All Change: Boris, Burnham And The £80B Northern Infrastructure Boost
Last Thursday night Heywood & Middleton swung to Boris Johnson's Conservative party, one of many Northern towns to flip political allegiance from Labour red to Tory blue.
It fell along with Leigh, Bolton North East, Bury North and Bury South as the Tories doubled their haul of seats in Greater Manchester.
Now there are reports that new Conservative voters will be rewarded with an £80B investment in Northern transport infrastructure.
What could the changed politics, and changed spending, mean for Manchester real estate?
Middleton and its landmarks are unknown to most Mancunians, let alone anyone outside the Greater Manchester connurbation. Yet this island of white, often Catholic, working-class residents sandwiched between multicultural Manchester, Rochdale and Oldham is the place to watch.
On 12 December the Conservative candidate won with a narrow 663-vote majority. It was a result a long time in the making and came five years after the 2014 by-election in the constituency that was nearly won by the right-wing United Kingdom Independence Party.
And yet Middleton has benefited from Labour Manchester's economic boom. Most of Middie works in the city centre, and the commuter buses, trains and trams are full every morning. In neighbouring Heywood the logistics sector provides a growing source of local employment. Plenty more warehouse development is planned as the area wins the major slice of 45M SF of new logistics floorspace under Mayor Andy Burnham's Greater Manchester Spatial Framework.
The Middleton result points to two significant trends. First, the potential for a shift in UK government attention to Northern infrastructure spending to reward new Conservative voters. Second, a shift in the political landscape that could undermine Labour's Greater Manchester Metro Mayor Burnham, who faces re-election in May.
Show Us The Money
The £39B Northern Powerhouse Rail project has been in Johnson's sights since July 2019. Speaking days after his election as Conservative leader Johnson announced support for a new trans-Pennine rail route between Manchester and Leeds.
"I want to be the PM who does with Northern Powerhouse Rail what we did with Crossrail in London," he said. "It will be up to local people and us to come to an agreement on the exact proposal they want — but I have tasked officials to accelerate their work on these plans so that we are ready to do a deal in the autumn," he said.
Speculation is mounting that a February or March budget could begin to deliver on these promises, with up to £80B invested in Northern transport infrastructure over five years, the Financial Times reported.
The announcement is likely to coincide with the publication of the Oakervee review into the £100B HS2 high speed train link from Manchester and Birmingham to London. The report is believed to recommend reconfiguring HS2 to make it compatible with the Northern Powerhouse Rail proposals.
“The North has — rightly — been a key battleground in this election, with pledges made on improving our transport and creating opportunities," Transport for the North chief executive Barry White said. "Now is the time to advance that northern agenda in the national interest. The prime minister must now deliver.
“We’ve been encouraged by promises to fully commit to Northern Powerhouse Rail, and invest in our strategic and local roads. We stand ready, on behalf of the North, to work with Boris Johnson and the new Government to ensure the much-needed investment is delivered to help rebalance the UK economy.”
The immediate beneficiaries in Manchester are likely to be close to Piccadilly railway station, and none is closer than the Portugal Street East development. Proposals for the first phases of the 8.7M SF development come before Manchester City Council planners on 19 December 2019.
Proposals from Aecom/Olympian Homes, filed in 2018, include two blocks of 29 and 23 storeys respectively, including 488 private rented apartments, on the site of Rammon House. Officials are recommending approval.
A second application seeks approval for demolition of buildings over the entire 2-acre Aecom/Olympian site.
White Rose Blooms
Leeds could also be a big winner, as some asset managers have been quick to point out.
"Boris has made it clear that he is going to reward the previously Labour areas that supported his ascendancy to a massive majority,” Squarestone Growth Managing Director Hugo Denée said. “Early indications are that he isn’t going to ignore them but pledge major investment in infrastructure to the North. I can certainly see the trans-Pennine link being built which will be great for Leeds, and which may become the main beneficiary of transport investment."
Denée is not alone in guessing that Leeds will be a winner. "For Leeds, the rebalancing effect of a high-speed rail connection to Manchester will undoubtedly generate growth opportunities,” Lambert Smith Hampton Capital Markets Director Luke Symonds said.
“Employers will consider spreading their occupational footprint across Leeds and Manchester to leverage flexibility of talent, ideas and cost base across a short commute. It is easy to envisage a combined Manchester and Leeds brand with a greater destination appeal than the sum of its parts, or at least the northern equivalent of the City and West End.”
Burnham Has A Problem
The general election result could also signal change in Greater Manchester's local politics. Burnham faces re-election in May, and his walkover result in 2017 is unlikely to be repeated.
Bisnow analysis of the 2019 general election results in the 27 Greater Manchester constituencies shows a total Labour vote of 554,842 and Conservative vote of 407,941. Compare this with the 2017 mayoral election result in which the Labour party outgunned the Conservatives by a ratio of nearly three to one (359,352 to 128,752) and it becomes clear that the 2020 mayoral race has opened out into one the Conservatives could win.
If Johnson enjoys a honeymoon, and the promise of infrastructure spending is believed, Burnham could be in trouble. As yet the Conservatives have not nominated a candidate for Greater Manchester mayor: but with the chance of victory in sight the odds on the selection of a heavyweight candidate with a high public profile must now be very high indeed.
A change in the Greater Manchester Mayoralty could mean a change in direction for the Spatial Framework, for transport and for housing, all of which could be significant for real estate. For now, the expectation is of policy continuing, not radical change, not least because a new Conservative mayor would have to compromise with the overwhelmingly Labour leadership of Greater Manchester's 10 borough councils.
Palace Capital invests in real estate around the UK regions, and chief executive Neil Sinclair is among those who has learned to live with the existing Labour administrations. “The councils have worked well with the private sector, and they won’t want things to get more difficult, so we’re confident they will want to carry on like today, with no upsets,” Sinclair said.
Labour insiders like Manchester Piccadilly Ward Councillor Sam Wheeler doubt that the city’s formidable Labour machine will crumble to the extent of allowing the election of a Conservative mayor. But he does envisage some policy adjustments around the limping Greater Manchester Spatial Framework.
It was a big issue in the 2017 election, with Labour victor Burnham dumping the original plan to secure his election. The risk of large-scale development on Greater Manchester's green belt dogged him in 2017, and will still dog him in 2020. Wheeler says that the problem must be addressed.
“The thing we haven’t got across is that the GMSF allows you to offset green belt development," Wheeler said. "If we build in the city centre, then you don’t have to build on green belt. We have to make that point, and we also have to make the point that the entire plan is to deliver Conservative building targets. We don’t get any choice about those targets.”
Locally, Wheeler thinks a tighter political race, perhaps meaning stasis for the GMSF as it gets trapped between new Conservative MPs and a Labour Mayor, will mean more Manchester city centre development.
“Already senior figures in local government are talking to the new Conservative MPs: I know these conversations are happening, and a lot will depend on the views of those new MPs," Wheeler said. "But for so long as the GMSF is undecided, and it means waiting for larger commercial sites in the outer boroughs to clear through the GMSF process, developers and investors will head for the clarity offered by the planning regime in Manchester City Centre.”
The sudden transformation of the 10.5-acre Great Ancoats Street site from residential to commercial just as the GMSF hit the buffers is a sign of that the city council expects more enquiries to come its way, many in the city believe. The site was acquired by the city council from TH Real Estate for £37M, the Manchester Evening News reports.
Elections rarely go as planned, and election aftermaths even less so. Whilst Johnson is assured of a healthy majority for the next five years, he can be sure of little else. The boost to the sterling exchange rate which began within minutes of the general election exit poll being announced has already dissipated. There will be tough times ahead. For Greater Manchester this could mean for transport investment, perhaps more devolution, or it could mean a political conflict between a Tory metro mayor and Labour-run councils which could bring the sub-regional planning system to a halt.