Exploring the Link Between Development Finance and Regional Investment
In the UK in recent years, there has been a lot of discussion on the importance of regional investment and growth outside of London and major cities, we take a look at the role development finance plays in regional investment and growth.
In 2024, data from the British Private Equity & Venture Capital Association (BVCA) showed that businesses in the UK received £29.4 billion in private capital investment, up 44% from 2023. Of those businesses, 58% were based outside London.
Many UK investors are now turning their sights to areas outside of major cities, where they can fund construction and refurbishment projects that can be more affordable, as well as contribute to economic growth in areas around the UK.
Development finance is likely to play a key role in this investment, and having an understanding of the connection between this form of financing and regional investment can help investors build a picture of the factors influencing change. Read on to find out more.
Development finance explained
Development finance is a way of raising money to undertake a ground-up construction of a building. Developers taking on bigger projects that will shape regional investment will be expected to have previous experience in order to borrow for larger projects.
However, development finance can also be used on smaller builds, where the applicant is working with experienced professionals (e.g. contractors, project managers) to do the work.
Typically, investors can borrow from £30,000, and terms are between 12 and 24 months. You will need capital which is a minimum of 30-45% of the purchase price of the land, with borrowing possible at up to 70% of the expected end value of the property being built.
Development finance requires a solution that is tailored to the project. This is why it is a good idea to speak to a specialist mortgage advisor like Commercial Trust, who will be able to help you find the most appropriate product for your project from a range of lenders.
How are regional development projects funded?
There are a number of ways regional development projects are funded, including public, private and blended finance sources. For example, central government funding, local government borrowing, public-private partnerships and joint ventures, institutional and pension fund investment, private capital and international and philanthropic sources.
Development finance contributes to regional investment through its use by property developers to buy and develop land to provide housing and commercial premises that facilitate jobs.
How development finance can support regional growth
In recent years, many investors have been deterred by the huge costs of properties and land prices in the UK’s major cities, most notably London. As a result, many are turning to regional areas that offer much more affordable properties and land prices.
Development finance facilitates these development projects in regional areas, which can be mutually beneficial for investors and local communities.
Investors can enjoy either profits from the sale of completed property, or long-term income from letting retained property, while local communities can benefit from economic stimulation, urban regeneration and increased interest from investors for whom a new development signals viability for others to follow.
To be wholly popular, development has to proceed with care. Loss of Greenfield land and the impact of that on wildlife is a significant concern. But, there are many benefits for regional communities when development is planned and undertaken with a sensitive and responsible approach.
