there is a sense of too little too late. 

Lambert Smith Hampton’s head of planning Jeevan Thandi, noted “The proposed consultation on an ‘accelerated planning system’ will likely be welcomed by developers, who are increasingly frustrated by the current lethargic process and will greet any solutions with enthusiasm. 

Additionally, he said that the extension of devolved powers to Warwickshire, Buckinghamshire, Surrey and the north-east has the potential to employment growth and housing delivery in these areas – but the Chancellor fell well short of a reform of the planning system which bodies such as Logistics UK, British Chamber of Commerce, the British Property Federation and other leading consultancies have been clamouring.

The stakes are getting higher, with demand for warehouse space expected to increase exponentially over the next few years. Research by Savills indicates that after 12 months of caution from occupiers there is likely to be a resurgence in demand as the economy recovers, inflation gets under control and consumer confidence returns.

In particular, there is expected to be an e-commerce comeback which could lead to additional logistics requirements of some 48 million ft2 of space to 2027. The real estate advisor is also tracking 26 million ft2 of lease events this year putting more pressure on somewhat restricted supply levels.

The Labour Party has said it will overhaul the planning system but like so many before the focus seems squarely on housing and there seems to be little detail regarding exactly how it intends to boost the levels of consented employment land which is so desperately needed.