Construction and development activity in the central London area contributes not just to the economy of London and the south east, but to the UK as a whole.
A new report argues that central London development creates £5.3bn of GVA (gross value added) and supports 85,000 jobs in the UK regions. These contributions are part of an overall £17.7bn of GVA and 290,300 jobs supported across the UK as a whole, by the development and construction industry in London.
The figures come from a new report commissioned by the Westminster and City Property Associations, prepared by Deloitte and prefaced by professor Tony Travers of the London School of Economics, who says: “It is easy to take Central London’s economy for granted. New buildings appear each year; there are cranes everywhere and the Tube is packed. Yet until now it has been hard to quantify the economic and wider benefits that Central London’s building boom brings for the economy more generally.”
“The capital’s development industry clearly benefits the UK as a whole, as demonstrated through this report, and looking to the future it is clear that the management of an on-going stream of new construction will need attention from local government, developers and the construction industry so that may continue.”
The report draws on data from across the 11 central London boroughs, and found that they account for 7% of the country’s construction output, while their populations have grown 6.7% and their employment by 15% in the last five years.
Daniel Van Gelder, chairman of the WPA, noted the value of the report in arguing London’s position as a supporter of the wider country: “Whether it’s steel from the north, bricks from midlands, or labour from across the UK, development construction within Central London has clear economic benefits which spread far beyond the site itself. This year’s General Election featured anti-London and anti-development sentiment which does not reflect economic reality. A reality which proves that development within Central London produces significant and tangible benefits nationwide. As such, it is vital that politicians factor in the unique nature of Central London when making decisions on the UK’s future as a whole.”
Deloitte reckon the capital imported close to £290bn of goods and services from the regions in 2011, while many office projects spend more than half of their supply chain expenditure outside the capital. One example given is the steel structure of the Cheesegrater tower, whose 18,500 tonnes of steel was manufactured and welded in steel mills in Bolton, creating 600,000 hours of work for British steelmakers.
One issue the report says is key is the contribution of higher levels of agglomeration and density. With the GLA predicting the need for 40,000 new homes a year, and more than 5 million sq m of additional office space by 2036, it warns: “Construction sector firms and planning authorities will need to work in close partnership to ensure that these targets are met.”
Denser development helps increase productivity, argues the report, citing research that points to a potential 2.9% productivity gain for London as a whole. “This is equivalent to an additional £5.8bn in GVA translating to roughly £230m annually.”
However, the report also notes the potential downsides of denser development, including overcrowding and congestion, and pressure on public spaces. “An effective and efficient planning system, as well as proactive action by the industry, is essential to ensuring that London balances its economic potential against a range of social and environmental factors.”
LPA Perspective: This research document is a robust defence of London’s development sector, against complaints from those up country that complain about “them in London” having it all, and keeping it all to themselves.
Regrettably, despite all the number crunching done by Deloitte, there is only one example – of how the Cheesegrater’s frame was welded in Bolton – to provide colour to the assertions. Perhaps some more, and more concrete, examples might help convince the doubters.
The report leaves this reader wanting more, too, in some other areas. Density is mentioned in passing, but gets very little discussion – here the property owners could be advancing a clear argument for denser development, based off the back of Crossrail’s arrival. It is happening, why not explain the economic benefits it for the same wider UK audience? As the Savills residential research team pointed out in a September report, London’s residential density is way below that of Madrid or Paris, and in planning terms needs to be reset for a new era.
There is also a disappointing reference to productivity, with the low figure of a 2.9% improvement promised for greater densification. There are plenty of other productivity improvements from redevelopment, which could also be mentioned. Law firms typically use a move to new offices to force partners out of their cellular offices, with consequent improvements in productivity – measured both by better communication between staff, and by less office space per head. And just about every new building today is heaps better than its predecessors, in terms of the quality of the working environment, and in energy consumption. The new UBS offices in Broadgate, for example, will deliver a larger floorspace on the site compared with what went before, will house more people per sq m of that floorspace, and will be significantly cheaper to run.
The CPA and WPA have clearly just whetted our appetite with this report – we look forward to the next in the series.
Lee Mallett comments: On another point, speaking at the launch of the report at City Hall, Tony Travers made the broader observation that there remains “much confusion” about the scale of the economy and anticipated growth in London, which generates a massive 9% of the UK’s GDP.
“The scale of future growth is a big challenge,” said Travers. “London’s population is growing fast and could reach 11m sometime between 2030 and 2040. If that happens this will be a very big challenge to explain this growth to Londoners.”