Bill Hughes 26 June 2018

The PPPs that do work

Public-private partnerships have come under serious scrutiny in recent months. From Carillion’s collapse to the judicial review of the Haringey Development Vehicle (HDV), some politicians, local authorities and the public have become wary of the public-private model, especially when focused on property and development.

After certain high-profile failures, this concern is understandable, but we need to consider each individual situation on merit. There are good and bad examples of all kinds of development models, whether public or private sector led, and to simply throw out the partnership approach would be wrong. Instead, we must remind ourselves of why we need partnerships and how they can, should and have delivered results for councils and communities.

In the context of the housing crisis and the ongoing squeeze on local authority budgets, more than ever we need to use progressive and meaningful partnerships to support successful communities and build the 300,000 new homes England needs each year.

The English Cities Fund is a collaboration between Homes England, Muse Developments and Legal & General dedicated to delivering regeneration with local authorities. Over the past 17 years, we have demonstrated that with the right relationship and culture, partnerships can play a vital role in helping councils to deliver inclusive regeneration and positive social impact, even in the most complex and challenging of circumstances.

Set up for success

Partnerships need to do what they say on the tin. They should be genuine collaborations with involvement, commitment and energy from all participants. Involved parties have to feel confident that working together will deliver what is needed through the full lifetime of the partnership.

Strong leadership and a clear vision which reflects the aims of all parties are invaluable. Any developer will need to anticipate a reasonable return. Equally, local authority partners will be in a stronger position when they are clear about what they want to achieve in terms of housing, economic regeneration and community amenities. This clarity should be both a mandate for the partnership and a pledge to residents and communities.

It is about having a vision of success, but also working flexibly to get there. At Salford, the English Cities Fund took a whole-site approach to viability, cross-subsidising challenging phases with returns from other parts of the scheme to maximise the opportunities to deliver new homes, office space and community facilities for the city.

Share the risk, share the rewards

In the current debate on public-private partnerships, a key challenge is the perception that the public sector currently shoulders all of the risk burden, with the private sector reaping the lion’s share of the rewards. Successful partnerships rely on balance in both regards.

It’s about each partner playing to their strengths and contributing based on their skills and capabilities, including fully recognising their capacity for risk. Local authorities understand policy, control land and can provide long-term commitment, while developers understand how to navigate investment, development, leasing and sales. Our work with Newham Council at Rathbone Market, for example, saw the council trust us with their land, while the fund shouldered the development and sales risk. Over the life of the scheme, Newham has achieved a return many times greater than the land’s base value. More importantly, through this sharing of both risk and reward the community has benefitted from more than 650 new homes across different tenures alongside a new community hub, library and market.

Sometimes, it’s simply about local authorities using their heft to ensure that a scheme gets off the ground. Salford City Council showed a vote of confidence in the English Cities Fund’s New Bailey scheme by taking a non-occupational lease on One New Bailey, a 125,000 sq ft state-of-the-art office. Thanks to the council’s foresight, the building is now occupied by law firm Freshfields Bruckhaus Deringer and wealth management business WHIreland, something unthinkable 10 years before, bringing new jobs and investment to Salford. This is alongside a range of residential schemes and an increasingly flourishing community.

Keeping promises

The true measure of success for public-private partnerships is whether they can stand the test of time, deliver what they say they will, and make a positive difference. For local authorities, this is vital to building trust and showing that they can keep their promises to their constituents by working with an outside partner.

Major development and regeneration schemes are delivered in phases and can take years or even decades to complete, although they need to show clear progress year on year. Partnerships need to be strong enough to overcome political and economic cycles and personnel changes. Market circumstances and local conditions will shift, but local authorities need commitment from their private sector partners that they will continue to invest and deliver over the long term. Transformation cannot happen overnight, but development must be progressed at pace to ensure that local communities remain on board.

With the right vision, leadership and working relationships, public-private partnerships are essential in that they can unlock successful development opportunities which simply would not happen otherwise. More importantly, they can help us to create genuine and thriving neighbourhoods, providing new homes, economic renewal and community infrastructure.

The public and private sector need to share ambition and choose to work together. Only then will the potential of the UK be fully unleashed.

Bill Hughes sits on the board of the English Cities Fund and is head of LGIM Real Assets. He is also chairman of the Property Industry Alliance.

This feature first appeared in Public Property magazine. Email to register for your free copy.

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