Despite Brexit uncertainty, the future of the Thames Valley – the UK’s ‘Silicon Corridor’ – looks bright as a powerhouse of the national economy. But, what is its future as a recognised global leader?
A packed audience at this breakfast seminar staged by The Business Magazine heard that incoming foreign direct investment (FDI) is holding firm at present according to EY’s latest annual UK Attractiveness Survey – the UK remained the number one FDI destination in Europe in 2018, ahead of Germany and France.
Locally, Reading is the highest ranked South East location for attracting FDI, with projects up 20% (12 projects) and the seventh best performing FDI location in the UK.
Jobs created by FDI in the South East in 2018 were up by 26% from 2,739 to 3,678 – the highest number secured in a decade. Most South East FDI investment (38% of regional total) still came from the US last year, but the region also secured investment from Germany (7%), Canada (6%), Denmark (6%) and Japan (4%).
However, EY’s survey showed that perceptions of the UK as an FDI destination have weakened.
More global investors (15% from 8% last year) say they have paused one or more UK projects due to Brexit, and 6% plan to move assets out of the UK in the future.
“We are still leading the pack in Europe. Brexit has had an impact but investors are not leaving in droves. The Thames Valley has a really good platform,” stated speaker Ros Payne of EY.
“Lots of projects have been put on hold, rather than fled elsewhere. A down-tick in head office and perhaps R&D activity is impacting the Thames Valley a little, but there are also signs of a very high level of M&A – our survey is very positive on that front. The Thames Valley continues to be resilient,” added EY partner Paul Etherington.
Keynote speakers were agreed that the Thames Valley has much to offer internationally – from location and environment to IT excellence and tech clusters, from quality companies to skilled professional services and a highly-regarded knowledge base.
So, no immediate crisis, but the region must continue to invest in its own future – from implementing key infrastructure improvements and tackling productivity challenges, to working hard to nurture young emerging talent, while maintaining a highly skilled workforce, the seminar at the Royal Berkshire Conference Centre heard.
Building the much-needed third Heathrow runway and associated Western Rail Link to Heathrow, a third bridge over the Thames at Reading, would be major progressive steps for the region, noted Etherington, but so would more effective use of the region’s human resources.
“With the Thames Valley workforce situation as tight as it is at present, increased productivity has to be the answer. You can’t just keep on employing more people, battling for talent all the time,” he stated.
Factors influencing land-use pressures
Charlie Nicholson of commercial property specialists Vail Williams spoke of the myriad factors influencing current Thames Valley pressures on land use and property types – and, referencing the regional ‘war for talent’, the need to build diverse and vibrant environments to attract and retain talent within the Thames Valley.
Evolutionary change was a given within the thriving Thames Valley and the property sector was one clear change-example, Nicholson noted.
Who, some years ago, would have expected Reading’s 3Bs (Biscuits, Beer and Bulbs) to become brownfield site developments as M&GPrudential’s corporate offices, Tesco’s million-sq-ft distribution centre, and a well-established business park, plus Reading’s historic Abbey Quarter now a professional services hub with Reading Gaol destined to be radically converted? There were similar change-stories from other main Thames Valley towns.
The dramatic rise of co-working and introduction of permitted development rights had more recently impacted the market, physically changing Thames Valley landscapes and the fit-out style of the built environment.
“Flexibility for tenants, being contemporary, and the concept of space as a service has become really important. It’s a really exciting time for occupiers and landlords alike. We see this trend of take-up continuing into 2019 and beyond.”
Property demand and value forecasts connected with the Elizabeth Line development had already been exceeded, Nicholson revealed. “Within 10 years of opening it is thought that the Elizabeth Line could be at capacity.”
Mentioning Heathrow expansion, Maidenhead and Reading station area projects, plus healthcare developments at Ascot and Wexham, he stressed: “We need to carry on with large infrastructure projects, get our shoulder behind them, and give our voice to them.”
‘Silicon’ enhancement and talent nurturing
Alex Tatham MD of Westcoast highlighted that, regardless of Brexit, the Thames Valley still needs strong global promotion and a powerful new identity – the Silicon Corridor of Great Britain, he suggested.
“Silicon is a wonderful substance that changes shape when you put energy through it, which can feed a wide range of creativity and enormous amounts of ability within a region, creating an area of truly global significance,” he explained.
The world knows what and where the original ‘Silicon Valley’ is – he exampled other regions emulating its name across the globe. “Clearly it’s important to be a ‘Silicon something’. We should be described as the Silicon Corridor, because the Thames Valley is the heart of our nation’s IT industry, already of worldwide significance.”
“Silicon is an enhancing, enlarging substance and the Silicon Corridor is no different. It will help enlarge the nation’s economy, and hopefully all of your businesses.”
External promotion of our Silicon Corridor also had to be allied with internal IT awareness, education and development, he argued.
The business community needed to accept and embrace the ‘creative destruction’ of IT technology advancements that will change future lives.
“Invest in technology, use automation and AI perhaps to digitally transform your businesses because that is the future of our country. Be creatively destructive to your own business, because if you don’t someone else will.”
If Thames Valley education was not delivering the skills and knowledge that the tech industry requires to keep it driving forward, then the local business community needed to be proactive.
Tatham challenged business owners and employers to build stronger links with the education sector, to help inform and nurture young emerging talent.
Inspirational business career talks within schools, commercial awareness, work experience opportunities, apprenticeships, in-house training, skill development, and tech hubs, were all under-utilised potential catalysts, he suggested.
Echoing the need for improved business-education relationships, Etherington called for a co-ordinated regional approach to issues, plus a single promotional ‘voice’. He queried: “Do we need a Thames Valley mayor? Look at the West Midlands and Manchester success where there is a single voice enabling them perhaps to punch above their weight economically.”
“This region is still strong, but we must all continue to promote the Thames Valley with a united voice, address its challenges, and ensure we have continued success.”
An encouraging overview
CoStar real estate analyst Henry Murray had previously set the scene with an encouraging overview of key Thames Valley commercial property themes and trends – not least the rapidly growing demand for co-working space.
Almost quadrupling over the past five years, the popularity of co-working space is currently highlighted by nine providers supplying the central Reading area alone.
Thames Valley office investment overall had slowed after a robust 2018 (up 50% year-on-year), but has topped £1 billion over each of the past five years.
The Thames Valley also punches above its office property weight internationally – eg outperforming New York, Seattle, Los Angeles, Boston and Washington DC. Foreign investors are still active in the region.
Locations with good access to the new Elizabeth Line (Crossrail) are prime.
Thames Valley local authorities/councils are driving up investment volumes – spending out almost £500 million last year.
Strong demand for office space has pushed vacancies to a 15-year low, not least because conversions have led to supply constraints.
Robust Thames Valley rent growth has outpaced the Big Six and London once again.
Office employment in TMT and business sectors is set to rebound strongly, CoStar forecasts.
Murray’s near-term outlook for the Silicon Corridor: “Relatively bright.”