CBI endorses use of asset backed vehicles

Tue 1st October 2013, 11:36 am

The benefits of creating local asset backed vehicles are still strong, despite the failure of some early versions of the model, according to a new report produced on behalf of the Confederation of British Industry.

Watford LABV: later versions of model are 'more flexible'

The report, The Next Generation: Unlocking Local Growth, written by consultant EC Harris, says that a number of early LABV projects stalled during the financial crisis due a lack of flexibility.

But it argues that learning lessons from these failures can help restore confidence in the model.

The report said: “…the financial crisis highlighted inflexibility in some of the earliest LABVs, which tended to be too prescriptive about land values and rates of return, and there was a lack of flexibility as the assets had been transferred into a vehicle.

“This led to a number of projects stalling during the downturn. These projects may now be difficult to rehabilitate but the principle of an asset backed joint venture remains strong…”

The report also said that businesses had indicated that "…the key [to make LABVs work] is to balance high-value and low-value sites in the same development portfolio to ensure that areas in most need of development are regeneratied,, while retaining overall viability.”

The authors said they were “disappointed” about slow progress on the introduction of tax increment financing schemes in England since deputy prime minister Nick Clegg first announced details in September 2010.

And it said that Wales has made even less progress, calling for the Welsh Government to accelerate plans to grant TIF powers to Welsh local authorities.

'Scrap CIL deadlines'

Elsewhere in the report, there is a call for the government to extend the UK Guarantees scheme, currently aimed at national infrastructure, to underwrite investment in large scale regeneration, including transport schemes and commercial property.

The authors said: “In the same way that the guarantees are designed to stimulate new-build residential property, they could also reduce the costs of borrowing for new high-grade office space.

“With a number of the UK’s largest cities facing the possibility of a shortage of quality commercial property in the near future, starting to build now is key to avoiding this becoming the next brake on growth.”

Another recommendation includes encouraging more cities to adopt the Urban Development Fund model, with the authors backing the pooling of such funds, as recommended by think tank Centre for Cities earlier this year.

And the report also calls for the scrapping of the deadline for local authorities to move from section 106 planning agreements to the new community infrastructure levy system.

The report said of CIL: “The policy was conceived before the financial crisis at a time when economic circumstances were very different but it now risks holding up projects, particularly in the parts of the country where viability is hardest to achieve.”

Download: The Next Generation: Unlocking Local Growth

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