Cutting the cost of Government

I was interested to read some recent analysis by Knight Frank  (http://www.cabinetoffice.gov.uk/news/3bn-growth-stimulus-london-government-vacating-property) which estimated that the government has delivered a boost to the London property and construction market (to the tune of £3.5bn) by reducing the size of its property portfolio. The work is part of the government's civil service reform plan. The aim is to change the way that civil servants work by sharing office space.

As part of the programme, outmoded government buildings are being replaced, refurbished or adapted for a range of residential and commercial purposes. For example, civil servants are vacating the Department for Business, Innovation and Skills, which shall be adapted for residential housing. The effects of the programme are estimated to be:

the injection of £2.3 billion of new investment capital

the £1.13 billion value of ensuing work for the property and construction industry

£7.5 million per annum of additional business rates and council tax income

£54 million of planning gain and public benefits brought about through additional housing and tax revenue for local authorities, including 1,535 new homes for London (of which 253 are affordable homes).

James Leaver, Head of Public Sector at Knight Frank, states that:

'The release of these buildings has created much needed activity in the London property market and we are now seeing the regeneration of large areas of Victoria and Westminster. Our analysis demonstrates that, despite earlier concerns, which had been raised in some quarters, about potentially “flooding” the property market, this has proven not to be the case. A shrinking government estate has delivered efficiencies for government and opportunities for UK PLC.'

The above demonstrates the effects of a smaller central government property estate on the London market. The funding squeeze for local government will only continue to get tighter. Local government bodies should not see estate consolidation merely as flogging off its wares on the cheap. Selling surplus government properties could deliver massive regeneration benefits in terms of greater housing stock and more commercial properties (and thus more tax and rates revenues). I am sure it will not be long, until local authorities across the country, take a leaf out of London's book and consolidate their property portfolios (if they have not already done so). This could present a new wave of instructions for property Lawyers who specialise in advising local government authorities. Property Lawyers should watch this space.

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