High road out of the downturn

Planners should look behind the negative headlines and depressing statistics to discover what impact the recession is really having on the Scottish development sector, says Robert Boddy.

At first glance, the economic signals in Scotland are as gloomy as those south of the border. Major projects are being cancelled or put on ice, planning application fee receipts are falling and house builders predict that the number of new homes built next year will be the lowest since 1924.

Last month it was announced that Gregor Shore, the firm behind the Platinum Point and Anchor luxury developments on Edinburgh's waterfront, had gone into administration (Planning, 24 October, p9). The credit crunch has also ended attempts by a Scottish-Scandinavian consortium to raise funding for a £1 billion combined pulp and paper mill, sawmill and renewable energy plant at Invergordon in the Highlands.

But while the worldwide downturn is undoubtedly having a significant effect on Scotland's development prospects, the headlines do not tell the whole story. The Scottish Government has brought forward the £100 million affordable housing investment programme (AHIP) and private house builders are now keener to become involved in low-cost schemes, seeing them as a way of keeping their workforces occupied.

In the planning sector, some consultancies are slimming down but others are taking the opportunity to recruit high-calibre staff who would have been unavailable or unaffordable 12 months ago. GL Hearn director Rick Finc, who is convener of the Scottish Planning Consultants Forum, has seen his firm take on staff in Glasgow and Edinburgh and talks positively of growing the market.

Finc reports that consultancies working predominantly with the larger private sector developers have been worst hit, laying off both younger and senior staff while retaining middle-ranking planners "to keep things ticking over". Others, however, are faring better. "Consultants should keep their nerve, look after their clients and expect opportunities to come forward in the second and third quarters next year," he advises.

"Property companies will outsource a lot more of their project management and I see an opportunity for planners to move into this and other areas outside their normal comfort zone. Quantity surveyors have already done this and I don't see why we should not do so too. We are also looking to regain business from some of the people who think they are planners, such as architectural surveyors and architects," Finc continues.

"Consultants working for landowners and estates have a different perspective on things and those in key sectors such as transport and health are continuing to get work," he says. "Multidisciplinary practices will do all right on the back of public expenditure projects. We are looking at alternatives to public-private partnership through the Scottish Futures Trust and quasi-public sector organisations with guaranteed budgets such as British Waterways, Network Rail and Scottish Coal will continue to commission."

The forum is lobbying the government's chief planner Jim Mackinnon in an attempt to ensure that consultants benefit from the wholesale changes to the planning system announced by finance secretary John Swinney last month (Planning, 31 October, p3). "We want to see a degree of rigour in the arrangements for development planning and appraisal so our members have to be employed to carry out this work," Finc explains.

Key measures in the package include:

- Less prescription in setting planning policy, allowing local circumstances to drive decisions and innovation.

- A focus on matters of genuine national interest among government agencies.

- Streamlining of the Scottish planning policy series into a single document.

- Greater certainty for investors and communities through up-to-date development plans.

- Quicker decisions on applications, supported by a "more proportionate" approach to notification and call-in.

- A dedicated unit to support strategic environmental assessment requirements.

"It is imperative that the development industry and the public sector work together in genuine partnership to speed up planning reform," says Scottish Property Federation chairman Dan Macdonald. "The likelihood of economic recession makes it even more important that applications can be dealt with quickly in the national interest. The planning system has to be more than just a regulator of development. It must also enable sustainable economic growth."

The Scottish Society of Directors of Planning, which has endorsed the package, has been meeting government planners to discuss the repercussions of the recession for local authorities, particularly the falling fee income resulting from a drop in planning applications of between 15 and 30 per cent. Householder applications are still being submitted but major schemes, particularly large housing developments, have dried up.

"We are having to make efficiencies this year and setting a budget for next year is going to be challenging," says the society's vice-chairman Brian Frater, head of planning at Scottish Borders Council. "We have to decide whether we can leave vacancies unfilled and, looking beyond that, whether any staff cuts are necessary."

The threat to council planning departments comes at a time of unprecedented change and Frater recognises the dangers in cutting too deeply. "Certainly there are challenges for staff and we must ensure that we do not lose knowledge and skills so we are able to react when the upturn comes," he says. "There are further implications for councils as a whole, because some services have become reliant on receiving money from developers to provide facilities."

Some local authorities are already taking steps to mitigate the effects of recession in their areas. Edinburgh City and Highland Councils are looking into buying up unsold homes from developers at a favourable rate and offering them for rent. Edinburgh may also establish a home loans scheme for first-time buyers and key workers and is reviewing section 75 planning gain agreements that developers claim are acting as a brake on projects.

Job losses have hit the house building sector hard, with most companies laying off both tradespeople and office staff. The country's three big names - Barratt Homes, Persimmon and Taylor Wimpey - are currently holding off moving onto new sites while they try to sell existing stock. But chief executive of industry body Homes for Scotland Jonathan Fair says he has been encouraged by the Scottish Government's willingness to listen to advice and act swiftly where it can to boost specific areas of the market.

Fair says the introduction of AHIP is welcome but stresses that it should only be regarded as a small first step. "We need to see other projects that are currently in the system evaluated quickly and all remaining funding allocations massively accelerated to make any kind of difference to housing supply in Scotland," he insists.

"With the severity of the situation facing us and the prospects for achieving housing aspirations, even in the medium term, appearing very remote, the Scottish Government needs to be even bolder. Very significant sums of public investment are required to be pumped into housing provision. There is an immediate need to expand wider public infrastructure spending and also leverage out the maximum benefit from its pre-funded reskilling and retraining programmes," he maintains.

In Edinburgh, the council's development arm EDI has rescheduled some of its planned developments. Yet it is optimistic about medium-term prospects and is considering adding to its 30-strong team. "We cannot just presume that everything is the same as it has been and the world has not changed," says acting chief executive John Mark Di Ciacca. He confirms that the company remains committed to all eight of its projects in the capital, including Fountainbridge and Granton Waterfront.

"Mortgages are hard to come by, homeowners are finding it difficult to sell and trade up and people are finding it difficult to move into Edinburgh," Di Ciacca acknowledges. "We have curtailed our activity but we have not stopped it. We are continuing to get sales. There is no property company in the UK that is not affected by the current climate. But we are one of the few that might expand in the next year rather than contract," he adds.

Housing associations regard the lack of access to finance as the biggest obstacle to meeting their targets for affordable homes and say further government action is vital. Giving evidence to the Scottish Government's rural affairs and environment committee's inquiry into affordable housing, Highland Housing Association chief executive Susan Torrance claimed that current government grants require levels of private borrowing that are no longer realistic.

"Some associations are saying: 'We have a choice here. At board level we are seeing financial projections that show us building no more houses and being very comfortable thank you. Alternatively, we can accept the new housing association grant assumptions and build. However, that could put our businesses in jeopardy because we cannot borrow at the rates that the government assumes that we can'," Torrance reports.

Back in Edinburgh, Finc believes that by working together, Scotland's public and private sectors can see out the recession and emerge as stronger, and in some cases reconfigured, organisations. "We need help from government and others, but if we are not optimistic we should not be in this business," he concludes.


- The average house price in Scotland in September was £141,657, down 7.1 per cent on the same month last year.

- Up to 26,000 jobs are estimated to have been lost in the Scottish house building industry since the downturn began.

- The cost of urban development land in Scotland has fallen by 40 per cent in the past year and greenfield sites by 30 per cent.

- Councils have seen the number of planning applications fall by up to 30 per cent year on year.

- Building costs in the Lochaber district have fallen from £1,350 per square metre six months ago to £800 now.

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