Brexit and Beyond - NLA Sounding Board update

Tuesday 9 August 2016

Brexit, we are told, means Brexit. But how should London’s built environment industry respond? How can it remain, in mayor Sadiq Khan’s words, Open for Business? And how can it pull together to deliver the development and integrated community that the capital needs?

The New London Sounding Board sought to provide some answers to these questions and more as they gathered in a special session to debate ways forward in the light of June EU referendum result.

Chris Madel, Board Director, London Communications Agency said that London had proved resilient in the past, weathering storms such as in the early 1990s thanks mainly to its strong economy. But while it is perhaps a little early to draw conclusions of what Brexit means for London, the line about London being ‘open’ needs to be explored further. ‘At the moment there isn’t much meat on the bones on that. What does that mean in terms of investing in London, and foreign investment in particular?’ he asked. There were further question marks over the housing market and skills, and there needs to be a more ‘joined up approach’ that works across all the capital’s sectors including the built environment.

For LSE London director Tony Travers, the challenge for the built environment and London and UK economy more generally is that the uncertainty about almost all aspects about how Britain’s trade relations and migration work are ‘iteratively linked’. And, as of today, there has been very little ‘signalling’ out of central government. There is a very complex matrix of trade policy and migration policy, which has to be negotiated one by one, he said. ‘This has a far, far greater impact in London than anywhere else, because London depends more than any other part of the UK on migrants in its workforce’, said Travers. Of London’s 5 million workforce, indeed, 1.5 million are migrants born overseas, some 30-35% of the city’s employment as regards ‘official’ numbers, compared to around 2 per cent in the North East. The Government is committed to reducing migration to the tens of thousands as stated policy. But what matters is the emerging policy that will affect London more than the rest of the UK as it relies on international migrant workers and openness and trading relationships that have allowed businesses like commercial office and residential development to take place. ‘All I’m saying is there is a lot of uncertainty and that uncertainty will take some time in being removed’, said Travers. For some politicians driving the debate, saying ‘Brexit means Brexit’, simply means very close control over these migration numbers.

What could London do about this? Sectors and sub sectors of the London economy could constructively point out the extent to which they rely on migrant labour and look at the consequences of that being considerably reduced, suggested Travers. Some sectors are harder hit than others – the university sector is around 35% are EU citizens, another 25% non-EU. So whether this stays or falls has a large impact.

Perhaps, suggested Investment Director at Mount Anvil, Darragh Hurley, this issue of the possible impact of a drop-off in numbers of workers in the construction industry should be twinned with a broader approach to education and skills, particularly early engagement with schools.

The ‘void in policy’ from government on the whole issue must, said Royal Borough of Kensington and Chelsea Councillor Daniel Moylan, be clarified by September or October to avoid the whole thing ‘drifting enormously’. But it was clear that there are two sides – the first being where the UK is no longer a participant in the single market, where an immigration system does not privilege EU citizens. The other strand is to try to maintain some sort of privileged relationship or participation in the single market, and access for EU citizens. ‘My personal view is people lobbying for London have to decide: ‘which of those do you want to push for?’, said Moylan. This is the existential choice at the top level, and if it is the former then what sort of criteria and arguments can be made for a ‘looser’ approach to immigration, he asked.

London’s experience is that immigration and the cosmopolitan nature of the city is a good thing, said Newham’s Director of Regeneration and Planning Deirdra Armsby, so are we asking to maintain the level, or do we have to pay attention to the situation in the rest of the UK? There is strong academic evidence that there isn’t a fixed number of jobs, said Tony Travers. London produces a third of the taxes of the UK, so reducing the size of the London economy in a ‘spirit level’ way to make it fairer would mean less money for social services for the rest of the country. And that is something the Treasury won’t do. Would it be good for London to shrink?

Cushman and Wakefield’s Chair UK & Ireland and Head of London Markets Digby Flower took a different perspective, looking at where demand is coming from. The UK is a net importer in terms of goods from the EU except in relation to financial services. So unless we get the passporting right to allow London to export to the rest of the EU this will have a major impact on what happens on financial services in London and, at a fundamental level, the demand for space. But the talk of Frankfurt, Paris and Dublin as an alternative are non-starters, Flower said. And Turley executive director Michael Lowndes agreed – none of the other cities mentioned have anything like the cultural heritage or entertainment assets that London has. The powerhouse for the likes of the Goldmans and the Citibanks are in London, and that is where the main people are, said Flower. However, FinTech could really impact here, said Savills’ world research director Yolande Barnes, because you could, using technology, execute in another European country but still have your decision-making in London. ‘There’s a big question about whether it’s back room functions or front room functions. As it happens, my money’s on Amsterdam if they do have to move.’

Skills are really important and we have to equip more people to be in work. Additional apprenticeships are needed.’, said Chair of the London Forum of Amenity and Civic Societies, Peter Eversden. 'The Mayor will have to be helped by businesses and Councils to know what he has to bargain for with Government as regards the built
environment', he added. What could be done to help deliver more housing, for instance? There are over 200,000 homes with planning permission in London, and we need to find out why they are not being built or get them reviewed.'
'Starter Homes are not the place to put our efforts. That Government policy should be rethought now and so too should the permitted development rights for office conversion which has put up office rents and reduced office availability, and that deters new entrants and deprives expanding businesses of options. We have to provide homes to rent at around 35% of average area incomes and more workspaces for small and emerging enterprises.’

This may also be where the public private partnership comes in, said Hurley, with an emphasis placed upon the private sector to engage more on skills. ‘There has to be some give and take on this’.

In Lambeth there is a pipeline of 3,500 homes the council will be building on its own land. But the challenge it has is to commission the skills and the construction industry to make that happen, said the borough’s Strategic Director Neighbourhoods and Growth, Sue Foster. ‘We do still go back to the issue of needing the skillset in London to make that happen’ she said. It is difficult to get skilled planners to process applications for instance. For its part, Newham has an Enterprise Zone, said Deirdra Armsby, the council trains, talks to employers about the skills they want, and drives it through. So it can be successful at scale. But some of the big challenges include affordable housing – an essential piece of infrastructure in the city. ‘Should we suspend the right to buy in London for the next 10 years? We’re trying to catch up 16,000 units that we’ve lost’.

How about new funding mechanisms for the capital? London is already treated differently with two-thirds of Crossrail paid for by London – a third by London taxpayers, said Tony Travers, and a third by TfL borrowing against fares. The Northern Line Extension will be 100% funded by a TIF. And then on the other hand, Travers went on, there is High Speed 2, which is 100% government funded and High Speed 3 would be similarly 100%. ‘So the issue in London is not will it pay for its own development, although this leads to very high development densities, which people don’t understand…but will it be given the powers to do it?’ That in turn begs the question whether the government wants the capital to go on growing, ‘or just deny it the powers and just allow it to become congested’.

A large component of those in London voting to leave was about pressure on public services, said Daniel Moylan, and in particular on school places. Similarly, the primary care system appears to have become ‘incoherent and overstretched’, he suggested. ‘So one of the things we should be saying is that if you really are listening to what people say and you get beyond the one word slogan “immigration”, and you ask them what they’re talking about, it’s not xenophobia that is driving them but a genuine pressure on services. And we need to address that.’

London is also seeing a general collapse in demand for luxury housing, Moylan went on, something that pre-dated Brexit but which is compounded by it. If turnover falls and the amount of construction goes down, said Yolande Barnes, given that most affordable housing is provided via Section 106 it per se means there are lower levels of affordable housing. On the other hand, the boom that is happening lies in build to rent, said HTA Design managing partner Ben Derbyshire, with overseas investors preparing very big schemes.

But, said Travers, all that has happened is that the terms of trade have adjusted away from the public sector towards the developer, so that when it comes to a new development the developer has a slightly greater toehold in negotiating than they did before. And it will thus be more difficult for the public sector to get the kind of ‘goodies’ from development, like new transport lines, that used to be seen as possible in London and nowhere else, said Travers. We are seeing a pause in development, said Sue Foster, so some towers that were expected to be now on site have been put on hold, and the flipping of tenure type has gone from for sale to PRS, a potentially positive outcome. The negotiation has shifted, sure – but only slightly.

Digital and creative are certainly taking over from financial as the country’s key driver, said Barnes, something which is consistent in London’s ‘twin city’ New York as well. In both cities there is an issue about gentrification becoming a dirty word and in both cities what we have seen is urban dispersal. This is true of Philadelphia with New York or very small places like Ithaca or Jersey City Heights, while in London that translates into alternative cities like Manchester, Bristol or Glasgow, or indeed very small places like Margate. ‘There are little kernels of entrepreneurial London scattered around’ said Barnes. So the issue of people moving out of London is true, but people aren’t commuting daily – it’s all about high quality urban centres connected to London. The city is still an important hub, but we may have to start to see its influence as being more dispersed, suggested Barnes, with London’s trade now being in human capital rather than physical or financial. So, what to do? London must be thought of as a lot bigger than the GLA boundaries, and the other urban centres’ contribution should be recognised.

We could create in post-Brexit London, a kind of world hub for design and building design, on the same scale as the financial hub, suggested Derbyshire, citing work done by David Cash of the Construction Leadership Council. Indeed, the architectural profession, interior design and construction skills professions would make for a powerful hub, said NLA chairman Peter Murray, and could indeed be part of a wider market place. So how can the changes lead to growth in trade with the wider world?

For Annie Hampson, Chief Planning Officer, City of London Corporation, one of the things we do at our peril is to downplay the situation and put ourselves in a greater problem that we are in. Given the state of world markets, London remains a good place in which to put your money, said Hampson, but transport and housing are key issues for the business city. To talk about the business sector is a bit general, too, with its wide variety of needs. ‘Sadiq has made it very obvious that he is supportive of business London and I think that is very welcome’, she said. And yet, said Barnes, it is very difficult to see how the situation will lead to a growth in trade. Trading with London was, after all, seen as a gateway to the EU. Part of the problem is that the average Londoner does not understand the relationship between growth and the pressure on public services, said Head of Sustainable Places at British Land, Sarah Cary, and we must open out a more public discussion around the next London Plan. As an industry, this is not just about our role in ‘hosting’ people, she said – the way we create and manage places affects how people live and work, and delivering open, integrated places will be even more important. London’s heritage is one of its biggest selling points, said Emily Gee, Head of Listing Advice, Historic England, and should be an integral part of the new iteration of the London Plan.

Exactly a third of Allies and Morrison’s 300 staff come from Europe, said Bob Allies, with nine per cent from elsewhere in the world. ‘So it is for us daunting wondering what the hell is going to happen. We hope they will stay, but the whole process of how we work will have to change because we totally relied on the ability to bring wonderful people to come and work for us’. But it is not just about migrants coming and living here, but about mobility, he added, and the opening up of more complex networks. If policy could achieve anything it would be to allow people to still come and work here, even if for short periods. And allowing architects to go and work freely in Europe has been an important pressure release valve, added Allies.

Ultimately, said Evans, London is an important city in the world economy which in order to carry on growing needs to attract and retain the right skills. A large proportion of that comes from the EU and overseas, and, since the city needs more investment in public infrastructure, a lot of that has been sharpened by Brexit, one answer may lie in pushing for devolution of the mayor’s powers. If London does do that, there are implications for density and what London looks like – and how it is communicated. Policies such as Starter Homes and Permitted Development Rights may need revisiting in the London context, with more positive intervention on build to rent from the mayor. Foreign investment in London should be seen as a good thing. But for Evans, what has been interesting over the last few weeks is the extent to which private developers and local authorities have ‘rolled their sleeves up’ to try to get developments done – creating their own certainty in a more uncertain world.

By David Taylor, editor, New London Quarterly

Members in attendance Toggle

Bob Allies, Partner, Allies and Morrison

Deirdra Armsby, Director of Regeneration and Planning, LB Newham

Yolande Barnes, Director, World Research, Savills

Giulia Bunting, Planning Director, GL Hearn

Sarah Cary, Head of Sustainable Places, British Land

Ben Derbyshire, Managing Partner, HTA Design

Robert Evans, Partner, Argent (Chair, New London Sounding Board)

Peter Eversden, Chair, London Forum of Amenity and Civic Societies

Digby Flower, Chair UK & Ireland and Head of London Markets, Cushman & Wakefield

Sue Foster OBE, Strategic Director Neighbourhoods and Growth, LB Lambeth

Emily Gee, Head of Listing Advice, Historic England

Annie Hampson, Chief Planning Officer, City of London Corporation

Darragh Hurley, Investment Director, Mount Anvil

Michael Lowndes, Executive Director, Turley

Chris Madel, Board Director, London Communications Agency

Daniel Moylan, Councillor, Royal Borough of Kensington and Chelsea

Peter Murray, Chairman, New London Architecture

Tony Travers, Director, LSE London 

Members not in attendance: Toggle

Pat Brown, Director, Central

Michele Dix, Managing Director, Crossrail 2

Heather Cheesbrough, Director of Planning and Strategic Transport, LB Croydon

Carolyn Dwyer, Director of Built Environment, City of London Corporation

Lyn Garner, Director of Regeneration, Planning and Development, LB Haringey

Robert Gordon Clark, Executive Chairman, London Communications Agency

Simon Harding-Roots, Executive Director, Grosvenor

Pat Hayes, Executive Director of Regeneration and Housing, LB Ealing

Benjamin Lesser, Development Manager, Derwent London

Stewart Murray, Assistant Director, Planning, Greater London Authority

Lucy Musgrave, Director, Publica

Fred Pilbrow, Founding Partner, Pilbrow & Partners

Ben Plowden, Director, Strategy and Planning, Surface Transport, Transport for London

David Shaw, Head of Regent Street Portfolio, The Crown Estate

Malcolm Smith, Global Leader of Masterplanning and Urban Design, Arup

Marc Vlessing, CEO, Pocket

Ed Watson, Executive Director, Growth, Planning and Housing, City of Westminster

 

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