A LONDON PROSPERITY AGENDA

A London prosperity agenda: a bold vision needed to deliver growth 1 A LONDON PROSPERITY AGENDA A BOLD VISION NEEDED TO DELIVER GROWTH

2 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 3 A London prosperity agenda London s new mayor needs to develop a prosperity agenda for the capital that focuses on business growth and competitiveness to enable business to succeed and ensure prosperity for everyone. This document is intended to assist the mayor in his/her role by identifying the areas where action is needed for the capital to remain a global magnet for business investment, tourism and creativity. Our key priorities for the new mayor Deliver on housing and transport infrastructure to meet people s needs now and in the future Address the slow planning system Reduce the cost and delay of deploying fibre broadband Raise levels of workforce skills and the employability of young people Ensure London is open to overseas talent Develop an economic strategy for London that supports the growth of world-leading and innovative tech clusters Provide a strong voice to increase trade and visitors Ensure policies and regulation promote growth for financial services. Lucy Haynes London director The CBI s mission, on behalf of its members, is to promote the conditions in which businesses of all sizes and sectors in the UK can compete and prosper for the benefit of all

4 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 5 Housing A lack of housing is preventing businesses from attracting and retaining the talent they need to grow. Fifty thousand new homes are needed each year to meet the demands of London s projected population growth under 24,000 new homes were built in 2014 1 London is ranked first overall as a global centre for business, finance and culture, but it is fifth highest for cost of living compared with other leading global cities. 2 High housing costs and the subsequent lack of availability is impacting businesses ability to recruit and retain employees 3 The London Land Commission estimates that 40,000 public land holdings in the capital could be used to deliver 130,000 homes. 4 Unlocking this is vital as over half of businesses (55%) cite a lack of available land to build homes as a key barrier to housing delivery 5 By 2025, 7.2 million households will be rented accommodation, compared with 5.4 million in 2016 and just 2.3 million in 2001. 6 It is estimated that government action to support the sector can attract an additional 30bn of investment 7 More support is needed to help small and medium-sized businesses (SMEs) return to the housing market from 2006 to 2013 the number of SMEs in the industry fell across the UK from 50,000 to around 20,000 firms. 8 Present a new housing strategy within the first 100 days in office which commits to building 50,000 homes each year Work with the London Land Commission to incentivise local authorities to unlock public sector land and other brownfield sites for development while also extending the Commission s remit to explore areas of London s green belt for development Support the government s Build to rent scheme by simplifying planning and the release of public land so it helps improve the quantity and quality of housing in the private-rented sector Encourage diverse sources of investment including institutional and overseas capital this is particularly important for the regeneration of large-scale mixed-use developments such as Battersea Power Station Support the return of SMEs to the market by encouraging local authorities to release smaller sites in greater number when allocating land for housing development and simplifying the planning system to build on these sites Spearhead a campaign to encourage more businesses to employ apprentices in the housing industry and work with businesses and schools to promote construction as a career option particularly to young women. Fifty-five percent of businesses cite a lack of available land to build homes as a barrier to housing delivery

6 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 7 Transport Transport capacity needs to be planned for now, in parallel with a London housing strategy, to meet business needs as London s population grows. Support the delivery of Transport for London s business plan including the development of the Silvertown Tunnel and Crossrail 2 to ease capacity issues on London s roads and railways Press the government to implement the Airports Commission s recommendation to increase new airport capacity in the south east. At the same time approve the London City Airport development programme before the end of 2016 and give the go-ahead for improvements to rail links to Stansted airport Explore innovative financing solutions such as user charging on London s new roads to help reduce congestion across the network The quality of London s infrastructure currently ranks 24th compared with other world cities 9 and 70% of businesses state the increased strain on the capital s infrastructure will negatively impact their operations 10 Delays to new airport capacity beyond 2030 could cost 5.3bn a year in lost UK trade with emerging markets 11 Improving the capital s road network is a top priority for 56% of businesses 12 and 90% of freight in London is transported by road, which is worth 200bn to the UK economy each year. 13 By 2030, drivers will spend an average of 97 hours a year stuck in traffic on London s roads, compared with an average of 65 hours in Paris and Stuttgart. 14 To improve the network, almost three quarters (72%) are open to the idea of road charging to help fund new road investment 15 Four times more people are using London s Overground since its launch in 2007, delays have been reduced by 50% and customers are among the most satisfied in the UK 16 Use of the Thames for the delivery of materials should be considered. For example, the Thames Tideway Tunnel will potentially reduce the number of lorries using central London roads from 800,000 to 100,000 during the life of the project if the Thames is used. 17 By 2030, drivers will spend an average of 97 hours a year in traffic on London s roads Work with industry to develop a holistic freight and commercial vehicle strategy across all London boroughs which supports the uptake of greener and sustainable vehicles and recognises the central role of logistics in supporting London s economy. Incentivise best practice for clean, safe and quiet deliveries through a package of measures which reduce the regulatory complexity around making deliveries and collections in London Continue the new rail partnership between Transport for London and the Department for Transport, to help create an integrated, more efficient commuter rail network for Londoners Promote the use of the Thames for moving goods and materials by supporting the existing River Action Plan, setting up a River Freight Concordat to maximise river freight (including domestic and commercial waste to UK treatment centres) and protect the capital s safeguarded wharves from alternative development, promoting opportunities for their reactivation for cargo-handling.

8 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 9 Integrated delivery and regeneration A cumbersome and slow planning system combined with a lack of joined-up thinking is holding back infrastructure delivery, smarter regeneration and business growth. 1.3trn worth of investment is required in energy, water, transport and digital infrastructure by 2050 18 An integrated approach to infrastructure and regeneration is crucial to create thriving new communities. The Queen Elizabeth Olympic Park in Stratford is projected to deliver 3,000 jobs, 1.5 million additional visitors and 2.8bn in economic value for east London 19 Sixty-four percent of businesses think the speed of decision making in London is average or below average when compared with global competitor cities and this is slowing down investment 20 Ninety-three percent of London businesses say that the current planning system acts as a barrier to building infrastructure 21 and over two thirds (70%) are prepared to pay more in planning fees in return for quicker planning decisions 22 Fibre broadband is currently available to around 95.2% (3.1 million) of London premises (93.4% at superfast speeds), 23 leaving around 170,000 premises still requiring access 24 But the cost of deploying fibre broadband is three times more expensive and takes three times longer to deploy in London than in the rest of the UK 25 Currently there is no requirement on developers to provide digital connectivity in new buildings as part of granting planning consent. The preference for many property owners to negotiate a non-standard wayleave agreement because of uncertainty and concerns about legal ramifications is a major barrier for businesses to obtain quick and affordable connections 26 Londoners consume eight million tonnes of food each year, much of which is wasted. By developing a circular economy strategy London can become a zero-waste city, creating 40,000 jobs and an estimated 7bn a year benefit by 2036. 27 Commit to the delivery of the 2050 London Infrastructure Plan. Ensure the London Delivery Board continues to play a role in integrating the delivery of London s transport, housing, digital and utility infrastructure and represents London at a national level by working closely with the National Infrastructure Commission Use the planning process to regenerate intelligently by placing an additional focus on creating stronger links between housing and infrastructure provision, particularly at the early stages of development Upskill and better resource local planning authorities to ensure interpretation of national planning regulations do not vary by authority or even by local planning officer. Explore accrediting external planners to help adjudicate applications and pilot an increase in planning fees if there are strong assurances decisions will be made within specified timelines Provide greater visibility and regular updates of growth data to support planning forecasts. Understanding how growth will spread out across London will support planning forecasts for the expansion of the London electricity networks, and other infrastructure, and will help prepare to meet the future demands of the growing city Ensure greater business representation on the London Enterprise Partnership so it can fully represent business views on key London development issues. This will help align the GLA and business priorities for the capital and will enable businesses to contribute to discussions on London s future, including the funding of projects and the role that devolution can play Encourage property owners to use a standardised wayleave agreement to speed up the deployment of fibre broadband and help reduce cost Promote the use of the voluntary Connectivity Ratings Scheme to provide business tenants with information about the level of connectivity within a building and encourage landlords to invest more in fibre broadband connectivity Encourage London s highways authorities to classify streetworks associated with the deployment of fibre broadband as standard works rather than major works to avoid delaying additional coverage and causing unnecessary costs, deterring investment Work with industry to develop a circular economy strategy and encourage recycling of materials by requiring a recycled content in local government procurement policies and ensure sustainability is considered at the design stage of urban planning. Further aggregation of waste streams across London boroughs into fewer well established efficient routines, transportation and infrastructure networks is also key. 1.3trn of investment is required in energy, water, transport and digital infrastructure by 2050

10 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 11 Education and skills London is fast running out of the skills needed for a digital and financial economy action is needed in education and to ensure London attracts international talent. A lack of skilled staff is cited as one of the top three concerns for London businesses 28 Nearly a third of businesses (31%) report access to global talent as a threat to the UK s labour market competitiveness in the future 29 56% of businesses believe the UK s visa system must be reformed the government s Tier 2 immigration cap, currently set at 20,700 a year, is damaging UK firms ability to attract the best talent 30 Over two fifths of businesses believe the technology and creative sectors are key to London s future economic growth and a half believe the capital s fin-tech sector could provide rapid growth. 31 Skills provision must be aligned with the needs of London s economy as two thirds of firms (66%) are concerned about the current levels of specialist skills including science, technology, engineering and maths (STEM) skills in London 32 Nationally, nearly three quarters (73%) of businesses have links or engage with either local schools or colleges but more could be done. 33 Stand up for London s need for skilled immigration by urging the government to raise the Tier 2 immigration cap, enable intra-company transfers under the migration rules and make it easier for companies to use the system Implement the recommendations of London s Digital Talent Taskforce to address skills gaps and enable opportunity for all of London s communities. Assess whether similar business-led initiatives could be set up to address other skills gaps Two thirds of firms are concerned about the current levels of specialist skills including science, technology, engineering and maths (STEM) skills in London Build on work to improve careers services in London by highlighting the value of high-quality degree and apprenticeship routes and ensuring university and college provision matches labour market needs Extend STEM education to primary schools Simplify and communicate the range of ways businesses can get involved with schools to encourage higher engagement by companies.

12 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 13 Innovation and technology To be world-leading in industries such as life sciences, fin-tech, clean-tech, artificial intelligence or wearable technology, London s development strategies must support entrepreneurial talent. Compared with competitor global cities, 50% of businesses say London is above average on its innovation but two fifths (41%) rate it as average demonstrating the need for continued investment 34 The UK has seen flat growth in life sciences R&D investment over the last few years while the US, China and Japan have all seen year-on year-increases. 35 Asia has also surpassed Europe for overall life sciences patent applications London ranks sixth for the supportive environment it provides to its tech start-up businesses, behind Silicon Valley and Tel Aviv. 36 The lack of flexible creative office spaces that are affordable are cited as a key barrier to the growth of the tech and creative sector 37 London s green economy is worth over 30bn a year, making it a clear contender to become the clean-tech capital for Europe. London s green economy is worth over 30bn a year, making it a clear contender to become the clean-tech capital for Europe Ensure new development strategies (including the economic strategy for London) are designed to support the growth of new business clusters so London can be truly world-beating in areas such as financial tech, wearable tech and more Work with central government on the development of London s knowledge quarter and continue to support life sciences research funding Join business calls to urge the government to remove the smallest businesses with rateable property values below 12,000 from Business Rates. Given 98% of digital and creative businesses are SMEs this could significantly help with their growth 38 Support growing tech clusters by encouraging greater sharing of flexible creative office spaces that are affordable for digital companies. Explore whether the mayor s Regeneration Fund, which saw the latest round of funding help tackle the shortage of affordable creative workspaces, should be expanded 39 Work with businesses to champion the clean-tech industry to help combat the threat of climate change and help attract greater investment in this growth industry.

14 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 15 Global competitiveness Increasing international trade and more visitors will drive London s competitiveness and attractiveness as a place to invest. The UK government has an ambitious target of doubling UK exports to 1trn by 2020. 40 London exports are currently worth 140bn to the capital s economy and more than 40% of London-based SMEs are aiming to trade internationally 41 Last year 381 projects across the capital attracted foreign direct investment (FDI) which represents its strongest performance over the last decade. When asked to name their first-choice investment destination, investors ranked London fourth globally behind the US, China and India 42 Many global businesses choose to base headquarters in London and its close proximity to Europe is seen as one of the capital s biggest strengths 43 Help firms reach the government s export target by supporting the CBI s recommendation for setting up an Export Commission drawing representatives from London and all UK regions Coordinate the bodies that offer export advice and support in London so that SMEs can easily access the guidance they need Be a strong ambassador for London and work with London & Partners to create a focused strategic approach to marketing the capital abroad Recognise that the majority of London businesses benefit from the UK s EU membership and work with government to maintain access to the world s largest single market, while developing alliances with other member states to build on reforms which encourage enterprise Champion continued investment in London s shopping and entertainment districts to ensure London is a worldclass tourism destination capable of competing with other European and global cities. London attracted 17 million visitors last year, contributing 11.8bn to the economy. 44 London attracted 17 million visitors last year, contributing 11.8bn to the economy

16 A London prosperity agenda: a bold vision needed to deliver growth A London prosperity agenda: a bold vision needed to deliver growth 17 Financial services London s position as Europe s financial centre can be assured if the UK focuses on regulation that promotes growth London s financial and professional services businesses are critical to the UK s economic success. The sector is a significant exporter of services, contributing 67bn to the UK s trade balance in 2013. 45 Today London accounts for over half of all the UK s services exports 46 The City is the world s most international financial centre. Over 250 foreign banks operate in London, the London Stock Exchange has the highest percentage of foreign listings in the world, and twice as many US dollars are traded in the UK than in the US 47 Since 2007, foreign companies have invested 100bn in UK financial companies which together employ 692,500 people in London 48 Global competition among financial centres is increasing: the gap between London and emerging financial centres such as Hong Kong and Singapore is narrowing 49 Threats to the UK s competitiveness are undermining London s default position as a location for international financial services businesses A recent BBA survey of international banks found that almost two thirds (65%) had moved activity away from the UK in the past five years while just over half (53%) believe there is a rationale for further reducing the scale of their activities here. This will inevitably mean the loss of high quality, highly paid jobs. The City is the world s most international financial centre twice as many US dollars are traded in the UK than in the US Act as an advocate to ensure the conditions are right for London to continue to be a global financial and professional services hub Work with government to ensure the UK refrains from unilateral regulation, or gold-plating EU regulations, to prevent UK rules from becoming disjointed with international norms Continue to attract financial companies by providing certainty and consistency in UK tax policy and getting behind calls for the chancellor to commit to ending the Bank Corporation Tax Surcharge by the end of the parliament once the budget is balanced Urge the UK government to help regulators think global first by writing global competitiveness into the objectives of the Financial Conduct Authority and Prudential Regulation Authority Ensure the UK s regulators are the best in the world by upskilling and improving the competence of their workforce.

18 A London prosperity agenda: a bold vision ion needed ed ed to deliver growth A London o prosperity agenda: a bold vision ion needed eded e to deliver growth 19 Footnotes 1 Fifty Thousand Homes campaign, Centre for Economics and Business Research, October 2015 2 Cities of Opportunity 6, PwC, 2014-15 3 CBI/CBRE London business survey, February 2016 4 London Land Commission, January 2016 5 CBI/CBRE London business survey, February 2016 6 PwC English housing survey, July 2015 7 The better renting for Britain campaign, British Property Federation, May 2015 8 Housing supply in London: priority considerations for the mayoral-elect candidates, JLL, November 2015 9 2015-16 World Economic Forum Competiveness Report 10 CBI/CBRE London business survey, September 2015 11 CBI http://news.cbi.org.uk/news/31-billion-cost-touk-trade-while-waiting-for-new-runway-to-bebuilt/, July 2015 12 CBI/CBRE London business survey, September 2015 13 Roads taskforce, the mayor of London, July 2013 14 Centre for Economics and Business Research, October 2014 15 Turning momentum into delivery: CBI/AECOM infrastructure survey, October 2015 16 A new approach to rail passenger services in London and the south east, Transport for London, January 2016 17 www.tideway.london, 2016 18 GLA London Infrastructure Plan, June 2015 19 http://queenelizabetholympicpark.co.uk/the-park/ attractions/olympicopolis, 2016 20 CBI/CBRE London business survey, February 2016 12 CBI/CBRE London business survey, February 2016 22 CBI/AECOM infrastructure survey, October 2015 23 ThinkBroadband.com, February 2016: http://labs. thinkbroadband.com/local/index.php?area=lo 24 Fibre broadband in London, BT, September 2015 25 Ibid 26 Greater London Authority: https://www.london.gov. uk/what-we-do/business-and-economy/ science-and-technology/connectivity/information-digital-connectivity, 2016 27 WRAP and London Waste Recycling 28 CBI/CBRE London business survey, March 2016 29 CBI employment and trends survey, 2015 30 CBI/KPMG London business survey, September 2014 31 CBI/CBRE London business survey, March 2016 32 CBI/KPMG London business survey, September 2014 33 Inspiring growth: education and skills survey, CBI/Pearson, May 2015 34 CBI/CBRE London business survey, February 2016 35 Global life sciences cluster report, JLL, 2014 36 Compass/CrunchBase The start-up ecosystem report, May 2015 http://techcrunch. com/2015/02/04/crunchbase-and-compass-partner-to-rank-global-startup-ecosystems/ 37 CBI/CBRE London business survey, February 2016 38 Tech City, January 2015 39 https://www.london.gov.uk/press-releases/ mayoral/new-20m-london-regeneration-fund, 2016 40 HM Treasury, UK government, 2012 41 London & Partners, February 2016 42 EY attractiveness survey, 2015 43 CBI/CBRE London business survey, February 2016 44 Office for National Statistics international passenger survey, May 2015 45 Key facts about UK financial and related professional services, The City UK, March 2015 46 An analysis of London s exports, GLA Economics, August 2015 47 http://www.uncsbrp.org/finance.htm 48 Key facts about UK financial and related professional services, The City UK, March 2015 49 Global Financial Centres Index, 2015 Conclusion The new mayor has a unique opportunity to plan and influence outcomes in these areas over the next five years and set a positive climate in which people and businesses can successfully operate. The CBI is ready and willing to help deliver a shared prosperity agenda for London by working with the new mayor to implement the actions necessary for business growth and competitiveness. Acknowledgements With thanks to members of the CBI s London Council for contributing to this document and to JLL for facilitating a series of roundtable discussions with the CBI.

For further information on this report, or a copy in large text format, contact: Sana Nabi Assistant director policy T: +44 (020) 7395 8034 E: sana.nabi@cbi.org.uk Copyright CBI 2016 The content may not be copied, distributed, reported or dealt with in whole or in part without prior consent of the CBI. Printed by Colourscript on Amadeus 100 pure white silk, containing 100% recovered fibre certified by the FSC. Colourscript is certified to ISO 14001 and registered to EMAS environmental management systems NEZ052. Product code: 11418 www.cbi.org.uk