A major conundrum facing governments across Europe today is how to cut spending to bring public debt under control while simultaneously driving economic growth.
But, despite constraints on the public purse, the need to bring key projects to fruition and to provide the right conditions for private sector investment remains. In today’s economic climate, such challenges require creative thinking.
Panelists at ULI Europe’s annual European conference afternoon plenary session, titled “Making Progress in Difficult Times,” were invited to explore that question, and to provide insights into how cities such as London, Paris, and Edinburgh were progressing in key areas despite current and dire economic constraints.
Sue Bruce, CEO for the city of Edinburgh, told delegates that focusing on “quality” had helped the Scottish city attract recent investment from firms such as Blackrock, Tesco Bank, and Amazon. And in October, Swiss banking software company Avaloq announced it was to set up a software development center in the city, creating 500 jobs over the next five years.
Bruce said the city had been in competition with Brazil for Avaloq’s investment, but the Swiss firm had been attracted by the quality of Edinburgh’s workforce.
“History and tourism play a part, but we are also focusing on renewable energy and life sciences. We are working with Edinburgh University and businesses to match in advance the investors coming in,” she explained.
“If you are smaller, you have to focus on quality. It is about specializing in industries and creating a sense of place and character.
“There are common ingredients for making progress: investing in infrastructure, connecting with growth markets, and focusing on what you are good at, as well as getting knowledge-creating institutions engaged,” advised Bruce.
Meanwhile, Judith Mayhew Jonas, chairwoman of the New West End Company, told delegates that the private sector was crucial to funding major projects and leading the way out of the recession.
Crossrail, a £16 billion (US$25.3 billion) infrastructure project connecting the west and east of London, was a prime example of how key projects could be brought into reality only by public and private sector cooperation, she said.
“New ways of funding vital infrastructure projects need to be found,” she noted.
“Crossrail is such a huge project that even before the sovereign debt crisis, new ideas were having to be added to the mix to ensure it could be funded. It is a laboratory of new forms of funding from national government, the mayor of London, and London businesses,” said Jonas.
She urged the private sector to also play its part, explaining that the British Airport Authority, Canary Wharf Group, and Berkeley Homes were among the firms making contributions to Crossrail.
Almost £2 billion (US$3.1 billion) of the project’s costs were being funded through bonds raised against future fare income, delegates were told, while additional funds were being raised through business rate supplements and development levies. “Those benefiting from Crossrail the most will pay the most,” she explained.
But such packages are not easy to negotiate, she warned, explaining that Crossrail’s funding took “years to agree” on and required changes to the law.
When asked whether such financing arrangements were possible only in cities like London, Jonas replied that it was more plausible in major urban areas but remained a challenge if governments were focused on directing capital to regional cities.
“The U.K. government has been forced to spend money on London because of the Olympics. It doesn’t like spending on the capital, so we have had to do it ourselves and it is no accident that most areas of the city are covered by business improvement districts [defined geographical areas within which businesses have voted to invest collectively in local improvement],” said Jonas.
“The fact that London doesn’t get enough investment has meant local business has had to work hard. Business has to lead us out of this recession, and it is imaginative funding in partnerships that will bring returns.
“The economic development of London has to be in the hands of the private sector.”