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The West End Powerhouse
Investing to drive Britain’s growth
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THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
The West End Powerhouse:
Investing to drive Britain’s growth
The West End is one of the biggest drivers of the UK economy,
bigger than The City of London and equivalent to the whole
of Wales. But to retain its world-beating position it needs
constant investment both to accommodate forecast growth
and to maximise its growth potential, especially in face of
global competition.
During this time of economic uncertainty
following the vote to leave the EU, it is
important to support those parts of the
economy, like the West End, with potential
to grow to allow them to produce jobs and
income to the Exchequer. This does not
require government funding, but policies
that enable and encourage West End
businesses to reach their full potential.
The West End needs to invest in its public
realm and infrastructure and it needs to
create an environment that encourages
the maximum private sector investment
from property owners, retailers, and all
types of critical industries based in
the district.
This paper asks government to work
in partnership with local authorities,
the GLA, and the private sector to
create that vital investment which will
produce an additional £23.6 billion of
Gross Value Added and contribute a
further £5.6 billion annually to
Exchequer tax.
How the Government can support
London’s West End:
• E
nable West End businesses and
authorities to fund essential public
realm and infrastructure improvements
by approving a TIF scheme.
• E
nable West End businesses to
generate investment funding by
reducing costs (specifically to mitigate
an 80% rise in business rates following
revaluation) and generate additional
income through changes to Sunday
trading regulations in the designated
International Shopping Centres
(West End and Knightsbridge)
and remove barriers to valuable
international tourists.
Sir Peter Rogers
Chairman
Jace Tyrrell
Chief Executive
Sir Peter Rogers, Chairman
é
Jace Tyrrell, Chief Executive
é
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1.
THE WEST END POWERHOUSE
The importance of the
West End to the UK’s economy
London’s West End is a major player in the UK’s economic growth1
1.1The 6.34 hectares of the West End
generates more GVA per year
than any other part of the UK
(£51 billion), more than the City of
London (£43.9 billion) and almost
the same as the whole of Wales
(£52 billion). It contains world
beating retail, entertainment,
medical-tech, cultural and
media industries.
1.2 It generates the largest proportion
of tax collected by the Exchequer,
£17 billion per annum, including 8%
of all National Non Domestic Rates.
1.3 It employs 650,000 people, 3% of the
total UK working population.
1.4It is one of the most productive areas
of the UK (output per employee in
Westminster was £71,152 in 2014
compared with the UK average
of £55,659) and can contribute
even more to the government’s
productivity challenge (because
Westminster has a higher that
average proportion working in
the lowest GVA sectors, food
and accommodation services).
1.5The West End is primarily
responsible for London’s status
as the world’s most popular
international visitor destination,
attracting 18.7 million visitors
in 2014, spending £11.8 billion
and supporting 300,000 jobs.
1.6It is a major factor for foreign
investors’ decision to invest in
London and the UK.
1. All figures are drawn from West End Partnership’s “Transforming the Competitiveness of the West End:
The Business Case for Investment” March 2016 unless otherwise referenced
2. New West End Company data
3. House of commons Library “UK steel industry: statistics and policy” May 2016
INVESTING TO DRIVE BRITAIN’S GROWTH
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THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
West End retailers play a major part in this success
1.7 The West End is the world’s top
shopping destination, with over
200 million visits each year.
1.10600,000 people visit Oxford Street
every day (equivalent to the entire
population of Glasgow or Leeds).
1.8 West End retailers make £11 billion
in sales and produce a £2 billion tax
take annually.
1.11 West End shopping is a major draw
to international tourists who form
25% of its 200 million visits each
year, so producing £3.3 billion of
foreign income.
1.9 The core West End shopping district
(Oxford Street, Regent Street and
Bond Street) generates £8.4 billion
sales annually and directly employs
60,000 people.2 In contrast, Britain’s
steel industry generates £2.2 billion
in sales and employs 34,500 people.3
1.12 London’s Luxury Quarter is the
world’s top luxury retail district,
generating £3 billion in
sales annually.
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2.
THE WEST END POWERHOUSE
The West End is Britain’s global high
street, working in partnership with the
rest of the UK to grow the economy
2.1 The West End is not just for London
– uniquely it belongs to and benefits
everyone in Britain. It’s Britain’s
global high street.
2.2 The West End is a vital partner to
promote economic growth across
the whole of the UK. Too often,
London is seen as a rival to the rest
of the UK. In reality the West End is
part of team UK, working together
with the regions to grow the whole
British economy.
2.3 The West End:
• Is Britain’s high street – over 50 million
non-London British people visit the
West End every year, virtually the
entire UK population outside London
• A
ttracts tourists to the UK and then
acts as a gateway to other UK
tourist destinations
• T
rains retail and leisure staff to a world
standards so that they can take these
standards to postings throughout the UK
• G
enerates profits which are invested
into more marginal stores throughout
the UK
• G
enerates massive amounts of
business rate income which fund
local government throughout the
UK. Westminster City Council raises
£1.8 billion in business rates annually,
8% of the total raised in England and
Wales, and retains just 4% of the
tax take
• H
as supply chains throughout the UK
providing jobs and generating income
across the whole of the country
INVESTING TO DRIVE BRITAIN’S GROWTH
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THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
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3.
THE WEST END POWERHOUSE
The need for continual investment
in London’s West End
The West End needs continual investment to accommodate its
forecasted growth
3.1Investment is needed just to
accommodate the forecast growth of
visitors and workers in the West End.
• L ondon’s population is forecast to
increase from 8.2 million today to
11.3-13.4 million over the next 15 years
• T
he London plan forecasts an
additional 74,200 jobs in the
West End over the next 20 years.
But if it matches its historic growth,
this could reach 281,000 jobs
• T
he Elizabeth line (Crossrail 1) will open
in 2018 and will bring an additional 1.5
million people to within 45 minutes of
central London. Heathrow will be just
29 minutes from Bond Street station
• T
fL estimate that a further 60 million
visits will be made to the West End
every year when the Elizabeth line
opens in 2018. Passenger numbers
are expected to increase by between
155,000 and 220,000 EVERY DAY at
Bond Street Station (60% increase)
and between 150,000 and 200,000
at Tottenham Court Road Station
(89% increase). This will produce
greater pedestrian discomfort and
increase safety concerns in an
area which in 2014 saw 109 major
accidents, 9 of them fatal
INVESTING TO DRIVE BRITAIN’S GROWTH
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THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
The West End needs continual investment to maximise potential
growth against international competition
3.2 But investment is also needed
to maximise potential growth by
ensuring that the West End remains
a world beating district. This is being
damaged by:
• Infrastructure and public realm that
is not world class (apart from the
Elizabeth line), particularly when
other global cities are investing
heavily in infrastructure
• Increasing air pollution which
undermines London’s status as a
world class city. NO2 on Oxford Street
is three times the EU health maximum
• A
congested road network, with TfL
forecasting a 20% increase by 2025
• L ack of commercial floorspace pushing
rents higher than most world cities.
• D
evelopers becoming increasingly
reluctant to invest in an area with
declining public realm and
rising congestion
3.3 The West End competes globally for
investors, customers and talent with
international destinations such as
Paris, New York, Dubai, Tokyo and
Hong Kong. Global competitors are
not standing still. Paris, for example,
is investing 500 million Euros in
the Champs Elysees. The West End
needs to invest if it is to retain its
world leading position.
3.4 The West End needs public and
private investment in public realm
and infrastructure improvements
and private investment in property
and retail developments.
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4.
THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
Investing in public realm
and infrastructure
Retailers and property owners support the West End Partnership’s programme for the West End
4.1 West End Partnership 4 is proposing a 14 year, £814 million
investment programme comprising 19 priority projects.
These will not just meet the needs of expected growth
but provide additional economic growth.
4.3 This investment will show dramatic returns in terms of
GVA growth, employment and tax to the Exchequer, as this
table shows.
• O
xford Street East and West – substantial public realm
improvements including reduction of surface transport
and revitalised open spaces
Economic
improvement
Without WEP
improvements
With WEP
improvements
GVA growth
£11.3 billion
£23.6 billion
• Bond Street – improved retail public realm and connections
to neighbouring oasis spaces
Gross additional jobs
35,600
102,000
Increase in Exchequer tax £2.7 billion
£5.6 billion
Tourism expenditure
Major increase
4.2 The projects include:
• Bond Street (TfL) – public realm improvements and
commercial developments associated with the two new
station entrances
• Tottenham Court Road Station – public realm improvements
to improve pedestrian access and traffic flow
• Marble Arch – public realm project to improve pedestrian
and cycling facilities
• Air quality – cross-cutting measures and planning policies
to improve air quality
• Broadband and CCTV – improvements
• Cycling – to make cycling easier, safer and more accessible
• Employment and skills – programme of cross-cutting
projects to reduce long term unemployment
• Energy – to ensure a secure power supply
• Freight and waste consolidation – a programme of reduction,
re-timing, consolidation and low emission project
Flat
4.4 The West End Partnership projects have secured funding of
£405 million with £154 million (38%) drawn from the private
sector. The Partnership has proposed an investment model
to raise the additional £409 million through a Tax Increment
Funding (TIF) scheme. This would produce the £37.5 million
required each year of the 14 year programme to fund
the improvements.
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THE WEST END POWERHOUSE
West End Partnership’s “ask” of the Government
4.5 To deliver the TIF, West End
Partnership needs the Government to:
• Define Westminster as a “special
council” (similar to the City of London)
to allow it to retain the £37.5 million
from its business rate before the
Business Rate Retention
scheme calculation
• Expand the definition of growth beyond
floor space to include revaluation
growth. There is limited scope for floor
space growth in densely developed
areas such as the West End, but major
growth is produced by public realm
and infrastructure improvements.
There is currently no incentive for
Westminster to invest which result in
revaluation increases. Westminster
City Council should be a pilot to test
how retention of revaluation growth
can be incorporated into the 2020
100% retention scheme
4.6 Meeting these asks would result in
Westminster City Council retaining
just 2% extra (up from 4% to 6%)
of its total £1.8 billion business
rate income. Currently a huge
96% of Westminster City Council’s
business rate is retained by central
government for redistribution.
4.7 To deliver the investments required
to ensure that the West End remains
a global destination West End
Partnership is seeking to retain just
£37.5 million per year (for 14 years)
from the £1.8 billion raised in local
business rates which will result in a
net increase in tax for the Exchequer
of £2.9 billion annually.
4. West End Partnership is the body providing strategic direction to the transformation and long term
development of the West End. Its board includes private sector landowners, businesses, local authorities,
the GLA, the cultural sector, BIDs and TfL
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5.
THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
Encouraging more investment
from West End retailers
5.1 Retailers and property owners are
major investors in the West End.
Selfridges, for example, is planning
to invest £300 million in their Oxford
Street store over the next 10 years.
West End Partnership estimate an
additional1.27 million square meters
of commercial space will be built by
the private sector as a result
of the infrastructure and public
realm improvements.
5.2 But retailers need strong trading
performances to create the money
to invest in the West End.
5.3 The district’s retailers face rising
costs and diminishing income
growth which is reducing the
money available for investment
and job creation.
5.4 New costs include:
5.5 Diminishing income growth is due to:
• The National Living Wage – estimated
to cost West End retailers between
£6 – £12 million annually 5
• Growth of international competitors
• The Apprenticeship Levy – estimated
to cost £3.4 million annually 6
• Rent rises – rents have risen by
an average of 80% since 2008,
based on high demand for space
with limited supply, rather than
on sales performance 7
• Business rate revaluation –
The Business Rate revaluation
will hit central London hard with
Business Rates in the West End
estimated to rise by 80%. The rise
in Oxford Street is estimated to be
58%, Bond Street 61%, Bond Street
122% and Old Bond Street £169%.8
The additional cost of this will be
around £125 million annually, around
25% of West End retailer’s profits
5. Voletrra, “Cost to Retailers” report for New West End Company, February 2016
6. Voletrra, “Cost to Retailers” report for New West End Company, February 2016
7. Gerald Eve “West End Shops face 80% surge in Business Rate Bills”, March 2015
8. Gerard Eve estimates produced for NWEC
9. NWEC economic data
10.Global Blue figures on Tax Free Shopping sales 2016
• Decline in international tourism spend
due to terrorism fears. The attacks in
Paris and Brussels have already had
an impact on international tourism
spend in the West End. In 2007,
West End retailers lost an estimated
£1 billion in the 12 months following
the London attacks.9 The recent fall in
the value of the pound has provided a
boost in international tourism spend
but we do not know how long this
will last
• Schegen visa changes which have
reduced Chinese visitor spend by 25%
in December 2015 and 29% in Jan 2016
compared with the previous year 10
• Growth of regional competition
• Growth of internet shopping, which
now accounts for 15% of all retail
sales in the UK
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THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
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6.
THE WEST END POWERHOUSE
INVESTING TO DRIVE BRITAIN’S GROWTH
How the Government
can support the West End
6.1 West End retailers ask the government to allow them to reach their full potential by:
Minimising the impact of an average 80%
business rate rise following revaluation
• Freeze the proposed revaluation during
this period of uncertainty. Failing that,
introduce a Transitional Relief Scheme
so that retailers do not receive an 80%
increase in the biggest tax they pay
• In the longer term, remove the
unfair competitive advantage of
online retailers who avoid the
government’s main instrument
for taxing retail businesses
Looking again at Sunday trading but just
for London’s designated International
Shopping Centres
• Generate an additional £260 million
income per year by adding the areas
designated in the Mayor’s London
plan as international Shopping Centres
(West End and Knightsbridge) to the
list of exemptions in the 1994
Sunday Trading Act
• Even opponents to the recent attempt
to liberalise Sunday trading laws
accepted that it was appropriate for
the West end and Knightsbridge
Promoting and enabling greater
international tourism
• Respond to the current downturn
as a result of the attacks in Paris
and Brussels and prepare for
further incidents
• Explore ways of raising money from
tourists, who currently make no
contribution to local taxes, to spend
on additional marketing
• Respond practically and imaginatively
to the decline in high spending Chinese
visitors as a result of Schengen
introducing biometric visas in October
2015, particularly in relation to the
visitor visa application process
• Invest more in marketing to emerging
markets with great potential,
particularly in the Far East