- The London Property Alliance urges the Chancellor to harness London’s global strengths and support the service economy that drives national prosperity
- The undersupply of modern office space is constraining the service industries that generate the majority of UK output
- Concerns also raised over business rates changes that will increase costs for office tenants in vital sectors such as professional and financial services
- Calls for fair funding, business-friendly taxation, planning reform and strategic transport investment to unlock growth in the UK’s most productive districts
The London Property Alliance, which represents the leading real estate developers and investors in central London, has called on the Chancellor to recognise offices as ‘critical economic infrastructure’ and support measures that ensure central London continues to drive growth, jobs and investment across the UK.
London’s Central Activities Zone, which equates to roughly ‘travel zone 1’, remains the economic powerhouse of the UK, supporting 2.2 million jobs and generating around 11% of national economic output, whilst contributing the lion’s share of London’s £40 billion annual tax surplus to the Exchequer.
Despite London’s status as a leading global city – attracting more than twice as many foreign investment projects as Paris, according to the Alliance’s Global Cities Barometer – a combination of planning constraints, cost pressures and declining office stock risks undermining its competitiveness.1
According to analysis by the Alliance, there has been a 54% decline in major planning applications in Central London over the last decade. This is leading to an acute undersupply of the modern, amenity-rich office space demanded by leading companies and talent, with availability of prime office space close to historic lows in the City (1.5%) and West End (2.5%).2
83% of UK economic output and 84% of jobs rely on the service sector, which depends on modern workspace in London’s commercial centres, and recent analysis from the City of London Corporation found that the UK remained the largest new exporter of financial services globally in 2024.3 The Alliance warns that the current undersupply of high-quality offices is constraining productivity, with leading businesses and growth industries competing for limited space.
At the same time, the cost of occupying offices in London is set to increase due to changes to the business rates system, whereby a decrease in the ‘multiplier’ for smaller retail, leisure and hospitality properties is funded by an increase of up to 10% for properties with a rateable value above £500,000. Businesses in more than 3,350 office buildings are set to be impacted by the higher tax rate.
Charles Begley, Chief Executive, London Property Alliance, said: “The Chancellor has pledged this will be a Budget for growth and so must take action to support those sectors that serve as the engines of our economy.
“London’s commercial centres power the UK’s high-value service industries and their success is inseparable from the country’s wider prosperity. These sectors rely heavily on modern workspaces in our key business districts to boost productivity, drive innovation and attract talent. The acute under-supply of prime office space in central London is a major economic risk, particularly as global companies are increasingly mobile and London faces renewed competition from global city rivals, including New York, Paris and Hong Kong.
“Offices should be recognised as critical economic infrastructure and there must be further action to address the bottlenecks in the planning system and the funding challenges facing planning departments. On top of that, the Government must avoid the own goal of increasing the tax liability for businesses in high-growth sectors that are dependent on modern office space to thrive and grow.”
Ahead of the Budget on 26 November, the Alliance is calling on the Chancellor to make targeted, low-cost interventions to support the development of offices and ensure London is able to attract leading businesses and talent. Its recommendations include:
- Reform business rates to support London’s economy, addressing the disproportionate impact on office buildings as well as flagship retail and entertainment venues.
- Amend national planning policy so city centre offices are treated as ‘critical economic infrastructure’ – equivalent status to data centres – to fast-track planning decision-making and regulatory approvals.
- Urgently reassess the formula for council funding. Analysis by London Councils4 indicates the proposed formula could leave London’s boroughs £700m worse off, despite the capital having the highest poverty rate in England once housing costs are considered.
- Provide funding for key pieces of strategic transport infrastructure, such as the Bakerloo line extension, to unlock housing opportunities and connect workers with London’s business districts.
