So what happens after the EU cash runs out?

It helped fund the development of Cornwall’s famous Eden Centre, and has injected some £5bn into more than 300 communities across England. But times are changing. The latest wave of European regional development funding came to an end in December, and the emergence of the new EU member states will see future funds channelled into their economies to bring them in line with their European partners. That leaves regeneration players contemplating how to fill the funding gap. Simon Marks, head of regeneration in Birmingham for property consultancy EC Harris, gives some advice.

The changing climate

Marks says developers will now need to work more closely with local authorities and regional development agencies in order to secure funding for future regeneration projects. “Public grant funding to support private sector development will become increasingly scarce and developers will probably see a dramatic reduction in the funds available from Europe for new projects.

“As the funds decrease, competition will increase, which will leave some developers out in the cold if they do not embrace change.”

Can developers make regeneration work?

Marks says: “There are a number of options that developers should focus on, from looking at tax-efficient solutions to creating a development mix that maximises value. One other option is to look at creating an integrated supply chain that has the effect of reducing costs and driving efficiency thereby creating regeneration benefits, such as employment through the growth of small and medium enterprises.

“The importance of ‘upskilling’ the local community, by creating a local procurement consortium as exemplified in the Fusion21 model (see box below), cannot be ignored. Training is linked to inward investment so that any wealth creation is retained thereby creating more money to flow through the local economy.”

When considering regeneration projects it is worth undertaking advance feasibility work to remove the pricing of risk for such projects, Marks points out, adding: “Linked to this is the need to engage the local community. As well as ensuring that a sustainable project is developed, it also reduces the risk of delays in the planning process. This way community hopes are managed through understanding the need for short-term deliverables, such as income for developers versus the longer-term community benefits.”

And the public sector?

DTI minister Margaret Hodge announced in October that regional development agencies will take on the daily strategic management of the delivery of European regional development funds to ensure that European money is used to meet local and regional needs. An implication of these changes is that funding will be primarily focused on the public sector. So for those active within the public sector, what are the best ways to obtain funding? Marks says: “Where the public sector is procuring a developer partner, look for opportunities for long-term commitments. In this way there will be greater willingness by the private sector to invest in the less profitable up-front ‘community projects’.”

Developers will need to embrace the concept of delivering community benefits and engage with those public sector partners that can enable this to be achieved as part of a commercial and deliverable programme of work.

Marks continues: “The real point here is the need for a partnership approach between the private and public sector to deliver a joint agenda. Overall, developers need to look at the way they work and re-assess how they work with public authorities to access them. Working with local authorities may also identify ways of reducing the time it takes for a planning application to go through, therefore reducing overheads that each project may incur.”

A happy ending?

Marks believes that although developers will have to change the way they work on regeneration projects, the funds will still be there, but just not as easily accessible: “We will see a shift in the market and a move towards indirect public funding. This could include the development of supporting infrastructure, public realm or investments in public sector developments to benefit the community as a whole.”