Spec Finish

The planning environment Tom Hall, Chief Economist at Barbour ABI and AMA Research, agrees that the higher demand for industrial activity is set to continue, with clear high demand for logistics and warehousing, and likely higher activity in production, though with a higher level of uncertainty. He reports that Barbour ABI has noticed that industrial activity has been increasing since 2020 (Figure 1), planning applications increased from £8bn in 2019 to £14bn in 2021, while planning approvals and contract awards have seen similar rises. This sector, he says, comprises two main areas; logistics and production and the drivers are different for each. Logistics and warehousing applications : Tom shares a few figures; logistics and warehousing applications more than doubled in 2020 from under £4bn in 2019 to £8bn in 2020, with closer to £7bn in 2021 (Figure 2). Contract awards jumped from under £3bn in 2020 to over £6bn in 2021. Demand for warehousing increased rapidly due to two main factors: • as Professor Francis noted; a dramatic increase in online shopping over the pandemic has become embedded as consumers continue to enjoy the convenience of buying goods online; and • the reliance on just-in-time logistics has been curtailed due to Brexit trade barriers, increasing the need for higher levels of stock tomitigate shortages and delays. Tom said: “Looking forward, these trends are set to continue. Moreover, the trade barriers erected as part of the decision to accept third country status instead of EU-market equivalencewill intensify over 2022 and beyond as further elements of the trade agreement are enacted, such as full customs checks and diverging product standards.” Production: This is the other element of the industrial sector (covering factories, manufacturing and R&D) which is more difficult to predict. Tom explained that production is perhaps the most sensitive sector to wider economic conditions because large-scale investments are reliant on a stable and predictable long-term economic and political environment: the hard Brexit deal and the weak economic recovery coming out of the pandemic is likely to have resulted in the deferral of investment decisions. But, Tom said, there are some upsides: • the uncertainty since 2016 is likely to have created a backlog of potential investments; • Brexit trade barriers are likely to change the investment decision – in some cases in favour of onshoring production; and • levelling up and climate change mitigation is likely to drive an increase in technological change demanding a change in production methods. “In the planning environment we have seen lower, but still sizeable increases in the production subsectors, with applications increasing from £5bn to 7.5bn between 2020 and 2021 (Figure 3). “Approvals and contract awards increased by similar proportions,” Tom said, but cautioned that overall, investment in new production sites is more uncertain and could be blown off course by further economic uncertainty. www.barbour-abi.com 0 2 4 6 8 10 12 14 16 2014 2015 2016 2017 2018 2019 2020 2021 Project value (£bn) Planning applications Planning approvals Contract awards 0 1 2 3 4 5 6 7 8 9 2014 2015 2016 2017 2018 2019 2020 2021 Project value (£bn) Planning approvals Planning applications Contract awards Industrial www.thefis.org 19 Figure 1: Industrial sector at planning stages, 2014-21 Figure 2: Logistics and warehousing subsector at planning stages, 2014-21 Figure 3: Production subsector at planning stages, 2014-21 0 1 2 3 4 5 6 7 8 2014 2015 2016 2017 2018 2019 2020 2021 Project value (£bn) Planning applications Planning approvals Contract awards