Make no mistake, the government has put its flag in the ground. It is sending a clear message that things are going to be very different in the public sector from now on.

This week’s eagerly anticipated Emergency Budget delivered a few welcome announcements, as well as the much talked-about cost saving targets.

It is good to see some of the regional infrastructure projects are retaining their priority – the redevelopment of Birmingham New Street Station being a key example – as maintaining capital expenditure on infrastructure will be an essential part of the UK’s long-term economic growth.

The publication of a National Infrastructure Plan in the autumn is also expected to provide greater certainty to the regeneration sector by clarifying where and when the public sector is going to invest. The market will be waiting with interest to see how the Infrastructure Development Fund will operate, its size and scale, and to what extent the property industry will be able to harness it.

Despite the positives, the 25% cuts facing all government departments will have a considerable depressant effect on those regional centres which have developed a disproportionate reliance on civil service demand for floor space.

The Treasury has already announced a freeze on new public sector leases and lease renewals, and while this may cut costs in the short-term, it could also lead to a serious regeneration problem if significant amounts of old office space are vacated in areas where there is no other occupier demand.

Overall, this paints a mixed picture for regional regeneration.

Although the Budget gave some indication of where the Government’s priorities lie, the full impact of the cuts will not be felt until the Comprehensive Spending Review on 20 October. Until then, the public sector faces a period of great uncertainty.

James Grierson is head of public sector at DTZ

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