Will 2023 drive the levelling up agenda?
The UK political arena has been volatile in 2022. Three Prime Ministers, three Chancellors of the Exchequer and an unclear levelling up agenda that could have offered more stability and confidence to businesses focused on the UK cities.
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The political and public sectors will significantly influence UK cities' activity again in 2023. The last possible date of the next UK general election is January 2025, with many expecting the UK public to be called to vote earlier. This will mean that much vote-winning policy trading will begin in 2023, as local MPs apply more significant pressure on the central government to address local concerns.
The much-mooted levelling up programme from the government will provide a topic of contention. With a target date of 2030, few examples exist of the progress of the 12 missions outlined in the 'levelling up' white paper of February 2022.
Significant infrastructure investment is one example that has pressed on, albeit plans diluted in some cases. In the 2022 Autumn statement, the Chancellor confirmed that the core Northern Powerhouse Rail (NPR), East West Rail and HS2 to Manchester schemes are all ready to go ahead. NPR has been scaled back at the expense of a new station in Bradford. More local infrastructure projects have also been completed, including the western extension of the Midlands tram line, a project supported heavily by elected regional mayor Andy Street.
The elected mayoral system and devolved power in all its guises will be another feature of UK cities in the coming year. The highest profile example is the prospect of a second independence referendum in Scotland. The UK Supreme Court ruled in November that the Scottish government cannot hold an independence referendum without the Westminster government's consent, which seems to have at least delayed any prospect. Following the resignation of Nicola Sturgeon, it is uncertain as to whether independence will be on the agenda for her successor and thus whether full devolution of power to Scotland will remain a key topic of discussion in 2023.
In England, the elected regional mayoral system takes another step. In December 2022, a devolution deal for the North East totalling £4bn was announced. Campaigning will begin in 2023 for the position of a newly elected Mayor covering Northumberland, Tyne and Wear and County Durham, with the election due in 2024. Conversely, in May 2022, Bristol voted to abolish the position of Mayor in a referendum, replacing it with a committee system in May 2024.
The prospect of a UK general election within the next 48 months is also likely to accelerate plans for the relocation of the civil service as political appeasement increases. As of 2022, 21% of the UK's civil services were located in London. Recent examples of shifting roles include the announcement that 1,800 civil servant jobs will move to a new hub in Manchester. The new building on First Street will accommodate about 2,500 civil servants, including 700 roles who have already relocated from London. In June 2022, the new HQ building for HMRC at 1 Atlantic Square in Glasgow opened. The building will also accommodate the Cabinet Office, with occupancy set to rise to 3,500 by 2025.
The UK government's Places for Growth programme aims to relocate 22,000 civil service jobs out of London by 2030. This will significantly impact real estate and present an opportunity for the UK regional office markets. Foremost, occupiers deriving from the public sector typically require long-term leases and are supportive of being anchor tenants to new development schemes. The influx, therefore, will mean viability for some schemes. A secondary implication will be the attraction of support organisations from the private sector. Proximity to principal clients could generate a second wave of new requirements.
It will be interesting to see the scale of influence that the public sector has in 2023. Even during fiscal restraint, the UK government is keen to cement economic equality's foundations. Developing central workplaces across the UK regions will be fundamental to its ambitions, which could be good news for office markets across the UK cities.