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BUILDING LONDON,

BUILDING

BRITAINTHE ECONOMIC IMPACT OF

CENTRAL LONDON OFFICE CONSTRUCTION

Contents1 FOREWORD 3

2 EXECUTIVE SUMMARY 5 KEY FINDINGS 5

3 INTRODUCTION 10 3.1 AIMS AND OBJECTIVES OF THE REPORT 10 3.2 SCOPE OF ANALYSIS 11 3.3 APPROACH 12

4 THE CONTRIBUTION OF CENTRAL LONDON OFFICE DEVELOPMENT TO THE UK ECONOMY 15 4.1 BACKGROUND TO THE LONDON ECONOMY AND CONSTRUCTION SECTOR 15 THE ROLE OF CONSTRUCTION IN THE UK ECONOMY 15 THE ROLE OF CONSTRUCTION IN THE LONDON ECONOMY 16 4.2 CONSTRUCTION INVESTMENT AS A DRIVER OF UK ECONOMIC GROWTH 17

5 THE CONTRIBUTION OF CENTRAL LONDON OFFICE DEVELOPMENT TO THE LONDON ECONOMY 21 5.1 IMPACTS ON THE LONDON ECONOMY 21 5.2 INFRASTRUCTURE INVESTMENT AS A CATALYST TO LONDON DEVELOPMENT 26

6 THE WIDER BENEFITS AND OPPORTUNITIES OF LONDON DEVELOPMENTS 30 6.1 THE ECONOMIC IMPACT OF CENTRAL LONDON OFFICE DEVELOPMENT ON THE REGIONAL ECONOMIES 30 6.2 OPPORTUNITIES AND CHALLENGES IN THE UK SUPPLY CHAIN 36 6.3 THE CONTRIBUTION OF DEVELOPMENT TO ENVIRONMENTAL SUSTAINABILITY 42

ANNEX 1 – ADDITIONAL RESULTS 49UK RESULTS 49LONDON RESULTS 50REGIONAL RESULTS 51

ANNEX 2 – METHODOLOGY 52ECONOMIC IMPACT ANALYSIS 52SAMPLE COVERAGE 53

ANNEX 3 – GLOSSARY 55

ANNEX 4 – LIST OF INTERVIEWEES 56

ANNEX 5 – REFERENCES 57

3

Look from the window of any tall building in Central London, in any direction, and the forest of cranes adorning the skyline stand as testament to London’s constant desire to rebuild itself. London is a magnet for investment and talent from around the globe, competing with international hubs such as New York, Hong Kong and Dubai, and where it succeeds it brings wealth to the whole of Britain.

So, we should take pride in the sight of all of those cranes. The development that they represent is a signal of continuing global confidence in London and its future growth.

The inherent value of such development to the city itself – bringing work to professional services firms, on-site construction jobs and, of course, new offices – is generally well-accepted. However, we were interested in understanding what value it might add more widely across Britain.

It is sometimes overlooked, for instance, that more than 60 per cent of Transport for London’s capital investment budget is spent in other parts of the country – there are no train carriage manufacturers in Westminster, for example. Given that there are, equally, no steelworks in the Square Mile, should we not expect to see the economic (and other) benefits of development activity in London being felt in other parts of the country?

To find out, we asked PwC to analyse the direct and indirect impact of a sample of developments in Central London that have been completed since 2008 or are expected to be completed by 2016. Nine of the city’s leading developers agreed to fund this work and, importantly, allow PwC access to their confidential proprietary data so that a full understanding of their construction expenditure, supply chain impacts and even employee spending could be developed. I would like to thank each of those firms for their support and co-operation.

1 FOREWORD

PwC was commissioned to undertake this study by London First and nine of the principal developers in London - British Land, Cadogan Estates, Canary Wharf Group, The Crown Estate, Derwent London, Great Portland Estates, Grosvenor, King’s Cross Central Limited Partnership and Land Securities. The objective of the study is to assess the gross contribution of a small, but easily identifiable, part of London’s construction activity to the UK economy, by quantifying the economic output and employment generated across the country.

The study measured the national and regional output and employment generated by Central London office developments through construction expenditure, supply chain impacts and employee spending. The study also examined the extent to which development expenditure is lost from the UK, and explored the wider qualitative impacts of London developments on the local community, the construction sector’s supply chain, and as a catalyst to economic regeneration.

KEY FINDINGS • CentralLondonofficedevelopmentsgeneratesignificanteconomicbenefitstotheUK,contributinganaverageof£1.7bnofGVAand34,600jobsperyear.

• Around84%ofdirectexpenditureonCentralLondonofficedevelopmentremainsintheUK.

• MorethanhalfofthisUKexpenditure(£0.9bnperyear)isdistributedtotheregionsoftheUK,generating£1.1bnofGVAand22,400jobsperyear.

• CentralLondonofficedevelopmentgeneratesalmosttwiceasmuchGVAand80%morejobsoutsideLondonasitdoeswithinthecapital.

• ThereisthepotentialfordevelopmentstogeneratefurthereconomicbenefitsfortheUK,byincreasingdomesticexpenditureongoodsandserviceswheretheUKcurrentlylackscapability,suchascladding,liftsandmachinery.

• AsampleofresidentialdevelopmentsfoundthatCentralLondonhousebuildinghassimilarmultiplierimpactsontheeconomy.

• TherearewiderbenefitsofLondondevelopmenttolocalcommunities,suppliersandtheenvironment,whichareadditionalandcomplementarytotheireconomicimpacts.

The picture that emerges is striking. While it should be no surprise that London itself benefits from office development in the centre – to the tune of around half a billion pounds annually – the further contribution to regional economies is almost double that, at over £1bn a year. Similarly, the 12,000 jobs supported in London are dwarfed by over 22,000 supported outside the city. And more than 80% of direct expenditure remains in the UK; overseas purchases tend to be limited to specialist equipment that is not currently made in Britain.

It is important to note that this research represents just a fraction of London’s overall construction activity. It looks at office development in Central London, and takes the sample from the nine developers and extrapolates it to Central London office development as a whole. But it does not look to office development outside this central zone - the West End, City of London and Docklands – nor does it include other types of development, such as housing or infrastructure. Total construction activity in London generates much larger economic benefits than those considered in this study.

Further research could shed light on the economic contribution of other development in London, particularly in the residential sector. But what is clear from this report is that, as with so many aspects of investment in the capital, building London brings benefits for many other parts of Britain.

JoValentineChief Executive, London First June 2013

2 EXECUTIVE SUMMARY

Regional economies

£1.1bn

22,400

London economy

£0.6bn

12,200

UK economy

£1.7bn

34,600Jobs

per annum

£GVA

per annum

Central London office

development

1GVA measures the contribution of an organisation or activity to GDP and jobs refer to person years of employment – one job is equivalent to one person employed for a full year. Results are presented in 2013 prices throughout unless stated otherwise.

54

Source: Development expenditure and PwC analysis.

Figure1:TheannualeconomiccontributionofCentralLondonofficedevelopment.1

THE CONTRIBUTION OF CENTRAL LONDON OFFICE DEVELOPMENT TO THE NATIONAL, LONDON AND OTHER REGIONAL ECONOMIES

A typical Central London office development of approximately 122,000 square foot - equivalent to two full-size football pitches - contributes £47m of GVA and 940 jobs to the UK economy. This includes the direct impact of expenditure on suppliers, the indirect impact of increased expenditure in their supply chains, and the induced impact of increased expenditure of employees in those businesses.

• TheconstructionofallCentralLondonofficedevelopmentscompletedbetween2008and2016isestimatedtogenerateatotalof£15.5bnofGVAand311,400jobs.

• Ofthis,approximately£9.7bnofGVAand201,700jobscanbeattributedtotheUKregionsoutsideofLondonwhile£5.8bnofGVAand109,700jobswere,orwillbe,retainedintheLondoneconomy.

THE ECONOMIC IMPACTS OF CENTRAL LONDON OFFICE CONSTRUCTION ARE DISTRIBUTED ACROSS THE REGIONS OF THE UK

• Aswouldbeexpected,theregionswhichbenefitmoststronglyfromCentralLondonofficedevelopmentarethoseclosesttoLondon–theSouthEastandEastofEnglandreceive£280mand£127mofGVAperyearrespectively.

• However,thereareregionsfurtherafieldwhichalsobenefitsignificantly–£57mofGVAand1,450jobsaresupportedeachyearinYorkshireandHumbersideand£44mofGVAand1,160jobsaresupportedeachyearintheWestMidlands.

• ThereareadditionalbenefitstotheregionsoutsideLondonof£467mofGVAand7,360jobsayear,whichresultfromknock-onspendingbetweentheregions(forexample,asupplierintheNorthWestsourcingmaterialsfromtheNorthEast)andcannotbeattributedtoaspecificregion.

• CentralLondonofficedevelopmentdirectlysupportsemployeewagesthroughsupplierexpenditure–£22mofwagesaredirectlysupportedinYorkshireandHumbersideeachyear,while£15mand£12mofwagesaresupportedeachyearintheWestMidlandsandtheNorthWestrespectively.

Source: Development expenditure and PwC analysis.Note: Regional spillovers refer to economic impacts that result from knock-on spending which leaks outside of the region - the specific region of the UK cannot be identified for these impacts.

76


Figure2:ThetotaleconomiccontributionofCentralLondonofficedevelopmentscompletedbetween2008and2016.

Figure3:AnnualGVAandemploymentsupportedbyCentralLondonofficedevelopmentintheregionsoftheUKoutsideofLondon.

350Direct UK jobs

£17mDirect UK GVA

£18mIndirect UK GVA

£12mInduced UK GVA

£47mTotal UK GVA

360Indirect UK jobs

230Induced UK jobs

940Total UK jobs

£A typical Central

London office development

£5.8 bn

£9.7bn

£15.5 bn

£0

£2

£4

£6

£8

£10

£12

£14

£16

£18

London GVA Regions GVA Total UK GVA

Gro

ss V

alu

e A

dd

ed (

£bn

)

109,700

201,700

311,400

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

London employment

Regions employment

Total UK employment

Em

plo

ymen

t

Region Annual

GVA Annual

jobs East of England £127 m 3,050 East Midlands £32 m 850 North East £12 m 280 North West £32 m 790 Northern Ireland £9 m 230 Scotland £9 m 210 South East £280 m 6,660 South West £10 m 280 Wales £3 m 90 West Midlands £44 m 1,160 Yorkshire & Humberside £57 m 1,450

Regional spillovers £467 m 7,360

All regional impacts

outside London

£1,082 m 22,410

Central London office development

£32m GVA

790 jobs

£12m GVA

280 jobs

£10m GVA

280 jobs

£3m GVA

90 jobs

£44m GVA

1,160 jobs

£32m GVA

850 jobs

£127m GVA

3,050 jobs

£57m GVA

1,450 jobs

£9m GVA

210 jobs

£9m GVA

230 jobs

£280m GVA

6,660 jobs

£32m GVA

790 jobs

£12m GVA

280 jobs

£10m GVA280 jobs

£3m GVA

90 jobs

£44m GVA

1,160 jobs

£32m GVA

850 jobs

£127m GVA

3,050 jobs

£57m GVA

1,450 jobs

£9m GVA

210 jobs

£9m GVA

230 jobs

£280m GVA

6,660 jobs


THERE IS POTENTIAL FOR CENTRAL LONDON OFFICE DEVELOPMENT TO GENERATE FURTHER ECONOMIC BENEFITS

THERE ARE WIDER BENEFITS OF LONDON DEVELOPMENTS

THE RESULTS IN THIS STUDY REPRESENT ONLY A SMALL PROPORTION OF TOTAL LONDON CONSTRUCTION

• TheeconomicbenefitsofCentralLondonofficedevelopmentresultfrom84%ofexpenditureremainingintheUK–thiscomparesfavourablytotheaverageforotherindustriessuchasoilandgasextraction(81%),telecommunications(69%)andvehiclemanufacturing(51%).2

• However,ifthisproportionincreasedto100%therecouldbeanadditional£3.1bnofhypotheticalGVAgeneratedintheUK.

98

£15.7 bn

£1.5 bn£0

£2

£4

£6

£8

£10

£12

£14

£16

£18

Value of all London construction output

Value of Central London office

construction output

An

nu

al v

alu

e o

f o

utp

ut

(bn

)

2ONS Input-Output Tables.

3The £1.5bn of construction expenditure in Figure 5 excludes all pre-construction costs such as design and planning. The £15.7bn of London construction output is the value of new work (excluding repair and maintenance) across Greater London.

Central London offices represent only a small proportion of all London development activity:

• Theconstructionexpenditureanalysedinthisstudyisequivalenttolessthan10%oftotalconstructionoutputinLondon(asmeasuredbynewworkorders).3

• Theremaining90%ofconstructionoutputincludessectorssuchashousing,retailandinfrastructure,aswellasofficedevelopmentoutsidethecentralzonesoftheWestEnd,CityofLondonandDocklands.TotalconstructionactivityinLondongeneratesmuchlargereconomicbenefitsthanthoseconsideredinthisstudy.

The variety of wider benefits of developments investigated in this study is listed below. These benefits are additional to the economic impacts of developments and are investigated through the use of a number of case studies throughout this report.

Many of these wider benefits are aptly illustrated by the case studies included in the report.

The study of Canary Wharf Group’s partnership with local councils and business groups shows how major developments can foster hyper-local supply chains. Cadogan Estates’ redevelopment of Duke of York Square has similarly benefited local businesses and provided a new public space for the community, while Great Portland Estates’ ambitious Master Plan for Hanover Square not only creates a new square for public use but also further enhances the new Crossrail station and the benefits that will bring to the area.

The supply chain impact of Central London development is illustrated in several case studies. British Land’s Leadenhall Building has preserved steelworking jobs in Bolton and used materials from other locations, including South Wales and Humberside. The skills that enabled the King’s Cross Central Limited Partnership to restore the iconic gas holders behind the station were found not in London, but in Yorkshire. And Grosvenor’s Core Product Team shows how a collaborative approach to procurement can work for both developers and their contractors and suppliers.

As in any sector, development activity can also help to foster skills among the next generation, as the success of the Construction Skills Centre at King’s Cross shows. Looking further forward, the contribution of development to environmental sustainability is often overlooked, but is well illustrated by Land Securities’ use of ground source energy at One New Change, Derwent London’s chameleon-like White Collar Building, at the Old Street Roundabout and The Crown Estate’s innovative energy strategy for the Quadrant 3 phase of its Regent Street regeneration programme.

Local regeneration - Creating public

space

- Mutual benefits of infrastructure

- Heritage restoration

- Local apprenticeships

Supplier relationships

- Hyper-local supply chains

- Utilising regional suppliers

- Supply chain collaboration

Environmental sustainability

-A flexible approach to sustainability

- Developing sustainability

expertise

- Constructive conservation

Figure4:ThecurrentandpotentialGVAofCentralLondonofficedevelopments,2008-2016.

Figure5:TheannualvalueofLondonconstructionoutputandCentralLondonofficeconstructionoutput,2008-2012.


Source: Output in the Construction Industry, ONS and PwC analysis.

£3.1bn£15.5bn

Current GVA

Potential GVA

1110

3 INTRODUCTION

There have been a number of studies which have examined London’s economic contribution to the UK and its regions, including those by the GLA4, the City of London5 and London First.6 There has also been significant analysis of the role of construction activity in generating economic growth, such as the publications by the UK Contractors Group7 and British Land.8 However, there is a gap in research into the economic impact of aggregate construction activity in London on the wider UK economy and the regions.

This study reduces this gap by quantifying the gross contribution of commercial development in Central London to the UK economy. This study was undertaken by PwC, and commissioned by London First and nine of the principal developers in London, and it involved the collation and analysis of construction expenditure at a number of office based developments in Central London across the nine developers.

The results for Central London offices have been scaled up for the entire population of developments using statistical analysis, as a large and representative data sample - representing 17% (by floor space) of all Central London office developments - was collected. This has produced the main results of the study, which are estimates of the total economic output and employment supported by construction expenditure across all Central London office developments. In addition, a number of case studies have been undertaken in order to identify any wider social, economic or environmental benefits.

The main objectives of this study are as follows:

• ToquantifythegrosseconomiccontributionofCentralLondonofficedevelopmentontheUKeconomythroughexpenditureonconstruction,supplychaineffectsandemployeespending.

• ToanalysetheextenttowhichtheseeconomicimpactsaredistributedacrossthedifferentregionsoftheUK.

• Tostudythecapabilityofthedomesticsupplychaininprovidingconstructionmaterialsandservices,andhencequantifyingthecostofexpenditure“leaking”fromtheUK.

• ToexploreanywiderqualitativebenefitsofLondon’sdevelopmentsoncommunities,suppliersandtheenvironment.

This study seeks to estimate the aggregate economic impact of one sub-sector of development in London –the Central London office market. This is achieved by collecting the supply chain expenditure data related to a sample of key development schemes. The scope of the analysis, in terms of geography, time and other factors, is illustrated in Figure 6 and is explained in more detail below.

CentralLondon The analysis includes all relevant developments located within the boundaries of Central London which are illustrated in Figure 7 below. This geography is based on the general definition of Central London provided in property reviews of London offices, which categorises the area into the sub-markets of The West End, Paddington, Midtown, King’s Cross, The City, Southbank and Docklands. It covers the main areas of office development activity in London and loosely overlaps with the GLA’s definition of the ‘Central Activities Zone’, the area with the highest concentration of important business activities.

4GLA, Growing Together – London and the UK Economy, 2005. 5City of London Corporation, London’s Place in the UK economy, 2009. 6London First, Keeping the UK Competitive, 2006. 7UK Contractors Group, Making the Economic Case for Construction, 2011, and Construction in the UK Economy, 2012. 8British Land, Our Economic Contribution, 2011 and Building Business, Creating Growth, 2012.

3.2 SCOPE OF ANALYSIS

London development

Central London

South LondonNorth London

Office Residential RetailOther (incl.

infrastructure)

Completed between 2008 & 2016

In scope

Out of scope

New Refurb

3.1 AIMS AND OBJECTIVES OF THE REPORT

W11

W14

W8

W2

SW7

SW3

SW1

W1W2

WC1

NW1

EC1

EC4

EC2

EC3

E1

SE1

E14

E16

Figure6:Thescopeofanalysisinthisstudy.

Figure7:TheboundariesofCentralLondoninthisstudy.

1312

Officedevelopments The developments included in the analysis either have at least 10,000 square foot of office floor space, or are predominantly used for office purposes if smaller than 10,000 square foot.

Completedbetween2008and2016The analysis includes all developments which completed or are expected to be completed between the years 2008 and 2016 inclusive. The developments included in the analysis may therefore be either recently completed, currently onsite or recently committed/proposed.

Newdevelopmentandrefurbishments The analysis includes both new developments and refurbishments.

1DefiningthesampleThe sample of developments was defined using the criteria identified in Chapter 3.2 – Scope of analysis. In total, 38 office developments in Central London were included in the sample, belonging to nine different developers. This sample contained a total office floor space of 6.7 million square foot, with development sizes ranging from less than 5,000 square foot to over 500,000 square foot. The developments in the sample were located across the breadth of Central London, in The City, The West End, Docklands and King’s Cross.

2EconomicanalysisThe first stage of the economic analysis involved collecting data on supply chain expenditure for each of the 38 developments. This dataset includes expenditure on suppliers providing construction materials such as cladding, the fees of contractors (both the main contractor and package contractor) and expenditure on professional services such as architects and consultants, including those incurred in the pre- construction phase. This expenditure is collectively referred to as thefirstroundofdevelopmentexpenditure, with the suppliers receiving this expenditure referred to as the first round of suppliers.

The economic impact of the first round of development expenditure was calculated by applying economic indicators to the expenditure data. These indicators were applied at both the national and regional levels, to estimate impacts on the regional economies as well as the UK economy. The two main metrics used to measure economic impact weregrossvalueaddedand employment, which are defined as follows:

The approach to estimating the main results consisted of three main stages, as outlined in Figure 8. Each of the three stages is described in turn below.

Economic impacts are categorised as direct,indirectand inducedimpacts, with indirect and induced impacts collectively known as multiplierimpacts. They are defined in the box below and illustrated in more detail in Figure 9. The three impacts can be summed together to calculate the total economic impact. It should be noted, however, that the economic impacts estimated throughout this study relate to gross rather than net impacts. This means that this study does not estimate what would have happened to the economy if there was no Central London office development. A more detailed description of the economic analysis is provided in Annex 2.

3.3 APPROACH

1) Defining the sample

of Central London office developments

2) Economic analysis

of supply chain expenditure

3) Extrapolation of results

for all Central London office developments

GROSS VALUE ADDED (GVA) Gross value added is the recommended measure (ONS, Measuring the Economic Impact of an Intervention or Investment, 2010) of the contribution of an organisation or activity to GDP.

EMPLOYMENT The number of jobs supported by construction expenditure is measured in person years, which assumes that each job is the equivalent of employing one person for one full year.

DIRECT IMPACTSThe GVA and employment supported by the first round of development expenditure.

INDIRECT IMPACTS The GVA and employment supported by increased supply chain spending in the first round of suppliers.

INDUCED IMPACTS The GVA and employment supported by the spending of employees in the first round of development expenditure (including on site workers) as well as the rest of the supply chain.

£xm

Main contractor

£xm

Construction suppliers

£xm

Architects & consultants

Direct impacts

Indirect impacts

£xmFirst round of development expenditure

£xm

Package contractors

£xm

Supply chain spending

Induced impacts £xmEmployee spending

Figure8:Thehigh-levelapproachtotheestimationofresults.

Figure9:Illustrationofthedirect,indirectandinducedimpactsofthefirstroundofdevelopmentexpenditure.

1514

3ExtrapolationofresultsTo extrapolate the results for the 38 developments in the sample for the population of all Central London office developments, the sample was categorised into clusters of developments. These categories were chosen after a detailed analysis of the characteristics which affect the pattern and size of economic impact resulting from developments. The main characteristics affecting economic impact were found to be the size and location of developments, so the sample was split into the five categories below based on those characteristics.

The economic impact results calculated in stage 2 were aggregated for each category and divided by the total amount of office floor space for that category. This produced estimates of the direct, indirect and induced GVA and employment (for the UK and each of the regions) per square foot of office floor space, for each category of development. For example, for Docklands developments:

The output of the construction industry has been a key determinant of the UK’s economic growth in recent years, and has mirrored the changes in output experienced by the overall economy. In the 16 quarters to the end of 2012, the construction sector accounted for 31% of the fluctuations in economic output, measured by gross value added, while only accounting for 7% of total output in the economy.

Then, data was collected on the total office floor space of developments with a completion date between 2008 and 2016, for each of the five categories. This was obtained using market reports on Central London office development activity, which provided individual data on developments previously completed, under construction, committed or proposed. The total amount of floor space within each category was then used as the basis of extrapolation, by multiplying the economic impacts per square foot of development by the total amount of office floor space, for each category. The floor space used at all stages of the analysis is the net internal area, and the floor space that is used for office purposes only.

Category Number of developments Office floor space (m sq ft) 1 West End area, <150,000 sq ft 14 0.8 2 West End area, > 150,000 sq ft 5 1.1 3 City area, <150,000 sq ft 8 0.6 4 City area, > 150,000 sq ft 6 2.3 5 Docklands 5 1.9 All 38 6.7

Direct UK GVA of Docklands developments

in sample

£x m

Floor space of Docklands

developments in sample

x million sq ft

Direct UK GVA per square foot of

Docklands developments

£x per sq ft


Docklands development

£x per sq ft

Floor space of Docklands developments

in population

xx million sq ft

Direct UK GVA of all Docklands developments

in population

£xx m

9The West End area refers to the West End and Paddington, while the City area refers to The City, Southbank, Midtown and King’s Cross. All Docklands developments in both the sample and the overall population were over 150,000 square foot of office space, so they were not categorised by size.

4 THE CONTRIBUTION OF CENTRAL LONDON OFFICE DEVELOPMENT TO THE UK ECONOMY

4.1 BACKGROUND TO THE LONDON ECONOMY AND CONSTRUCTION SECTOR

THE ROLE OF CONSTRUCTION IN THE UK ECONOMY

-2.5%

-1.5%

-0.5%

0.5%

1.5%

2007 2008 2009 2010 2011 2012

Ch

an

ge i

n o

utp

ut

Change in output excluding constructionChange in output due to construction

7%

31%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Share of output, 2009-2012

Share of output fluctuations, 2009-2012

Construction sector Non-construction sectors

Direct UK GVA of Docklands developments

in sample

£x m

Floor space of Docklands

developments in sample

x million sq ft


Docklands developments

£x per sq ft


Docklands development

£x per sq ft

Floor space of Docklands developments

in population

xx million sq ft

Direct UK GVA of all Docklands developments

in population

£xx m

Table1:ThecategorisationofCentralLondonofficedevelopmentsbylocationandsize.9

Source: UK Economic Accounts, ONS.

Figure10:ThecontributionoftheconstructionsectortoUKoutputgrowth,2007-2012.

Source: UK Economic Accounts, ONS.

Figure11:Theconstructionsector’sshareofUKoutputandUKoutputfluctuations,2009-2012.

1716

Figure 12 below presents the change in the number of workforce jobs since the start of 2007, for the construction sector and the whole economy. The economy has recovered from the decline in employment between 2009 and 2011, with total workforce jobs in December 2012 exceeding that of January 2007 by 280,000. Meanwhile, the construction sector has lost 305,000 workforce jobs over the same period, as a result of a steady decline in employment from 2009 onwards.

The construction sector in London tends to move in the same direction as the London economy as a whole, but is generally exposed to much wider fluctuations in output. As illustrated in Figure 13, the output of the London construction sector experienced much larger increases in output than the wider London economy during the pre-recession years, notably in 2006 when nominal output growth in construction was three times greater than that across all sectors. Similarly when London experienced a slight drop in nominal output of 0.1% in 2009, the corresponding fall in nominal output for the construction sector was 14%. However, the share of the London construction sector in the wider London economy has been relatively constant over this period, remaining between 4.5% and 5.5% of total output between 2000 and 2010.

Central London office development between 2008 and 2016 contributed an estimated £15.5bn of GVA and 311,400 jobs.10 This equates to an annual average of £1.7bn of GVA and 34,600 jobs. Approximately £5.7bn of GVA and 115,300 jobs of the total economic contribution are the direct impacts of the development expenditure on the economy. The remaining £9.8bn of GVA and 196,100 jobs are supported through indirect and induced impacts, which are a result of increased supply chain and employee spending.

The developments included in the extrapolated results are equivalent to 40.5 million square foot of office space and are distributed across the West End, City and Docklands and their immediate surrounding areas. The total floor space used to estimate these results is presented in Figure 15 by completion date. The economic impact per million square foot of floor space differs significantly based on the location and size of the development, so separate extrapolations were undertaken for each type of development based on these characteristics.

Dec 2012 = -305,000

Dec 2012 = 280,000

-600

-500

-400

-300

-200

-100

0

100

200

300

400

2007 2008 2009 2010 2011 2012

Ch

an

ge

in w

ork

forc

e jo

bs

('0

00

s)

Construction All sectors

THE ROLE OF CONSTRUCTION IN THE LONDON ECONOMY

-15%

-10%

-5%

0%

5%

10%

15%

20%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Ch

an

ge i

n n

om

ina

l o

utp

ut

Growth in London construction output

Growth in London output

Construction as a % of London output

4.2 CONSTRUCTION INVESTMENT AS A DRIVER OF UK ECONOMIC GROWTH

£5.7 bn

£6.0 bn

£3.8 bn £15.5 bn

£0

£2

£4

£6

£8

£10

£12

£14

£16

£18

Direct GVA

Indirect GVA

Induced GVA

Total GVA

Gro

ss V

alu

e A

dd

ed (

£bn

)

115,300

119,900

76,200 311,400

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Direct employment

Indirect employment

Induced employment

Total employment

Em

plo

ymen

t (j

obs)

0

1

2

3

4

5

6

7

2008 2009 2010 2011 2012 2013 2014 2015 2016

Offi

ce fl

oor

spac

e (m

sq

ft) Docklands area West End area City area Average

10 GVA measures the contribution of an organisation or activity to GDP, and jobs refer to person years of employment – one job is equivalent to one person employed for a full year. Results are presented in 2013 prices throughout.

Source: Labour Market Statistics, ONS.

Figure12:Changeinworkforcejobsfortheconstructionsectorandthewholeeconomy,2007-2012.

Source: Regional Accounts, ONS.

Figure13:ChangeinoutputoftheLondoneconomyandtheLondonconstructionsector,2000-20102.

Sources: Development expenditure data and PwC analysis.

Figure14:TheeconomiccontributiontotheUKofCentralLondonofficedevelopments,byGVAandemployment,2008and2016.

Sources: London Offices Crane Survey, Deloitte Real Estate and Central London Property Market Review, CBRE.

Figure15:FloorspaceofallCentralLondonofficedevelopmentsbycompletiondate,2008-2016.

18

The floor space in Figure 15 is presented by year of completion, which does not give a precise indication of when the economic impacts occur. This is because the development of large offices often takes a number of years and economic impacts will occur throughout the development lifecycle. Figure 16 presents the estimated time profile of economic impacts for all Central London office developments with a completion date between 2008 and 2016. This is calculated using information on the timescale of office development and the assumption that economic impacts are distributed equally across this development lifecycle. As illustrated in Figure 16, this means that economic impacts tend to be smoothed over time, with the effect of the completed floor space slump in 2011 spread out over 2009 and 2010.

It should be noted that Figure 16 only includes developments with a completion date between 2008 and 2016, and that developments with a completion date outside of these years are likely to bring additional economic impacts in the years shown. For example, developments that completed in 2007 are likely to have had a GVA impact in 2007 and the preceding years. Hence, to obtain estimates of the annual impact of Central London office developments, the total GVA and employment should be divided by the range of years in which they are due to complete, rather than the time profile of impacts. This gives an annual average of £1.7bn of GVA and 34,600 jobs supported by Central London office developments, after including multiplier impacts.

The Central London office developments considered in the above analysis represent only a small proportion of the total construction activity in London. The construction expenditure analysed within this study is equivalent to less than 10% of the total value of construction in London, as measured by new work orders.11The remaining 90% of construction output consists of sectors such as housing, retail and infrastructure, in addition to office development outside of the central area of London defined for the purposes of this study. £0.0

£0.5

£1.0

£1.5

£2.0

£2.5

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Gro

ss v

alu

e a

dd

ed (

£b

n) Direct GVA Indirect GVA Induced GVA

BOX 1: THE ECONOMIC IMPACT ON THE UK OF A TYPICAL CENTRAL LONDON OFFICE DEVELOPMENT

350Direct UK jobs

£17mDirect UK GVA

£18mIndirect UK GVA

£12mInduced UK GVA

£47mTotal UK GVA

360Indirect UK jobs

230Induced UK jobs

940Total UK jobs

£A typical Central

London office development

11 The £1.5bn of construction expenditure in Figure 5 excludes all pre-construction costs such as design and planning. The £15.7bn of London construction output is the value of new work (excluding repair and maintenance) across Greater London.

£15.7 bn

£1.5 bn£0

£2

£4

£6

£8

£10

£12

£14

£16

£18

Value of all London construction output

Value of Central London office

construction output

An

nu

al v

alu

e o

f o

utp

ut

(bn

)


Figure16:ThetimeprofileofeconomicimpactsfromCentralLondonofficedevelopmentsinscope,2005-2016.

Source: New Orders in the Construction Industry, ONS.

Figure17:Londonconstructionworkordersbylocation&developmenttype,2009-2012.


The values in Figure 17 illustrate that the results presented in this chapter reflect only a proportion of total London construction. The economic impacts of these other construction types (such as residential developments) are likely to be significant given the comparatively strong knock-on effects of the construction sector, which is explained in more detail in Annex 1. However, the exact scale and structure of economic impacts resulting from the construction of other development types are likely to vary depending on their sector and location. Box 2 presents an analysis of the economic impact of a sample of residential developments in Central London.

This is based on the average GVA and jobs per square foot of office space across the five categories of development, combined with the average floor space of Central London offices of 122,000 square foot. The results take into account the direct impact on the first tier of

suppliers receiving the expenditure (including the impact of onsite workers), the indirect impact on the supply chain beneath those suppliers, and the induced impact resulting from employees on site and along the supply chain spending their money in the economy.

The economic analysis of supply chain spending at a representative sample of Central London office developments has estimated that the development of a typical Central London office supports £47m of Gross Value Added (GVA) and 940 jobs in the UK economy. This is illustrated in Box 1 opposite.

19

2120

BOX 2: THE ECONOMIC IMPACT OF EACH 100 UNITS OF CENTRAL LONDON RESIDENTIAL DEVELOPMENT

550Direct UK jobs

£28m Direct UK GVA

£14m Indirect UK GVA

£10m Induced UK GVA

£52m Total UK GVA

310Indirect UK jobs

230Induced UK jobs

1,090Total UK jobs

£

100 units of Central London

residential development

A significant proportion of expenditure on Central London office developments remains within London, as would be expected, and generates a stream of economic benefits within the capital. Approximately 46% of UK expenditure is disbursed to London-based suppliers, totalling £6.7bn for developments between 2008 and 2016. This supports approximately £5.8bn of GVA and 109,700 jobs in London, which is equivalent to approximately £0.6bn of GVA and 12,200 jobs per year.

While £2.7bn of GVA and 48,100 jobs are generated directly, there is also an indirect impact of £1.8bn of GVA and 32,800 jobs through further supply chain spending within London. In addition, there is an induced impact of £1.3bn of GVA and 28,800 jobs from employees spending their wages in London, as a result of the initial expenditure.

The percentage of development expenditure that remains in London tends to vary significantly across the packages that are procured for Central London office construction. Two packages which tend to be highly concentrated in the London area are architects and consultants, and groundwork and demolition services. The impact on the London economy resulting from expenditure on these packages, for all Central London office developments to complete between 2008 and 2016, is presented below.

Approximately 91% of total expenditure on architects and consultants remains within London, reflecting the competitive advantage of London in business services. This package includes a range of professional services required for large office developments such as architects, surveyors, cost consultants and environmental consultants, and it includes expenditure both during construction and before construction during feasibility stages. Total expenditure on London-based suppliers of these services is approximately £1.2bn.

5 THE CONTRIBUTION OF CENTRAL LONDON OFFICE DEVELOPMENT TO THE LONDON ECONOMY

5.1 IMPACTS ON THE LONDON ECONOMY

£2.7 bn

£1.8 bn

£1.3 bn£5.8 bn

£0

£1

£2

£3

£4

£5

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£7

Direct GVA

Indirect GVA

Induced GVA

Total GVA

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£bn

)

48,100

32,800

28,800109,700

0

20,000

40,000

60,000

80,000

100,000

120,000

Direct employment

Indirect employment

Induced employment

Total employment

Em

plo

ymen

t



Figure18:TheeconomiccontributiontoLondonofCentralLondonofficedevelopments,byGVAandemployment,2008and2016.

The construction of residential developments in Central London generates significant multiplier effects in the economy, in a similar manner as the construction of office buildings. A large proportion of expenditure at residential developments remains in the UK (93%), which increases its potential to generate significant economic impacts.

For each 100 units of Central London residential development in the sample analysed, approximately £51m of GVA and 1,090 jobs are supported in the UK economy. This includes £28m of GVA and 550 jobs at the suppliers directly involved in construction and £14m of GVA and 310 jobs supported in

the supply chains of those businesses. In addition, £9m of GVA and 230 jobs are supported by the increased consumer spending of employees on site and in the supply chain. The residential developments analysed in this sample consist of a mix of refurbishments and new builds, as well as a combination of market and affordable housing.

A unit of residential development is defined as an individual dwelling such as a flat or house, regardless of size. Between 2008 and 2012, the average number of dwellings completed in London was approximately 19,000 per year (DCLG, Housebuilding Statistics).

2322

Expenditure on architects and consultants in London directly supports £631m of GVA and 12,750 jobs, with £399m distributed to employees in wages. The indirect and induced impacts of this expenditure support a further £492m of GVA and 11,890 jobs for other businesses in London, while the spillover of knock-on expenditure into other regions supports a further £415m of GVA and 2,600 jobs for businesses outside London.

Suppliers of groundwork and demolition services in London receive £515m of expenditure as a result of Central London office developments. This supports approximately £181m of GVA and 3,260 jobs for suppliers of those services, with £93m distributed to their employees in wages. This creates a further £179m of GVA and 3,820 jobs for other businesses in London, with an additional multiplier impact of £173m of GVA and 3,780 jobs for businesses in the rest of the UK.

The expenditure on London-based suppliers in the construction phase of development is only one aspect of how developers can contribute to the prosperity of London, however. The case studies below highlight some examples of how developers have engaged with local communities in London, to ensure that the benefits of development are shared with those living nearby.

Direct impact on suppliers

Multiplier impacts in London

Multiplier impacts on the rest of the UK

• £631m of GVA • 12,750 jobs & £399m of wages

• £492m of GVA • 11,890 jobs

• £415m of GVA • 2,600 jobs

£1.2bn of expenditure


Multiplier impacts in London

Multiplier impacts on the rest of the UK


• £179m of GVA • 3,820 jobs

• £173m of GVA • 3,780 jobs

£515m of expenditure

CASE STUDY 1 HYPER-LOCAL SUPPLY CHAINS EAST LONDON BUSINESS PLACE

TheEastLondonBusinessPlaceThe East London Business Place is a public-private partnership which Canary Wharf Group leads, working alongside the East London Business Alliance (ELBA) and East London borough councils. The objective of the East London Business Place (ELBP) is to maximise business opportunities between local companies by providing local and regional supply chain support services within each of the boroughs.

Gay Harrington, Director of the ELBP, says that they achieve this by “working with micro and small to medium sized enterprises and buyers across all industry sectors to source and match local suppliers to their purchasing needs”. The ELBP operates within 10 boroughs around the Thames Gateway, offering buyers and suppliers free one-to-one advice.

The ELBP grew out of the success of Canary Wharf Group’s Local Business Liaison Office (LBLO) model, which was implemented in 1997. The LBLO worked with local companies to help them secure contracts, which totalled £615m of business for local suppliers by 2008. Approximately 84% of these contracts and purchase orders were for less than £10,000, and could therefore be delivered by SMEs. Since 2008, ELBP has helped East London businesses to secure a further £117m of contracts.

HowtheELBPsupportsEastLondonbusinessesThe ELBP actively works to match specific local suppliers to local buyers, tracking and giving access to contracts around the 10 boroughs of East London. In addition, the ELBP provides a number of procurement and business development services to buyers and suppliers in East London, including:

• face-to-facebusinessandprocurementadvice.

• groupandone-to-onesupporttoimprovecompetitivenessandfitnesstosupply.

• freeeventssuchasworkshops,seminars,procurementclinicsandnetworkingevents.

To support buyers, the ELBP offers a face-to-face, flexible approach to meeting the needs of individual businesses. Services include access to a database of more than 3,500 local suppliers from a range of trades and disciplines, which reduces the time needed for sourcing and contracting. In addition the ELBP allows buyers to confidentially track and measure their local procurement metrics, to meet their compliance obligations and corporate social responsibility agenda.

Aim To maximise local business opportunities in East London by matching local suppliers to the purchasing needs of buyers and providing business support services

1997 The Local Business

Liaison Office (LBLO) established

1997 -2008 LBLO helped local

companies to secure over £615m of contracts

2008 LBLO expanded across East London, forming

the East London Business Place (ELBP)

2013 The ELBP to date has

helped local companies to secure a further £117m of business

Bexley

Greenwich

Havering

Lewisham

Newham

RedbridgeWaltham Forest

Hackney

Tower Hamlets

Barking and Dagenham

3,502 businesses registered

3,108 businesses supported

£ 117.5 m of business secured locally •4,187 contracts •84% of contracts worth £10k or less



Figure19:ThetotaleconomiccontributionofCentralLondonofficeexpenditureonLondon-basedarchitects&consultants,2008-2016.

TheachievementsoftheELBP(andpreviouslytheLBLO).

Figure20:ThetotaleconomiccontributionofCentralLondonofficeexpenditureonLondon-basedgroundwork&demolitionsuppliers,2008-2016.

2524

CASE STUDY 1 HYPER-LOCAL SUPPLY CHAINS EAST LONDON BUSINESS PLACE

TheELBPinaction:KilnbridgeConstructionServicesLimitedTo demonstrate their commitment to hyper local procurement and supporting East London suppliers, Canary Wharf Group have procured local construction contractor, Kilnbridge, since 1992. Kilnbridge delivers integrated construction services across sectors such as infrastructure, rail, and commercial. They have provided a number of services for Canary Wharf Group across their portfolio of developments, including:

• Subandsuperstructureframeconstruction.

• Structuralalterationsexistingstructures.

• Concretecutting.

• Passivefireprotection.

• Wastemanagementservices.

In addition to providing sizeable construction contracts, working with Canary Wharf and the ELBP has enabled Kilnbridge to open its networks across East London to gain further benefits from local procurement: “ Kilnbridge is passionate about supporting local regeneration and the services offered by ELBP have been invaluable in promoting the benefits of utilising a diverse local SME supplier-base. Networking events held by ELBP have given us opportunities to market our company to other contractors on the Canary Wharf Estate and East London generally. Training provided by ELBP has assisted us in the continuous education of our workforce.” DermotMcDermott,Managing Director of Kilnbridge Construction Services Limited.

Local economy & community

Local Buyers

Local Suppliers

Canary Wharf Group

•Strengthened local economy •Improved job opportunities for local residents

•Increased access to local suppliers •Greater ability to track local procurement performance

•Increased revenue from accessing local buyers •Access to business development resources

•Canary Wharf Group leads the ELBP by connecting the local supply chain and developing businesses in East London

CASE STUDY 2 CREATING PUBLIC SPACE FOR THE COMMUNITY THE DUKE OF YORK SQUARE

TheDukeofYorkSquareThe site of today’s Duke of York Square shopping centre in Chelsea served as the Head Quarters of the Greater London Territorial Auxiliary and Volunteer Reserve in London for almost a century before the site was sold to Cadogan in 1998. Between 2003 and 2008 the site underwent a transformation, with Cadogan taking a space that had previously been inaccessible to the public and converting it into a modern, mixed use and public realm space. The Duke of York Square is the largest new public space created in London in the last 20 years.

HowCadogandevelopedtheSquareThroughout the planning process Cadogan adopted an inclusive approach, consulting with the community as well as local organisations such as the Chelsea Society, for their input on design and implementation. A decade after its opening, the presence of amenities such as the Saatchi Gallery, a mix of high end and high street retailers and a Saturday market have made the square a highly attractive location for leisure and shopping.

“ Cadogan are huge stakeholders in the area, so they work hard to engage with the local community to enhance the value of the development of the Duke of York Square for everyone.” DamianGreenish,Chairman of the Chelsea Society.TheongoingbenefitsoftheSquareCadogan have actively managed the site, funding and hosting community events and engaging with local interest groups. Community events include Santa’s Grotto and public screenings of major London events, such as the Olympic Ceremonies, the Royal Wedding, and Wimbledon tennis finals. They also host events to sponsor and raise awareness for charities, such as their Help for Heroes race for recovery.

Mr Greenish added that, “Cadogan have a genuine commitment to maintaining the character of the buildings and to ensuring the architecture is in keeping with the character of Chelsea. It doesn’t happen often that London sees the creation of such a large new public space, and Cadogan had the unique opportunity to take the long term view. Cadogan have brought the Duke of York Square to life; it would be hard to imagine any other developer being able to attain the same result that Cadogan have.”

Phase 1

•2003 : Redeveloped and finished ‘public’ areas.

Phase 2

•2006: Completion of the garages and Queripel House.

Phase 3

•2008: Completion of the Saatchi Gallery.

Aim To create new public space and amenities for the benefit of the local economy and residents

Aim To maximise local business opportunities in East London by matching local suppliers to the purchasing needs of buyers and providing business support services

1997 The Local Business

Liaison Office (LBLO) established

1997 -2008 LBLO helped local

companies to secure over £615m of contracts

2008 LBLO expanded across East London, forming

the East London Business Place (ELBP)

2013 The ELBP to date has

helped local companies to secure a further £117m of business

Bexley

Greenwich

Havering

Lewisham

Newham

RedbridgeWaltham Forest

Hackney

Tower Hamlets

Barking and Dagenham

3,502 businesses registered

3,108 businesses supported

£ 117.5 m of business secured locally •4,187 contracts •84% of contracts worth £10k or less

GeographiescoveredbytheELBP.AchievementsoftheELBPsince2008.

SummaryoftheactionsandbenefitsrelatingtotheELBP.

Local businesses

Local community

Cadogan

•Visitors to events and amenities at the square attract customer footfall to the area, stimulating business

•The community benefits from a new public space with a range of amenities •The community benefits from the provision of events and activities in the square

•Cadogan regenerated the Duke of York Square into a public space through consultation with the local community and actively managing the public space

SummaryoftheactionsandbenefitsrelatingtotheELBP.

PhasesofregenerationattheDukeofYorkSquare.

PHASE12003: Redeveloped and finished ‘public’ areas.

PHASE22006: Completion of the garages and Queripel House.

PHASE32008: Completion of the Saatchi Gallery.

2726

5.2 INFRASTRUCTURE INVESTMENT AS A CATALYST TO LONDON DEVELOPMENT

Infrastructure is the basis upon which the built environment rests, both physically and economically. Studies of infrastructure investment in over 100 countries over the period from 1960 to 2000 found that not only is growth positively impacted by infrastructure assets, but income disparity decreases as infrastructure increases and improves in quality.12 Investment and improvement in infrastructure can have a major impact on development by making opportunities viable for developers and maintaining the capability of a skilled construction workforce.

Investment in London’s infrastructure is being driven by the twin pressures of an expanding population and the need to modernise legacy networks that often date back to the Victorian era. London’s population grew by 12% between 2001 and 2011, and is forecast to increase further over the next 20 years, from 8.2 million to 9.7 million.13

Significant infrastructure projects are either planned or underway, including the rail and tube networks, power distribution, and water and sewerage. Although infrastructure improvements are vital to keeping London operational, they also offer significant opportunities for redevelopment and regeneration, spurring wider economic benefits. Crossrail offers a good illustration of this catalytic effect since it not only involves the building of several new stations and rail tracks, but will also entail the redevelopment of a number of existing London Underground stations.

CrossrailCrossrail involves the construction of 21km of twin bore tunnels in addition to the building of eight new stations, covering a total of 118km of track. Due to open to the public in 2018, the London economy has already begun to feel the impacts with investment opportunities being generated by what is one of the most significant infrastructure projects ever to be undertaken in the UK. Crossrail will provide vital new capacity to enable London’s congested transport network to cope with projected increases in demand, as well as significantly cut journey times across the capital. It also has the potential to act as a catalyst for regeneration in the areas surrounding the stations.

There are four broad benefits from Crossrail:

ImpactonpropertyCrossrail is already impacting the way in which property investment decisions are being made. Over the period of 2012-21, Crossrail is helping to create additional value of up to £ 5.5 billion for residential and commercial developments along the route. Commercial office spaces could see their value increase as much as 10%, where 3.35 million square metres of developable office space has been identified within 1 kilometre of stations.14

SkilledworkforceAnother important impact of large infrastructure projects such as Crossrail is that on employment and skills development in the UK. The significant employment opportunities and the furthering of skills in a growing workforce have important benefits for the wider London and UK economy. Crossrail has helped to maintain a base load of workers capable of supporting the construction industry, creating a larger pool of skilled workers for developers to draw on in future developments.

Approximately 30,000 jobs in Central London are expected to be supported over the course of the Crossrail project, with up to 14,000 people being employed at the peak of construction (2013-2015), and overall the equivalent of 55,000 full time jobs will be created throughout the project, and its supply chain.15

In terms of skills development, Crossrail has been collaborating with National Apprenticeship Service so that a minimum of 400 apprenticeships will be generated over the project’s lifetime. Research suggests that apprenticeships generate value by delivering significant improvements to innovation, productivity, and retention rates.16

ImpactonsupplychainsAs with Central London office development, investment in London infrastructure creates demand and jobs across the country. The total value of work directly awarded to businesses by Crossrail is estimated at £5.5bn to date, generating 75,000 business opportunities. Analysis of Crossrail’s supply chain reveals that 43% of businesses that have won work with Crossrail are based outside London and the South East. In addition, 58% of all businesses in Crossrail’s supply chain are small and medium enterprises (SMEs).17

12 Serven, L. and Calderon C., The Effects of Infrastructure Development on Growth and Income Distribution Dataset, 2004. 13 ONS, Subnational Population Projections, 2010.

14 GVA, Crossrail – Property Impact Study, 2012. 15 Crossrail, £5.5bn of Crossrail Contracts Creating Jobs and Business Opportunities Around the UK, 2013. 16 Crossrail, Crossrail Creating Lasting Legacy of Local Jobs for Londoners, 2013. 17Crossrail, £5.5bn of Crossrail Contracts Creating Jobs and Business Opportunities Around the UK, 2013.

1

The building of new stations and increased rail capacity to keep

pace with growing demand

2

Improving stations and public and urban realm around the stations

3

Opportunities for over station development and encourage investment along the route

4

Employment of skilled workforce in the UK

Benefits of Crossrail

1. The building of new stations and increased rail capacity: This enables greater and faster access to various areas in and beyond London. London employers are able to draw from a larger labour market pool, and hence job opportunities are extended to those previously too far removed from the city.

2. Improving stations and public and urban realm around the stations: As above, improved stations improves access to London, by reducing congestion for passengers. Improvements in the public realm make London a more attractive and enjoyable place in which to live and work.

3. Opportunities for over station development and encourage investment along the route: Improved infrastructure encourages increased investment. Investment is not only made by established developers or public or private actors, but also attracts new investment from abroad.

4. Employment of skilled workforce in the UK: See below – ‘Skilled workforce’ for more details

2928

CASE STUDY 3 THE MUTUAL BENEFITS OF INFRASTRUCTURE AND DEVELOPMENT CROSSRAIL BOND STREET STATION

CrossrailBondStreetStationGreat Portland Estates’ development at 18-19 Hanover Square will form part of the new Crossrail Bond Street Station and was subject to a compulsory purchase order in 2009. As part of a more holistic approach for the area around the station Great Portland Estates (GPE) formulated a Master Plan for their involvement around Bond Street Station. They proposed a revision of their existing collaboration agreement with Crossrail in order to co-develop a larger station in a more comprehensive manner.

As a result of the Master Plan, GPE have been working with Crossrail towards a broad scheme over and around the station, which consists of increased public access to the station, the creation of new public realm and the redevelopment of mixed use properties.

The objective is not only to benefit the two parties involved, but also commuters and the local community.

TheMasterPlan“ GPE have been working closely together with Crossrail from the design stages, and thereby totally integrated the design of the station with the over-station developments.” ColinSmith, Head of Over-site Development at Crossrail.

As part of the Master Plan, GPE acquired six separate properties along Hanover Square and New Bond Street, totalling up to 200,000 sq ft of developable space.

In addition to these acquisitions, GPE’s Master Plan involves:

(1) creating a new public square, (2) developing mixed use properties above

and around the station, including best in class office developments and retail units above the station,

(3) building public access walkways to allow commuter access to the station from New Bond Street.

Mr Smith added: “In addition, Crossrail have, in full consultation with Westminster City Council and GPE, redesigned the whole of Hanover Square for it to properly relate to the new station and development, but also to make the Square more pedestrian-friendly. Hanover Square illustrates how the desire of both Crossrail and the developer to leave a lasting legacy of good urban design will result in the enhancement of public spaces and amenities. By bringing into play a much wider area of urban realm around the station, we will ensure the whole integrated Master Plan development will have a major and positive impact on the area.”

ThecurrentandfuturebenefitsoftheMasterPlanHanover Square has become a more amenable location for the local community and office workers. Development activity has secured modernised spaces for commercial and retail use while ensuring that the buildings are in keeping with the square’s architecture.

In conclusion, Mr Smith said that: “At the New Bond Street Station we have been able to achieve a triple win: Not only will this work leave a lasting legacy for good urban design, but it will also result in a better station, and overall better revenue for the parties involved.”

Collaborating with Crossrail has allowed GPE to provide them with a wider space within which to work, which has facilitated the development of a larger station with more direct access to the platform than was originally possible. Public walkways will allow commuters easier access to the station, while greater public access to New Bond Street will support retail activity in the area.

“ Working with Crossrail is part of the long term strategy of developing assets within close proximity of the emerging stations, namely the development at Hanover Square but also Rathbone Place and 79-80 Oxford St adjacent to the Tottenham Court Road station. Currently 81% of our West End portfolio by value is within 800m of a Crossrail station.” JamesPellatt,Head of Projects at Great Portland Estates.

Aim To collaborate with infrastructure development in order to produce mutually beneficial outcomes

1Original asset64 New Bond Street14/18 Brook Street

2Acquired August 200618/19 Hanover Square

3Acquired September 200620 Hanover Square

4Acquired October 200665/71 New Bond Street

5/6/7Acquired 2007/20081 Tenterden Street, 72 New Bond Street 18 Dering Street

Prime West End Site Assembled Through Six Acquisitions

Local residents, commuters and businesses

Crossrail

Great Portland Estates

•Gain a new square for public use •Greater access to the station and nearby amenities •Increased access of customers to local businesses

•Able to work with a much larger space in the station •Able to build a larger, better station with more direct access to the platform and better amenities

•GPE developed and improved Crossrail Bond Street Station and its surrounding area by working closely and collaborating with Crossrail.

1Original asset64 New Bond Street14/18 Brook Street

2Acquired August 200618/19 Hanover Square

3Acquired September 200620 Hanover Square

4Acquired October 200665/71 New Bond Street

5/6/7Acquired 2007/20081 Tenterden Street, 72 New Bond Street 18 Dering Street

Prime West End Site Assembled Through Six Acquisitions

MasterPlandevelopmentacquisitions.

SummaryoftheactionsandbenefitsrelatingtotheMasterPlan.

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6 THE WIDER BENEFITS AND OPPORTUNITIES OF LONDON DEVELOPMENTS

6.1. THE ECONOMIC IMPACT OF CENTRAL LONDON OFFICE DEVELOPMENT ON THE REGIONAL ECONOMIES

£3.0 bn

£4.6 bn

£2.1 bn£9.7 bn

£0

£2

£4

£6

£8

£10

£12

Direct GVA

Indirect GVA

Induced GVA

Total GVA

Gro

ss V

alu

e A

dd

ed (

£bn

)

67,200

84,100

50,400201,700

0

50,000

100,000

150,000

200,000

250,000

Direct employment

Indirect employment

Induced employment

Total employment

Em

plo

ymen

t

The construction of Central London offices generates expenditure across the country, with the majority of UK packages (54%) procured from suppliers outside of London. This is estimated to have generated £7.7bn of expenditure for UK suppliers outside of London, as a result of all Central London office developments with a completion date between 2008 and 2016. This supports approximately £9.7bn of GVA and 201,700 jobs in these regions, equivalent to £1.1bn of GVA and 22,400 jobs per year.

Approximately £3.0bn of GVA and 67,200 jobs are a result of direct impacts on regional suppliers, while further supply chain expenditure generated indirect impacts of £4.6bn of GVA and 84,100 jobs outside of London. Finally, there is an additional economic benefit to the regions of approximately £2.1bn of GVA and 50,400 jobs through local employee spending of wages.

The annual GVA and employment in the regions supported by Central London office development is presented against a map of the UK in Figure 22. The two regions which benefit the most from Central London office development expenditure are those that are closest to London, the South East and the East of England. Respectively, their economies receive £280m and £127m of GVA annually. However, there are regions further afield which also benefit significantly such as Yorkshire & Humberside and the West Midlands, which benefit respectively from £57m and £44m of GVA annually.

The total impact within each region of the UK depends not only on the amount of development expenditure within the region, but also the industries in which it is spent and the respective multiplier effects within each region. There are additional GVA and employment impacts on the regional economies, referred to as ‘regional spillovers’, which cannot be attributed to a specific region. They are caused by knock-on

expenditure between regions, such as businesses in the North West sourcing their raw materials from the North East or employees from the South East spending their wages in London. The regional spillovers into London have been estimated using data on the trade flows between London and the rest of the UK.18 These impacts are included in the GVA and employment results for London, and are therefore excluded from the regional spillover impacts presented below.

There are a number of packages which have a higher tendency to be procured from the regions rather than within London, and expenditure on these packages make a significant contribution to those regional economies. In particular, there is a strong supply of mechanical and electrical engineering in the West Midlands, and of structural steel in the North West and Yorkshire and Humberside regions. The total economic impact of these specific packages in the regions is presented below, for all Central London office developments to complete between 2008 and 2016.

As presented in Figure 23, suppliers of mechanical and electrical engineering in the West Midlands receive £255m of orders from office developments in Central London. This spending directly supports £96m of GVA and 2,490 jobs for the suppliers, with £54m distributed to employees in the form of wages. Through indirect and induced impacts, a further £102m of GVA and 2,950 jobs were supported in other West Midlands businesses. The spillover of indirect and induced impacts outside of the West Midlands generated a further £86m of GVA and 2,850 jobs in the other regions of the UK.

18 City of London Corporation, London’s Linkages with the Rest of the UK, 2004.

£32m GVA

790 jobs

£12m GVA

280 jobs

£10m GVA280 jobs

£3m GVA

90 jobs

£44m GVA

1,160 jobs

£32m GVA

850 jobs

£127m GVA

3,050 jobs

£57m GVA

1,450 jobs

£9m GVA

210 jobs

£9m GVA

230 jobs

£280m GVA

6,660 jobs


Region Annual jobs

Annual

GVA East of England 3,050 £127 m East Midlands 850 £32 m North East 280 £12 m North West 790 £32 m Northern Ireland 230 £9 m Scotland 210 £9 m South East 6,660 £280 m South West 280 £10 m Wales 90 £3 m West Midlands 1,160 £44 m Yorkshire & Humberside 1,450 £57 m Regional spillovers 7,360 £467m

All regional impacts outside London

22,410 £1,082m

£32m GVA

790 jobs

£12m GVA

280 jobs

£10m GVA

280 jobs

£3m GVA

90 jobs

£44m GVA

1,160 jobs

£32m GVA

850 jobs

£127m GVA

3,050 jobs

£57m GVA

1,450 jobs

£9m GVA

210 jobs

£9m GVA

230 jobs

£280m GVA

6,660 jobs



Figure21:TheeconomiccontributiontotheUKregions(outsideLondon)ofCentralLondonofficedevelopments,byGVAandemployment,2008and2016.

Source: Development expenditure, PwC analysis & Regional Accounts, ONS.

Figure22:AnnualGVAandemploymentsupportedbyCentralLondonofficedevelopmentintheregionsoftheUKoutsideofLondon.

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Multiplier impacts in the West Midlands


• £102m of GVA • 2,950 jobs



Multiplier impacts in Yorkshire & Humberside


• £171m of GVA • 4,780 jobs



Multiplier impacts in the North West


• £102m of GVA • 2,890 jobs


The North West and Yorkshire and Humberside regions are major suppliers of structural steel, providing approximately 55% (by expenditure) of the structural steel for Central London office developments. This equates to a total spend of £826m across the two regions.

This expenditure supports a combined direct impact of £334m of GVA and 8,100 jobs for suppliers in those locations, with £231m distributed to their employees in the form of wages. The multiplier impacts of structural steel expenditure in Yorkshire and Humberside and the North West support a further £273m of GVA and 7,670 jobs within those regions. In addition, there is a spillover of impacts outside of these two regions which are equivalent to £276m of GVA and 2,740 jobs for other regions of the UK. The case study below identifies a specific supplier of structural steel in the North West, and explores how supplying Central London office developments impacted their business and the local economy.

CASE STUDY 4 HOW STEEL IN LONDON SUPPORTS JOBS IN BOLTON WATSON STEEL STRUCTURES AND THE LEADENHALL BUILDING

WatsonSteelStructuresandTheLeadenhallBuildingThe construction of The Leadenhall Building required approximately 18,500 tonnes of steel, and much of this steelwork is on display due to its unique design, which consists of external megaframes of inclined columns. British Land used Watson Steel Structures to deliver this demanding steelwork package, who are based in the historic steel town of Bolton.

ThebenefitsofTheLeadenhallBuildingcontractforWatsonSteelStructuresThe work for The Leadenhall Building came at an important time for Watson Steel, as the UK fabricated steel market had recently slumped from 1.2 million to 0.9 million tonnes per annum and Watson Steel’s largest project, supplying steel for the Olympic stadium, was coming to an end. Undertaking the Leadenhall contract provided an amount of work equivalent to 200 full-time jobs for a year for Watson Steel, and a further 100 for the other businesses in the Severfield-Rowen Group. It provided 80% of their turnover in 2012.

“ In the absence of The Leadenhall Building project we would have had to downsize, with redundancies sadly being unavoidable.” PeterMiller, Director of Watson Steel Structures.

As a result of winning the contract, Watson Steel has been able to upskill and expand its workforce, as well as invest in equipment which allows them to produce higher value work. They have also been able to safeguard their apprenticeship programme, which takes around three apprentices a year.

“ The complexity of The Leadenhall Building has been the catalyst for us to convert the last of our low value bays into a high-value bay, producing higher-value fabricated steel elements. As a result of this, we have recruited a further 20 skilled workers.”

Aim To utilise the North West's capability in structural steel fabrication during the construction of The Leadenhall Building


Figure23:ThetotaleconomiccontributionofCentralLondonofficeexpenditureonWestMidlands-basedmechanical&electricalengineeringsuppliers,2008-2016.


Figure24:ThetotaleconomiccontributionofCentralLondonofficeexpenditureonYorkshire&Humberside-basedstructuralsteelsuppliers,2008-2016.


Figure25:ThetotaleconomiccontributionofCentralLondonofficeexpenditureonNorthWest-basedstructuralsteelsuppliers,2008-2016.

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CASE STUDY 4 HOW STEEL IN LONDON SUPPORTS JOBS IN BOLTON WATSON STEEL STRUCTURES AND THE LEADENHALL BUILDING

ThebenefitsforthelocaleconomyandsupplychainWatson Steel is surrounded by a local supply chain of small businesses in Bolton, which indirectly rely on the knock-on work provided by large projects such as The Leadenhall Building.

“ The existence of Watson Steel over a long period of time means there is almost a nursery of entrepreneurial firms related to the steel industry. Some of the small firms providing Watson Steel with specialist services, such as painting and blasting, would probably disappear if there were large reductions to Watson Steel’s business.” LesHarvey, Bolton President of the Greater Manchester Chamber of Commerce.

The raw steel required for The Leadenhall Building is also sourced from the UK, provided by Tata Chorus mills located in areas such as South Wales and Scunthorpe. Also, from the quantitative analysis it was estimated that for each square foot of Central London office development, more than £8 of steel is purchased from the North West.

Local supply chain

Watson Steel Structures

British Land

• Provided with important revenue as a result of knock-on work from the Leadenhall contract

•Gained a significant amount of work at an important time for the business •Able to expand and upskill their workforce • Able to invest in new capital equipment

• Procured Watson Steel Structures to provide 18,500 tonnes of structural steel for The Leadenhall Building

CASE STUDY 5 PRESERVING HERITAGE AND MAINTAINING SKILLS GASHOLDER RESTORATION

ThegasholderrestorationThe four gasholders at King’s Cross are an icon of local heritage, originally built to store gas which was manufactured onsite from coal in the 19th century. The so called ‘Siamese Triplet’ of Gasholders No. 10, 11 and 12 and Gasholder No. 8 (which is Grade II listed) were originally constructed in the 1850s and 60s, with the ornamental frames of the gasholders made from three tiers of hollow cylindrical cast iron columns. King’s Cross Central Limited Partnership (KCCLP) hired Shepley Engineers Limited (SEL) for £1.2 million over two years to restore the gasholders, which involved meticulously dismantling the frames and transporting them to Yorkshire.

ActionsandbenefitsOver the two year restoration period, Shepley Engineers have not only hired an additional four employees and three apprentices, but they have also safeguarded the employment of the current workforce, which consists of up to 20 skilled operatives as well as supporting a local supply chain in the South Yorkshire and Lancashire area.

“ There have been palpable benefits from working with KCCLP for SEL’s restoration division. Due to the size and construction of the gas holders, existing skills usually employed in the refurbishment of historic structures had to be developed further, to enable the works to be completed. These new skills can only add value to what we can offer future clients and in particular KCCLP. Everything we’ve done for KCCLP has added value for our team.” TrevorMarrs, Senior Engineer at SEL.

These benefits are in addition to the broader economic impacts on Yorkshire and Humberside of development expenditure at Central London office developments, with every square foot of development supporting an estimated £19 of expenditure in the region.

Aim To preserve the local heritage of King's Cross through the use of restoration specialists in Yorkshire

Local community

Shepley Engineers Limited

King’s Cross Central Limited Partnership

• Benefitted from the restoration of the four gasholders, a symbol of local cultural heritage

• Restoration work safeguarded their skilled workforce and allowed them to hire new employees and apprentices

•Preserved the local heritage of the King's Cross area and supported a specialist workforce in Yorkshire through the restoration of gasholders.

SummaryoftheactionsandbenefitsrelatingtoLeadenhallsteel.

Summaryoftheactionsandbenefitsrelatingtogasholderrestoration.

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6.2 OPPORTUNITIES AND CHALLENGES IN THE UK SUPPLY CHAIN

The quantitative results presented so far illustrate that significant economic benefits accrue to the UK as a result of Central London office development. Chapter 5.1 identified that 84% of total development expenditure remains in the UK, while Chapters 6.1 and 7.1 highlight specific packages where expenditure is highly concentrated on suppliers in London and the regions, such as architects and consultants and structural steel respectively. It is likely that they attract a greater amount of work because there are a greater number of suppliers with the expertise and capability to compete for these packages. Similarly, there is likely to be a lack of capability in the UK supply chain for packages which tend to be procured from outside of the country.

Figure 26 identifies the proportion of expenditure at Central London office developments which leaks out of the UK for a selection of key packages. It is clear that the tendency to procure from outside of the country varies significantly across different packages, with UK-based suppliers providing nearly 100% of professional services such as architects and consultants, but less than 25% for packages such as lifts and cladding. For these packages, it is likely that UK suppliers primarily provide installation services rather than fabrication, perhaps due to a lack of domestic manufacturing capability. The countries outside of the UK which attract the greatest proportion of expenditure are Germany and China, as indicated by Figure 27, although the remaining expenditure is spread across a large number of countries.

The potential benefit to the UK economy from maximising the proportion of UK expenditure across all packages is illustrated in Figure 28. Although attaining 100% UK expenditure for all packages is unlikely to be feasible, the chart demonstrates the areas in which there is greatest potential for Central London office developments to generate further economic benefits.

If the UK content of all packages procured at Central London office developments increased to 100%, then there could be an additional economic benefit to the UK of £3.1bn of GVA and 62,000 jobs after including direct, indirect and induced impacts. The packages where the greatest gain in economic impact could be obtained are in cladding and lifts & machinery, respectively constituting 48% and 17% of potentially additional GVA. For the remaining packages, there is a comparatively small amount of potential economic benefit from increasing UK content to 100%. This includes ‘other packages’, which consist of several packages where there is only a small potential gain in GVA, including external works, structural elements and architects and consultants.

It should be noted however, that the UK has already captured the large majority of potential economic benefits from expenditure at Central London offices, gaining £15.5bn of GVA out of a potential £18.6bn. This is due to the procurement of UK suppliers in the majority of packages, whether they are London-based architects or structural steel fabricators in Yorkshire and Humberside. The case studies below provide greater detail on how developers work with local employees and supply chain companies to ensure that the UK’s ability to deliver construction goods and services is maintained.

0%

3%

9%

16%

76%

78%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Architects & consultants

Structural steel

Fittings & furnishings

All packages

Cladding

Lifts & machinery

Proportion of UK expenditure

UK expenditure Non-UK expenditure

38%

14%9%

7%5% 3% 3% 3% 1% 1% 1% 1%

15%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Pro

po

rtio

n o

f n

on

-UK

ex

pen

dit

ure

Current GVA £15.5bn 48%

17%

7%5%4%

19%

Additional GVA

£3.1bn

Cladding

Lifts & machinery

Windows & doors

Mechanical & electrical engineeringFittings & furnishings

Other packages


Figure26:BreakdownofthelocationofCentralLondonofficeexpenditureforselectedpackages.


Figure28:AdditionalGVAfromincreasingtheproportionofUKexpenditureto100%atallCentralLondonofficedevelopments,2008-2016.


Figure27:Thedestinationofnon-UKexpenditureofCentralLondonofficedevelopments.

CASE STUDY 6 SUPPLY CHAIN COLLABORATION CORE PRODUCT TEAM

The Core Product Team

Grosvenor

•Are able to plan their pipelines, and allocate resources effectively •Have security of income and certainty of work •Are able to achieve efficiencies through (1) savings in tendering process (2) innovative collaboration (3) joint initiatives

•Grosvenor have established a core team of contractors and suppliers to work with. It is based on a culture of sharing information and ideas in order to drive innovation and efficiency gains through the supply chain.

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TheCoreProductTeamThe Core Product Team (CPT) is a procurement initiative, through which Grosvenor have taken a portfolio approach to working with contractors and suppliers for Grosvenor’s major London Estate developments. This portfolio approach to procurement encourages improvements in efficiency during the development process, with the overarching aim of a 10% reduction in time and cost relative to the market baseline for each project.

Grosvenor underwent a competitive and rigorous selection process to establish their Core Product Team, who are bound by a framework agreement over five years.

The CPT members are:

• ECHarris–CostConsultant.• Ramboll–MultidisciplinaryEngineer.• SirRobertMcAlpine–PrincipalContractor.

• Chorus–PrincipalContractor.

ThekeyelementsoftheCoreProductTeamThe formal arrangements not only benefit Grosvenor in streamlining their procurement process, but also help contractors and suppliers more effectively forecast and manage both their workload and the commitment of their resources. This aligns with Grosvenor’s aim to build long term, straight forward relationships and to deliver a positive impact on the communities they serve.

1.OpenbooksMembers of the CPT make their financial details accessible to Grosvenor, who in turn share their development pipeline with the members. This allows the team to work together to understand the true build costs and where savings and ‘value for money options’ can be made in projects. Also, it allows Grosvenor to understand any financial risks and to work together with the CPT to manage those risks.

2.BenefitsTrackingGrosvenor work in conjunction with both contractors and suppliers in the CPT to share mutually beneficial savings in cost and time.

Team members produce a long list of ideas on strategy as well as delivery, which can be implemented across the portfolio of projects. These benefits are tracked so that the endeavours of the CPT can be measured.

The tracker allows the CPT to measure their collective performance and to drive continuous improvement across the portfolio, with a focus on ensuring value for money.

“ Grosvenor is setting a new standard in the industry by innovating the way in which developers and suppliers work together.” VinceCorrigan,Main Board Director & Regional Manager for London and South East at Sir Robert McAlpine Ltd.

3.PipelinecertaintyAs part of their commitment to the CPT, Grosvenor share their long term pipeline forecast with team members. This allows the team to allocate their resources to Grosvenor projects going forward, and the greater certainty of work allows team members to incorporate Grosvenor business into their forward-looking strategies. Contractors and suppliers can be involved in the planning of a development from the very early stages, maximising their scope to improve the cost and time efficiency of a project from the beginning.

“ This isn’t about squeezing margins: we want companies’ A-teams on our projects helping us to deliver for our customers by keeping costs down and saving time, and in turn generating value for themselves.” CharlesHorne, Technical Director, Grosvenor Britain & Ireland.

4.JointprocurementinitiativesThere are a number of opportunities for CPT members to work together to achieve greater efficiencies. One example of this is a joint procurement initiative (JPI) set up between Sir Robert McAlpine and Chorus, who collaborate on the procurement of contractors across the portfolio. The JPI involved having a single format and approach for contracting suppliers.

Through the JPI the contractors were able to go to market together with their projects. This has resulted in much greater economies of scale, whereby suppliers can bring larger volumes into play.

Aim To drive efficiency and innovation in the supply chain through a collaborative approach to procurement

1

Open Books

2

Benefits Tracking

3

Pipeline certainty

4

Joint initiatives

Core Product

Team SummaryoftheactionsandbenefitsrelatingtotheCoreProductTeam.

CASE STUDY 7 LOCAL CONSTRUCTION APPRENTICESHIPS CONSTRUCTION SKILLS CENTRE

Local community

Construction Skills Centre apprentices

King’s Cross Central Limited Partnership

•Reduced unemployment and increased skill levels • Knock-on impacts through the local economy from greater employment

• Develop the skills necessary to enter the construction workforce • Gain work experience and a path into further employment

•Set up the Construction Skills Centre and partnered with borough councils to deliver construction training and apprenticeships to local residents.

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TheConstructionSkillsCentreThe redevelopment of King’s Cross has brought significant change to the local area, and also provided valuable training opportunities for local residents. King’s Cross Central Limited Partnership (KCCLP), working in partnership with the London Borough of Camden (LBC) and the London Borough of Islington (LBI), has set a goal of 5% of the onsite construction workforce to be local apprentices working towards a qualification in the construction industry, and aims to achieve this target through its Construction Skills Centre (CSC).

Training in the CSC is mainly focused on young residents of the boroughs aged between 16 and 19 years - more than 70% of all trainees at the centre are from Camden and Islington.

BenefitsoftheConstructionSkillsCentreThe CSC offers skills training such as National Vocational Qualifications (NVQ) levels 1, 2 as well as softer skills such as interview training. This involves the developments of skills for trades such as carpentry, brickwork and general construction, and the centre has capacity to train up to 120 apprentices a year.

The CSC works closely with the contractors at the King’s Cross site to place those applying to the CSC in apprentice positions. Over time, KCCLP has been able to increase the percentage of the workforce provided by local apprentices, as shown in the figure below.

This initiative demonstrates that large developments such as King’s Cross have the ability to generate significant benefits to local communities by generating employment and skills. In an area that experiences pockets of high unemployment, the CSC provides physical space for the development of employability skills as well as providing work placements. By contributing to the economic development of the local area and increasing

London’s construction workforce, KCCLP are able to engage with the local community in a mutually beneficial manner. The model will be developed as buildings and public realm are built and completed. As the King’s Cross estate creates more job openings in the commercial and retail sectors, KCCLP, LBC and LBI will open a new recruitment centre to help ensure that between 15-30% of the expected 25,000-30,000 jobs are filled by local residents.

Aim To provide construction-related training, apprenticeships and employment to local residents in and around King's Cross

2011: 2.3%

2012: 3.3%

2013: 4.1%

Theaveragepercentageoftheonsiteworkforcewhoarelocalapprentices.

SummaryoftheactionsandbenefitsrelatingtotheConstructionSkillsCentre.

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6.3 THE CONTRIBUTION OF DEVELOPMENT TO ENVIRONMENTAL SUSTAINABILITY

With non-domestic buildings accounting for almost a quarter of UK emissions,19 the office construction sector could play a key role in making the built environment of the UK more sustainable and contribute to a low carbon economy. This study looks at a number of developments in the UK which are helping to shape, improve and innovate the way in which construction approaches sustainability.

Managementofbuildings In some cases, developers are able to play an active role in the management of a building. The management can be as important as the original materials and energy strategy used in a building, as the emissions and overall environmental impact of tenants can greatly vary. As one example of this, Derwent London have been actively engaging with their tenants through specially devised environmental forums.

Skills In order to move towards a more sustainable built environment, the UK will need to work to foster the skills needed to install renewable energy technology, and to continue to innovate the approach to construction and its supply chain. There is a significant opportunity for the employment of not only skilled labour involved in sustainable construction, but also consultants and other experts in the ‘green building’ space.

The case of Land Securities and the installation of geothermal energy technology at One New Change (Case Study 8) illustrates the role that a developer can play. Land Securities in this case created demand for the development of particular skills, which are needed more widely across the country for the installation of renewable technology in other developments.

Energy The installation of new technologies such as solar panels and hydrogen fuel cells are vital in reducing the emissions of a building, mitigating the negative impact of energy consumption on the climate. The decentralised energy centre installed at The Crown Estate’s Quadrant 3 (Case Study 10) illustrates how a comprehensive energy strategy can help to achieve economies of scale in energy consumption and therefore lower overall emissions.

Futureproofing Looking to the future, it is important for all new buildings to consider longevity as an important factor, in addition to the overall sustainability and flexibility of the use and performance of the building. Derwent London’s White Collar Factory (Case Study 9) is innovating the way in which the industry approaches the sustainability of a building, by taking into consideration the impact of a building on the environment throughout its whole ‘life’.

19Carbon Trust, Building the Future, Today, 2009. This statistic refers to UK’s non-domestic buildings, comprised of commercial offices, hotels, shops, schools, hospitals, factories and other buildings.

CASE STUDY 8 DEVELOPING SUSTAINABILITY EXPERTISE GROUND SOURCE ENERGY AT ONE NEW CHANGE

GroundsourceenergyatOneNewChangeWith a target of cutting carbon emissions from its properties by 15% over the next decade, Land Securities has utilised ground source energy technology at a number of its developments. One New Change is one of Land Securities’ largest London mixed use developments, and sustainability has been central to its design. In 2008, at a very difficult time in the property market, Land Securities put out to competitive bid the installation of a ground source energy system.

Large-scale ground source energy technology allows for a building to be heated and cooled by using thermal energy generated and stored in the earth. Cementation Skanska and Geothermal International won the £14 million contract for the foundations, including installation of ground source heat pumps and pipe work in the foundations of the development. With that contract, Land Securities commissioned the largest application of ground source energy technology in Europe at the time, installing both open and closed loop ground source technology from ground and aquifer sources. One New Change has received an ‘Excellent’ sustainability rating under BREEAM for the office areas. The ground source energy system fulfilled the requirement to provide a source of renewable energy for the scheme and is projected to achieve at least a 10% reduction in CO2 emissions from the building,

TheroleofCementationSkanskaCementation Skanska installed 13 ground source heat pumps at One New Change, achieving significant carbon savings of approximately 900 tonnes of CO2 emissions per year. The development also has intelligent control devices, where the system redirects heat from warmer to cooler areas to enhance overall energy efficiency. Land Securities anticipate decreasing the building’s carbon footprint by more than 10%, while at the same time cutting One New Change’s energy bills.

For Cementation Skanska, One New Change was not only a significant contract in a very difficult market, but it was also an opportunity to further develop their ground source energy technology skills internally by working alongside Geothermal International. Those skills have put Cementation Skanska in a position to contribute to the wider industry applications of this technology - for example through innovations in the installation of the pipework within the steel cages used for the foundations. Meanwhile, the One New Change project has contributed to enhancing the skills of the green workforce, increasing the capability of the UK workforce to deliver low carbon technology projects.

Aim To reduce the carbon emissions of One New Change through the installation of ground source heat pumps

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CASE STUDY 8 DEVELOPING SUSTAINABILITY EXPERTISE GROUND SOURCE ENERGY AT ONE NEW CHANGE

As a direct consequence of their work on One New Change, Cementation Skanska have had the opportunity to bid for further work with Land Securities. They were also able to produce strong bids for further work, winning at least another two major developments in London and one in Glasgow. Cementation Skanksa have been able to maintain a steady revenue stream through the recession, keeping skilled operatives in employment.

“ The expertise from One New Change was instrumental in securing further work, and developing our capacity to install larger scale ground source energy technology.” NeilAbbott,Operations Manager for Cementation Skanska.

UK low carbon technology workforce

Cementation Skanska

Land Securities

•One New Change facilitated the development of a substantial number of highly skilled workers, who now have the capability to install further low carbon technology across the UK

•Developed their skills and expertise in low carbon technology •Won further work with Land Securities to install geothermal energy •Maintained a steady revenue stream through the recession

•Targeted substantial carbon emissions reductions at One New Change through the installation of ground source heat pumps, procuring a specialist UK supplier to do so.

CASE STUDY 9 A NEW APPROACH TO BUILDING SUSTAINABILITY WHITE COLLAR FACTORY

IntroductionWhite Collar Factory is the culmination of several years of research and sets out an innovative, highly flexible and energy-efficient office space arrangement. It is a 21st century interpretation of the industrial buildings of the past – typified by high ceilings, exposed thermal mass and natural ventilation.

By incorporating these passive techniques into the core of the design concept, Derwent London has been able to develop an arrangement which can be efficiently converted in order to meet future user requirements. This approach saves costs and ensures a high degree of future proofing and longevity.

“ The White Collar Factory project provides office space that has volume, light, flexibility and efficiencies evolving from a shared experience with Derwent London of reinventing existing buildings. The robustness to change that these buildings offer has been translated into a new-build concept that offers a smart solution for today’s office occupier, whilst providing a flexible framework for future advances.” StephenTaylor, Associate Director at Allford Hall Monaghan Morris.

ActionsDerwent London worked closely with architects AHMM, engineers AKT and ARUP, and cost consultants Davis Langdon, an AECOM company, to develop the design concept around five key principles:

SustainabilitybenefitsofWhiteCollarFactoryBuilding flexibility: The five core design principles of White Collar Factory provide a simple and sustainable foundation from which tenants are able to adapt to their purposes, without compromising the building’s ability to operate efficiently.

Moreover, this foundation allows for maximum flexibility and does not confine tenancy profile or fit-out approach. This has environmental benefits as it reduces the need for materials, and provides social benefits in terms of a better working environment for employees and potential economic benefits in terms of greater productivity.

Aim To create an innovative, highly flexible and energy-efficient space arrangement

• Increased flexibility of use, with volume allowing easier retro-fitting • Improved and consistent comfort levels • Increased natural daylight and ventilation penetration and efficient distribution of artificial lighting

1

Tall Ceilings

•Minimal provision, with no excessive 'kit' •Concrete Core Cooling: chilled water piped through the slabs for radiant cooling •Maximum use of passive systems

2

Smart Servicing

•Openable windows controlled by users •Glazing designed to suit orientation - more glazing when facing the north, less when facing the south • Shading where necessary

3

Passive Facade

•Potential for optional voids between floors to connect tenancies •Potential for two-way split tenancy per floor

4 Flexible Floor-

plates

•Exposed thermal mass •Low carbon concrete - utilising higher levels of cement replacements •Exposed concrete walls and soffits providing a high quality architectural finish

5

Thermal Mass

SummaryoftheactionsandbenefitsrelatingtotheGroundSourceEnergyatOneNewChange.

ThefiveprinciplesofWhiteCollarFactory.

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CASE STUDY 9 A NEW APPROACH TO BUILDING SUSTAINABILITY WHITE COLLAR FACTORY

“ Initiatives such as White Collar Factory prototype at Old Street Roundabout are an important part of the reinvention of these areas in the long term.” StephenTaylor,Associate Director at Allford Hall Monaghan Morris.

Energy efficiency: Aside from the use of renewable technologies incorporated into the design, the building will also utilise smart technology to allow the user to interact with the building.

Development is underway for a mobile app to allow occupants to ‘talk’ to the building and adjust environmental comfort conditions. For example, users can specify whether they are too hot or cold and the building will be able to select the most appropriate solution, which could include opening a window or turning a fan on.

Climate change resilience: White Collar Factory has been designed with a potentially changing climate in mind. The design and technology principles included will allow the building to adapt to events such as increased ambient temperatures much better than a traditional sealed building.

A sustainable built environment

Derwent London

•Climate change resilience •Efficient operation •Flexibility of assets

•Conceptualisation and delivery of White Collar Factory concept, creating office space with simplicity, flexibility, efficiency and resiliency.

CASE STUDY 10 CONSTRUCTIVE CONSERVATION AND SUSTAINABILITY SUSTAINABILITY AND HERITAGE AT QUADRANT 3

SustainabilityandheritageatQuadrant3Quadrant 3 (Q3), the mixed-use redevelopment of the former Regent Palace Hotel, forms part of The Crown Estate’s comprehensive restoration of the four Quadrant blocks, comprising Quadrant 3, 2 and 1, at the site of the former Regent Palace Hotel, the Quadrant Arcade and Café Royal blocks respectively. The project falls within The Crown Estate’s £1bn regeneration programme for Regent Street.

The project, which was completed in October 2011, has rejuvenated the southern part of Regent Street, attracting a range of businesses and retailers. Comprising 200,000 sq ft of offices, 14 retail units, two restaurants and nine apartments, its construction involved 2.5 million man hours of work without a reportable accident.

The Crown Estate has taken a sensitive approach to restoring Q3, a complex listed building. The scheme retains all of the special features noted in the building’s listing description, with English Heritage praising the restoration as an example of constructive conservation. The 1930s rooms in the building were dismantled, restored off-site and reinstated after the construction work was complete.

Sustainability was a core consideration in the design and construction of the Quadrant 3 project. The Crown Estate took a wide- ranging approach to the sustainability of the development, addressing issues such as carbon emissions reduction, water use, waste management and material supply.

Quadrant 3 and its main office space, AirW1, have been widely recognised for their sustainability credentials, receiving accolades and praise from high profile tenants such as former Vice-President of USA and Chairman of Generation Investment Management, Al Gore:

“ Generation is delighted to be The Crown Estate’s anchor tenant in this exciting building. The AirW1 office space and associated public realm development showcases their on-going and increasingly sophisticated commitment to sustainability. We are very pleased to be able to continue our partnership with The Crown Estate, whose emphasis on sustainability is fully aligned with our own values and investment philosophy.”

Aim To create a development with sustainability at its core while preserving its architectural heritage

SummaryoftheactionsandbenefitsrelatingtoWhiteCollarFactory.

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CASE STUDY 10 CONSTRUCTIVE CONSERVATION AND SUSTAINABILITY SUSTAINABILITY AND HERITAGE AT QUADRANT 3

KeysustainabilityfeaturesofQuadrant3

• EnergyStrategy:AkeyelementoftheenergystrategyisadecentralisedenergycentreinstalledbelowQuadrant3.Thecentresuppliescooling,heatandpowerwithinthesiteforallfourquadrants.Itcomprisesofacombinationoftraditionalandlowcarbontechnologies,includingthermalstores,photovoltaics,ahydrogenfuelcell,absorptionchillersandcombinedcooling,heatandpowerunits(CCHP).TwoCCHPsandthephotovoltaiccellsprovide22%oftheenergyandheatfortheQuadrantscheme.OneoftheCCHPsisthelargest,mostefficientfuelcellinEurope.

• Water:Rainwaterharvestingallowsrainwater,termed‘silverwater’,tobereusedinresidentialwashingmachinesandallofthetoilets.

• Waste:TheQuadrantschemeproduced600cubicmetreslesswastethanthe‘bestpractice’requirementsandrecycledover90%ofunavoidablewaste.

• Materialsupply:TheCrownEstateused55%recycledcontentforsuperstructure,60%recycledcontentfortheblockworkandreused1,500tonnesofexistingsteelwork.Otherbuildmaterials,suchasroofprotection,carpetunderlay,screeningandraisedfloorsusedrecycledmaterials,suchasplasticbottles,oldclothes,orwasteglassbottles.AlltimberwassustainablyresourcedandFSCcertified.

PublicRealmandcommunityengagementThe Crown Estate has made improvements to the public realm as part of the Quadrant 3 project. This included the pedestrianisation of Glasshouse Street and further improvements to Air Street, Brewer Street and Sherwood Street. To ensure the local community were involved as the project progressed The Crown Estate created a Community Liaison Group, which shared information about the project with interested stakeholders and engaged with them to address concerns.

During the scheme charity events were held on site, raising nearly £65,000. Also, a school project was set up where The Crown Estate worked with two local schools, providing lessons on renewable energy, health and safety, ecology and general construction.

The local community

Environmental sustainability

The Crown Estate

•The preservation of local architectural heritage •Improved public realm and community engagement

•Carbon emissions reduction •Reduction in embedded carbon from water use •Reduced landfill waste •Ecology – provision of urban habitat to foster biodiversity

•Combined the conservation of design heritage with community engagement and environmental considerations, throughout the design, build and operations phases.

In Figure 29 below, the mechanism by which development expenditure produces economic impacts in the UK is illustrated. The 16% of expenditure which leaks abroad, driven by the non-UK fabrication of packages such as lifts and cladding, is excluded from the analysis of economic impacts. The expenditure which remains in the UK generates direct employment and direct GVA in the UK economy, as the first tier of suppliers supply construction goods and services for the development.

Gross value added is the contribution of an individual organisation to GDP, and is calculated as revenue minus the cost of sales (i.e. supplier expenditure). Because the cost of sales is netted out, direct GVA will be less than the initial expenditure.20 Throughout this analysis, jobs are defined as a full year of employment rather than the creation of a new position, which aligns with the transitory nature of employment generated by expenditure on construction projects.

The indirect impacts in Figure 29 result from the first tier of suppliers increasing their own supply chain spending as a result of the initial expenditure – for example on raw materials such as cement and other costs such as transport. The induced impacts result from employees of the initial suppliers, as well as the employees in the rest of the supply chain, spending their wages in the economy – for example in shops and restaurants. The sum of the direct, indirect and induced impacts gives the total economic contribution of the development expenditure. The ratio of total GVA or employment to its initial impact is known as a Type II multiplier.21 This can be compared to the average multiplier for other sectors of the economy to evaluate the magnitude of wider impacts that result from a direct impact in each sector.

ANNEX 1 – ADDITIONAL RESULTSUK RESULTS

£100 mSupplier expenditure

£33 mDirect GVA

670Direct jobs

£35 m Indirect GVA

£22 m Induced GVA

440Induced jobs

700Indirect jobs

£90 mTotal UK GVA

1,810Total UK jobs

Total economic contribution Total economic contribution

£16 mOverseas suppliers

£84 mUK suppliers

Leakage of expenditure

Direct economic contribution


Employee spending


Employee spending

20 Calculations of GDP exclude the cost of sales to avoid their double-counting, so an increase in £1 of expenditure is not equivalent to an increase in £1 of GDP. 21 A Type I multiplier is the ratio of the direct and indirect impacts to the direct impact.

SummaryoftheactionsandbenefitsrelatingtoQuadrant3.Sources: Development expenditure data and PwC analysis.

Figure29:BreakdownofeconomicimpactsontheUKfromCentralLondonofficeexpenditure.

5150

2.73

0 1 2 3 4

Domestic appliances

Construction

C. London office construction

Structural metal

Air transport

Retail

Telecommunications

Tobacco products

Banking & finance

GVA multipliers (Type II)

2.70

0 1 2 3 4

Construction

Tobacco products

C. London office construction

Domestic appliances

Air transport

Banking & finance

Structural metal

Telecommunications

Retail

Employment multipliers (Type II)

The Type II multipliers for Central London office construction are 2.73 and 2.70 for GVA and employment respectively, meaning that the total economic impacts of expenditure are almost three times greater than the direct impacts. Both multipliers are greater than comparable GVA and employment multipliers in a wide range of sectors such as retail, banking & finance and the manufacture of structural metal. These sector-specific figures represent the average multiplier for business interactions within each respective industry, while the multipliers for London office construction are bespoke as they utilise bottom-up data on supplier expenditure.

The bespoke multipliers for Central London office construction are lower than the average multipliers for the construction industry, suggesting that other subsectors of construction, for example retail or residential construction, have a greater multiplier impact. The size of these multipliers is driven by a number of factors relating to how supplier and employee expenditure ripples through the economy - for example whether it occurs in sectors which are productive and have a low tendency to import.

LONDON RESULTS

REGIONAL RESULTS

In Figure 31 below, the mechanism by which Central London office expenditure generates economic impacts in London is illustrated. For each £100m of expenditure on UK suppliers, £46m remains within London and generates direct impacts, while the remaining £54m is distributed to the other regions of the UK and generates direct impacts in those locations.

The indirect and induced impacts on the London economy from expenditure on London suppliers are estimated using multipliers for the London economy (multipliers are explained in more detail in Annex 2). These multipliers are lower than those at the UK level, because expenditure leaks from London into the other regions of the UK and generates impacts in those regions. The GVA and employment multipliers (Type II) for London are 1.84 and 2.03 respectively, compared to 2.73 and 2.70 for the UK. Expenditure on regional suppliers also causes indirect and induced impacts on the London economy, because expenditure leaks from the regions into London – for example when businesses in the regions buy goods and services from London or when employees from the regions spend their wages in London. This is estimated by combining data on the trade linkages between London and the rest of the UK with estimates of the spillover impacts between regions.

The economic impacts on the regions for each £100m of Central London office expenditure on UK suppliers is illustrated in Figure 32 below, which demonstrates the direct, indirect and induced economic impacts that are generated within the regional economies. The indirect and induced impacts include the knock-on effect of direct spending within each region as well as the leakage of expenditure from other regions – for example when a North East supplier sources their materials from the North West. For these spillover effects the impacts which accrue to London have been estimated, but for the regions outside of London the specific region of impact has not been be identified.

£100 mUK expenditure

£19 mDirect GVA

330Direct jobs

£12 m Indirect GVA

£9 m Induced GVA

200Induced jobs

230Indirect jobs

£40 mTotal London GVA

760Total London jobs


£54 mRegional suppliers

£46 mLondon suppliers

Expenditure outside London


Supply chain spending in London

Employee spending in London

Supply chain spending in London

Employee spending in London

£100 mUK expenditure

£21 mDirect GVA

470Direct jobs

£32 m Indirect GVA

£15 m Induced GVA

350Induced jobs

580Indirect jobs

£68 mTotal regional GVA

1,400Total regional jobs


£46 mLondon

£54 mRegional suppliers


Supply chain spending in the regions

Employee spending in the regions

Supply chain spending in the regions

Employee spending in the regions

Sources: Development expenditure data, PwC analysis and UK Input-Output Tables, ONS.

Figure30:TypeIIGVAandemploymentmultipliersforCentralLondonofficeconstructionandotherselectedsectors.


Figure31:BreakdownofeconomicimpactsonLondonfromCentralLondonofficeexpenditure.


Figure32:BreakdownofeconomicimpactsontheUKregions(outsideofLondon)fromCentralLondonofficeexpenditure.

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To estimate the GVA and employment supported by development expenditure this study uses a traditional economic impact analysis approach, which is illustrated in Figure 33. The development expenditure was categorised into similar ‘packages’ of goods and services, and mapped to the appropriate sector of the economy. Then, economic ratios relating to each sector of the economy were applied to the development expenditure in order to estimate the direct, indirect and induced GVA and employment impacts. These ratios are shown in red font in Figure 33, and are explained in more detail below.

TypeImultipliers – An economic multiplier is a ratio used to measure the increase in economic activity that occurs as a result of a direct impact. Type I multipliers measure the ratio of indirect and direct impacts to the original direct impact. Type I multipliers are available for both GVA and employment, and are applied as follows:

TypeIImultipliers – Type II multipliers measure the ratio of direct, indirect and induced impacts to the original direct impact. Type II multipliers are also available for both GVA and employment.

All of the above ratios were applied for the UK and for the regions (including London), producing estimates of direct, indirect and induced GVA and employment for the UK and for each region. The economic ratios were developed for the UK using input-output tables from the ONS and for the regions using third party data.

In Figure 34 below, the proportion of total floor space captured by the sample dataset is displayed. Developments within the sample represented 17% of total Central London office floor space, as defined by real estate market data, and the sample coverage varies between different categories of development. The low coverage in categories such as small City developments is a result of the trade-off between choosing categories based on thresholds which group similar developments together, and choosing categories which maximise the sample coverage across all categories. For example, the threshold for small City developments could be increased to 250,000 square foot, which would increase sample coverage for the category but would also involving combining developments with differing economic impacts, which would decrease the robustness of the extrapolation process.

GVA-outputratio – This indicator provides the average proportion of output that is converted into GVA for each sector of the economy. GVA is the contribution of an organisation to the GDP of the economy, and is the difference between output and intermediate consumption. Expenditure is used as an approximation to output (so £1 of expenditure is assumed to equal £1 of sales for the supplier), so this ratio therefore calculates the direct GVA that is generated for each £1 of expenditure.

Employment-outputratio – This indicator provides the average number of jobs corresponding to each £1 of expenditure (where expenditure is again approximated to output). Because the data used in the calculation of this ratio is collected on an annual basis, applying the ratio to expenditure produces an employment estimate that is measured in person years. Each person year is equivalent to one person maintaining a job for a full year of employment.

ANNEX 2 – METHODOLOGYECONOMIC IMPACT ANALYSIS

SAMPLE COVERAGE

Construction expenditure (£m)

-By region- By package

Direct GVA (£m)

- By region- By package

GVA-output ratios

Employment-output ratios

Direct employment (person years)

-By region- By package

Indirect GVA (£m)


Type I GVA multipliers

Induced GVA (£m)


Type II GVA multipliers

Indirect employment (person years)


Induced employment (person years)


Type II employment multipliers

Type I employment multipliers

Total GVA (£m)


Total employment (person years)


Direct GVA Expenditure GVA-output ratio

Direct employment Expenditure Employment

-output ratio

Indirect GVA Direct GVA (Type I GVA multiplier -1)

Indirect employment

Direct employment

(Type I employmentmultiplier -1)

Induced GVA Direct GVA (Type II GVA

multiplier - Type I GVA multiplier)

Induced employment

Direct employment

(Type II empl. multiplier - Type I empl. multiplier)


-output ratio


Indirect employment

Direct employment




Induced employment

Direct employment



-output ratio


Indirect employment

Direct employment




Induced employment

Direct employment


Figure33:Economicimpactmethodology.

5554

15%

21%

6%

12%

100%

17%

0% 20% 40% 60% 80% 100%

West End <150,000

West End >150,000

City <150,000

City >150,000

Docklands

All Central London office

Proportion of total Central London office floor space in category

The total sample coverage over time, by completion date, is displayed in Figure 35 below. This shows that there is a correlation between the floor space in the sample and the total floor space completed. It also shows that sample coverage tends to vary significantly over time. However, the initial analysis of sample data revealed that the date of completion is not a significant factor that affects the economic impact of developments, particularly compared with characteristics such as the size and location of developments.

When a sample of data is used to estimate the results for a larger population, there are a number of measures which can be used to gauge the likely precision of results that are produced. One of these is a confidence interval, which measures the likely margin of error of the results produced by the sample. Confidence intervals are a measure of uncertainty, which reflect the assumption that the results calculated from the sample are just one set of results from many theoretical samples across the population. Hence, a different sample of Central London office developments would be likely to produce different estimates for the total GVA and employment generated by all Central London office developments.

The confidence intervals for the estimates of GVA and employment produced in this study are presented in Figure 36. The confidence interval states that £15.5bn of GVA has been estimated using the sample dataset, and it is 95% likely that the true value for GVA lies between £10.5bn and £20.5bn. Similarly, 311,400 jobs have been estimated using the sample dataset, and it is 95% likely that the true value for employment lies between 216,100 and 406,800 jobs. The smaller the confidence interval, the closer the sample results are likely to be to the true results.

0

1

2

3

4

5

6

7

2008 2009 2010 2011 2012 2013 2014 2015 2016

Cen

tral

Lon

don

offi

ce fl

oor

spac

e(m

illi

on s

q ft

)

Floor space in sample Floor space outside of sample

The confidence intervals in Figure 36 were produced by estimating the confidence interval for each of the five categories used in the extrapolation process. The metrics used for the confidence intervals were GVA per square foot and employment per square foot, as these were the metrics used for extrapolation. The lower and upper bounds for each of the five categories were multiplied by the population floor space within each category, which produced the total values for the lower and upper bounds of the confidence interval presented in Figure 36.

£0

£5

£10

£15

£20

£25

GVA

To

tal G

VA

(b

n)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Employment

To

tal e

mp

loym

ent

(jo

bs)

Directimpacts The GVA and employment supported by the first round of development expenditure.

Grossvalueadded(GVA) The contribution of an organisation or industry to the GDP of the economy.

Indirectimpacts The GVA and employment supported by increased supply chain spending in the first round of suppliers.

Inducedimpacts The GVA and employment supported by the spending of employees in the first round of development expenditure (including on site workers) as well as the rest of the supply chain. Personyears The measure of employment generated by construction expenditure. One person year of employment is the equivalent of one person having a job for one full year. Totalimpacts – The sum of direct, indirect and induced impacts.

ANNEX 3 – GLOSSARY

Sources: London Offices Crane Survey, Deloitte Real Estate and Central London Property Market Review, CBRE and Development data.

Figure34:FloorspaceofdevelopmentswithinsampleasaproportionoftotalCentralLondonofficespace,bycategoryofdevelopment.

Sources: London Offices Crane Survey, Deloitte Real Estate and Central London Property Market Review, CBRE and Development data.

Figure35:FloorspaceofdevelopmentswithinsampleasaproportionoftotalCentralLondonofficespaceovertime(bycompletiondate),2008-2016.

Figure36:ConfidenceintervalsofGVAandemploymentestimates.

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ANNEX 4 – LIST OF INTERVIEWEES ANNEX 5 – REFERENCESCase Study

Organisation Interviewee Position

7. Land Securities Cementation Skanska Neil Abbott Operations Manager 7. Land Securities Cementation Skanska Martin Pedley Managing Director

5. KCCLP Shepley Engineers Limited

Trevor Marrs Senior Engineer

6. Grosvenor Sir Robert McAlpine Vince Corrigan Main Board Director and Regional Manager for London and South East

2. Cadogan Chelsea Society Damian Greenish Chairman

8. Derwent London AHMM Stephen Taylor Associate Director

3. Great Portland Estates

Crossrail Colin Smith Head of Over-site Development

4. British Land Watson Steel Structures Peter Miller Director4. British Land Greater Manchester

Chamber of CommerceLes Harvey Bolton President

1 British Land (2011) Our Economic Contribution http://www.britishland.com/files/pdf/responsibility/bl_our_economic_contribution.pdf

2 British Land (2012) Building Business, Creating Growth http://www.britishland.com/files/re-ports/2012_sec_report.pdf

3 Carbon Trust (2009) Building the Future, Today http://www.carbontrust.com/media/77252/ctc765_building_the_future__today.pdf

4 City of London Corporation (2004) London’s Linkages with the Rest of the UK http://www.cityo-flondon.gov.uk/business/economic-research-and-information/research-publications/Docu-ments/2007-2000/London%E2%80%99s%20Linkages%20with%20the%20Rest%20of%20the%20UK.pdf

5 City of London Corporation (2009) London’s Place in the UK economy http://www2.lse.ac.uk/geog-raphyAndEnvironment/research/london/pdf/BC_RS_LPUKfullreportforweb09.pdf

6 Crossrail (2013) Crossrail Creating Lasting Legacy of Local Jobs for Londoners http://www.crossrail.co.uk/news/articles/crossrail-creating-lasting-legacy-local-jobs-for-londoners#.UYGtJaKsiSp

7 Crossrail (2013) £5.5bn of Crossrail Contracts Creating Jobs and Business Opportunities Around the UK http://www.crossrail.co.uk/news/articles/55bn-of-crossrail-contracts-creating-jobs-and-bu-siness-opportunities-around-the-uk#.UYkGAqKsiSp

8 DCLG (2013), Housebuilding Statistics https://www.gov.uk/government/statistical-data-sets/live-tables-on-house-building

9 GLA (2005) Growing Together – London and the UK Economy http://www.london.gov.uk/mayor/eco-nomic_unit/docs/growing_together_report.pdf

10 GLA (2013) Jobs and Growth Plan for London http://www.london.gov.uk/sites/default/files/Jobs%20%26%20Growth%20Plan%20for%20London.pdf

11 GVA (2012) Crossrail – Property Impact Study http://www.crossrail.co.uk/assets/library/document/c/original/crossrail_property_impact_study_main-_small.pdf

12 London First (2006) Keeping the UK Competitive

13 ONS (2010) Subnational Population Projections http://www.ons.gov.uk/ons/publications/re-reference-tables.html?edition=tcm%3A77-246448

14 ONS (2010) Measuring the Economic Impact of an Intervention or Investment http://data.gov.uk/dataset/measuring_the_economic_impact_of_an_intervention_or_investment/resource/833e86bc-9895-4308-88fa-11e6c903fa22

15 ONS (2013) New Orders in the Construction Industry http://www.ons.gov.uk/ons/taxonomy/index.html?nscl=New+Orders+in+the+Construction+Industry

16 ONS (2013) Regional Accounts http://www.ons.gov.uk/ons/taxonomy/index html?nscl=Regional+Accounts

17 ONS (2013) UK Economic Accounts http://www.ons.gov.uk/ons/rel/naa1-rd/united-kingdom-eco-nomic-accounts/index.html

18 Serven, L. and Calderon C. (2004) The Effects of Infrastructure Development on Growth and In-come Distribution Dataset http://go.worldbank.org/MWLEIS62E0

19 UKCG (2011) Making the Economic Case for Construction http://www.ukcg.org.uk/uploads/media/Making_the_economic_case_for_construction_PR_2011.11.08.pdf

20 UKCES (2012) Sector Skills Insights: Construction Evidence Report 50 http://www.ukces.org.uk/assets/ukces/docs/publications/evidence-report-50-construction.pdf

21 UKCG (2012) Construction in the UK Economy http://www.ukcg.org.uk/fileadmin/documents/UKCG/LEK/LEK_May_2012_final.pdf

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This report has been prepared for and only for London First in accordance with the terms of our engagement letter dated 10th January 2013 and for no other purpose. We do not accept or assume any liability or duty of care for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. © 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom), which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

ContactusLondon First, 3 Whitcomb Street, London WC2H 7HAT +44 (0)20 7665 1500 E [email protected] www.londonfirst.co.uk D

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