London: how do we keep the capital competitive?
How to finance and deliver London’s infrastructure is a key problem of our time and one of national importance. London is not the UK but it does contribute 20% to the national GDP and has a critical role in driving the wider economy. It is therefore critical that we effectively plan, finance and deliver London’s infrastructure for the city itself as well as for the national economy to move forward.
Recently the London branch of the Institute of Economic Development chaired a panel discussion on the risks to London’s competitiveness if major infrastructure cannot be appropriately invested in and delivered. Unpicking London’s critical infrastructure needs over the next decade, the panel of selected experts from central government, local authorities and the private sector debated the mechanisms for funding and delivery of large-scale, major infrastructure schemes to support London’s competitive position.
The debate offered various perspectives on this and quickly highlighted the real problems in getting this wrong; energy blackouts, water shortages, insufficient supply of housing. It made the point that there is a real and pressing need to do something; that while private sector funding is available, leveraging it is not straight forward nor automatic and there is, at present, no prioritisation as to the order in which the required infrastructure should be built.
From a business perspective, London is just one city among many where investment in human and physical assets could be made. There needs to be clear understanding of the impacts on London’s economy of a lack of proper infrastructure investment and how this ultimately affects the capital’s attractiveness to globally footloose talent and finance.
Similar issues apply to individuals and communities. Inefficient, congested cities take a toll on those who live in them and London needs to ensure that this does not surpass people’s ‘tolerance’ levels. By improving infrastructure (including soft infrastructure: homes, jobs, schools, hospitals and entertainment), people’s tolerance to the general pressures of the urban environment can be improved.
Investment in London’s social infrastructure, such as schools and healthcare, will also need to be a focus. With a current shortfall of £30k per person in terms of funds available, there seems to be no real solution in sight. Local authority funding has been cut by 25-30% with further cuts expected at the end of the decade and any land and assets that can potentially generate an income have, in the main, already been disposed of. There may be some hope, however, in private- sector funding schemes which take an innovative approach to risk. Careful thought will have to be given therefore to how these funds can be drawn into attractive infrastructure projects.
From an effective delivery perspective, project pipeline visibility will also become increasingly important, ensuring investors and developers can get to the detail of what is being proposed and that the risk is shared out effectively between government, the private sector, consumers and tax payers.
UK cities, including London, do not have the direct means to procure the infrastructure they need. There is some help from government but most infrastructure delivery comes with major private sector support and facilitation. It seems that there are many institutional funds potentially available but new and innovative ways need to be discovered to access this and there is much that can still be done in terms of reducing and sharing the risk, including a more efficient regulatory role for government.
Technology and behaviour change also have a role in reducing the burden placed on infrastructure and making what we have go further, particularly and obviously in areas such as energy usage and reducing peak demand but clarity is needed about what can be achieved and the time needed to do it. The big challenge is mapping London’s infrastructure needs to a genuinely strategic national plan. Only with clarity regarding what the big picture looks like, can an effective London plan be developed. In the meantime
London knows what it needs but these core needs require prioritisation. Look out for our next edition of Y magazine which will continue this debate with the IED panellists.