Challenging the Myths: an investigation of the barriers to wider use of Local Asset Backed Vehicles in the UK

Greenhalgh, Paul and Purewal, Bikki (2015) Challenging the Myths: an investigation of the barriers to wider use of Local Asset Backed Vehicles in the UK. Journal of Urban Regeneration and Renewal, 8 (3). pp. 260-278. ISSN 1752-9638

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Abstract

With a shortage of debt funding, particularly for real estate investment and development, alongside public sector funding cuts, the full effects of which are only just being felt, the need to explore alternative modes of regeneration financing has, arguably, never been so acute. When considering the public sector real estate asset base, comprising operational assets, commercial estate and development land, a series of questions, mostly related to access of finance, are raised. Such questions are often prompted by concerns about refurbishment requirements and liabilities, financing of new developments, the creation of sustainable communities and the delivery of better estate management. How will these be funded in light of current budgetary and wider resource constraints? One option is Local Asset Backed Vehicles (LABVs).

LABVs are limited liability special purpose joint ventures, operating through Public Private Partnership (PPP) collaboration between a public body and a private company. HM Treasury’s review of sub-national economic development (1) emphasized that central government would support the development of LABV’s but despite being widely touted by both public and private sectors as a viable way to generate additional infrastructure funding, by packaging local authority owned assets with private sector equity and expertise, their use in the U.K. remains subdued. In the intervening period there has been little objective evaluation of their merits, problems and performance, resulting in myth and rumour filling the gaps.

This article presents findings of a research project that sought to identify essential success factors and investigate barriers preventing wider uptake, firstly through a comprehensive review of literature on LABVs that have operated in the U.K. over the last decade, and secondly, by capturing, through expert interviews, the perceptions and experiences of practitioners involved in such LABVs. The study sheds light on some of the myths surrounding LABVs and attempts to dispel some of the common misconceptions surrounding their procurement, operation and performance. The research ultimately sought to identify the key measures that are required to make LABVs a more viable tool for financing and facilitating investment in economic development, regeneration and renewal in the U.K.

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