Thursday 3rd January 2013
Funding for development projects in London is drying up, with large schemes running out of money, experts have warned.
While the £14.8bn Crossrail scheme remains on track, concerns are mounting that developers may not be able to reap the benefits of the long-awaited project because of a lack of funding.
Crossrail chairman Terry Morgan, who was speaking at a property seminar hosted by national audit, tax and advisory firm Crowe Clark Whitehill, also said that other infrastructure projects could fail to get off the ground.
The Crossrail scheme is Europe’s largest infrastructure project. Due for completion by the end of 2018, the service will connect some of London’s major transport hubs with business centres across the capital, including Heathrow Airport and Canary Wharf, as well as opening up new links for commuters.
It is being partly funded by an infrastructure levy charged by London mayor Boris Johnson.
While Crossrail is expected to generate up to 14,000 new jobs and trigger regeneration in the South-East, other development projects have ground to a halt as a result of the shortage of available finance.
The most high-profile scheme to hit difficulties is the Pinnacle 63-storey skyscraper in the City, where contractors Brookfield are said to be in legal dispute with the developers, and the scheme having stalled at just seven storeys.
A survey of property developers conducted by Crowe Clarke Whitehill shows that 73% of developers say that the regeneration and connection opportunities brought by the Crossrail project would have a positive impact on their property business.
Nonetheless, 73% also felt that obtaining funding for new or existing projects would be the major issue facing the property development market in 2013.
The data collated by Crowe Clark Whitehill also revealed that the majority of respondents felt the Government was implementing the correct economic policies for the country; however, 78% felt not enough was being done for the property industry.
Stacy Eden, partner at Crowe Clark Whitehill, said: “Although the Crossrail scheme is a rare bright spot, being given a funding envelope of £14.8bn from the Government, the Mayor of London and London businesses, many development projects will fail to get off the ground in the short term owing to the lack of funds available.
“The Government appears to be implementing the correct policies to stimulate the economy, but more could be done to encourage lending specifically within the property sector.”
