North's future is bright, but there's work to be done

14 February 2017

David Vayro from Trowers & Hamlins outlines where the Northern Powerhouse is at with the change at Number 10.

David Vayro

When Theresa May became prime minister Northern Powerhouse watchers began to pick over her every utterance in their efforts to discern how her government would respond to George Osborne’s pet policy.

The Northern Powerhouse Strategy document, published in November 2016, sought to lay these concerns to rest. Its message was one of commitment to the north. It signalled policy continuity in boosting the economic growth of the region, contextualised the north as the birthplace of the industrial revolution and pointed to increasing amounts of inward investment, new jobs and record employment rates.

There were no surprises in the key pillars of government strategy: connectivity; skills; enterprise and innovation; trade and investment. The proof of this pudding will be, as ever, in the eating and alongside the publication of the Building Our Industrial Strategy Green Paper in January 2017 the details of the third round of Growth Deals were published, including those awarded to the 11 local enterprise partnerships (LEPs) which cover the footprint of the Northern Powerhouse.

Growth Deals 1 and 2 generated £2.9bn for those LEPs and Growth Deal 3 provides for £556m more. This investment will continue to benefit the Northern Powerhouse annually, until 2020-21, out of the remaining £6bn allocation.

Growth Deal is not the only game in town. Greater Manchester, for example, has benefited from £6m in funding for the Airport City Enterprise Zone, the City Deal which should generate investment of up to £30m a year until 2042 with the Growing Places Fund (£37.4m) and Regional Growth Fund (£122m) making significant contributions.

Greater Manchester is by no means unique, however, with the Northern Powerhouse Strategy giving practical focus for similar funding along the length of the M62 corridor and up into Lancashire, Yorkshire, Cumbria, Tees Valley and Tyneside.

But what is this likely to mean for the construction sector in Greater Manchester and the north?

Strategically, the Northern Powerhouse Strategy document, the detail of Growth Deal 3 and other investment hits all the right notes for establishing and maintaining a balanced approach.

Underpinned by HS2/HS3 long-term development plans, this substantial investment will support the continued integration and improvement of transport networks across Greater Manchester. This is a theme which recurs across the Regional Growth Deal, as does investment in skills with Greater Manchester continuing plans to put in place integrated 16+ learning to equip the new workforce with the skills they need to meet the actual requirements of employers in the market.

Business growth and development, linked to the regeneration and revitalisation of key urban centres, feature prominently with Hull, Burnley, Halifax, Bradford, Lancaster, Sunderland, Sheffield, York, Scarborough and Harrogate among those specifically targeted for significant infrastructure, housing, transport and commercial development.

The positive messages for the region’s construction businesses are clear: this sustained programme of investment generates individual projects which require robust, skilled and well-resourced supply chains to deliver them. The extent and duration of the Growth Deal and other programmes, together with the inward investment from outside the UK which is ready, willing and able to participate in the early stages of a long-term investment cycle, starts to incubate confidence in construction businesses to make their own investments.

This all raises as many questions as it answers. Capacity is a key concern. The recent recession stripped the construction sector of the skills and people that are at the heart of delivering the Northern Powerhouse vision. How is the skills gap to be plugged in the short to mid-term? Where is the workforce going to come from? How are the necessary new homes (225,000 envisaged by the Greater Manchester Strategic Framework alone) to be built?

Equally, as the UK moves away from the EU there is a crucial opportunity to recalibrate the procedures and regulations by which the work required to deliver this investment will be procured. SME engagement and involvement needs to be promoted and safeguarded, local labour and materials sourcing needs to be prioritised and the principles of the Social Value Act need to be embodied in a new public procurement framework so that increasing proportions of the return on this investment are retained and re-invested locally.

As Philip Hammond notes in concluding the Northern Powerhouse Strategy document, strengthening connectivity, ensuring development, attraction and retention of skilled workers, fostering enterprise and innovation and promoting trade and investment are key areas of focus. He also points to engagement with local authorities, LEPs, businesses and others across the region. He's right, of course – and the future does look bright – but is not simply there for the taking.

David Vayro is a partner in the projects and construction team at Trowers & Hamlins’ Manchester office

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