LDN Weekly – Issue 336 – 17 October 2024 – Summitry

SUMMITRY

Dear Reader,

What do Thomas Tuchel, Rachel Reeves and a London council Chief Executive have in common? Well, all three have near-impossible jobs. Tuchel carries the weight of history as England chase that elusive second World Cup. Reeves faces a parliament-defining Budget in under two weeks, juggling the nation’s precarious finances, desperately trying to free up money for investment without breaking Labour's manifesto promises on tax. And council bosses are trapped in what seems like a never-ending spiral of shrinking budgets and a relentless rise in the cost of and demand for services.

Before the last general election, Sue Gray (remember her?) had responsibility for pulling together a list of crises that could explode on Labour's watch. Her list included prison overcrowding, an insolvent Thames Water and bankrupt local authorities. While the parlous state of local government finance isn’t a new problem – rumbling on for well over a decade – it has certainly deteriorated sharply in the last few years. Councils bore a disproportionate share of public spending cuts under the Coalition Government – a neat way for Whitehall to displace the pain away from central Government. In more recent years, a string of councils have faced S114s - effectively bankruptcy – including Woking, Slough, Birmingham, Thurrock and Croydon. While not all of these can be blamed on austerity, it can hardly have helped matters.

Others have come close - if it wasn't for emergency support from central government and the granting of permission to sell assets to pay for running costs (which is an unwise thing to encourage), the list of bankrupt councils would have been even longer. The last local government funding settlement under the previous Tory government had all the hallmarks of kicking the can down the road, the sole aim to avoid any embarrassing council bankruptcies before the general election. The Secretary of State Michael Gove, no doubt with one eye on the polls, may also have had in mind that a delayed problem for the future would not be one his party would be left to deal with.

Recently I bumped into a senior local government official, and we talked about the state of council finances in London. I'll admit that it was a depressing conversation. The language used was of the desperate need for a lifeboat in the coming Budget to stave off a rush of effective bankruptcies. As we cover in today's LDN, we are seeing reports of London councils facing eye-watering budget deficits. While a lot of the coverage leads with the cancellation of the annual Christmas lights and the like, this masks more serious problems in key services upon which many thousands of Londoners rely.

Deep knowledge of local government finance requires a PhD. But there are two basic essentials that in part explain where we are. Council funding comes from two main sources. First, Council Tax which is around half of income, but governments have in recent years capped the amount local authorities can increase this by. Second, central government grants, retained business rates and income from Sec 106 and CIL payments from developers. But councils only find out how much grant they will receive a few months before the new financial year, and settlements have tended to be only for the coming 12 months. This creates great uncertainty and limits their ability to plan. It also gives great power to governments to squeeze funding.

Yet local councils have a legal duty to provide key services such as social care and temporary accommodation regardless of local demand. What we’ve seen in recent years is demand for both going off the scale with councils left in a bind – unable to raise enough additional income to fund the rising costs, nor can they cap demand. In London temporary accommodation is a particular headache - a product of the rapid growth of the city and our inability over many decades to build enough new homes. London Councils estimate that the temporary accommodation bill “threatens to break borough budgets" with a £700m funding shortfall next year.

The built environment sector is understandably frustrated at under-resourced planning departments. But when councils are fighting day to day to stay afloat, the reality is that planning will be some way down the priority list even if it does generate important income. The Labour Government, focused on kickstarting growth and getting Britain building, will need to be very mindful of this – the extra 300 planning officers promised will barely touch the sides of what is needed.

So, while the lifeboat is desperately needed in the coming budget, it is only an emergency rescue. Longer term solutions on how we fund local services and what we expect from our councils will require very tough decisions by Ministers. These go to the heart of debates on decentralising power from Whitehall, how we tax property and development in this country and what additional finance-raising powers councils and Mayors might need to diversify their income streams.

With a 174 majority, the current Government is the best placed in recent times to grasp the thorny stinging nettle of local government funding. Let’s hope it doesn’t take as long as it has for England to bag another a World Cup.

Nick Bowes

Managing Director, Insight

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REACHING THE SUMMIT

Can you feel the love tonight - the Government wheeled out the big hitters at this week’s Global Investment Summit at the Guildhall in the City as it sought to woo sovereign wealth funds into opening their cheque books. Two hundred top execs, Cabinet Ministers and metro mayors including Sadiq Khan got to mingle with King Charles, Tim Berners-Lee, Andrew Lloyd Webber and Gareth Southgate. All were overshadowed by Elton John serenading guests in the Guildhall’s Crypt.

Saturday night’s alright for fighting – threatening to overshadow the Summit, the days before saw a public spat between global logistics firm DP World and the Government over comments by Transport Secretary Louise Haigh on boycotting DP World subsidiary P&O Ferries over controversial fire and rehire tactics.

Sorry Seems to be the Hardest Word - DP World threatened to boycott the summit, but after some serious smoothing over and a public rebuke for Haigh, £1bn of investment in their London Gateway container port was unveiled on the day.

Bennie and the Jets - elsewhere, set piece investments were announced, including £1.1bn on expansions and upgrades to Stansted Airport, hot on the heels of last week’s highly prescient piece in LDN on the growth plans of London’s airports. Also unveiled were £6bn on date centres from US tech firms ServiceNow, CyrusOne, CloudHQ and CoreWeave and a £20billion investment by Macquarrie in offshore wind, battery energy storage and new homes.

I’m Still Standing – buffeted by recent negative stories and a slump in the polls, the Summit was an opportunity for the Prime Minister to regain the initiative. In his speech Keir Starmer committed to "rip up the bureaucracy that blocks investment" and will “make sure that every regulator” in the country takes growth seriously (a message we have heard before from the likes of David Cameron). This comes on the back of delays to major projects such as the Lower Thames Crossing, which has seen £800m spent to date on planning and some reports of nearly 360,000 pages of associated planning documents. Someone might need to tell Starmer that his ministers are reported to have delayed 40% of infrastructure project decisions.

NATIONAL POLITICS ROUNDUP

Long term plan: Ahead of the Investment Summit, the Government set out more information on their long-term plan for infrastructure delivery. Chief Secretary to the Treasury, Darren Jones, published the Government’s vision, which will see a ten-year national infrastructure strategy published next spring.

Under control: Jones also revealed that a new National Infrastructure and Service Transformation Authority will be created, to ‘get a grip’ on delays to the delivery of new infrastructure. John Armitt’s role as Chair of the National Infrastructure Summit was also extended.

New kid on the block: Perhaps stung by last week’s LDN pointing out the Investment Minister role remained vacant, the Prime Minister has now appointed former Darktrace chief executive, Poppy Gustafson, into the role. Gustafson will take charge of a beefed up Office for Investment.

Industrious: Coinciding with the Summit, the Government released its Industrial Strategy Green Paper, setting out measures to create long-term, inclusive, secure and sustainable growth and identifying eight high-growth sectors: Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services. The consultation is open until 24 November, with the final strategy to be published in spring 2025.

Getting Britain Building: 54 councils are to get £68m through the Brownfield Land Release Fund to unlock delivery of 5,200 homes, including shares for Camden, Haringey, Newham, Barking and Dagenham, Barnet, Croydon and Hackey. Whilst welcome it’s a drop in the ocean.

Retrofit revival: Sky News has reported that the new National Wealth Fund has come to a £1bn agreement with Barclays and Lloyds Banking Group to facilitate the retrofit of housing association homes. The deal would see the banks provide partial guarantees on loans to housing associations.

• A High Court judge has promised a decision by the end of next month on an appeal by a local campaign group, Save Our South Bank, who are objecting to plans to redevelop ITV’s former London headquarters. If planning permission is granted, developers CO-RE and Mitsubishi Estate expect project completion in early 2029.
  
  
• The Elizabeth Line has won the 2024 RIBA Stirling Prize. The shortlisted projects for the 2024 prize were Chowdhury Walk, the Elizabeth Line, King’s Cross Masterplan, National Portrait Gallery, Park Hill Phase 2, and Wraxall Yard.
  
  
• Unite Students has secured planning consent for a new 952-bed (333 affordable) purpose-built student accommodation tower in Stratford.
  
  
• Gaw Capital and City & Docklands’ proposals for a 450-home (35% affordable) skyscraper on the Isle of Dogs have been approved on their third attempt. The plans for a 52-storey tower were unanimously approved by Tower Hamlets’ Strategic Planning Committee on 9 October. The plans also include retail space, restaurants, creative and community space.
  
  
• The SoCo and Blue Coast Capital have secured planning consent for a purpose-built shared living and affordable housing development in Southwark. It will comprise a 16-storey tower with 216 shared living units, and a separate 10-storey building providing 24 homes, 100% of which will be affordable. The scheme will also provide more than 1,500 sq ft of affordable workspace.
  
  
• Travelodge has exchanged contracts with developer London Iron Works for a new hotel in Upminster. Planning permission has been granted to build an 82-bed hotel with new retail units on the ground floor in Upminster town centre.

• The Prime Minister has appointed former Darktrace chief executive, Poppy Gustafson, as the Government’s new Investment Minister. She will take charge of the Office for Investment.
  
  
• John Armitt’s role as Chair of the National Infrastructure Summit has been extended.
  
  
• Kaya Comer-Schwartz, leader of Islington Council, has been appointed as the new Deputy Mayor for Policing, subject to a confirmation hearing by the London Assembly. Following this, it is expected she will resign as leader of the council
  
  
• Rosanna Lawes has announced that she is to step down as Executive Director of Development at London Legacy Development Corporation (LLDC).
  
  
• Former Editor of City A.M., Andy Silvester, will join The Times as their London Editor from the end of the month.
  
  
• Hill Group has appointed Tom Starkey, who has previously worked at Taylor Wimpey, Berkeley Group and developer HUB, as their new dedicated build-to-rent manager as it looks to expand into the sector.
  
  
• Bellway has appointed Shane Doherty from Cairn Homes as the company’s new Chief Financial Officer.
  
  
• Student accommodation specialist Nido Living has appointed DR Beatrice Lafon as chairperson of the company’s newly established board.
  
  
• Bidwells has recruited Jo Hawkings from Pembroke as a new group partner in the company’s investment and property management team.
  
  
• Daniel Harris from Cain International has been appointed as Fusion Group’s new Chief Investment Officer.
  
  
• Cluttons has hired Laura Dam Villena from Knight Frank as head of the company’s London residential agency business.
  
  
• UK development manager Bankfoot APAM has appointed Sam Crusz as project director.
  
  
• Hugh Bushell from Savills has been appointed as a senior associate in Allsop’s residential transactional and living markets team.

CAPITAL GAINS, COUNCIL PAINS

Investment boom: London’s skyline isn’t the only thing that’s rising – so are levels of inward investment, at least according to the Mayor. Sadiq Khan was proud to announce that 2024 has already seen a record £100m in investments, nearly £10m more than previous years. International investments have created 10,000 jobs for Londoners over the last five years, cementing the city’s status as a global leader.

Mind the (political) gap: the Mayor also made his stance clear at this week’s Investment Summit on London’s future on the global stage, showing support for rejoining the EU’s Single Market. This is in sharp contrast to the Prime Minister, whose manifesto promised to keep Britain firmly outside the EU. However, the Mayor might have found common ground with the Lord Mayor who has said that leaving the EU was a ‘disaster’ and has cost the City almost 40,000 jobs.

Laying tracks: London Underground projects are tunnelling forward, despite a fresh wave of Tube strikes threatening to bring the network to a standstill this November. The first of the new Piccadilly Line trains have made the journey from Austria via the Channel Tunnel – although they got an early ‘artistic’ welcome to the capital with a fresh coat of graffiti. These trains are set to undergo rigorous testing (minus the spray paint) before rolling out into service at the end of 2025.

Extending the line: the Bakerloo Line extension is gaining traction, with TfL moving ahead with feasibility studies for four new stations at Burgess Park, Old Kent Road, New Cross Gate and Lewisham.

But but but… with TfL’s piggy bank running on empty, Government support will be needed for the project to go ahead. If planning and funding get the green light, construction could start in the 2030s with completion set for 2040. All eyes now on the coming Budget to see if there’s any money forthcoming from the Government to get shovels in the ground.

Flowing smoothly: London’s Victorian plumbing is getting a long-overdue upgrade, with the first four sites of the Thames Tideway Tunnel ‘Super Sewer’ now open. This crucial upgrade which started construction back in 2016 will significantly reduce the amount of raw sewage flowing into the Thames and aims be fully operational by 2025. However, with the project having cost £4.5bn which needs to be recouped, Londoners will be paying a £25 annual levy to Thames Water for decades for the privilege of a cleaner river.

Cleaner waters ahead: this is good news for the Mayor’s 10-year plan to clean up the River Thames after it was reported that five times more sewage flowed into London’s rivers in 2023 compared to the previous year. In an interview with The London Standard, the Mayor highlighted the fact that great progress had been made in cleaning London’s air and he wants to do the same with London’s rivers. He even wants to see otters and beavers reintroduced. The Mayor will also be pleased with the seven new public spaces which have opened along the Thames following the construction of the Super Sewer.

Under pressure: London’s councils are reaching a financial breaking point, with boroughs set to overspend by £600m this year, and a £700m shortfall looms for next year. With 175,000 Londoners in temporary accommodation, the housing crisis alone is contributing £250m to the overspend. Newham Council reportedly has a budget gap of £175m over the next three years and has to find savings of £20m this year, with Christmas lights being one of the first things to get the chop. Havering Council has also cancelled Christmas lights in addition to not providing Christmas trees in Romford and Collier Row, as they face a £32.5m budget deficit.

WE RECOMMEND

• What Euston looked like when it was shiny and new.
• A giant floating model of the Earth is landing at Southwark Cathedral.
• Women are a majority of MPs in London for the first time.
• How the Mayor plans to clean up London’s rivers. 

100 DAYS OF LABOUR REPORT 

LCA’s Insight Team’s new 100 days of Labour special report is now out, taking a look at what the new Government has done so far and what it means for the built environment. We look at the Government’s new proposed housing targets, the changes made to infrastructure and the planning interventions made by Ministers, as well as a lookahead at what’s to come. Please get in touch here if you would like a copy.

LDN CONTRIBUTORS 

LCA prides itself on its intelligence-led approach to PR and communications and our dedicated insight team monitors London politics, news and issues as it happens.

If you would like to know more about LCA or anything in this edition of LDN – London in short please get in touch. 

Nick Bowes

Managing Director, Insight

Robert Gordon Clark

Senior Advisor and Partner

Emily Clinton

Account Manager, Insight 

 Ben Donson

Insight Executive

Design:  Aroa Maquedano Pulido:

We strive for balance and accuracy at all times; however, if you feel we have made a mistake, omission or have misrepresented a story or issue please alert the team by contacting the LDN team by using the details above.

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