Turning Glasgow’s heritage into investable PLCs could unlock millions for rebuilding — but only with bold tax incentives and strict safeguards, says Martin Roche.

The Herald recently reported that Glasgow City Council is considering compulsory purchase of the Union Corner building, the listed building on the corner of Union St and Gordon St that was destroyed by fire on March 8. The Scottish Government is making available a £10 million fund that will contribute to the regeneration of the area.

The public sector has a central role to play in enabling an economically viable and aesthetically appropriate new building to fill the space left by the fire. There is also an opportunity to attract capital from private sector financial institutions and from ordinary citizens.

One way that has the potential to be a model for the whole of the listed building estate in the city centre is to create new public limited companies (PLCs).

PLCs were previously known as joint stock companies. In the 18th and 19th centuries and well into the 20th century, joint stock companies were the favoured vehicles for businesses seeking to raise capital. In Scotland, famous joint stock companies in shipbuilding, ship owning, engineering, banking, insurance, retailing and food and drink manufacture powered Scotland’s economy, and created and spread wealth.

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There were stock exchanges in Aberdeen, Dundee, Edinburgh and Glasgow. They merged to create the Scottish Stock Exchange in 1971, based in Glasgow. In 1973, the Scottish Stock Exchange merged with the London Stock Exchange. This removed from Scotland one of the most favoured ways of raising capital. The Scottish investor with a modest amount to invest in a Scottish business and who wanted to monitor the performance of their stock on a Scottish stock exchange was out of luck.

So how would a PLC work in the case of Glasgow’s listed buildings? A building owner would come forward with a plan to modernise a listed property, which it would present to the city council. The plan would have to explain what the building is to be used for and how the developer would protect the internal and external features that led to the building’s listed status. A business plan that laid out the project’s viability would be included in the submission.

The business plan would have to demonstrate how sufficient rental income can be generated to repay the cost of construction, maintain the building and generate profits for the shareholders. At present, the risks of taking on listed buildings are too high for most developers.

What is needed in Glasgow is innovative tax treatment to incentivise investors, reduce risk and maximise return on investment. Let’s call it “The Glasgow Heritage Enterprise Zone.”

To persuade private capital to put its hand in its pocket, all profits from the new property PLCs would be completely free of UK taxes for the first ten years (but not business rates). Fees paid to the city planning department would be halved. The public sector might contribute to the legal costs and other professional fees involved in creating the PLC. Only genuinely Scottish or British companies would qualify. No offshore entities allowed.

The scheme would see no VAT being paid on faithfully recreating lost buildings or on the major modernisation of existing listed buildings. Alexander “Greek” Thompson’s wonderful Egyptian Halls might benefit from such a scheme, as could another dozen or so threatened important buildings in the city centre.

Given the right incentives, buildings designed for the commercial world of the 19th century can be internally remodelled to meet the needs of this era, and meet modern fire safety, energy efficiency and environmental standards.

However, if the state, the taxpayer and the small investor is to underwrite the regeneration of Glasgow’s built heritage and city centre economy, it seems right that certain conditions are imposed.

Barring exceptional and court approved circumstances, any properties supported by the scheme could not be sold for ten years, and subsequent owners would not benefit from any special tax treatments.

The Heritage Enterprise Zone might also be framed to encourage new homes, not only for single people and students, but for families and the retired. Buildings currently struggling to find viable uses could be schools, health centres and museums, as well of course hotels as restaurants, offices, shops and night clubs.

The core purpose of generous initial tax treatments is helping retain Glasgow’s historic buildings, revitalising the city centre, attracting new businesses and create and protect jobs. The tax holiday would exist not only to attract investment, but also to allow a PLC time to build a “sinking fund” to meet the ongoing costs of keeping a building in top condition.

It’s a plan in which financial institutions like banks and pension funds, and small investors from across Scotland would be invited to participate. Small investors might have their capital sheltered in an ISA. The deal is that there are good things to be won by the city and investors.

We’d have a vote of confidence in Glasgow and a new way to share wealth in Scotland. And why not use the creation of new PLCs as a platform to open a new Scottish stock exchange, in a renewed heritage building in Glasgow, of course.

Creating new PLCs to help give Glasgow better prospects would allow countless thousands of people in Scotland to put some of their savings into investment in Glasgow’s future. Their money would go towards building a stronger business and tourism economy and to helping Glasgow city centre thrive and flourish.

Are there risks? Of course, but there are potentially great rewards for Glasgow.

Martin Roche is retired and lives in Glasgow. He had a 35 year career in international public relations and as a writer. 

© Herald Scotland