Download West London Economic Assessment

West London Economic Assessment
A baseline analysis of the West London economy
Peter Brett Associates LLP
Introduction
• PBA were commissioned in October 2015 to complete an economic assessment of West London to refresh the existing West
London Vision for Growth inform strategic planning and prioritisation of interventions by the new West London Economic
Prosperity Board.
• The commission was approved by the West London Growth Directors’ Board and covers the economic sub–region made up of
seven Boroughs.
• The assessment is high level and does not cover all economic themes in Borough by Borough detail but seeks to inform an
over arching sub-regional approach.
• Other proposed and future studies will contain a more detailed deep dives into skills, employment and business on a Borough,
Ward and super output area.
• The report is structured as follows:
•
Introduction and context
Slides
3-8
•
People & Skills
Slides
9-27
•
Enterprise
Slides
28-45
•
Place & Infrastructure
Slides
46-68
•
Inclusive Growth
Slides
69-84
•
Working to Catalyse Change
Slides
85-95
•
Issues to address
Slides
96-98
•
Selected Sources & Bibliography
Slides 99-100
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Introduction
Peter Brett Associates LLP
The purpose of this report
• This study provides a local economic assessment for West London. The question is “what do West London’s stakeholders
need to know about current and likely future conditions to secure prosperity through the West London Vision for Growth”
• This study provides
• A look at macro trends, applied to West London
• A spatial review of economic performance across the West London area, with a view on sub-area level performance
• Key findings that will help inform the West London Economic Prosperity Board in delivering future policy, and targeting available
resources where they are most likely to be effective
• Proposed changes to Government structures in West London makes this work particularly important. Control over some
central Government spending may be devolved to sub-regions. Without robust, granular data, the sub-region will be limited in its
ability to plan and commission effectively. As City Growth Commission (2014, 12) states, “aligned service budgets and an
integrated reform agenda hinge on the power of timely, accurate information”.
Peter Brett Associates LLP
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Work so far: the West London Vision for Growth
•
The West London Vision for Growth was developed in early 2014 and launched with the approval of West London Leaders in
November 2014.
•
The Vision outlines six key objectives:
•
To achieve a step change in partnership with business and industry to facilitate sustainable economic growth
•
To increase small business start-up and survival rates through business support hubs, higher exports and focused
collaboration with higher education institutions
•
To remove the skills gap and support low-paid residents in work to enable them to achieve pay levels that can sustain
and improve their living arrangements
•
To radically improve success rates for employment programmes for residents with all young people in education,
employment or training
•
To deliver at least 74,000 homes as part of a housing programme that meets the needs of our residents and supports
growth
•
To create and maintain thriving town centres which are hubs for work and living
•
The West London Alliance states that the vision provides a good high level commitment to growth, but that a specific
prioritisation of how to encourage inclusive growth in West London is needed
•
This assessment is the first stage in this process. It will be used to refresh the vision, which can be prioritised and translated
into action planning.
Peter Brett Associates LLP
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This assessment broadly follows the Government’s framework for
increasing productivity, but with an additional focus on inclusive
growth - so that all West London businesses and residents
capture benefits
•
A plan to grow productivity as a driver for economic growth has been the focus for the current and past governments.
•
•
•
‘Productivity is the challenge of our time. It is what makes nations stronger, and families richer.’ (Treasury 2015: Fixing
the Foundations)
The Treasury work sets key reforms to achieve a ‘step change’ towards creating a competitive economy
•
‘encouraging long-term investment in economic capital, incl: infrastructure, skills & knowledge’ (Treasury 2015)
•
‘promoting a dynamic economy that encourages innovation & helps resources flow to their most productive use’
(Treasury 2015)
Productivity relies on increasing three key factors:
•
People and skills –growing human capital
•
Enterprise – supporting what businesses do
•
Investment – in infrastructure and places
•
Our report follows this broad structure. We add a focus on inclusive growth to ensure that growth improves everyone’s
living standards.
•
We begin with the context of change.
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The long term is driven by product and technological change, making
future sources of success very hard to predict. Ideas of the future vary
widely, so it seems centrally important to stay flexible and innovative
<Tetlock: Predictions, even from
experts, are usually wide of the
mark. Experts’ predictions perform
only slightly better than random
guessing
>Stiglitz: The first great depression
was caused by a shift from farming
to factories. The same process is
happening as jobs move from
manufacturing to services
>Cowen: Innovation is slowing
down. Economic growth will be
low in future. There’s nothing
much can be done
<Taleb: seemingly
improbable events
occur far more
frequently than
thought
>Perez: we are going through an
ICT revolution. Revolutions cause
crisis. We need the state to roll
out ICT
>Arthur: Innovation is speeding
up rapidly, as ICT gets adopted.
Expect massive disruption.
Technological unemployment will
become widespread
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There are three broad risks to West London’s prosperity
•
Risk 1: West London becomes a victim of its own success. It fails to invest in new growth capacity, and is overwhelmed as
the external costs of growth (transport congestion; air quality; reduced social infrastructure quality; housing costs) gradually
outweigh the locational benefits of being in London. As the city economy loses efficiency, capital investment moves out over
time, and skilled labour follows.
•
Risk 2: West London fails to stay flexible and innovative, and becomes over-dependent on certain products or
technologies. Professor James Simmie shows how some places have become ‘locked in’ to certain economic sectors, and so
fail to adapt to emergent technologies and working patterns as they change over time. Simmie suggests that an ability to
innovate is central to explanations of why some areas have been able to remain successful over time, whilst some areas have
failed.
•
Risk 3: Inequalities and social exclusion in West London rise unacceptably. Social cohesion is a partial determinant of
economic growth. A level of trust in other people is essential for economic success in large, dispersed and interdependent
society.
•
In the worst case, each of the above risks could manifest themselves simultaneously in different economic sectors and
parts of West London. West London could develop an approach which is intended to manage and reduce these risks in
order to secure long-term prosperity. West London will need to invest in the capacity needed to cope with rapid
growth; maximise the ability of the economy to adapt in the face of what is likely to be very rapid change, and create an
environment in which new land uses and economic configurations are supported; and create a level of social inclusion
which gives all members of society a shared stake in prosperity and growth.
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People and skills
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What this section is about, and why it is important
•
Skills are an important determinant of economic performance and growth.
• Low skills are bad for individuals: educational attainment – in the form of qualifications and test scores – during
compulsory schooling has been identified as “the most frequent and effective childhood predictor of adult outcomes”.
(SEU 2004). Non-graduates, on average, earn around £200,000 less over a lifetime than non-graduates – even after
taking degree costs into account. (BIS 2013).
• Low skills are bad for West London as whole: There are wider network effects that mean that one person’s increase
in skills increases the productive capacity of others. That means that the subject has a wider social and economic
relevance, and is one of the justifications for Government intervention in the provision of skills. The skills of the workforce
and technical expertise in a region are the most important drivers of knowledge-based industry business location
choices. (DfT). And research has shown for example that a 1 percentage point increase in the number of people being
trained adds 0.6% to productivity (Institute of Fiscal Studies, WP05/16). In OECD countries a 1% increase in the number
of graduates adds 1.1% to GDP growth (BIS, Next steps for universities, business and Government, June 2012).
•
Demographic profiles matter to economic outcomes. Other things being equal, rising populations tend to bring rises in
economic output, but the profile of the population has an important influence on income per head. This is because people’s
economic behaviour and needs vary at different stages of life: while young people require investment in health and
education, prime-age adults supply labour and savings, and the elderly require health care and retirement income
(Prskawetz 2007)
Peter Brett Associates LLP
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West London is a major entity in its own right. Its population of 2
million accounts for a quarter of London’s total population, and
outnumbers that of Birmingham and Manchester together
% share of London
Total Population, 2014
North & East London
2,737,700
South London
32%
20%
1,702,400
Central London
2,078,100
West London
2,020,500
-
500,000
24%
24%
1,000,000 1,500,000 2,000,000 2,500,000
Source: 2014 Mid year estimates
Peter Brett Associates LLP
0%
10%
20%
30%
40%
Source: 2014 Mid year estimates
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In West London, there are pockets of high population density –
particularly in Hammersmith and Fulham – but for parts of West
London, population density is relatively low
Population density per square km (selected world cities)
35,000
• As Claire Bennie (2015) has shown,
30,000
• London is a relatively low density city. There
are just over 50 people and 20 homes per ha,
or 5000 people per square kilometre – less than
one sixth of the density of Mumbai.
25,000
20,000
15,000
10,000
5,000
0
Source: City Mayors Foundation (2007 data)
Population density per square km (West London)
• The National Land Use Database (2012) shows
that, at a London-wide level, London has 38%
open green space and (in addition) 24% back
garden space. Buildings account for, at most,
22% of the land usage.
• Population densities are higher along the
eastern border of West London, particularly in
LB Hammersmith & Fulham. Densities are
lower along the west side, particularly in
Hillingdon. Of course, these numbers will be
influenced by the provision of employment land
and major installations such as Heathrow.
• As we show later in the report, there are
debates emerging about how population growth
can be accommodated through increasing
population densities, particularly in suburban
areas and town centres. This data would tend to
suggest that higher densities are possible, if the
developments are made acceptable in planning
terms.
Peter Brett Associates LLP
Source: Census 2011
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Overall, West London has more workers than jobs. It supplies other
labour markets with people. But West London defies easy
categorisation: it is not a dormitory. Looked at on a borough basis,
there are varying job densities
Job Density
England and Wales
Job Density
London
(excl: City of London (81.79) and Westminster (4.35))
Lewisham
Barking and Dagenham
Waltham forest
Redbridge
Haringey
Newham
Greenwich
Harrow
Croydon
Bexley
Enfield
Brent
Wandsworth
Havering
Sutton
Ealing
Bromley
Barnet
Hackney
Merton
Lambeth
Kingston upon Thames
Richmond upon thames
England & Wales Average
London Average
Hounslow
Hammersmith and Fulham
Hillingdon
Southwark
Kensington and Chelsea
Tower Hamlets
Islington
Camden
0.83
0.95
North & East London
0.41
0.44
0.61
South London
0.45
0.45
0.65
Central London
1.73
0.45
West London
0.47
0.48
0.79
-
0.50
0.10 0.20
0.30 0.40
0.50
1.10 1.20 1.30 1.40 1.50
1.60 1.70 1.80
• The Office for National Statistics provides data on current population
and jobs at local authority level. These provide a picture of workforce
jobs and the local labour force in West London. Broadly, there are
three possible situations.
• Some areas will have as many jobs as workers;
• Some will have more workers than jobs, and so ‘export’ workers to
other areas. These areas can be said to have a low jobs density
(the number of jobs in an area divided by its working age
population).
• Others will have more jobs than workers, and ‘import’ workers from
an economic hinterland. These areas have a high jobs density.
• There is no clear West London story emerging from the data on jobs
densities. However, looking at the data at borough level shows
significant differences. Harrow has a low jobs density compared to the
rest of London, suggesting that many Harrow workers commute out of
the area for employment. In contrast, Hillingdon has a high jobs
density, suggesting that it imports labour. Ealing and Barnet sit midtable when compared to the rest of London, further complicating the
story. This would suggest that there is no easy characterisation of the
West London area as a whole: it can neither be said to be a dormitory
suburb, nor a jobs hotspot.
0.53
0.54
0.57
0.58
0.59
0.60
0.61
0.65
0.65
0.66
0.67
0.70
0.72
0.72
0.76
0.80
0.93
0.93
1.08
1.13
1.17
1.29
1.34
1.36
2.15
0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50 1.60 1.70 1.80 1.90 2.00 2.10 2.20
Source: ONS data (2013)
0.60 0.70 0.80 0.90 1.00
Peter Brett Associates LLP
No. of jobs / working age population
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At the moment, West London has a similar age profile to London as a
whole, but has proportionately fewer old people than the rest of the
UK. Two-thirds are working age (16-64 yrs), which is similar to other
London sub-regions except Central London
Population, 2014
0-15 yrs
UK
19%
London
20%
North & East London
22%
South London
21%
Central London
18%
West London
21%
0%
UK
16-25 yrs
26-64 yrs
13%
51%
13%
11%
13%
15%
59%
13%
10%
54%
12%
Working Age Population, 2014
20%
40%
60%
• The data is potentially important because it may
indicate a particular “dependent age” population,
as against those of working age.
10%
53%
80%
100%
64%
68%
North & East London
68%
• West London has a similar proportion of young
people (0-15 years) to the London average and
the rest of the UK, but there is, at the moment,
proportionally fewer 65+ people in West London
compared to the UK, although the same as in
London overall.
• At two-thirds of the population, the working age
population (16 to 64 yrs), is also proportionally
greater than in the UK. This is important
because it mostly among this age group where
prosperity for all is generated: larger the
proportion of working age people, then the lower
the ‘dependency ratio’ - and the higher the
typical per capita output.
65%
Central London
West London
12%
54%
London
South London
18%
55%
14%
• This data is taken from 2014 mid year population
estimates, and so represents the best up to date
view of the current population age structure in
West London.
65+ yrs
73%
67%
Peter
Associates
0%Brett
10%
20% LLP
30%
40%
50%
60%
70%
80%
Source: 2014 Mid year estimates
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Population and working age population has been rising strongly
in West London. This is projected to continue
1.45
Total Population and Working Age Population 20052035
• The chart to the left is constructed from
Experian data projections. These can be
expected to differ on matters of detail from the
projections used in the Outer London
Commission (OLC) Background Paper Issue
1 Options for Growth June 2015, but the
emerging story is similar.
1.35
1.25
1.15
1.05
West London (Total population)
Greater London (Total population)
UK (Total population)
0.95
West London (Working age population)
Greater London (Working age population)
UK (Working age population)
0.85
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
Growth Index: 2005 = 100
• Relative to the UK, West London is projected
to experience high rates of population
increases over the next 20 years.
Peter Brett Associates LLP
Source: Experian RPS
• The OLC states that “the 2011 Census
showed that London’s population has been
increasing by an average of 87,000pa in the
previous decade, which is nearly double the
rate of that had been assumed previously and
planned for in the 2011 London Plan. Current
population projections suggest London’s
population is likely to continue to grow and
that between 2011 and 2036 it is projected to
increase by a further 1.8 million, or 22 per
cent, putting it at 10 million by 2036.” The
report continued that “it is not anticipated that
London’s growth will be evenly distributed
between age groups. The working age
population (16 to 64) is projected to rise by 1
million or 18 per cent, while the over 65s are
expected to increase by 600,000 – an
increase of 65 per cent from 2011, driven by
increasing life expectancy and the large
cohort of baby-boomers passing 65.”
15
Population change has been modelled down to ward level
• These ward projections are taken from the GLA 2014 round
population projections accessed via the London Datastore. London is
shown first and then West London separately.
GLA SHLAA-capped pop projections within
London: short-term migration variant (2011-36)
• The London wide map shows that population growth is strongest in
East London. There is strong area-wide growth across West
London, with pockets of particular change. These projections are
frequently driven by residential expansions, including hotspots such
as around Wembley, Golders Green and Colindale.
West GLA SHLAA-capped pop projections within West
London: short-term migration variant (2011-36)
Source: GLA Demographics
Peter Brett Associates LLP
Source: GLA Demographics
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West London is very diverse
• The Census 2011 information on the
left shows the number of people in
West London Boroughs by ethnicity,
showing how diverse West London
is.
• Four out of the seven West London
Boroughs have a majority non-white
ethnic population and by 2021 this
will have increased to five.
0
2
4
6
%
8
10
12
14
16
WHITE
2.9
White Irish
White Gypsy
0.1
13.1
Other White
MIXED
Mixed White and Black Caribbean
Mixed White and Black African
1.1
0.7
Mixed White and Asian
1.4
Other Mixed
1.3
ASIAN
14.6
Indian
Pakistani
Bangladeshi
Chinese
3.4
0.7
1.4
7.9
Other Asian
BLACK
5.2
Black Caribbean
Black African
Other Black
• West London’s diversity and superb
global transport links mean that it
may be well positioned to benefit
from a push to further
internationalise its strong ‘small
business’ economy. Any
interventions would be hard to
design but could yield interesting
benefits. Such projects would need
to be approached with caution to
ensure that value to the public purse
is delivered (rather than simply
benefiting private individuals).
3.2
1.8
OTHER
Arab
Other ethnic group
2.1
2.4
West
London
Boroughs
Peter
Brett
Associates
LLP
17
England
Source: Census 2011
We now turn to skills. A skilled labour force is becoming
increasingly important as the economy moves into higher value
added goods and services, with a need for knowledge and creativity
Source: GLA London Labour Market Projections 2013
Peter Brett Associates LLP
• Most new jobs are expected to be in
knowledge sectors, and
professional/managerial in nature. GLA April
2013 London Labour Market Projections predict
that by 2036, there will be an additional 1.6 million
jobs. Of that total, 55% of growth is expected to
be in knowledge economy sectors; 1 million of the
1.6 million new jobs created will be in professional
/ managerial jobs. There is expected to be a
decline in traditional sectors. (GLA 2013)
• This is having important effects. Unskilled people
will find that labour demand for their skills
falls, eroding their wage bargaining power (OECD
2005). This has resulted in “a striking [negative]
shift in the employment and earnings
prospects of workers with low skills” (HM
Treasury and DWP)
• Skills levels will therefore be critical to the
short, medium and long term performance of
the West London economy. West London’s
unskilled population will suffer constant pressure
on wage rates (assuming all other things remain
equal – e.g. minimum wage policy). An area’s
economy which is locked into low wages will find
itself compelled to compete on price and
geographical/physical endowments. The Area
Based Review of the FE sector in London is being
carried out which should provide a role for
London’s sub-regional grouping of boroughs to
deliver a reformed skills system that can help
tackle these issues.
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Qualifications of the working age residents in West London are
relatively good, with nearly half holding a degree level qualification.
But 15% have basic or no qualifications
Qualifications of working age residents, 2014
21%
England
16%
London
• Qualifications of the working age residents – whether
in work or not - in West London are relatively good
compared to England as a whole, with nearly half of
these residents holding a degree level qualification.
But 15% have basic or no qualifications.
Basic (NVQ 1)
or no
qualification
36%
49%
Degree
equivalent
qualification
20%
North & East London
41%
South London
14%
Central London
13%
• The second chart shows the proportion of the
working-age residents with various qualification levels
who are actually in work. It shows that more than half
of these working residents hold NVQ level 4+, which
is greater than the proportion of all residents with
NVQ4+ qualifications in the first chart.
47%
62%
15%
West London
48%
0%
10%
20%
30%
40%
50%
60%
• By contrast, only 11% of working-age residents in
work hold a basic (NVQ L1) or no qualifications
despite 15% of all working age residents achieving
this level.
Qualifications of West London working age
residents in work , 2014
Other qualification
10%
NVQ L4+
NVQ L3
NVQ L2
• These, albeit small, differences do infer that
qualifications make a difference in employment
opportunities in West London. But while there are
differences between skills levels for all residents of
West London compared with those residents in work,
in general they are not especially significant.
56%
14%
9%
NVQ L1
6%
No qualification
5%
0%
10%
20%LLP 30%
Peter Brett
Associates
40%
% in employment (16-64)
50%
60%
19
Source: Annual Population Survey
Lower qualified residents are spatially concentrated. Because lower
skilled workers are likely to struggle in the future economy, these
areas will tend to perform worse over time. Resources may need to
be concentrated in those areas in order to upskill workers through
their working lives
Concentrations of low skilled residents neighbourhoods where more than 13% have
only a basic NVQ Level 1 or no qualification
(lowest skilled 20% of neighbourhoods)
Source: Census 2011
Concentrations of high skilled residents - where
more than 18% have an NVQ L4 degree
equivalent qualification (highest skilled 20% of
neighbourhoods)
Source: Census 2011
Peter Brett Associates LLP
Source: Census 2011
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In an economy where skills demands are ever-rising, schools
performance will be very important to the long term performance
of the economy. Some areas of West London have shown strong
improvement since 2002
Change in proportion of pupils eligible for
FSM achieving five or more GCSEs at A*–C
including English and maths (or equivalent),
across local authorities, 2002–12
• London schools have improved significantly since 2000, at a
faster rate than anywhere else in the country.
• Some explanations suggest that improvements in KS4/GCSE
results are best ascribed to changes in primary school attainment
from year 2000 onwards (IFS/Institute for Education 2014).
• Other research (Centre for London, CBFT 2014) suggests that
four key school improvement interventions provided the impetus
for improvement - London Challenge, Teach First, the academies
programme and improved support from local authorities was
responsible for the change, and identifies common features that
link together all of these interventions:
• a focus on performance data;
• a culture of accountability;
• the creation of a more professional working culture;
• a collective sense of possibility and highly effective
practitioner led professional development; and
• effective leadership at every level of the system.
• Data produced by the IFS study suggests that the increase in
attainment in poorer pupils has been most significant in
Hillingdon, Ealing, Hounslow, Hammersmith and Barnet.
Source: IFS (2014)
Peter Brett Associates LLP
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Although performance has improved, GCSE outcomes remain
spatially uneven. Schools’ performance has very significant long
term economic implications
GCSE attainment
• People entering the school
system now will enter the
labour market between 2033
and 2035, and leave the
labour market around 2075.
• Fixing the performance of
underperforming schools
would represent a major long
term economic development
strategy in itself.
Source: DfES, OSCI
Peter Brett Associates LLP
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Differences in school performance can be ascribed to the socioeconomic background of pupils, but some schools are able to
generate excellent results even with a disadvantaged school
population. Best practice needs to be spread across the subregion
•
Social Mobility and Child Poverty Commission (2014) reported on the relationship between disadvantage and education
provision: “Some schools seem to have learnt the secret of how to alleviate the impact of background on life chances. They
have found a way of overcoming the barriers that impede social mobility. At a time when social mobility is stalling and child
poverty is rising, there is an urgent need to share the lessons so that every school can crack that code.”
•
The key findings of the report were that
1. The wide variation in results between schools with similar intakes shows that there is a lot of scope to raise performance
2. Some schools will need to shift their focus towards core academic subjects and raising attainment across the whole
ability range to avoid falling in national league tables and - most importantly - to improve social mobility for their pupils
3. Some teachers’ expectations of students from disadvantaged backgrounds are too low and getting the best teachers to
teach in the worst schools requires stronger incentives, including higher pay
4. Schools could
A) use the Pupil Premium strategically to improve social mobility
B) build a high expectations, inclusive culture
C) incessantly focus on the quality of teaching
D) tailor strategies to engage parents
E) prepare students for all aspects of life - not just for exams
•
This does happen in West London, as else where in London, but perhaps requires a consistent approach.
Peter Brett Associates LLP
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Recent Bank of England research suggests that lower skilled jobs may
be at risk of automation, putting further pressure on wages of lower
skilled workers. This reinforces the need for the creation of a very
effective lifelong learning capability for West London
Peter Brett Associates LLP
•
Skills demands have been rising since the late 19th and early
20th centuries, as rising incomes created a demand for new
goods and new, more complex and technical, ways of producing
them (Haldane 2015).
•
Lower skilled jobs may be at risk from automation. It is argued
that information technology may be poised for exponential
growth, as its full fruits are harvested. Andy Haldane (Bank of
England Chief Economist) suggests that we may be on the cusp
of a fourth Industrial Revolution. Automation of administrative,
clerical and production tasks may affect major swathes of the
labour market. 15 million jobs may be at risk within the UK.
Those most at risk from automation have the lowest pay:
“technology could act as a regressive tax on the unskilled.”
(Haldane 2015)
•
In previous periods of technological change, humans have
responded by upskilling themselves, and rising real incomes
have created new demands for human skills. But technological
capacity is becoming so pervasive that this process may not
occur in the same way in future.
•
If these trends do materialise – and we cannot be certain that
they will - workers in higher skilled jobs will tend to be insulated
from change, as well as those with in jobs that demand high
levels of creativity, caring and emotional intelligence.
•
Residential areas with concentrations of lower skilled
workers may be particularly affected by these shifts if large
scale technological unemployment is created. This
reinforces the need for the creation of a very effective
lifelong learning capability for West London in order to help
workers adapt to future circumstances as quickly as
24
possible.
Skills upgrades outside school settings will also be critical
•
The National Institute of Adult Continuing Education state that there is an lack of good quality studies “investigating the net
impact of lifelong learning on poverty reduction in the UK and on the possible multiplier effect of educational policies with
other initiatives”. Research finds that there “is a particularly strong need for continuing longitudinal studies” that demonstrate
the impact of lifelong learning on candidates over time.
•
However, there does seem to be an important role for lifelong learning. This might be particularly important for new migrants
who arrive too old to pass through the school system. In an international study, the OECD has found that “in most countries,
immigrants with a foreign-language background have significantly lower proficiency in literacy and numeracy than nativeborn adults. Countries with relatively large immigrant populations… need to consider more effective ways to support
immigrants in learning the host language, through pre- and/or post-arrival interventions…Foreign-language immigrants who
have low levels of education are particularly at risk. When low educational attainment is combined with poor proficiency in
the language of the host country, integration into the labour market and society becomes even more difficult.” (OECD 2013)
Peter Brett Associates LLP
25
West London has a current and growing role in this area
•
Firstly, the FE Sector is under review. There is a substantial role for London borough leaders working through London’s subregional grouping of boroughs to deliver a reformed skills system following the Area Based Review of the FE sector in
London to shape future skills provision, with employers, via colleges.
•
Secondly, London’s Mayor and Borough Leaders have been working closely together to agree the appropriate levels of
governance and proposals for additional powers and funds sought for skills and employment as set out in London’s CSR
submission on 4th September 2014.
•
Thirdly, the wider West London Vision is to reduce the disparity between the high skills requirements of jobs available locally
and the lower skill levels of many of the resident workforce. The Skills Escalator programme provides support for employed
people with low skills to progress and increase their wages in order to end or reduce their dependence on benefits.
•
Fourthly, a wider skills devolution is underway in London, particularly with regard to the transfer of adult learning budgets to
local authorities.
•
Finally, there is a prospect of long-term investment in infrastructure and housing in West London, which could be better
related to social benefits. West London has already developed an approach to the Social Value Act 2012 (which came into
force in January 2013). This has two elements. The first is that deprived people have the opportunity to obtain employment
in growth areas, and secondly that SMEs have the opportunity of joining the supply chain for large public sector contracts.
Peter Brett Associates LLP
26
Key issues
•
West London has a diverse and growing population. A rise in the working age population is expected, along with a
significant rise in the number of older people. West London’s diversity and superb global transport links mean that it
may be well positioned to benefit from a push to further internationalise its small business economy. Any
interventions would be hard to design – and such projects would need to be approached with caution, if value to the
public purse rather than private individuals was to be delivered - but could yield interesting benefits.
•
The future prosperity of this population will depend to a significant extent on skills levels. Skills in West London are generally
strong, but there 15% of people have basic or low levels of qualifications. These people will struggle in the economy of the
future, and tend to be spatially concentrated. Resources may need to be mapped closely to these individuals and areas in
order to address low skills. West London may have a role in this prioritisation and mapping process.
•
School performance will be critical, and has long term economic implications. People entering the school system now will
leave the labour market around 2075. Some schools are able to generate excellent results with a disadvantaged school
population. London schools have made very significant strides in the last decade or so, but the practice of the very
best still needs to be shared across the sub-region. West London may have a role in this process.
•
Lifelong learning outside school settings will be critical. Ensuring that new migrants (who arrive too late to move through the
school system) acquire language and job skills is very important to integration into the labour market and broader society.
There may be upcoming challenges of automation particularly affecting lower skilled workers in London. This reinforces the
need for the creation of a very effective lifelong learning capability for West London. It will also be important to capitalise on
opportunities: there is a prospect of long-term investment in infrastructure and housing in West London, which could be
better related to social benefits. West London has already developed an approach to the Social Value Act 2012 to ensured
that public procurement processes create social benefits. West London has a significant – and growing – role in skills
provision. The subject is going to be subject to detailed review. Getting lifelong learning and FE provision right is a
potentially major win for West London, and is likely to have highly beneficial effects over the long term on both
growth and social inclusion.
Peter Brett Associates LLP
27
Enterprise
Peter Brett Associates LLP
What this section is about, and why it is important
• The engine of the West London economy is its businesses.
Businesses create jobs and add value. Enterprises bring new
ideas and technologies and increase competition. In this
section, we explore the scale and key features of the West
London’s businesses; their performance to date; and their
expected performance in the future.
• There is at times a basic confusion: that a bigger economy is
necessarily better, or that more (of anything – jobs, workers,
output) is necessarily better.
• It is true that we get more economic output if we grow the
number of workers, or if they work longer hours. But that is
just growth through ‘brute force’: we have simply applied more
resources.
• Instead, what West London needs to do is grow output per
worker. That can be termed ‘smart growth’ – or rising
productivity. Output per worker can be raised by increasing
skills, increasing capital, or better efficiency with which factors
are combined – including technological improvement, ways of
working and culture, management, economies of scale,
regulation and competition.
• Productivity is measured as output per hour, or worker, or
person. Raising labour productivity is the most important way
of generating long-term economic growth. The alternative that of constantly raising the number of hours worked – is in
the long term unsustainable.
Peter Brett Associates LLP
29
The degree of West London’s exposure to growing sectors is likely
to influence future growth rates
GVA per employee (£000s) 2015
• We have looked at two economic models which broadly agree on
the future source of jobs growth.
250
GVA per employee (£000s)
200
150
100
50
0
Accomodation,
Food Services &
Recreation
Agriculture,
Forestry &
Fishing
Construction
Finance &
Insurance
West London (2015)
Information & Manufacturing Professional & Public Services
communication
Other Private
Services
West London (2035)
UK (2015)
Transport &
storage
Utilities
Wholesale &
Retail
UK (2035)
Projected change in employment by sector, West
London 2015-2035
Employment Growth, 2015 - 2035
Total (148,050 jobs)
16%
Construction (11,510 jobs)
34%
Accom, Food Serv & Recreation (22,190 jobs)
25%
Transport & storage (25,330 jobs)
24%
Wholesale & Retail (24,250 jobs)
15%
Public Serv (29,450 jobs)
15%
Professional & Other Private Serv (29,360 jobs)
13%
Information & communication (8,380 jobs)
11%
Utilities (310 jobs)
7%
Finance & Insurance (650 jobs)
Manufacturing (-3,230 jobs)
Extraction & Mining (-120 jobs)
Agriculture, Forestry & Fishing (-30 jobs)
• The Outer London Commission reports findings from the in-house
GLA economic modelling. It finds that “the projections in the 2015
London Plan suggest that the total number of jobs in London could
increase from 4.9 million in 2011 to 5.8 million by 2036. The largest
increase in employment over the period to 2036 will be in the
professional, real estate, scientific & technical activities sectors –
nearly doubling to 1.1million. This is followed by growth in
employment in administrative & support services, information &
communication and accommodation & food services, which are
expected to grow by a combined 536,000. In outer London,
employment growth is expected to be 2.2 million in 2036 – the
equivalent of 38.8% of the London total (and a 15.6% increase from
the 2011 value), compared to inner London of 3.5 million jobs”
(Outer London Commission (June 2015) Background Paper Issue 1
Options for Growth.
6%
-8%
-9%
-14%
-15%-10% -5% 0% 5% 10% 15% 20% 25% 30% 35%
Peter Brett Associates LLP
Source: Experian RPS
• Since the GLA job forecasts are not available below London level by
sector, we have also drawn on the latest (Sept 2015) Experian
Regional Planning Local Economic Forecasts, which identifies that
West London will grow by 148,000 jobs (16%) over the next 20
years. Unlike the London projections, the biggest increases are
projected in construction, accommodation & food services, and
transport & storage. More modest growth in jobs (but not
necessarily output) is expected in the high value sectors of
information and communication, professional services and financial
services, where many of the jobs are likely to be full time. The only
notably projected reduction is in manufacturing jobs, which
continues its long term decline in West London and London, and
even more widely across the nation.
30
West London is a big, prosperous economy. West London has the
second highest total GVA of any London sub-region. West
London has the highest productivity per worker, reflecting its
more capital intensive economy
GVA (£m, 2015)
Central London
£178,265
North and East London
South London
GVA per worker, 2015
£66,396
£58,925
£50,441
£55,436
£39,653
West London
£67,319
£72,995
£0
£50,000
£100,000
£150,000
£200,000 £0
Source: Experian RPS
Peter Brett Associates LLP
£20,000
£40,000
£60,000
£80,000
Source: Experian RPS
31
Compared to the national average, West London has seen significant
growth in total businesses – although is about London average on
this measure
No. of Enterprises, 2011 and 2015
102,100
North & East London
2015
69,500
2011
71,700
South London
• West London has nearly 100,000 business enterprises which are VAT
registered. Over five years, its business growth performance has been
about the London average, which far exceeds the average growth for
England and Wales. But West London’s performance is a way behind the
extraordinary performance of North and East London.
56,400
173,500
Central London
134,500
97,500
West London
74,000
Total net business growth 2011 - 2015
England & Wales
19%
London
• The Flat White Economy is big. Across the UK, the media, information and
communication sectors account for nearly 8% of GDP – the size of the car
manufacturing and oil and gas industries combined. It is also growing
rapidly. Douglas McWilliams of CEBR believes that its share of GDP will
double over the next decade.
33%
North & East London
47%
South London
• North and East London’s performance in comparison to West London’s
requires some explanation. One potential explanation concerns the fact
that, looking into the figures, North and East London contains the “flat white
economy” hotspot of Old Street roundabout – the centre of the dense
network of digital marketing, computer programming, software publishing
and video post-production businesses. Between 2012 and 2014, more
businesses were created in the single London postcode of EC1V Old
Street postcode than in the whole of Manchester and Newcastle put
together. In two years, 32,000 businesses have been registered in that
single postal district.
27%
Central London
• Some areas in West London already are strong performers in this sector –
notably Hounslow, which has seen growth driven by Sky Digital.
29%
West London
32%
0%
20%
40%
Source: ONS UK Business Counts
Peter Brett Associates LLP
32
West London’s micro businesses are an important part of the
economy – as they are in the rest of London. They may become
the established large businesses of the future
Number of business Enterprises, by size (2015)
West London
Central London
South London
North & East London
Micro (1-9 emp)
89,400
151,700
65,900
93,800
Small (10-49)
6,600
17,300
4,700
7,000
Medium (50-249)
1,600
4,600
1,000
1,300
Large (250+)
300
1,100
100
200
Businesses by size (2015)
100%
0.3%
0.6%
1.6%
98%
0.2%
1.4%
0.2%
1.3%
6.6%
6.8%
0.4%
0.4%
1.9%
2.0%
2.6%
96%
6.7%
94%
7.9%
9.2%
92%
9.9%
90%
88%
86%
91.9%
91.4%
91.7%
89.7%
88.5%
84%
86.9%
• West London has a slightly
higher proportion of micro
businesses (employing fewer
than 10 workers) compared
to the London & national
averages, although the
difference is not particularly
significant. This proportion is
particularly high in the
northern areas of West
London, in Barnet and
Harrow.
• Such business can develop
into the large established
businesses of the future. But
by the same token, microbusinesses can be more
vulnerable in times of change
and downturn because of
lapses in cashflow rather
than being poor or bad
businesses.
82%
80%
West London
Central London
South London
North & East London
London
England & Wales
Large (250+)
0.3%
0.6%
0.2%
0.2%
0.4%
0.4%
Medium (50-249)
1.6%
2.6%
1.4%
1.3%
1.9%
2.0%
Small (10-49)
6.7%
9.9%
6.6%
6.8%
7.9%
9.2%
Micro (1-9 emp)
91.4%
86.9%
91.9%
91.7%
89.7%
88.5%
Peter Brett Associates LLP
Source: ONS UK Business Counts
33
Micro businesses are particularly well represented in the local
service economy and business services. Nationally, though,
wages of the self employed have fallen by 22% since 2008/09
Micro businesses as a proportion of total in each location
Barnet Brent Ealing Hamm. &
Fulham
Harrow Hillingdon Hounslow West
London
London
A : Agriculture, forestry & fishing
0%
0%
0%
0%
0%
0%
0%
0%
0%
B : Mining & quarrying
0%
0%
0%
0%
0%
0%
0%
0%
0%
C : Manufacturing
2%
3%
3%
3%
2%
3%
2%
3%
3%
D : Electricity, gas, steam & air conditioning supply
0%
0%
0%
0%
0%
0%
0%
0%
0%
E : Water supply; sewerage, waste management & remediation
0%
0%
0%
0%
0%
0%
0%
0%
0%
F : Construction
12%
12%
13%
6%
12%
14%
9%
11%
9%
G : Wholesale & retail trade; repair of motor vehicles
14%
19%
17%
12%
16%
16%
14%
15%
13%
H : Transportation & storage
2%
3%
3%
1%
3%
6%
5%
3%
2%
I : Accommodation & food service activities
3%
5%
4%
4%
3%
4%
4%
4%
4%
11%
13%
15%
15%
16%
14%
21%
15%
14%
K : Financial & insurance activities
2%
1%
1%
2%
2%
2%
1%
2%
3%
L : Real estate activities
9%
5%
4%
4%
6%
4%
3%
5%
5%
22%
18%
20%
29%
23%
18%
20%
21%
25%
N : Administrative & support service activities
9%
8%
8%
9%
7%
8%
8%
8%
10%
O : Public administration & defence; compulsory social security
0%
0%
0%
0%
0%
0%
0%
0%
0%
P : Education
1%
1%
1%
1%
1%
1%
1%
1%
1%
Q : Human health & social work activities
4%
4%
4%
4%
4%
4%
4%
4%
4%
R : Arts, entertainment & recreation
3%
3%
3%
5%
2%
2%
3%
3%
4%
S : Other service activities
4%
3%
4%
4%
3%
4%
4%
4%
4%
T : Activities of households as employers
0%
0%
0%
0%
0%
0%
0%
0%
0%
U : Activities of extraterritorial organisations & bodies
0%
0%
0%
0%
0%
0%
0%
0%
0%
J : Information & communication
Source:
ONS& UK
Business
Counts
M : Professional,
scientific
technical
activities
Source: ONS UK Business Counts
Peter Brett Associates LLP
• Micro business are highly
represented in the sectors
highlighted in red. This shows a fifth
of ‘micro’ businesses are in the
“Professional, scientific & technical”
sector (compared to a quarter in
London). Comparatively, West
London has a greater representation
of micro businesses in wholesale
retail, construction & I.T. than
London, potentially more specific to
serving a local and sub-regional
market. But also potentially
representing the niche family owned
businesses which are prevalent in
certain high street areas.
• There has also been a strong shift
towards self employment, and the
most common roles are working in
construction and taxi driving and in
recent years there have been
increases in management
consultants. Part of this rise, though,
might be what is known as ‘defensive
self-employment’, and wages of the
self employed have fallen by 22%
since 2008/09 (ONS).
34
Micro businesses are widely distributed across West London but with
a denser scattering in the eastern side of the West London area likely reflecting economic mass, transport provision and proximity to
central London. However, a high proportion of micro-businesses are
found in the northern part of West London
Peter Brett Associates LLP
Source: BRES data 2015. Total employment (measured as employees plus working
proprietors) working in businesses employment less than 10 employees and registered
for VAT and/or PAYE purposes .
35
New start-ups drive innovation and competition, with
consequent productivity effects. The latest data shows that
West London has a good rate of new business formation
VAT registration (businesses) births and deaths, 2014
Businesses born
Business Business
per 1,000 of
births
deaths
resident pop
Net Death and
change birth ratio
9.3
18,100
10,600
7,600
1.72
16.7
33,300
18,700
14,500
1.78
South London
7.2
11,900
7,000
4,900
1.70
North & East London
8.3
21,500
11,200
10,300
1.91
10.4
84,800
47,500
37,200
1.78
5.5 306,200 193,400
112,800
1.58
West London
Central London
London
England & Wales
100%
Business survival rates, 2009-2014
90%
West London
Central London
80%
South London
70%
• The most recent data on VAT registrations, so
that from 2014, West London’s business birth
rate (as reflected by a new VAT registration)
per 1,000 population is higher than North and
East, and South London. For every
business death (i.e. VAT de-registration) there
are 1.72 additional business births in West
London, which is much greater than the
national rate, but below Central London and
North & East London.
• Most small business in West London will fail
within 5 years, but despite this West London
has a good record for business survival
relative to Central London and North & East
London.
North & East London
London
60%
England & Wales
50%
40%
30%
1 Year
2 Years
3 Years
4 Years
5 Years
Source: Business Demography, 2014
Peter Brett Associates LLP
36
Business survival rates are perhaps less important than often
thought in the creation of long term prosperity. It is the level
of competition that creates productivity growth by driving
innovation and efficiency
• Enterprise – the creation of new firms – raises productivity in a continually evolving process. This process was
termed “creative destruction” by Schumpeter as far back as 1942. The mechanisms by which this process works
are as follows.
• Competition rises as new firms drive out existing underperforming firms, so levering up productivity.
• New firms and entrepreneurs introduce new technology and innovation – again levering up productivity.
• There is an important and rather counter-intuitive element here. Research suggests that raising business survival
rates is not as important as sometimes thought in raising economic growth. Instead, the birth rate may be more
important. it is the constant process of competition and innovation between firms which drives long term
productivity growth in an economy. Research suggests that “it is not necessary that new entities [ie, new firms]
survive and exhibit strong growth in order for these supply side effects to occur…even those start-ups that fail to
survive competition might make an important contribution. It is the contestability of the market that counts” (Fritsch
and Mueller). Those firms destroyed in this process release labour capital and land for more productive use
elsewhere in the economy.
• It is also the case that self employment has been a significant driver of business formation across the UK economy.
A significant number of business “closures” will be self-employed people going back to paid employment –
although it is not possible to isolate this precise process in the West London statistics.
• These findings may have implications for future decisions about the nature of future business support that West
London may choose to commission.
Peter Brett Associates LLP
37
Because micro-businesses are such an important sector, there could
be an interesting niche for West London in neighbourhood or town
centre co-working spaces. These could be used to re-engineer high
streets
• Cass Business School research finds that ’future work’ will see more work being done remotely. These trends may lead to
demand for a new types of space which is neither workplace nor home space but a new place to work. This has been termed “Third
space” and use by telecommuters in US (growing at 10% p.a.) tends to focus on chain eateries and coffee houses. There is some
evidence of an emerging trend in UK for independent cafes/coffee houses, libraries and more flexible atrium/flexible shared type spaces.
• A number of reports highlight specific sectors which have a high or growing incidence of homeworking. The Workhub report
(June 2010) – a survey of homeworkers in Milton Keynes and South Midlands revealed homeworkers in that area as being involved in
the following sectors:
• Legal, Finance, business, IT: solicitor’s practice, financial advice and planning, book-keeping, accountancy, training, coaching,
management consultancies, and office support
• Creative/marketing: architect, PR consultants, copywriting, graphic design, fine art, sculpture, jewellery, exhibition design, web
design, consultancies, market research, photography, publishing)
• Health: midwifery, personal training
• Retail and personal services: food produce and sales, designing and manufacturing children’s products, accessories and gifts,
florist, book sales, genealogy, educational goods and hardware, hair and beauty treatments, dog care/walking/boarding,
personalised wine labelling, life coaching
• Tourism: information and promotional goods.
• With the growth of super-fast broadband, home working will become even more attractive. Not only it may provide an impetus for
ICT sector growth, but it will also enable a much more comfortable use of internet telephony and video conferencing, thus contributing to
a reduction in travel and commuting. With the profile of its resident population and access to central London markets, West London may
be well placed to capitalise on these trends.
• Chris Brown (Igloo): “London’s co-working spaces are currently booming. [But] starting up neighbourhood co-working spaces is
incredibly challenging. You would be in pretty direct competition with coffee shops and it is hard to achieve the scale necessary to
support onsite management in a local neighbourhood and so it is tough to find a workable business model.”
Peter Brett Associates LLP
38
38
Large businesses (employing more than 500 workers) are
exclusively found in the south of West London
Total employment in large businesses (employing more than 500 workers) in West London
West London (north)
West London (south)
Peter Brett Associates LLP
Source: BRES data 2012. Total employment (measured as employees plus working proprietors) working
in businesses employment less than 10 employees and registered for VAT and/or PAYE purposes
39
We have looked at West London’s economy using Location
Quotient analysis
• A more refined analysis of sectoral employment is useful at this point to help identify the West London’s areas of strengths
and specialisation, and single out a number of sectors for more in-depth analysis. We do this in the following chart by
combining Location Quotients (LQ), historical growth in jobs at national level over 2001-08, and job numbers by sub-sector.
• Location Quotients compare a sector’s share of total jobs in an area with the national average. This means that an LQ
greater than 1 points to some degree of specialisation in the local economy. The higher the LQ, the stronger the
specialisation.
• The following chart can easily be read in quadrants:
•
In the North East quadrant are sectors that are strongly represented in the local economy and have been growing
nationally. They drive the local economy.
•
In the North West quadrant are sectors that have grown nationally but are poorly represented in the borough. They
are sectors where some policy support may prove useful.
•
In the South West quadrant are sectors which have been declining and account for few jobs in the borough. These
are sectors of little interest in terms of economic policy as they represent a small and shrinking number of jobs.
•
In the South East quadrant are sectors which have been declining but in which the local economy retains a
significant presence. This is not a problem because West London has no significant jobs in these sectors.
• The size of the bubble is proportional to the size of the sector in terms of jobs.
• The key sectors in West London, which are well represented, large and have experienced recent growth at a national level,
are Business Administration & Services, Financial & Insurance, Information & Communication, Transport & Storage and
Wholesale.
Peter Brett Associates LLP
40
These changes have created an economy in which about one third of
jobs are typically in white collar business and professional services.
However, the single largest sector is in Transport and Storage (11%)
reflecting West London’s gateway role between Central London,
Heathrow and the rest of the country
National employment growth, 2009-2014
Sectors overrepresented in WL,
growing nationally, incl
25%
Sectors under-represented
in WL, growing nationally
Professional
scientific,
technical
(9%)
20%
13
17
10
LQ : Eng & Wales = 1
12
10%
Property (2%)
165%
6
18
10
11
0%
0.5
1
3
7
Information and
Communication (8%)
Wholesale
(5%)
1.5
-5%
Sectors underrepresented in WL,
shrinking nationally
4
-10%
15
-15%
Transport & Storage
Business admin
and support (9%)
15%
9
2
14
Transport and
storage
2
(including
postal) (11%)
8
2.5
Sectors over-represented
in WL, shrinking nationally
-20%
1 : Agriculture, forestry & fishing (A)
5 : Motor trades (Part G)
9 : Accommodation & food services (I)
13 : Professional, scientific & technical (M)
17 : Health (Q)
3 : Manufacturing (C)
7 : Retail (Part G)
11 : Financial & insurance (K)
15 : Public administration & defence (O)
2 : Mining, quarrying & utilities (B,D and E)
6 : Wholesale (Part G)
10 : Information & communication (J)
14 : Business administration & support services (N)
18 : Arts, entertainment, recreation & other services (R,S,T and U)
4 : Construction (F)
8 : Transport & storage (inc postal) (H)
12 : Property (L)
16 : Education (P)
Peter Brett Associates LLP
3 : Manufacturing (C)
7 : Retail (Part G)
11 : Financial & insurance (K)
15 : Public administration & defence (O)
1 : Agriculture, forestry & fishing (A)
5 : Motor trades (Part G)
9 : Accommodation & food services (I)
13 : Professional, scientific & technical (M)
17 : Health (Q)
4 : Construction (F)
8 : Transport & storage (inc postal) (H)
12 : Property (L)
16 : Education (P)
2 : Mining, quarrying & utilities (B,D and E)
6 : Wholesale (Part G)
10 : Information & communication (J)
14 : Business administration & support services (N)
18 : Arts, entertainment, recreation & other services (R,S,T and U)
Source: Business register and employment survey (2014)
41
West London’s employment in Knowledge Based Economy sectors is
about average for London, but has been improving. Emerging work
suggests that growth in offices may need flexible policy provision in
some parts of West London
Number and growth in KBE jobs
2009
West London
344,900
395,700
50,800
15%
1,107,700
1,304,700
197,000
18%
South London
240,900
245,800
4,900
2%
North & East London
386,300
454,300
68,000
18%
Central London
60%
Difference
2014
Proportion of jobs in the knowledge based economy
(2009 compared to 2014)
2009
2014
50%
40%
30%
20%
55% 56%
42% 43%
42% 41%
49% 49%
46% 46%
39% 40%
• High value activities are part of the
knowledge based economy, and as
such are considered a key driver of
productivity and economic growth, by
spreading technical progress and
efficient business methods.
• However, they do not always
generate large numbers of
employment opportunities as rising
productivity may translate into fewer
jobs.
• Emerging work we are aware of in
West London suggests that a flexible
approach to planning policy may be
needed in order to accommodate
growth in knowledge-based jobs. It
may be necessary to follow market
signals in allowing these jobs to
locate in out-of-centre office parks,
rather than within town centres as
stipulated by current policy.
10%
0%
West London
Central London South London
North & East
London
London
England &
Wales
42
Peter Brett Associates LLP
Source: Business register and employment survey (2014)
Economic modelling is poor at picking up discontinuities. How
exposed are West London’s enterprises and their employees to
• Some economists suggest that the risks of significant
unexpected structural change?
discontinuities do not show up well in mainstream
economic modelling.
• Although economic modelling make an attempt to
anticipate change, John Kay points out that modelling
will tend to “project the present into the future with
essentially linear trends…In the face of such radical
uncertainty, the sensible course is to focus on known
facts and give yourself as many options as possible,
not to guess at numbers to fill the cells on your
spreadsheet.” (John Kay, ex Director of IFS, Financial
Times, November 2015)
Transportation
• Carl Benedikt Frey and Michael Osborne (2013) have
a list of 700 jobs most at threat from structural
changes brought by automation (see earlier slides on
Haldane).
• The sectors in which West London has particularly
strong employment appear to be quite exposed to
these changes. It is difficult to directly correlate Frey
Office and admin and Osborne’s findings to West London because of
the different sector categorisations used. But there
does seem to be change coming. This area could
usefully benefit from further detailed analysis, and we
Sales and related
suggest that GLA Economics considers this issue.
Services
Peter Brett Associates LLP
• Of course, we cannot be sure how these changes will
play out in practice. As Haldane points out, capital
investment has historically created a real income rise
which has led to new employment opportunities
arising in other parts of the economy.
• Given West London’s location between London and
the rest of the UK, it may be very resilient in the future,
and will remain well located for strategic transport
43
connections abroad.
Further disruptive changes could be on the way. Is West London
going to be sufficiently flexible to respond effectively? Any
developing action plan needs to be agile enough to cope with
rapid change
• A recent review of the emerging research (Fox and O’Connor, 2015) found a number of emerging trends in the workplace .
None are assured, and only some have implications for economic development.
1. Workplace structures. Rigid company structures will be replaced with a ‘corporate lattice’ that allows free-flowing career
paths. These changes reinforce the importance of a flexible and well-skilled workforce, able to operate independently of
traditional company structures – perhaps encouraging the creation of co-working spaces discussed earlier.
2. Artificial intelligence. As set out above, If forecasts on automation are correct, millions of jobs will be lost both nationally and
globally. Again, this indicates the imperative of skills development and lifelong learning.
3. The human cloud. Websites that match employers with freelancers are growing fast – and so is the potential for lower wages
and inequality. Benefits systems and workspace provision are likely to need to respond, and West London may have a role.
4. Workplace monitoring. Staff may be wearing activity trackers. (This is likely to be a privacy issue dealt with at national level,
rather than at West London level).
5. The end of retirement and new forms of working. Retirement at 65 will become uncommon. Assumptions on economic
modelling, housing and service planning may need to shift if new working patterns continue to emerge around home working
and shared, short term workspaces. This could have implications for planning and land use in West London – again
perhaps encouraging the creation of co-working spaces.
<Amazon’s Kiva robot – and similar – is likely
to change employment patterns in logistics
and distribution. Many unskilled employees
in Heathrow’s distribution chain may be
affected by these changes and others like it
Peter Brett Associates LLP
44
Key issues
•
West London is a big, prosperous economy. Economic modelling suggests that it will stay that way into the future.
Compared to the national average, West London has seen significant growth in total businesses. West London’s micro
businesses are an important part of the economy – as they are in the rest of London – and the micro-businesses are
forming frequently.
•
New start-ups drive innovation and competition, with consequent productivity effects. The latest data shows that West
London has a good rate of new business formation, and the most recent data – from 2013 – shows that West London’s
business birth rate per 1,000 population is higher than South and North East London. Business survival rates are perhaps
less important than often thought in the creation of long term prosperity. It is the level of competition that creates productivity
growth by driving innovation and efficiency. These findings may have implications for future decisions about the
prioritisation of spending, and the nature of any future business support that West London may choose to
commission.
•
Because micro-businesses are such an important sector in West London, there could be an interesting niche for West
London in neighbourhood or town centre co-working spaces. These could be used to re-engineer high streets uses in a
time of structural economic change in the retail sector. West London may have a role in sponsoring these
interventions.
•
A Location Quotient analysis shows that transport and storage, IT, wholesale, and business administration are strongly overrepresented in the West London economy, and West London’s employment in Knowledge Based Economy sectors is about
average for London, but has been improving. Emerging work we are aware of in West London suggests that West
London authorities may need a flexible approach to planning policy in order to accommodate growth in knowledgebased jobs. It may be necessary to follow market signals in allowing these jobs to locate in out-of-centre office
parks, rather than within town centres as stipulated by current policy. Policy change may be needed.
•
The degree of exposure that the West London economy has to growing sectors is likely to influence future growth rates, but
we cannot be sure how the economy of the future will perform: economic modelling is poor at picking up discontinuities.
Further disruptive changes could be on the way. Any developing action plan – and future land use planning - needs to
emphasise the agility to cope with rapid changes in market conditions, and the importance of equipping lower
skilled workers to cope with rapid global change.
Peter Brett Associates LLP
45
Places, housing and
infrastructure
Peter Brett Associates LLP
What this section is about, and why it is important
• Quality of place and quality of infrastructure is critical to future development.
• For a while, this concept was contested. From around the mid-nineties, the idea emerged that the telecoms
revolution and globalisation created a ‘flat earth’ in which place and geography was no longer important. Reich for
example, has suggested that ‘almost every factor of production – money, technology, factories and equipment – moves
effortlessly across borders’ creating a ‘death of distance’ and an ‘end of geography’.
• Even at the time, though, some criticised this view as being over-simplified. Wolf pointed out that ‘a globalized economy
could be defined as one in which neither distance nor national borders impede economic transactions. This would be a world
where the costs of transport and communications were zero and the barriers created by differing national jurisdictions had
vanished. Needless to say, we do not live in anything even close to such a world. And since many of the things we transport
(including ourselves) are physical, we never will.’
• If anything, place specifics seem to becoming more important to economic development. London is an expensive
place to live and do business, but the place-specific advantages of locating here more than outweigh the costs – so far. But it
remains the case that in a globalising economy, aspects of Reich’s arguments have real traction. Flows of economic activity
are accelerated and more footloose than ever. Consequently, competition for economic activity is rising, and it is important
that West London embeds quality economic activity as deeply as possible in the economy.
• London needs to create the conditions in which new investment can take place, and needs to create the
infrastructure investment that will allow it to grow over the long term without overheating : West London needs to
play a part in that economic place making and ensuring the best conditions for economic growth.
Peter Brett Associates LLP
47
The importance of embedding growth in local economies
• To embed growth, policy will need to create the right environment to embed globally footloose capital and
workers. Although economies themselves do not directly compete, the authorities responsible for them do
compete with their neighbours – and compete globally – for skilled residents and high value companies (Gordon,
GEMACA). This has got to happen in an environment where flows of economic activity are accelerated and more
footloose than ever.
• Traditionally, economic productivity was determined by location (such as natural endowment and property offers),
and technology and corporate strength; but since the 1980s/90s, telecoms mean that physical locational attributes matters
less – and place-based social and cultural externalities matter more.
• In this highly competitive environment, it is important that London embeds quality economic activity as deeply as
possible in the local economy. The question, then, is how we best go about embedding economic activity.
Successful areas will have the ability to provide locations and context for face-to-face contact, including a retail offer,
places for social and cultural interaction (such as cafes, restaurants, theatres, sports facilities) and the ability to
concentrate labour markets and expertise.
Peter Brett Associates LLP
48
West London needs a major expansion in the supply of housing,
jobs space, and the infrastructure to support them
London Plan Housing Targets to 2025 for West London
Hillingdon
Harrow
Barnet
Brent
Ealing
Hounslow
H&F
559
593
2349
1525
1297
822
1031
Minimum
10 Year
Target
(20152025)
5593
5927
23489
15253
12972
8222
10312
Total
8176
81768
Borough
Annual
Monitoring
Target (2015
-2025)
Source: GLA (2015, 110) Table 3.1
Annual housing completions 1871-2011
• In London’s growth context, it will be essential to create
growth capacity. This amounts to major supply-side measures
to release new site development opportunities for jobs and
housing, and new social and transport infrastructure to serve
new populations.
• The London Plan and London Infrastructure Plan attempts to meet
this challenge. The London Plan sets out a strong growth agenda.
London-wide, we need 49,000 and 62,000 new homes to be built
every year, although those rates of development have only ever
been achieved for a short inter-war period, in a very different
regulatory environment. New infrastructure will be needed to
support the new homes and jobs. The redevelopment of brownfield
land could play a significant role in accommodating growth but has
other implications for economic growth. Major new housing and
jobs developments are planned in London, focused around
Opportunity Areas. There are 38 Opportunity Areas identified in
the London Plan (FALP). Achieving the balance between creating
housing and creating and maintaining jobs for people in current and
proposed housing is one of London’s greatest challenges.
• In West London, the minimum housing production target for the
decade 2015 -25 is 82,000 homes.
• The infrastructure pressures arising from population growth
are acute. Looking at London Population rise to 2025 equates to
growth of around 12 people per hour. At this rate, it will take less
than 6 hours to fill a 70 seater bus.
Source: GLA (2014, 4) Table 3.1
Peter Brett Associates LLP
49
Housing demand plus relatively unresponsive supply translates into a
major housing affordability problem. This creates significant social
and economic problems
House price affordability ratio, 2014
Flats only
All properties average
25
20
23.8
19.4
15
17.0
10.7
5
16.2
14.6
10
10.9
12.2
9.4
14.5
14.1
9.9
8.1
7.0
0
LB Barnet
LB Brent
LB Ealing
LB H&F
LB Harrow
LB Hillingdon
LB Hounslow
• GLA Economics (2015) cites London First evidence that “the implications of market distortions and knock-on effects can be
serious, profoundly affecting the London economy and wellbeing of its residents. For businesses, the rising costs of housing
in an area place upward pressure on wages as firms compensate their workers for higher housing costs and/or longer
commutes. In turn, this may present an economic risk to London since it increases the costs of doing business, and reduces
firms’ ability to recruit and retain staff in the capital”.
• House prices reduce productivity in an area – because if workers need paying more, then costs rise. (The productivity
calculation is derived from output less cost).
£2,500,000
Average House price (2014)
London Average (2014)
£2,000,000
£1,500,000
£1,000,000
Wandsworth
Waltham forest
Tower Hamlets
Sutton
Southwark
Richmond upon…
Redbridge
Newham
Merton
Lewisham
Lambeth
Kingston upon…
Kensington and…
Islington
Hounslow
Hillingdon
Havering
Harrow
Haringey
Hackney
Greenwich
Hammersmith…
Peter Brett Associates LLP
Enfield
Ealing
Croydon
City of…
Camden
Bromley
Brent
Bexley
Barnet
£0
Barking and…
£500,000
50
Source: ASHE and Land Registry
Only New York and Hong Kong have higher housing rents than London.
There is substantial variation within London, but rents in north and west
London tend to be higher than those in the south and east
Median monthly private rents by London borough,
2013/14
West London boroughs
Source GLA Economics (2015)
Average monthly rents by selected major city, 2015
Source GLA Economics (2015) / UBS 2015
Peter Brett Associates LLP
• Research by GLA Economics (2015, 49) finds that
fundamental drivers such as a growing population,
attracted by London’s amenities and access to
employment, and higher incomes and earnings are
able to explain part of the rise in demand for housing in
the capital.
• The GLA Economics team finds that “the demand for
housing has however also been fuelled by greater
financial liberalisation and historically low costs of
borrowing. The evidence shows that while earnings
are increasingly disconnected from house prices, this
affordability gap has to date been sustained by a
combination of cheap, accessible mortgage credit and
increasing transfers of wealth between friends and
family to meet the costs of high deposit requirements.
• Evidence on the changes in London’s housing supply
in response to house price signals suggests that in the
past, increases in the housing stock were more in line
with the rates of growth in London’s population and
number of households and that these coincided with a
period of more moderate house price increases. Since
1999, however, at a time of rapidly increasing house
prices, housing supply has not kept pace with the
demand for housing in London. In this respect, further
measures to overcome constraints in housing supply
can be seen as an important step to address
affordability in London’s housing market.”
51
Part of West London’s response to high rents and prices has
been to shift employment land to housing, but West London is
coming up against real land capacity constraints
•
The GLA has worked with the Boroughs to estimate how much land has been lost over the last 5 years. From this we can
estimate whether land is being released more quickly than anticipated and whether there is likely to be a growing shortage of
industrial land.
•
The indications are that the loss of industrial land is happening very rapidly. We have sampled Ealing, Brent and
Hammersmith and Fulham. The Mayor’s Land for Industry and Transport SPG, informed by the Industrial Benchmarks Study,
indicated that the three boroughs should monitor the release of industrial land against a benchmark of 89 ha between 2011
and 2031.
•
From the new data collected by the boroughs we can see that over 60% of this land has already been lost in only 5 years – a
rate of loss is more than double that suggested in the Benchmarks.
•
In summary, across the three boroughs it is likely that the supply of industrial land over the plan period will fall significantly
short of the assessed minimum demand. For prime industrial locations within the area, the result is that demand for industrial
land – the amount that would be taken up for industrial uses if made available to the market – exceeds physical capacity, as
frustrated demand from the wider market focuses on the remaining land that is still reserved for industry. The market
evidence confirms that view.
•
This situation is being replicated across the rest of Outer London. The Outer London Commission Report (Third Report) July
2014 highlighted that industrial land is being released in outer London at twice the annualised benchmark set out in the
GLA’s Land for Industry and Transport SPG.
•
Demand for light industrial and logistics land demand in West London is now very strong, and there is no substantial amount
of vacant industrial and logistics space remaining beyond the frictional minimum. The remaining industrial and logistics
occupiers that are still in London tend to be connected to an essential supply chain or population-driven consumer need. (If
they were not connected to this supply chain, then cost pressures would have pushed them out before now).
Peter Brett Associates LLP
52
Given that there is now very little obviously ‘surplus’ industrial
land to move to housing, West London now faces hard questions
about whether the costs of further industrial land loss outweigh
the benefits of using the same space for housing
•
There is no reliable ‘technical’ answer to the question. Because demand is so high, and supply is so tight, the typical
method of advising on industrial land supply no longer works well in London. (This sets London apart from the rest of the
UK: elsewhere, a reasonable technical answer to the question can be constructed from the use of jobs growth modelling and
new site supply).
•
Instead, the only answer to this question becomes a question of judgement for land use planners. All that land use
planners can do is to use industrial land evidence base work to better understand the broad implications of losing further
industrial land, and set this against the broad implications of using the same space for housing.
•
Attempts have been made in policy to try to square this circle by trying to intensify the use of industrial and
logistics land. This is not been especially successful. High bay warehouses are already in place, and this change
has been successfully absorbed by the market. However, other attempts at intensification have met resistance from
users. For example, a two storey distribution warehouse (which we believe to the be first and only example of its type in the
UK) was built by SEGRO at the Heathrow PMA, just outside of Hounslow at Hatton Cross. The top floor of around 13,500 sq
m has been difficult to let. Concerns by potential occupiers include drivers negotiating the access ramps and perceptions of
risk of storing heavy goods on raised floors. Our work at Old Oak has suggested that occupiers prize open yardage, and as a
result are unwilling to pay the additional costs resulting from this type of development, making this form of development
unviable.
Peter Brett Associates LLP
53
There has also been a shift of office space to housing. The
results appear to be mixed. Authorities may have to make the
best of this new reality
•
In 2013, new regulations allowed office space to be converted to residential use without planning permission –
(‘Permitted Development rights’). The scope has recently been extended to also include the change of use of some
smaller warehouse property to houses. The Government’s justification for this relaxation was that there was a national
surplus of employment space, most noticeably secondary office space, which should be re-used to meet the national
housing shortage.
•
There was some logic in this new approach. Changes to the way office space is utilised in recent years means that office
buildings can be used much more intensively. While the UK economy has seen strong growth in the number of office jobs
this growth has not kept up with improved office densities. So there was an undeniable national surplus of stock. In
common with England most outer Boroughs had an acknowledged over supply of office space; this was a theme in the last
GLA London Office Policy Review (2012).
•
But what is less certain is the effect on local economies and the individual London Boroughs. Few boroughs have
commissioned extensive evidence to explore the extent to which office space had been lost, but in 2014 PBA worked with LB
Richmond – near, but not within the West London area - and this evidence showed a dramatic shift: in some of the Borough
centres almost all the office stock had been lost to housing within only 2 years. This may have been a relatively extreme
example but a similar process will have been under way in West London overall.
•
It is difficult to know whether the process has been damaging overall. There may still be sufficient surplus office stock
which can usefully be converted to residential without affecting the availability of employment space. The main corporate
office developments seem unaffected – as yet. The alteration does seem to have affected the supply of secondary space
which would have been affordable for small businesses and new businesses, but more positively may have brought new
residential populations (and expenditure) to town centres.
•
The fact that the change in Permitted Development rights has now been made permanent suggests a long term
process of office space loss which many ultimately result in the hollowing out of West London’s ability to host
office employment. Any newly creates space will not be affected by PD rights for conversion, but new office development
is unlikely given the viability differential between residential and office accommodation.
•
There is little West London authorities can do about this change. (Article 4 exemption applications have been made
but these have been unsuccessful). Whether the shift is desirable or undesirable, authorities may therefore be best
to see this change as part of the shift in town centre uses – and plan to make the best of this new reality.
Peter Brett Associates LLP
54
West London boroughs are responding to the need for inclusive
economic growth by creating a pipeline of new Opportunity Areas,
major development sites and infrastructure investments
• The picture is necessarily
highly complex: West
London is a large area, and
this picture of delivery covers
the long term.
• Much of the growth and
infrastructure agenda is
run through the Mayor and
TfL.
• This structure of what is (in
effect) regional planning
appears to give London a
real advantage over other
parts of the UK, but there is
likely to be a need to
consider growth and
investment priorities subregionally in order to lever
in resources and create
new models of delivery.
Peter Brett Associates LLP
55
West London’s Opportunity Areas offer space for 92,800 homes
and 136,000 new jobs in West London. They use transport
investment to open up major opportunities for new investment
Opportunity Areas and Areas for Intensification in the
London Plan (2015)
• Opportunity Areas are the focus of attempts to raise the
ability of London to house a rapidly growing population
and create commercial space for jobs. The London Plan
has 38 Opportunity Areas. Across London as a whole, London
First (2015) calculate that 23% of new housing capacity
identified by the boroughs being in the Areas. The Areas vary
in physical size and growth potential, but typically each can
accommodate at least 5,000 jobs, 2,500 new homes, or some
combination of the two. These are not just large sites: they
are large sites that are also linked to existing or potential
improvements to transport accessibility.
• Opportunity Areas within the West London boundary are at
Heathrow (Hillingdon), Southall (Ealing), Harrow and
Source GLA (2015)
Wealdstone (Harrow) Wembley (Brent) Colindale/Burnt Oak
(majority Barnet) Cricklewood Brent Cross (Barnet) Old Oak
Opportunity Areas and Intensification Areas in West
and Park Royal (Brent, Ealing and Hammersmith & Fulham),
London (homes and jobs) to 2036
White City (Hammersmith & Fulham) and Earls Court (H&F
Employment
Minimum new
with RBK&C)
Place / status
Opportunity Area
Heathrow
Southall
Harrow and Wealdstone
Wembley
Colindale/Burnt Oak
Cricklewood Brent Cross
Old Oak Common
Park Royal
White City
Earls Court & W Kensington
Intensification Area
Mill Hill East
Total
Borough
Hillingdon
Ealing
Harrow
Brent
Barnet
Barnet
Brent, Ealing, H&F
Brent, Ealing, H&F
H&F
H&F with RBK&C
Barnet
capacity
homes
12,000
3,000
3,000
11,000
2,000
20,000
55,000
10,000
10,000
9,500
9,000
6,000
2,800
11,500
12,500
10,000
24,000
1,500
6,000
7,500
500
136,000
2,000
92,800
• Opportunity Areas are emerging at Kingston and Hounslow
(GLA, 2015).
• Together, the West London Opportunity Areas have the
capacity to deliver 136,000 new jobs and 92,800 extra homes.
Opportunity Areas typically require significant upfront transport
investment to unlock their development potential, alongside
social infrastructure to support new communities.
• There is one intensification area at Mill Hill East (Barnet)
• Major growth is also planned in West London outside the
Opportunity Areas.
Source GLA London Plan (2015) Annex 1
NB. Old Oak and Park Royal have been merged to form the Old Oak & Park Royal Development Corporation
Peter Brett Associates LLP
56
West London boroughs could continue to push hard on
production of Opportunity Area Planning Frameworks and
Development Infrastructure Funding Studies
•
The delivery of Opportunity Areas may require land assembly, land remediation, and/or assistance with the
relocation of some of the existing uses, particularly industrial activities. Each London Opportunity Area is supported
with a rolling programme of further support which intends to de-risk investment driving out information and building a shared
understanding of delivery between public and private sectors.
•
The GLA envisages that an Opportunity Area Planning Study (OAPF) is prepared for each Opportunity Area, which is
then followed by a DIFS (Development Infrastructure Funding Study).
•
OAPFs (and subsequent DIFS) studies production has a way to go before full coverage is reached in West London.
OAPFs have been published or are in draft at Southall (2014), Cricklewood/Brent Cross (2008), White City (2014) and Old
Oak and Park Royal (2015) and Earls Court and West Kensington (2012). Half of Opportunity Areas remain without an
OAPF.
•
It may be advantageous to increase in the speed and scale of production of OAPFs and DIFS studies. We
understand that the GLA is reviewing this issue, and the GLA and boroughs are likely to need to work together very closely
in future.
Peter Brett Associates LLP
57
If West London is running up against the limits of its ability to
create new residential space from ex-employment and office sites,
how might it respond? Options are being explored
Option 1: Trend base
• West London may need to work creatively with the
new development options which are being
developed.
• As the Outer London Commission reports (June 2015)
Report Background Paper Issue 1 Options for Growth
a number of spatial growth scenarios are being worked
up for consideration in the next London Plan. These
are based on 2050 London Infrastructure Plan.
Source: TfL, Outer London Commission
Option 2: Density increase at PTAL 4+
Peter Brett Associates LLP
Source: TfL, Outer London Commission
• We set these out below
• Option 1: Trend base shares growth relatively
evenly between inner and outer London.
• Option 2 looks at increasing housing densities
in locations with a PTAL over 4, taking account of
funded and committed transport schemes.
Additional work assumes that Crossrail 2 and
Bakerloo Line extension are funded. This finds
room for 150,000 people up to 2050.
58
West London could begin to investigate Options 2, 3 and 4 further?
Which town centres and suburbs are suitable for higher density,
housing led renewal or redevelopment? Which transport nodes should
see further intensification?
Option 3: increasing densities in district and major centres
• Option 3 looks at increasing densities in all district and
major centres. The scenario shows that inner London
population would grow by 11% and outer London by 16%,
reflecting the higher number of town centres in outer
London than inner London. This scenario would be likely
to have a significant impact in West London.
Option 4: suburban renewal
• Option 4 looks at increasing residential densities. Work
by HTA suggests that if 10% of semi-detaching
housing was redeveloped at twice the existing density
this would accommodate a total of 400,000 new homes.
This scenario therefore looks at housing built between1930
and 1939, which includes mainly semi-detached housing
which are built at less than 30 dwellings per hectare –
Source: TfL, Outer London Commission
typical of West London. This scenario presents an
interesting alternative distribution to the other scenarios,
with a distinct bias towards population growth in outer
London. Under this scenario, the 2050 Infrastructure Plan
particularly emphasizes the importance of ensuring that
employment growth would also need to be promoted in
these areas to ensure that by intensifying these parts of
outer London would not move them to a dormitory role.
• Option 5 – not shown here – looks at the possibility of
growing capacity in the wider south east (including
Garden Cities and limited use of green belt).
Peter Brett Associates LLP
Source: TfL, Outer London Commission
59
West London might be able to adopt an accommodating policy
approach to ways of making suburban housing denser?
Maccreanor Lavington proposals for denser suburbs
•
• Policy will need to be flexible enough to allow rapid adaptation to
economic change. In a rapidly changing and uncertain economic
environment, an ability to change rapidly is essential. London has shown
that flexibility, and Outer London has that flexibility too: LSE research states
that ‘Outer London is a success story and that could provide lessons on
successful adaptation to change. This success is often based on ‘invisible’
spaces, such as garages and backlands and ‘invisible’ uses such as small
business, workshops and offices. Much of outer London is successful
because it is flexible and adaptable; this applies to both its fabric and its
communities. Often unremarkable, the built form has shown an ability to be
adapted over time to new uses and changing economic circumstances’.
There is likely to need to be a mix of initiatives, such as
• A prompt response to the findings of the London Land Commission
on releasing public sector land supply.
Baca proposals for new housing on water
• A creative, positive approach to new ways of doing things – for
example, around new proposals for increasing density in low
density suburbs arising from New London Architecture recent work on
New Ideas for Housing. Maccreanor Lavington suggests that with over
600,000 semi-detached homes in London, the suburbs could be where
the focus should lie. The practice’s ‘multi-detached’ idea seeks to
intensify the suburbs on a plot-by-plot basis. If five per cent of the semis
in outer London could be replaced with four-storey detached mansion
blocks, some 81,000 new ‘Multi-detached’ homes could be created,
facilitated by Local Development Orders.
• The ageing population identified earlier may need to be supported
with more older peoples accommodation. These “last time
purchasers” can release large amounts of family housing, helping to
alleviate shortages, and can create new town centre populations. There
are 5.3 million under occupied homes in the UK with 7.7 million spare
bedrooms. (Legal and General, 2015).
Peter Brett Associates LLP
• Specialist student accommodation creates new town centre
populations and can reduce loads on the rental sector.
60
West London might be able to find housing and jobs expansion
space through a sensitive and careful green belt review?
• Green belt review –
and subsequently
focusing green belt
on areas of real
value – might
release valuable
development land.
• The Government is
facilitating such an
approach, with a
consultation on a
NPPF change which
will allow councils “to
allocate appropriate
small-scale sites in
the Green Belt
specifically for starter
homes”. (Dec 2015)
Peter Brett Associates LLP
61
West London might be able to find housing and jobs
expansion space from a flexible approach to town centre
uses?
• Town centres are undergoing major changes, and an expanded role for town centre residential uses may be an important
new role. Research suggests that retail performance will continue to polarise, with secondary shopping venues declining
further while prime venues will thrive. This 'polarisation trend' is a significant and long-term trend which has been taking place in
UK retail in recent years, and is expected to continue in the short to medium term. There are two drivers. First is the preference
of retailers to concentrate trading activities in larger schemes in larger centres. Second is customers themselves, who have
become more discerning and are increasingly prepared to travel further afield.
• There is therefore a concentration of comparison goods expenditure in a smaller number of larger centres. This
concentration of retailing activity is likely to threaten medium and smaller centres, and require them to potentially refocus their role
and function away from solely being retail destinations.
• The convenience (food) sector is restructuring. The proportion of convenience floorspace accounted for by ‘smaller stores’
will increase. Convenience goods market growth forecast at 29% between 2012 and 2017, from £33.9bn to £43.6bn (IDG 2014).
• The share of internet sales as a proportion of total retail sales is growing. This increased to 11.7% in mid-2015 against
4.7% in June 2008 (Experian 2015). Non-store spending will account for 17.8% of total retail spending in 2020 rising to 19.6% by
the mid-2030s driven by multi-channel internet sales. Savills forecast that 20-25% of retail sales will be generated online across
Europe by 2025 (Savills 2015).
• The private leisure sector is forecast to grow. This sector includes restaurants, cinemas, and non-municipal health and fitness
facilities. This sector is forecast to account for an increasing amount of town centre floorspace. Strong demand for floorspace into
2016, particularly in London (Savills 2015).
• Together, these threats suggest that West London needs to be thinking ahead of how to position its town centres to
weather this shift. One commentator suggests that we ‘begin by thinking of the high street as the social heart of a town or
suburb, not just the commercial heart. We need to reclaim town centres for community activity, learning, leisure and living. Viable
retail and economic uses can then cluster around activities that people want to engage in, and in places they want to go to’.
• Various independent studies have made a series of common recommendations for town centres. A new role for housing
is likely to be an important part of the mix.
• Some West London town centres may require significant repositioning, redevelopment and masterplanning in order to keep up
with changes in the retail market. A diversified range of town centre uses will be required, to include leisure, housing, employment
and community uses.
• Flexible set-down space could be integrated with residential uses.
• Strong Local Authority leadership is required to develop a clear town centre vision and strategy.
Peter Brett Associates LLP
62
62
West London is already exploring how space for housing
and jobs might arise from new thinking on the public sector
estate through the One Public Estate model
• In 2014, the West London Alliance commissioned a review of public sector property to develop an understanding of
the scale and potential of the public sector property portfolio in West London (Barnet, Brent. Ealing, Harrow,
Hammersmith & Fulham and Hounslow) and its capacity to deliver more housing. The work included:
• developing a database of public assets as the foundation to developing increased joint work around the use of assets
• Modelling four “exemplar” sites to demonstrate what a different approach might achieve
• The findings of the review included:
• Development of a new co-operative approach to public sector assets is an achievable goal with tangible benefits both
financial and operational;
• Better use of assets would deliver more housing, more affordable housing, new public sector services and a financial return;
• The identification of 600 non local authority public assets and somewhere between 2,000 -4,000 local authority
properties/assets in the 6 borough areas (excluding council housing);
• Taken collectively, the four exemplar sites showed, among other things:
• that, in addition to new homes, a number of brand new buildings for delivering public services could be created without any
external subsidy;
• the potential to release funds to the public sector;
• that intensification of sites is achievable and financially attractive;
• public sector assets are often co-located and can be combined to achieve greater outcomes than developing them on their
own; and
• that the financial returns are greater if the public sector takes on a more active development role.
• Next Steps
• Having identified the potential, next steps include working with partners to develop more collaborative approaches and
practical solutions to any barriers within the context of the urgency to resolve West London's housing pressures.
Peter Brett Associates LLP
63
Over time, improvements in IT could help West London grow the
economy without major increases in the demand for space
People working mainly at or from home
Peter Brett Associates LLP
• Information technologies appear to have
begun to alter the way in which space is
occupied – although the LSE finds that there
is surprisingly little evaluation work carried
out on this issues (What Works Centre,
2015). The London Office Policy Review found
that utilisation rates are increasing (meaning that
there are now frequently fewer desks than
workers, as some workers are assumed to be
working at home or otherwise out of the office).
The result is what is known as “spaceless
growth”; organisations can grow without a
corresponding increase in the amount of office
space they use. This reduces the amount of
office space demanded.
• This changing situation is reflected in
Government planning guidance. The HCA
provided updated guidance on employment
densities in 2010. These newer densities reflect
modern working practices; for example flat
screen monitors, home working facilities by
broadband and modern manufacturing.
Appendix 2 of the HCA guide compares the
2001 edition to the 2010 edition. For most office
uses space is used at least 60% more
intensively; the density for 'general office' space
has fallen from 1 FTE Job for each 19 sqm of
floorspace to 1:12 sqm. For 'business parks' the
density is now estimated as 1:10, very roughly
half the space assumed per worker in typical
previous studies.
64
High speed broadband is widely available in West London, but
some areas – notably Park Royal – complain of slow speeds
Average broadband speed (2015)
Source: House of Commons Library (2015) Fixed Broadband: Policy and Speeds
Superfast (greater than 24 Mbps) broadband availability
Source: House of Commons Library (2015) Fixed Broadband: Policy and Speeds
• New homes will be provided with high speed connections as part of the normal operation of the market. BT Openreach will
normally require developers to excavate and lay the necessary ducts and joint boxes, which BT Openreach provide free of charge, and
construct the necessary chambers as part of the general highway construction works. All other works are typically undertaken by BT
Openreach at their expense, provided each individual connection does not exceed £3,400. For residential developments in dense
urban areas, it is unlikely that this cost will be exceeded.
• Businesses in most areas are able to buy high quality internet connections from commercial providers. New infrastructure
providers are emerging as competitors to BT Openreach, such as Hyperoptic. However, some businesses are not willing or able to pay
for custom connections. And in some areas in West London – notably Park Royal Industrial Estate (the largest industrial site in
Europe) – we understand that businesses complain of low speeds. Elements of this issue are being addressed: in 2011 the
government set up the Urban Broadband Fund (UBF). A voucher scheme contributes £3000 towards the cost of broadband
connections for business. London businesses have claimed the largest number of vouchers (House of Commons, 2015, 14).
• BT runs a number of exemplar projects across the UK, and could be encouraged to see parts of West London as a testbed for
new G-Fast technology, which offers 80-500mbps speeds. These speeds are far beyond those available even to Ethernet users. If
G-Fast is not available, developers could be encouraged to install Ethernet connections to individual blocks of flats. This would provide
very high speed access both on upload and download.
Peter Brett Associates LLP
65
A closer look at average broadband speeds in West London shows
generally effective provision but pockets of under performance. The
economic effects of underperformance are likely to vary by how people
and firms adapt to and innovate around technology
Average broadband speed (2015)
• This map provides less context than the preceding map,
but gives a clearer view of conditions in West London. It
suggests that areas receiving superfast broadband (classed as
faster than 24 mb/s) are relatively widespread in West London,
but that there are pockets of underperformance.
• Overall, of the 16 broadband evaluations that the LSE’s
What Works Centre reviewed, 14 found that broadband has
positive impacts on the local economy. However, effects are
likely to vary across types of firms, workers and areas, and may
not be large in the aggregate. The LSE reports that
• enthusiasts for broadband provision suggest that the
technologies may allow for efficiencies in production, both
by lowering costs (eg working with suppliers) and by
enabling innovation (eg reaching new customers online).
Productivity gains could translate into higher wages and
possibly higher levels of employment (although firms might
well shed staff in response to technological change), and
allow for more flexible patterns of work, and lower the
barriers to starting a business.
• Sceptics suggest that the economic implications of
broadband are overstated.
• There is a middle camp between these groups, which
assumes that the internet and ICTs contribute to economic
change, but that the extent of this change depends on how
people and firms adapt to and innovate around technology.
Source: House of Commons Library (2015)
Fixed Broadband: Policy and Speeds
Peter Brett Associates LLP
• We suggest that if West London is to get involved in
funding or influencing superfast broadband provision, it
will need a carefully thought through programme which
provides a clear set of benefits which would not be
delivered anyway through market provision.
66
Great living environments will have positive economic impacts
• Fuelled by labour mobility and increasing
personal wealth, many households will have a
growing choice as to where they live. Richard
Florida: “Quality of place – particularly natural,
recreational, and lifestyle amenities – is absolutely
vital in attracting knowledge workers and in
supporting leading-edge high technology firms and
industries. Knowledge workers balance economic
opportunity and lifestyle in selecting a place to live
and work. Given that they have a wealth of job
opportunities, knowledge workers have the ability
to choose cities and regions that are attractive
places to live as well as work”.
• There is good evidence that investment follows
concentrations of skilled workers: attract and
retain skilled workers, and firms will come to take
advantage of them.
• Clearly, strong environments create benefits for
all members of society and represent a merit
good and a public good – justifying continued
provision.
Peter Brett Associates LLP
67
Key issues
•
London needs to create the conditions in which new investment can take place, and needs to create the infrastructure
investment that will allow it to grow over the long term without overheating.
•
Strong housing demand plus relatively unresponsive housing supply translates into a major housing affordability problem.
However, West London is coming up against real land capacity constraints.
•
Part of West London’s response to high rents and prices has been to shift employment land to housing. There have been
attempts to densify development on industrial land, and so release more land for housing use. However, there appear to be
limits to occupiers’ willingness and ability to use employment land more intensively. Changes to PD rights have meant that
there has also been a shift of office space to housing use – with a mixture of positive and negative effects. Authorities may
have to make the best of this new reality.
•
West London boroughs are responding to the need for inclusive economic growth by creating a pipeline of new Opportunity
Areas, major development sites and infrastructure investments. London’s Opportunity Areas offer space for 92,800 homes
and 136,000 new jobs in West London. They use transport investment to open up major opportunities for new investment.
West London boroughs could continue to push hard on production of Opportunity Area Planning Frameworks and
Development Infrastructure Funding Studies.
•
West London boroughs will be well aware that Opportunity Areas are by no means the full solution to the demands of growth.
Emerging development options see new approaches being considered. Hard choices may be needed – perhaps allied
with a relatively permissive planning framework that allows innovation and the risks that inevitably accompany it.
New ideas on denser development in existing suburban areas could be trialled, and selective redevelopment at
places with good transport connections encouraged. Sensitive green belt reviews may be needed – and are being
encouraged by Government guidance. New thinking on residential and other uses for town centres will be needed –
and align well with structural change in the retail sector.
•
We suggest that if West London is to get involved in funding or influencing superfast broadband provision, it will
need a carefully thought through programme which provides a clear set of benefits which would not be delivered
anyway through market provision.
•
A continuing focus will be needed on creating great living environments. These attract and retain skilled workers –
and there is good evidence that investment follows skilled labour markets, creating a positive economic impact as
well as quality of life benefit.
Peter Brett Associates LLP
68
Inclusive growth
Peter Brett Associates LLP
What this section is about, and why it is important
•
From a purely economic perspective, deprivation reflects economic inefficiency: deprivation is caused by, and
causes, an inefficient utilisation of productive resources in an economy. If factors associated with deprivation,
unemployment or under-employment of labour could be addressed, then the overall productive capacity of the economy
would be higher, resulting in increased economic welfare for all. National, regional or sub-regional differentials in GVA per
resident capita will be a function of variations in:
•
Productivity: the output each worker produces; and
•
Employment: the number of people who are working, depending in turn on:
1. demographics (the working-age population);
2. labour market participation rates; and
3. unemployment rates.
•
Here we investigate the second and third of those sub-bullets – on labour market participation rates and
unemployment rates. We also look at some of the proxy measures for social cohesion.
Peter Brett Associates LLP
70
Reducing social exclusion and building community cohesion can
increase prosperity
• Social cohesion is a partial determinant of economic growth. For example, a level of trust in other people is essential for
economic success in large, complex and interdependent society. Trust represents a valuable efficiency gain. Fukuyama
believes that “the economic function of social capital is to reduce the transaction costs associated with formal coordination
mechanisms like contracts, hierarchies, bureaucratic rules, and the like. It is of course possible to achieve coordinated action
among a group of people possessing no social capital, but this would presumably entail additional transaction costs of
monitoring, negotiating, litigating, and enforcing formal agreements.” This observation is borne out in practice. Trust is strongly
correlated to growth. Empirical research has shown that “trust and civic co-operation are associated with stronger economic
performance”.
• Some commentators argue that social cohesion is a pre-requisite for the institutions required to create a more equal
society. Cohesion matters to equality, given that some form of shared purpose sits beneath the concept of mutual obligations
which lie behind a good society and the welfare state. Goodhart, for example, has suggested that falling levels of social
cohesion could, over time, generate pressure for a more American approach - where an atomised, highly individualistic society
has a much weaker sense of shared obligations.
• Personal well-being, people’s thoughts and feelings about their own quality of life, is an important aspect of national
and local well-being. Personal well-being estimates are based on data from the Annual Population Survey (APS) which
includes responses from around 165,000 people.
• West London outperforms all other London sub-regions on this measure. West London may decide that there is a
continued role for investment in community cohesion, and shared community events, as well as more targeted interventions
aimed at deprived individuals. These interventions may make West London a better – and more prosperous - place to live.
The fostering of a civic pride and identity may also have positive economic results.
Low
0-4
Medium
High
5-6
7-8
Very High
9-10
Peter Brett Associates LLP
Average
reported score
Life
Satisfaction
Worthwhile
Happiness
Anxiety
West London
Central London
North & East London
South London
London
England
7.54
7.44
7.48
7.56
7.50
7.60
7.74
7.63
7.71
7.84
7.73
7.81
7.43
7.33
7.33
7.46
7.38
7.45
2.87
3.20
2.97
3.10
3.01
2.86
71
The newly released Index of Multiple Deprivation (2015) shows the
uneven spatial distribution of deprivation around West London
Peter Brett Associates LLP
72
The IMD is made up of different domains which show deprivation
around West London in different dimensions
1. The Income domain follows similar spatial contours to
the main IMD…
3…but the Health deprivation does, surprisingly, break out
of that spatial pattern in places…
Peter Brett Associates LLP
2…as does the Living Environment domain…
4…as does the Crime dimension, which suggests that West
London is a relatively high crime area
73
Although there are some pockets of severe deprivation in West
London, relative deprivation appears to be falling compared to the
rest of England. Blue areas in the map are becoming less deprived
at a faster rate than the red areas
Source: Consumer Data Research Centre, UCL Dept of Geography.
Contains National Statistics & Ordnance Survey data © Crown copyright & database right 2014-5
Peter Brett Associates LLP
• The IMD 2015 can be compared
with older datasets to identify how
areas are changing over time
relative to other areas across
England. However, it is not
a direct measure of whether areas
are “improving” or “closing the
gap” against the average – so we
need to be a little cautious about
using to identify trajectories over
time. The difference in 2010 and
2015 measures is down to how an
area has fared compared to areas
across England with similar levels
of deprivation.
• A local neighbourhood could well
have improved in real-terms (eg
lower levels of unemployment,
higher incomes, higher skill levels,
lower crime rates, better
environment and so on), and may
have improved faster than the
average. However if other areas
with similar levels of deprivation
have done slightly better, the local
neighbourhood will score as more
deprived in 2015 than 2010. The
message is that local authorities
need to use direct measures
alongside the IMD to understand
how local areas are changing.
74
Unemployment is spatially concentrated – and maps back to the
pockets of severe deprivation highlighted in the IMD 2015
Peter Brett Associates LLP
75
At the wider West London level, unemployment rates and long term
unemployment rates are low: average rates are not far from being
at frictional (full employment) levels
• Frictional unemployment is always present in the
ILO Unemployment Rate (June 2015)
England & Wales
5.6%
London
6.6%
North & East London
7.9%
South London
5.5%
Central London
6.4%
West London
0.0%
6.0%
2.0%
4.0%
6.0%
8.0%
Source: Annual Population Survey
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
Job Seekers - Previous and Sought Jobs
Sought occupation
Usual occupation
Peter Brett Associates LLP
Source: JSA
economy, resulting from temporary transitions made by
workers and employers or from workers and employers
having inconsistent or incomplete information. Though
estimates of frictional unemployment can vary, we are
unlikely to see unemployment fall much below 4-5%
when measured using the International Labour
Organisation (ILO) measure, as used here. Anything
below the frictional rate identifies a tight labour market,
leading to either higher wages to compete for labour –
possibly encouraging inactive working age residents
back into the market – or disinvestment in the market.
The former would be more preferable, however this
could be an risky end game to play.
• The ILO measurement is to be preferred to the claimant
count statistics, because it measures people who are
looking for work, rather than those simply claiming
benefits. It is also the official rate of and the
international standard measure for unemployment.
However, it is unable to show the spread of
unemployment below local authority levels.
• As shown, those claiming unemployment benefit are
predominately looking for similar occupations they
previous have had. The biggest employment sector is
sales and customer services, which tends to be lower
value and therefore lower paid. These and other low
value activities may not help drive an economy up the
value chain but they provide a significant number of
entry level jobs, and essential support services to other
businesses. These are particularly beneficial for the
long-term unemployed and the less qualified. As such
they can have wider social benefits through inclusion.
76
Unemployment is not falling as quickly in West London as elsewhere.
However, West London is starting from a relatively low number, so
improvements are likely to be more difficult to achieve
• With low rates of unemployment above the
frictional rate, the challenges may be
harder to reduce unemployment because
those out of work active residents may have
greater problems in matching their skills to
the market.
Change in unemployment, Aug 2011 to 2014
West
London
Central
London
South
London
North &
East
London
London
England &
Wales
0%
-10%
-20%
-30%
-40%
-50%
-60%
Unemployment over 12 months
Unemployment over 6 months
50%
40%
43%
44%
45%
43%
37%
30%
20%
43%
28%
25%
26%
26%
28%
21%
• Such problems will tend to relate to reflect
a lack of basic employability skills like
communication and attitude and other
challenges such as debt, addiction and
complex child care. The existence of these
problems tend to be more prevalent where
there is a high proportion of long term
unemployed within a low unemployment
area. Some 43% of unemployed West
Londoners have been unemployed for
more than six months and a quarter for
more than a year.
• The West London Boroughs have codesigned whole neighbourhood
interventions with partners and communities
to make local neighbourhoods more
successful with targeted employment and
skills advice.
10%
0%
West London Central LondonSouth London
North & East London London
Peter Brett Associates LLP
England & Wales
Source: APS
77
The overall unemployment rate masks particular problems in
particular age cohorts. The “NEET” problems remains – with
significant long term implications
• Youth unemployment remains an issue which can
create long term effects. The issue of NEETS (those
Not in Employment, Education, or Training) remains
important. Whilst the data suggests that this issue is
not particularly acute in West London – at nearly half
the national average - there is a risk that the issue is
bigger than these statistics suggest. This is because
the proportion of 16-18 year olds whose current
activity is not known is more than 50% above the
England average of 9.0%. As a result, it is possible
that the number and proportion NEETs will be
inaccurate.
% of total unemployed aged between 16 and 24
England & Wales
16%
London
19%
North & East London
23%
South London
15%
Central London
16%
West London
19%
0%
5%
10%
15%
20%
16 - 18 year olds NEET, Nov'14 to Jan'15
England
4.7%
London
3.4%
North & East London
3.8%
South London
3.7%
Central London
West London
0.0%
• Continuing to address the problem of NEETS though
intervention activities may be worthwhile to avoid
longer term problems and impacts on resources in
addressing issues relating to exclusion like drug
abuse and crime. The Audit Commission (2010) finds
25%
that “relatively inexpensive youth support projects can
result in major public finance savings” – a NEET
individual is likely to incur public finance costs of £56k
over a lifetime, and resource costs of £104k arising
from un- and under-employment.
3.1%
2.6%
1.0%
2.0%
3.0%
4.0%
Peter Brett Associates
LLP
NEETs as a
% of 16-18 year olds
Source: Annual Population Survey
5.0%
• Some provision on this issue is already in place. West
London’s Opportunities for Young People Programme
supports a key objective in the current Vision for
Growth in West London. This is to support young
people (14-19) who have been identified as being at
high risk of, not taking up employment, education or
training post 16. The project also covers a group,
many of whom are highly vulnerable, who have
already become Not in Employment Education or
Training and therefore are likely to require subsequent
dependence on benefits.
78
There appears to be an emerging problem with poverty in West
London. West London contains two of the worst performing four
boroughs in London
• The Trust for London document London’s Poverty
Profile 2015 states that, for the Outer West &
Northwest area, “this sub-region has always been in
the middle of the rankings with a mixed performance
across the indicators. But now the sub-region contains
two of the worst performing four boroughs in London:
Ealing and Brent”.
• The report continued that “these two boroughs in
particular stand out for the high levels of low pay and
unemployment.”
Peter Brett Associates LLP
79
Low pay is a problem in West London. Nearly half of jobs in one West
London borough are paying less than the London Living Wage.
Typically a quarter of residents are earning less than this
Gross Hourly Earnings, 2014
£17.50
10 percentile
20 percentile
25 percentile
30 percentile
40 percentile
Median
• This bar chart gives
average hourly wages up
to the median average
range by percentile
groupings for each West
London borough.
£16.50
£15.50
• It shows that between
around 20% to 30% of
West London residents
were earning less than
the London Living Wage
(LLW), irrespective of
whether they work within
West London, or outside.
£14.50
£13.50
£12.50
£11.50
£10.50
• Looking at the jobs
actually located in West
London, we find that
around 20% to 30% in
West London are paying
Minimum
less than the LLW, and in
Wage = £6.50 in
one borough this is nearly
2014
50% of jobs.
London
Living
Wage = £9.15
at 2014
£9.50
£8.50
£7.50
Residents
H&F
Harrow
Barnet
Ealing
Hillingdon
Hounslow
Brent
H&F
Harrow
Barnet
Ealing
Hillingdon
Hounslow
Brent
£6.50
Workers
• However, there is a
strong variation between
the boroughs.
Source: Annual Survey of Hours and Earnings
Peter Brett Associates LLP
80
Wages in West London have fairly consistently stayed £30 per
week lower than the London average, but around £80 higher than
the national average. However, in recent years national wage level
have started to slowly converge with West London wages
£640
£620
£600
£593
£580
£593
£587
£585
£582
£560
£540
£520
£500
2010
2011
West London (Resident earning)
2012
London (Resident earning)
2013
2014
England and Wales (Resident earning)
Source: ASHE 2014
Peter Brett Associates LLP
81
There is a significant emerging problem with ‘in-work poverty’.
The London Living Wage may be part of a solution, and West
London could encourage take-up
• Back in 2012, in-work poverty was called “the most
distinctive characteristic of poverty today. For the first
time, it outstrips poverty in workless households.”
• There is broad agreement that work is the most
important route out of poverty, but more and more poor
households in the capital include someone who is
working. The Trust for London (2015) finds that number of
low-paid jobs in London increased for the fifth consecutive
year to 690,000 in 2014; a 13% increase on 2013. This
means that 21% of people living in London are paid below
the London Living Wage (or low-paid).
• The Joseph Rowntree Foundation (2015) finds that “there is
a lot riding on the labour market continuing to grow as
strongly in the next five years as it did in the last five. But
while the last five years was about getting people who were
out of work into work, the next five has to be about helping
people in work progress both in terms of hours and pay. This
is potentially a much harder task.” (JRF (2015) Monitoring
Poverty and Social Exclusion 2015
https://www.jrf.org.uk/mpse-2015/commentary)
• The London Living Wage is a potentially important
component of that effort. The London Living Wage
(£9.20/hr) exceeds the national minimum wage of £7.20.
The London Living Wage is voluntary; employers choose
whether or not they pay it. It is independently set, based on
the cost of living.
• Lobbying exercises are under way to extend the London
Living Wage. Campaigners point out that staff retention
and productivity rise, making the Living Wage a
potential win-win for both employers and employees.
Peter Brett Associates LLP
82
Are socially excluded residents of an area negatively affected by
investment?
• There is a long-term debate in academic circles (Zuk et al, 2015) about whether attracting investment to an area
simply brings in richer people from outside an area, bids housing prices up and so is always bad for existing
residents - particularly the disadvantaged. This is a complex area, but particularly where investment is accompanied by
protected social housing tenures for existing less advantaged residents, evidence suggests that investment that creates a
more socially mixed area can improve the lives of all people, whether advantaged or disadvantaged. As we point out
below, though, the situation is changing and will need to be kept under review.
• Rising prosperity in an area has been shown to raise incomes for all types of people– not just skilled workers,
but also for workers with lower skills. Moretti explains that this is for three reasons. Firstly, skilled and unskilled
workers complement each other: an increase in the former raises the productivity of the latter. Second, a bettereducated labour force facilitates the adoption of newer and better technologies by local employers. Third, an increase in
the overall level of human capital generates externalities – in other words, when people interact, they learn from each
other, and this process makes those who interact with better educated peers ultimately more productive. (Moretti (2012)
• Area effects are reduced. Literature on ‘area effects’ suggests that to be poor in an area which houses lots of other
poor people would generally be worse than being poor in a wealthy area. Whilst precise evidence of the existence of
area effects (eg through longitudinal data) is elusive, it tends to be the case that levels of service are often lower in
poorer areas; higher rated public services tend to be found in wealthy areas. There are a number of reasons advanced
as to why this might be so (some suggest that middle class populations create pressure on service providers, so driving
up standards). (Atkinson and Kintrea 2001).
• However, the positive effects of attracting a more mixed demographic group to a disadvantaged area might only
work effectively if rising prices do not force out existing disadvantaged residents. Until recently, secure social
housing tenures and S106 agreements directed towards social housing tenures tended to help ensure that disadvantaged
people could maintain a presence in an area subject to economic change. With recent changes through housing benefit
reforms and the 2015 Housing Bill on Starter Homes, together with an increase in the number of less well off people in the
private rented sector, means that we may see changes to the previous position.
• West London may chose to keep the effects of these changes under review and design a specific policy response
if the evidence suggests it is necessary.
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Key issues
• Deprivation can reflect an inefficient utilisation of productive resources in an economy, and social cohesion is a partial
determinant of economic growth in large, complex and interdependent society. West London may decide that there is a
continued role for investment in community cohesion, and shared community events, as well as more targeted
interventions aimed at deprived individuals. The fostering of a civic pride and identity may also have positive
economic results for West London.
• Research suggests that rising prosperity in an area has been shown to raise incomes for all types of people– not just skilled
workers, but also for workers with lower skills. Rising prosperity in an area has been shown to raise incomes for all types of
people– not just skilled workers, but also for workers with lower skills. However, recent changes to benefits and affordable
housing provision and tenure might weaken these conclusions. West London may wish to keep the effects of these
changes under review, and design a specific policy response if the evidence suggests it is necessary.
• The newly released Index of Multiple Deprivation (2015) shows the uneven spatial distribution of deprivation around West
London. Although there are some pockets of severe deprivation in West London, relative deprivation appears to be falling
compared to the rest of England. Unemployment rates and long term unemployment rates are low: average rates are not far
from being at frictional (full employment) levels, but unemployment is not falling as quickly in West London as elsewhere.
However, West London is starting from a relatively low number, so improvements are likely to be more difficult to achieve.
The overall unemployment rate masks particular problems in particular age cohorts. The “NEET” problem remains.
Although the problem is comparatively modest in West London, the large costs associated with NEETS justify
intervention, even from a narrowly economic standpoint.
• There appears to be an emerging problem with poverty in West London. West London contains two of the worst performing
four boroughs in London. There is a significant emerging problem with ‘in-work poverty’. The London Living Wage may be
part of a solution, and West London could encourage take-up. Other interventions could also be developed.
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Working to catalyse
change
Peter Brett Associates LLP
What this section is about, and why it is important
•
In this section we look at how West London may choose to approach some of the issues identified.
•
This is not an action plan. Nor can we set priorities. This is the proper role of elected members and their officials.
However, it is our role to help inform that the decision making process.
•
It is important to understand the limits of what local authorities, either alone or together, can do – in order to focus
on the areas where they do have most influence. Local authorities cannot do much, if anything, to affect the macroeconomic environment, business regulation, and nationally controlled policy. In an age of austerity, they have very limited
abilities to pay for direct intervention (eg real-world projects or programmes) in the economy. But evidence suggests that
local authorities can be genuinely effective if they work carefully to catalyse change.
•
There is evidence that many of these factors are already in place in West London.
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West London’s current position
•
West London Alliance have set out a position on the strengthening of Economic Development in West London
2014-2015. It states that
“The seven West London Boroughs which make up the West London Alliance have actively embraced a new
approach to economic development and putting in place the right governance and partnership to facilitate inclusive
growth.
West London Leaders agreed a Vision for Growth and it was launched in November 2014 as a statement
demonstrating their commitment to economic growth and the transformation of public services.
West London is seeking to position itself effectively in order to take advantage of any devolution of resources and
powers in various negotiations with Government and the outcomes of the Comprehensive Spending Review in
November 2014 have led to the development of firmer proposals on how to make, for example, skills work at a subregional level.
West London gained over £2m to implement its transformation of public services in the areas of employment, skills
and providing opportunities for young people. They are extending and scaling out these programmes through EU and
other funding.
The West London Boroughs have developed new thinking with regard to a One Public Estate approach to co-locating
services and freeing up development land , multi-Borough procurement of services, shared services and much closer
working with key strategic partners , for example, Health , Employment and Housing partners combining to help
residents into work.
The West London Boroughs have embarked on large scale regeneration programmes such as Southall and Brent
Cross using flexible methods of financing change and facilitating prosperity.
The West London Leaders set up a new Joint Committee to promote and oversee economic and infrastructure growth
in the sub-region – the West London Economic Prosperity Board.
To ensure a larger scale and consistent stimulus to economic growth in the sub-region the West London Growth
Directors commissioned this new economic assessment to inform the development of growth priorities for West
London. Following adoption of priorities by the West London Economic Prosperity Board in February 2016 the
Boroughs will be developing a Growth Action Plan with partners. The implementation of this action plan to promote
inclusive growth will be overseen by the Board.”
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Adopting a clear strategy on intervention
•
•
•
•
•
•
•
Longstanding Treasury advice provided under Governments of all complexions has provided a clear rationale for
Government intervention. It has stated that “the rationale for government intervention, whether via a new or changed
policy, a programme or a project … is essentially twofold:
•
The achievement of economic objectives by addressing inefficiencies in the operation of markets and institutions; and,
•
The achievement of an equity objective, such as local or regional regeneration.”
Basically, then, we can intervene in the free market on two grounds: to fix failing markets, or to correct the
outcomes of markets when we think that they are damagingly unfair.
The underlying assumption is that markets are the best way of allocating resources. However, the Government
acknowledges that markets do have problems in some instances. It is in these cases that government should intervene, but
only if it can achieve a better allocation of resources.
Like any other intellectual framework, the concept of market failure must be understood and properly applied if it is
to be of use. The concept can only be properly applied to questions of whether public sector intervention in the economy is
justified.
Market failure is a concept that only applies when a market is failing to efficiently allocate resources due to some
barrier to its operation. These barriers occur at the level of the market, be it the market for labour, skills, information,
research and innovative technologies, environmental goods, transport and many others. (Market failure is not properly
understood as being when the market does things that are unpopular. Markets might be working perfectly, and still produce
unpopular results).
The framework suggests that Government intervention is also justified on equity grounds. The judgement of when
inequality becomes unacceptably high rests with democratically elected politicians.
Market failure concepts say either nothing or very little about questions related to the geographical location of
intervention. Market failures are not, generally, geographically bounded. Market failures can exist in both deprived places
and wealthy places. Stakeholders may choose to address market failures in prosperous places or deprived places,
depending on their strategic choices, and their approach to equity considerations.
•
Market failure concepts also say very little about the relative importance of different themes within an economic
development strategy. Whilst evidence of market failure will be necessary in order to justify economic intervention within a
particular thematic area (say, skills), it will say nothing about the relative importance of that theme in relation to other themes.
•
Market failure concepts apply to the rationale for intervention and the focus of policy intervention – but say little
about how the resulting policies themselves should be designed or applied.
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High quality monitoring and evaluation can be used at policy
design stage, and then through the lives of projects
•
As the City Growth Commission observes, “Metros need to improve their capacity to collect and analyse data about
the economy and public services, including the demand for and outcomes of such provision. Without robust,
granular data, metros are limited in their ability to plan and commission effectively; aligned service budgets and an
integrated reform agenda hinge on the power of timely, accurate information.” RSA City Growth Commission
Unleashing Metro Growth (2014, 12)
•
Nationally, it seems fair to say that regeneration interventions suffer from systemic confirmation bias. There can be
an unwillingness to use good quality evaluation evidence to direct spending choices.
•
Some failure can be expected, and risk of failure is an inherent part of innovation. Risk should be tolerated, but is not
a badge of entrepreneurial courage or zeal. Policies should have risks minimised at design stage.
•
Local authorities could develop a culture of experimentation, and be willing to innovate, but from a basis of good
evidence. The What Works Centre for Local Economic Growth from the LSE is just one source of impact evaluation. The
Centres’ reviews consider a specific type of evidence – impact evaluation – that seeks to understand the causal effect of
policy interventions and to establish their cost-effectiveness, and produces a range of evidence reviews that will help local
decision makers decide the broad policy areas on which to spend limited resources.
•
If projects or interventions are failing, then management will need to ‘fail fast’ and respond quickly to either adjust
delivery or terminate the intervention. More successful interventions can then be backed.
•
Evaluation through the project life cycle will also highlight difficulties in any funded interventions.
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Planning and regulating flexibly and entrepreneurially
• West London’s authorities cannot do a great deal to avert
structural shifts in the economy. These are macro-economic
changes, and local authorities can do little to address them – even
if this was considered desirable.
Growth
• The best mitigation is, perhaps, creating an innovative
regulatory environment that will allow rapid adaptation to new
sources of growth
• It is likely to be important to stay in front of change. If West
London can see change on the horizon, it is better to make the
right adjustments early and in a controlled way, rather than wait
until graver difficulties force change.
• Charles Handy’s Sigmoid curve conceptually represents the
things and the ways in which current circumstances have
been arrived at. It has a base building/introduction phase; then
growth; then a maturing phase, and finally a decline. It is the story
of a product’s life cycle and of organisation’s (or individual’s) rise
and decline.
• The secret of constant growth is to start a new curve before
the first one peters out. The right place to start is at point A –
even when things are going well. Point A is when there is time, as
well as the resources and the energy, to get the new curve through
its initial explorations before the first curve begins to dip
downwards. Often change only comes at point B, when it may be
too late.
• West London needs to get in front of change, and creating an
innovative regulatory and skills environment will be one way
to do this. We have provided a series of examples of how
innovations might be needed throughout this paper.
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West London can plan and regulate entrepreneurially
Does West London need to think innovatively and consider applying more radical ideas from elsewhere?
Self build in Holland to a set of broad design guidelines
Co-housing community
RSH+P modular housing scheme for the YMCA
Freiburg urban agriculture
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West London can lead and manage networks entrepreneurially
NESTA/Demos matrix on policy co-production
Source: NESTA/Demos
Peter Brett Associates LLP
• The level of change and innovation likely to be needed in West
London policy over the coming period suggests that it needs to build
its capacity to innovate.
• New ideas will be needed. They very rarely arrive as a result of
an individual or organisation operating alone. Instead, they
most frequently arrive following communicating with others with
different experiences and professional qualifications. Steven
Johnson, for example, has claimed that the coffee shop is a common
factor to a great number of eighteenth century financial and trade
innovations: the social mix and quasi-business meeting space that
the coffee shop provided created a crucible for new ideas.
• West London needs a network to create a ‘collective
intelligence’. NESTA: ‘In an age of “combinatorial” innovation –
where major breakthroughs are likely to involve knowledge from
different fields, and joint working between thinkers, doers and
communicators - being good at collective intelligence will be a crucial
determinant of success for businesses, for governments, and for
countries. Understanding more about how collective intelligence
happens, and devising and implementing effective tools for fostering it
should be a major project for the UK in the next decade’. (NESTA
2013).
• The network will need to include local Government, private
businesses, utilities, academia, and consultancies in the creation
of a “growth coalition” for West London.
• We are suggesting a process of policy co-design, which builds
in the ideas of a broad base of users from the very beginning of
the planning process, and then involved in the evolving thinking
as the plan is shaped. This should be distinguished from the usual
plan design process where a draft (but relatively finalised) plan is
presented for public consultation. Excellent examples are already
emerging in West London – for example, on infrastructure delivery at
Old Oak and Park Royal.
• This process of co-design can be seen as a somewhat less
ambitious version of what is known as ‘co-production’, in which
service users take responsibility for both design and delivery of
policies (right).
• The West London Alliance itself is an example of what needs to
happen, and business to industry links will be needed at all
levels in order to keep policy innovative and focused.
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Building West London’s ability to pro-actively manage and deliver
change
•
Attempts are underway to create a cultural shift in Planning towards an emphasis on delivery. This is not a new
aspiration. For example, the Killian Pretty review of 2008 sought to deliver a more “a positive and proactive approach to
shaping, considering, determining and delivering development proposals.” Planning has become increasingly concerned
with questions of 'how' development can be delivered, and 'when' - rather than just 'what’ development is desired and
‘where'. the implications of this change should not be underestimated.
•
This approach is already being adopted in West London (for example, at Brent Cross in Barnet or on Hounslow’s Golden
Mile) and this best practice could be spread. Planners will need to
•
play an active role in enabling development and planning infrastructure, or research, or running applications
more carefully to ensure that what is needed is provided when it is needed.
•
get an understanding of what investors need to see happen; and seek to understand, and then bring about,
the right planning response. That means a more proactive approach, working alongside developers to ask
questions like: how do we fix the barriers to positive change? What do we do next? When? Who is responsible? What
is the right planning role? The right response might be to “do nothing” – but that needs to be a positive choice.
•
understand how to solve real-life issues on the critical path. Management intervention and funding could be
focused on these issues.
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Brigading the funding
•
There is a need to better understand available funding opportunities to support growth in West London. This may be
done more efficiently on a sub-regional basis, particularly with regard to EU funding.
•
Government is putting in place a number of initiatives to assist with stimulating economic growth and localising funding for
this, including through local government. What is emerging are different policy and funding initiatives, with some potential for
bringing funding from more than one initiative together, to create a larger financial pot and impact. However this places a
considerable requirement on local authorities to keep abreast of changing funding environments and adapt to new financing
opportunities including what may become more localised.
•
West London may need to identify the opportunities for public private partnerships and investment funding to
support capital investments in infrastructure to underpin economic growth, and make recommendations on likely
viable investment models. Key issues are to:
•
•
review existing external funding sources and their future ongoing potential; and review internal borrowing/investment
potential; to identify what monies could be used/pooled in support of investment;
•
review the scale of tax increments/business rates that might arise from developments and could support investment
repayments;
•
explore alternative investment and funding models including public private partnership models, Pension Infrastructure
Platforms and Municipal Bonds;
•
make recommendations to the West London Economic Prosperity Board on the models that best fit with West
London’s financial resources and Vision in co-operation with other local authorities; and in relation to short, medium
and long term financing of infrastructure;
•
identify key risk factors and next steps needed to progress recommendations
Such a study would require the full co-operation and participation of the West London Authorities’ finance
departments and should have a cross Borough steering group. Critically, this will go beyond an understanding of
public sector grant funding, and incorporate a better view of private sector funding opportunities.
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Key issues
•
Our work suggests that West London will need to
1.
Develop – or simply adopt - a clear framework to understanding how a Local Government sub-region can
intervene effectively, and apply it rigorously. This requires having a very clear idea about the market failures
that an intervention is really addressing, and how it is expected to achieve its outcomes.
2.
Use high quality monitoring and evaluation at policy design stage to maximise chances of success, and
quickly adjust or terminate failing initiatives. Some risk of failure accompanies risk – but when initiatives do fail,
then management needs to respond quickly.
3.
Plan and regulate entrepreneurially to get in front of change: West London’s Local Authorities need to get the
regulations they do control – particularly Planning – to be genuinely innovative and proactive.
4.
Lead and manage governance networks entrepreneurially: Governance networks matter to growth, improving
competitiveness is “a collaborative process involving multiple levels of government, companies [and] educational
institutions…a large number of factors impact on competitiveness and hence only a broad coalition can hope to
improve [it].” (Porter) The network will need to include local Government, private businesses, utilities, academia,
and consultancies in the creation of a “growth coalition” for West London.
5.
Building West London’s ability to proactively deliver change – through a relentless focus on outcomes.
6.
Understand how to best brigade the funding – providing a real sub-regional lead to promote sub-regional
growth, possibly working to identify the opportunities for public private partnerships and investment funding to
support capital investments in infrastructure to underpin economic growth. Critically, this will go beyond an
understanding of public sector grant funding, and incorporate a better view of private sector funding opportunities.
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Issues to address
Peter Brett Associates LLP
Important issues to address (1)
• This is intended to be an economic strategy or an action plan. Setting priorities is properly left to elected members
and their representatives. We do not offer any order of priority here. Other interventions not listed here may need to
be considered, and scoping exercises will be needed to ensure that interventions are deliverable. But our analysis of
the West London’s economic context suggests the following:
• People and skills: West London could
1. Design, prioritise and map skills interventions.
2. Spread the practice of the very best schools across the sub-region.
3. Develop a significant role in skills provision. Getting lifelong learning and FE provision right is a potentially major win for
West London, and is likely to have highly beneficial effects over the long term on both growth and social inclusion.
4. Leverage diversity. Develop interventions designed to further internationalise its small business economy. (Note that any
interventions would be hard to design – and such projects would need to be approached with caution, if value to the
public purse was to be delivered).
• Enterprise: West London could
1. Sponsor interventions on neighbourhood or town centre co-working spaces aimed at micro-businesses and the selfemployed. These could be used to re-engineer high streets uses in a time of structural economic change in the retail
sector.
2. Promote planning policy flexibility: emerging work we are aware of in West London suggests that West London
authorities may need a flexible approach to planning policy in order to accommodate growth in knowledge-based jobs. It
may be necessary to follow market signals in allowing these jobs to locate in out-of-centre office parks, rather than within
town centres as stipulated by current policy. Policy change may be needed.
3. Sponsor research – possibly through GLA Economics – on the implications of future disruptive changes arising from
automation, and possible responses.
4. Note that any business support schemes need to be approached with care in order to obtain good value.
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Important issues to address (2)
• Places, housing and infrastructure: West London could
1. Continue to push hard on production of Opportunity Area Planning Frameworks and Development Infrastructure Funding
Studies.
2. Help to sponsor the hard choices needed around innovations on denser development in existing suburban areas,
sensitive green belt reviews, and new thinking on residential and other uses for town centres.
3. Continue a focus on creating great living environments for both social and economic benefits.
4. Note that if West London is to get involved in funding or influencing superfast broadband provision, it will need a carefully
thought through programme which provides a clear set of benefits which would not be delivered anyway through market
provision.
• Inclusive growth: West London could
1. Promote interventions on community cohesion, and shared community events, as well as more targeted interventions
aimed at deprived individuals.
2. Monitor the effects of recent changes to benefits and affordable housing provision and tenure in order to ensure that all
groups continue to see the benefits of growth and change.
3. Continue intervention on the “NEET” problem.
4. Encourage take-up of the London Living Wage. Other anti-poverty interventions could also be developed.
• Working to catalyse change: West London could
1. Develop – or simply adopt - a clear framework to understanding how a Local Government sub-region can intervene
effectively, and apply it rigorously.
2. Use high quality monitoring and evaluation at policy design stage to maximise chances of success, and quickly adjust or
terminate failing initiatives.
3. Promote entrepreneurial regulation to get in front of change
4. Create, and manage governance networks entrepreneurially. West London could create a “growth coalition” for the subregion including local Government, private businesses, utilities, academia, and consultancies.
5. Building West London’s ability to proactively deliver change – through a relentless focus on outcomes.
6. Brigade the funding – providing a real sub-regional lead to promote sub-regional growth, possibly working to identify the
opportunities for public private partnerships and investment funding to support capital investments in infrastructure to
underpin economic growth.
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