SMILE of confidence as capital fills in the gaps says Ter Murden
For those still struggling to find a job or make ends meet the news last week that the long recession is finally over may have been received as welcome news, or as a bad joke.
The indicators are certainly heading in the right direction and one convincing sign that confidence is back is the willingness of investors to back long-delayed property developments. Edinburgh is not alone in this regard, though the presence of so many gap sites and postponed projects in a city supposedly amongst the wealthiest in Britain indicates how much of a slowdown there has been.
Maybe it is just coincidence, but the “end of the recession” was announced at the same time as three major developments received huge support from financial institutions.
The first was the go-ahead for the controversial Caltongate project off Canongate. A fortnight ago came long-awaited news of an £850 million revamp of the St James’ Centre, followed last week by a £100m package of support from investment bank Evans Randall for the first phase of the Haymarket scheme. Two of these are gap sites which have blighted the city like missing teeth in an otherwise perfect smile. And, like missing teeth, they have become something we have been forced to put up with until they can be fixed.
Of course, one man’s urban blight is another man’s opportunity for development, though this is where the problem lies. While local authorities get the blame for eyesore wastelands, it’s the owners of the land who hold the key to redevelopment and when those owners finally show the money, they can expect to have their hands bitten off.
However, government and local authorities have major roles to play in kickstarting schemes. A key issue to emerge at a planning seminar organised by Savills last week was how much is being done to release land for development. Demand exists, not least for housing, and while public sector agencies would prefer that developers focus on brownfield sites (the technical term for derelict industrial sites), pressure is mounting on the greenbelt.
The upshot is that as brownfield sites are developed, land values and rents will rise and the planning authorities will be forced to offer other locations.
There are, however, other interesting dynamics to consider. The St James’ redevelopment is a vote of confidence in bricks and mortar retail at a time when more shoppers are buying goods online. Is there a risk of it becoming a white elephant?
Apparently, this is not likely. A significant majority of those professionals who attended last week’s event at the Scottish parliament took little persuading that the new development would have no problem finding tenants because of its prime location and a demand for better shopping in the capital.
An added factor is the tram which will take shoppers directly to St James from the west of the city. No wonder the developers are looking to help fund an extension to Leith to tap into the most densely populated community in Scotland.
All this may explain why the development was rubber-stamped quickly by Edinburgh City Council. In truth, everyone was keen for this scheme to go ahead and, presumably, they could not afford to look a gift horse in the mouth.
MPs should deliver a knockout blow to Pfizer deal
RINGSIDE seats may be in demand in the Commons this week for the clash of the pharmaceuticals industry titans. Pfizer’s chairman and chief executive Ian Read – a Scot – will face the scrutiny of MPs before they grill Pascal Soriot, the head of AstraZeneca, which the US firm is seeking to acquire.
The pair can be expected to exchange blows about the commercial merits of the £63 billion bid, with Read likely to argue that because this is an industry facing price pressures a merger is the only way to go.
The parliamentarians, however, will be more interested in the implications for British jobs and research. Pfizer’s record in this regard is not impressive, with the Swedes in particular making known the devastation wrought on its drugs industry when it succumbed to foreign takeover.
There are those who say the “Britishness” of AstraZeneca is overplayed. It is headed by a Frenchman and reports results in US dollars. More importantly, supporters of the merger insist that there is no place for public interest measures and that the market should decide.
By and large, yes, but few countries step aside when their defence industries come under attack. The arguments in this case favour a similar case for protectionism. The pharmaceuticals industry accounts for a huge proportion of research skills and funding, not least from the public sector which pumps money into universities and into seed funding start-ups. The sheer size of this proposed deal – which would be the biggest foreign takeover of a British company – and the justification for it – to control costs – implies that there will be cutbacks.
Ironically, US politicians are also unhappy about the proposed merger as Pfizer is planning to relocate its tax domicile to the UK to avoid higher US rates. It looks unloved and unwanted, and unlikely to go ahead.