Press release: New Government can unlock £100bn boost for national economy through planning reform in central London

09 Jul 2024
  • Central London could deliver 407,000 jobs, 50,700 new homes and an additional
    55.7m sq ft in office floorspace by 2045 – boosting the UK economy by £101bn (GVA). But economists warn policy support is needed urgently to help reverse a 54% fall in major office planning applications across central London over the past decade 
  • London boroughs driving the recovery as measured in major applications for office space since January 2023 include the City of London (3.2m sq ft), Southwark (2.7m sq ft) and Camden (2.2m sq ft) 
  • Adopting a ‘balanced’ approach to growth could deliver £3bn in additional contributions paid by developers for improvements to local streets and communities. These are over and above the business rates generated by new development 
  • With arguably the lowest carbon intensity per jobs in England, central London is one of the most sustainable locations to create jobs or generate economic growth in the country.    

A new study commissioned by the London Property Alliance (“LPA”) has found that a more pro-growth planning environment could deliver 407,000 jobs and an additional 55.7m sq ft of commercial floorspace in central London by 2045 – equivalent to around 39 new Shards. The research, Good Growth for Central London, produced by global sustainable development and engineering consultancy Arup, is published amid concerns that a sustained fall in central London’s commercial floorspace could threaten the capital’s global city status and undermine economic growth and productivity.  

The capital’s Central Activities Zone (CAZ) contributes almost half (48%) of London’s economic output and is home to 41% of the capital’s jobs, despite occupying just 2.2% of Greater London’s land area. It is also home to 65% of all office floorspace within London making it the most sustainable location for jobs and economic activity. With greenhouse gas emissions of just 0.6 tonnes of CO2 equivalent per job per annum, the CAZ is four times less harmful to the environment as a place to grow the economy compared to the rest of England and Wales. The CAZ is strategically important to the UK economy generating 11% of the UK’s total economic output.  It is home to 2.2m jobs and generates £315bn a year in economic output. Other research shows1 some £5.5bn is raised in business rates of which 80% is spent on providing public services in other parts of the country. However, according to the report, this track record of success is at risk following a fall in the volume of ‘major’ office planning applications (>10,000+ sq ft), which decreased by 54% between 2013 and 2023 across the CAZ.  

The City of London is leading the capital’s recovery approving 3.2m sq ft of major office space in the period January 2023-May 2024, followed closely by Southwark and Camden. Over the same period, this trio of local authorities approved nearly 8million square feet of office space attractive to global companies and tech start-ups alike.  

The report indicates that more prescriptive approaches to development could see London lose out to competitor global cities such as New York and Paris, as companies seek out higher quality and better value accommodation. The ‘checks on growth’ scenario could see office floorspace in central London decrease by 5.9m sq ft by 2045, making it harder to attract leading businesses, resulting in fewer jobs and significantly lower economic output (£7.6bn vs £101.2bn).  

Charles Begley, Chief Executive, London Property Alliance, said: “It is highly encouraging the new government is putting planning reform at the heart of its agenda for growth. Our analysis lays bare the profound impact of planning decisions on growth, particularly in relation to attracting investment to ensure buildings are sustainable and fit for purpose.   

“The essential role development plays in generating jobs and supporting local areas is all too often overlooked. We need to ensure that the planning system is optimised to turbocharge housebuilding and sustainable commercial development in central London, providing certainty and clarity to investors and local communities alike.” 

The report shows that planning reform delivered by the new government and recently re-elected Mayor of London, focusing on a ‘flexible and balanced’ approach to commercial development in central London, could usher in a new era of strong economic growth as long as individual boroughs supported more offices, homes and commercial uses in their local areas.  

Under the ‘balanced growth’ scenario, Arup finds that an additional 40.7m sq ft office space could be delivered over the next 20 years, as well as 6.5m sq ft of hotel space and 8.4m sq ft of retail, restaurant and entertainment space. 

Matt Dillon, Global Economics Skills Leader at Arup said “Economic growth in central London drives economic growth for the whole of the UK.  This report shows that planning policies, working patterns, consumer behaviour and the public realm can have a significant impact on growth, housing, and the public finances, especially when compounded over several years.   

“Central London is a challenging area, with policies needed to encourage new, high quality, sustainable development, as well as take account of heritage assets and the needs of residents, but the prize in taking this ‘balanced approach’ is huge.” 

The research has been produced in collaboration with Arup, with additional analysis by Gerald Eve.  It has been supported by Derwent London, Gerald Eve, GPE, Landsec, Shaftesbury Capital, The Pollen Estate and The Portman Estate. 

Further reading:

Report: Delivering Good Growth in Westminster

Manifesto: Manifesto for growth