The South East Local Enterprise Partnership (SELEP) agreed in January 2017 to allocate £8.2m of Local Growth Fund money to the East Sussex Strategic Growth Project (ESSGP). This is SeaChange’s next big project, and worth taking a look at in a bit of detail.
What is it?
The initial phase of the ESSGP consists of business park developments at three sites: the Bexhill Enterprise Park, Sovereign Harbour in Eastbourne, and South Wealden. If those projects are successful, the income generated will be used to pay for further development of the ‘Priory Quarter’ area in Hastings. In total, the project will provide 34,632sqm of business floorspace. SeaChange Sussex will be the developer for all the projects.
‘Exceptionally high’ value for money…
As part of the bid for funding, SeaChange produced a business case for the project. This showed that the benefit:cost ratio (BCR) was forecast to be a staggering 127.6:1 – that is, for every pound put in by SELEP, there would be a return of £127.60. This is described in the report as ‘exceptional’.
They’re not wrong. Government guidance on BCR has categories going from a BCR of 1:1 (‘poor’) up to a BCR of 4 plus (‘very high’). That this project is predicted to achieve almost 128:1 is incredible: SeaChange has finally found the pot of gold at the end of the rainbow.
Or simply using the wrong method?
It’s not quite that good, however. For reasons known only to themselves (perhaps to stun SELEP into coughing up the money), SeaChange has used a different method of evaluation from that recommended in the Treasury Green Book – the main document setting out government guidance on the appraisal of public investments. As it coyly states in the notes for the meeting in which SELEP was asked to approve the funding for the ESSGP:
‘The Value for Money assessment which has been completed for the scheme has not strictly complied with the assessment approach set out in the Green Book’ (italics added).
Which is odd, given that SELEP’s own template for projects seeking funding under the Local Growth Fund states quite clearly:
‘Please note that this template should be completed in accordance with the guidelines laid down in the HM Treasury’s Green Book’.
But still 40:1…
But not to worry – even using the recommended method, the project still comes out at a most impressive 40:1 (for comparison, the third runway at Heathrow (should it ever be built) is forecast to be between 4:1 and (extremely optimistically) 10.2; HS2 (again, should it ever be built) is predicted to come in at around 2:1; whilst the Queensway Gateway road is predicted to achieve 2.7:1). The Bexhill Hastings Link Road – which has some similarities to this project in that a great deal of the ‘benefits’ relate to business parks to be built around the road – officially has a BCR of a not-that-impressive 1.5:1, but the real BCR – once the ever-increasing costs are taken into account – is likely to end up at a miserable 1.3:1 or even lower.
Calculating benefit:cost ratios is notoriously difficult, and the final figure may well be lower than that predicted, as costs almost always rise but ‘benefits’ remain the same. What is clear, however, is that a BCR of 128:1 – or even 40:1 – is miles and miles outside what might be expected for an infrastructure project of this kind.
Cheap at twice the price
The business case goes on to say that ‘The project offers very good value for money in terms of the headline cost per net additional job of £3,286′. It’s hard to find figures for the average cost of job creation, but a report by the National Audit Office in 2012 found that the average cost of creating a job through the Regional Growth Fund was £33,000. So if SeaChange can create jobs for a mere £3,286, that sounds like a bargain. Or, alternatively, it sounds like SeaChange once again hurling some pigs into the air and hoping they’ll fly.
How many jobs?
SeaChange claims the various projects will create 656 net jobs (in the first phase of the first three projects) by 2021/22, and a total of 2045 (including the second phase of the first three projects, plus the Priory Quarter development) by 2032/33. However, we’ve learnt to take SeaChange’s job figures with a very large pinch of salt.
And all of these jobs are, of course, speculative – how many are ultimately created depends on how many companies decide to set up shop in the premises provided and whether they are new businesses which wouldn’t have started without the new space, or simply existing businesses moving house. But the second phase jobs are even more speculative as that part of the scheme can only go ahead if the first part is successful (ie if there is money from rents to be returned into the scheme to pay for more development).
‘Market demand intelligence’
The 2045 projected jobs include 862 in Priory Quarter by 2026/27. This is based, we’re told, on an assumed occupancy of at least 85%. Where does the figure of 85% come from? It’s ‘based on SeaChange Sussex estimates, informed by local market demand intelligence’. We’d suggest that basing job estimates on SeaChange figures and ‘intelligence’ is, well, pretty unintelligent. SeaChange is notorious for vastly overstating likely job figures. There is already a huge amount of vacant space in SeaChange’s previous office developments in the ‘Priory Quarter’ offices in Havelock Place, with only a tiny percentage of available space occupied two years after the offices were completed. The failure to fill existing space is, unsurprisingly, not mentioned in the business plan for the ESSGP.
SELEP falls for it yet again
It’s not good enough to say, as SeaChange does, that you can create x amount of jobs per y amount of space, therefore if you multiply x by y, that’s how many jobs there’ll be. Based on SeaChange’s previous record on filling space, this is absolute nonsense. It’s shocking that SELEP continues to fall for it, and continues to pour vast amounts of public money into this kind of high-profile speculative development, rather than into the kind of bottom-up, community-based projects that Hastings needs. Maybe this time it’ll be different, and those 2045 jobs will really materialise – but based on past records, we’d suggest you don’t hold your breath.