Alan Wilson-Oxford Economics

Assessing the economic contribution and potential of East London

Research commissioned by London Thames Gateway Development Corporation

Presentation to Thames Gateway London Partnership

March 2011

March 2011

The study area

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The study area

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A prime location…

Unique area of opportunity and regeneration in East London

Relatively underdeveloped area, earmarked by numerous strategic plans as an area of opportunity

Defined by 16 wards, lying within the London Boroughs of Greenwich, Hackney, Newham and Tower Hamlets

Home to almost 200,000 people – 4.2% of London’s total population

Despite strong economic growth in past 20 years, the area still includes some of the most deprived areas in the country

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In a world class region…

London’s 7.8m people produces 21% of the UK’s GVA (£232bn) and leads the world in a wide range of financial and professional services activities

1.6m people work in financial and business services sectors, accounting for over 40% of the city’s GVA

In 2007/08 the city ran a ‘fiscal surplus’ of £25.9bn and provided 23% of the UK’s corporation tax returns

Home to premium universities within the UK, with international reputations

21% of UK graduates from the Russell Group work in London as their first destination

GDP per employee, €000 at 2005 prices

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40.0

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80.0

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140.0

London Paris Frankfurt Milan Tokyo Madrid Beijing

Source: Oxford Economics

1997 2007 2012 2020

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Which out-performs the national average…

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Index of total employment, London & UK (1991=100)

London has outperformed the UK average since the mid 1990s


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High value business services driven growth in London…

Employment change000s % p.a. 000s % p.a.

AB - Agriculture -1.5 -1.8% -109.1 -1.3%CC - Extraction -2.0 -2.7% -20.2 -1.8%MF - Manufacturing -98.3 -2.4% -1117.4 -2.0%EE - Electricity, gas & water supply -12.3 -6.0% -76.4 -3.0%FF - Construction 45.4 1.5% 429.1 1.4%G - Distribution 43.7 0.5% 537.5 0.8%H - Hotels 115.3 3.0% 407.7 1.6%II - Transport & Communications 37.0 0.7% 312.5 1.2%J - Financial Services 36.4 0.8% 43.2 0.3%K - Business services 524.1 3.6% 2227.6 3.5%LL - Public admin & defence -21.4 -0.6% 10.7 0.0%M - Education 78.9 1.9% 624.0 1.9%N - Health 96.3 1.7% 847.3 1.7%OO - Other personal services 119.9 2.3% 478.1 1.9%Total 940.0 1.5% 4334.0 1.0%

London (1998-2008) UK (1998-2008)


Employment change, London & UK (1998 - 2008)

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Which has translated into faster GVA growth…

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London UK

Index of total GVA, London & UK (1991=100)


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East London has outperformed both London & UK…

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East London London

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East London London

Source: Oxford Economics Source: Oxford Economics

■ From 1991 to 2000 East London provided 1 in 8 of the net new jobs created in the region (or 12% of net job creation).

■ From 2000 to 2008 East London accounted for just under 1 job in every 4 net new jobs created in London, mostly in financial and business services

Index of total GVA, East London & London (1991=100)

Index of total employment, East London & London (1991=100)

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The financial services sector has driven growth…

Employment change000s % 000s %

AB - Agriculture 2.0 73.9% 0.0 -44.9%CC - Extraction 1.4 61.4% 0.8 316.3%MF - Manufacturing -45.6 -16.8% -5.2 -30.5%EE - Electricity, gas & water supply 0.6 7.5% 0.5 91.5%FF - Construction 14.0 6.5% -2.3 -18.3%G - Distribution 3.9 0.6% 0.3 2.1%H - Hotels 2.0 0.6% 1.5 24.7%II - Transport & Communications 4.8 1.4% 0.7 7.3%J - Financial Services -1.8 -0.5% 33.6 117.4%K - Business services 190.2 17.4% 19.8 82.0%LL - Public admin & defence -12.3 -5.2% 0.9 15.5%M - Education 34.1 12.0% 2.4 37.9%N - Health 43.5 11.1% 2.9 39.3%OO - Other personal services 46.3 12.8% 4.1 62.9%Total 275.3 6.1% 59.9 42.4%

London (2003-2008)East London (2003-

2008)


Note: yellow shading highlights the strongest performance

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An area of major investment…

Much investment is underway or planned for East London…

■ Olympics are driving major development in four adjacent areas – Hackney, Wick and Fish Island, northern Olympic fringe, Stratford town centre and Stratford high street, each having masterplans drawn up to ensure development connected to Olympic legacy

■ By 2013 LTGDC will have invested £163m in Olympic Fringe and Lower Lea Valley

■ Investments in land assembly, public realm and economic development will ultimately lead to 15,000 homes and 10,000 jobs in addition to Olympic Park and Stratford City

■ In Stratford, Westfield is a 1.9m sq ft retail centre as a first phase of 13m sq ft of mixed use development, including 4.9, sq ft offices as well as homes, hotels and cinemas

■ South of Olympic Park – significant investment from Tesco, Inter Ikea and Bouygues will deliver new mixed use ‘places’ all linked by the Lea River Park

■ Greenwich Peninsula – 4m sq ft commercial development of which 3.5m sq ft is office space; 10,000 residential units will also be constructed between 2009 and 2021

■ Canary Wharf will remain a key driver for both change in East London and development opportunities – plans for an extension at Wood Wharf, providing 4m sq ft of commercial space and 1,700 homes

■ High speed rail and Crossrail services in addition to underground upgrades will support connectivity

Looking forward

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Global and UK economies returning to growth…

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1995 1997 1999 2001 2003 2005 2007 2009 2011 2013Source: Oxford Economics

UK: GDP growth% quarter

Forecast

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-1

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1996 1998 2000 2002 2004 2006 2008 2010 2012Source: Oxford Economics

World: GDP growth% year

Forecast

The economic environment is very different and has implications for future growth…

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A tighter public spending environment…

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1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

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90% of GDP % of GDP


UK: Government balance and debt

Government budget (LHS)

Debt (RHS)

Forecast34

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1986 1989 1992 1995 1998 2001 2004 2007 2010 2013

UK: Government expenditure and receipts


% of GDP

Governmentexpenditure

Governmentreceipts

Forecast

Restricted access to credit and tighter fiscal policy will put pressure on the private sector to drive growth…

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London expected to lead the way…

Global investment helps drive London’s international FBS

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1985 1989 1993 1997 2001 2005 2009 2013 2017

London & the World Investment Cycle% p.a. (constant prices)

Source : Oxford Economics * excludes China

Inner LondonFinancial & Business

Services GDP

World investment*

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Baseline employment to continue rising…

…though East London is expected to slow going forward and be more in line with the regions growth.

NB baseline forecasts are based on sectoral prospects rather than local investments

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London East London


Note: The data in the table above refers to the East London study area as defined using the 2003 ward boundaries to define the East London

Index of total employment, East London & London (2003=100)

2003 2008 2010 2020 2030Employment 3.1% 4.2% 4.3% 4.3% 4.5%

East London (Golden Triangle) as a % of London

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Employment change000s % 000s %

AB - Agriculture -1.7 -39.2% 0.0 -45.1%CC - Extraction -1.9 -48.8% -0.4 -42.4%MF - Manufacturing -86.2 -41.9% -5.4 -50.5%EE - Electricity, gas & water supply -1.9 -23.7% -0.2 -24.0%FF - Construction 14.9 6.6% 1.4 13.6%G - Distribution 5.6 0.9% 3.7 23.0%H - Hotels 29.6 9.5% 1.3 17.6%II - Transport & Communications 19.1 5.5% -0.1 -1.1%J - Financial Services 26.0 7.9% 13.9 23.1%K - Business services 681.3 55.2% 30.0 70.5%LL - Public admin & defence -37.0 -16.7% -0.6 -9.2%M - Education -0.1 0.0% 0.5 5.1%N - Health 28.5 6.4% 1.4 13.7%OO - Other personal services 106.0 26.7% 4.1 40.0%Total 782.4 16.7% 49.5 25.2%

London (2009-2030)East London (2009-

2030)

Driven by financial and business services…

Future employment growth in London (and East London) expected to be driven by financial and business services


Note: using the 2003 ward boundaries to define East London

Note: highlighted cells show where each sector is expected to perform best

The potential

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Scenario assumptions: a mix of sectoral growth

Project Jobs Sectors Timing

Stratford City zones 2-7 24,200 Offices, hotels & leisure, retail

2013-15 and 2015-20

Royal Docks development

6,000 Office plus some industry

2013-25

Canning Town/Custom House

2,500 Widespread 2009-25

Greenwich Peninsula 24,100 Retailing, restaurants, offices, leisure

2011-30

IPC/MBC 4,000 Office 2013-30

Wood Wharf 25,000 Fin. & bus. services 2013-30

Canary Wharf 50,000 Fin. & bus. Services 2012-2020

Note the model has been developed to assess only the direct, indirect and induced impacts that are relevant for the East London wards in question (we have separately modelled impacts across all the Olympic Host Boroughs)

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Significant employment potential exists…

130,000 additional jobs by 2030 (inc. Olympic investments and wider investments such as Wood Wharf)

London could benefit from an estimated 282,000 jobs.

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Baseline employment

Scenario employment



Employment forecasts for East London (2003 to 2030)

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Employment change000s % p.a. 000s % p.a.

AB - Agriculture 0.0 -2.8% 0.0 -2.8%CC - Extraction -0.4 -2.6% 1.2 3.7%MF - Manufacturing -5.4 -3.3% -3.6 -1.9%EE - Electricity, gas & water supply -0.2 -1.3% -0.2 -0.8%FF - Construction 1.4 0.6% 2.0 0.9%G - Distribution 3.7 1.0% 8.6 2.1%H - Hotels 1.3 0.8% 4.2 2.1%II - Transport & Communications -0.1 -0.1% 5.5 2.0%J - Financial Services 13.9 1.0% 38.1 2.4%K - Business services 30.0 2.6% 112.3 6.3%LL - Public admin & defence -0.6 -0.5% -0.4 -0.3%M - Education 0.5 0.2% 1.0 0.5%N - Health 1.4 0.6% 1.7 0.7%OO - Other personal services 4.1 1.6% 9.5 3.2%Total 49.5 1.1% 180.1 3.1%

Baseline (2009-2030) Scenario (2009-2030)

Again a financial and business services story


Note: Using the 2003 ward boundaries to define the East London

Other personal services” include a range of activities such as leisure, hairdressing etc. In addition retail is included with “Distribution”

Cells shaded yellow highlight notably stronger positive growth in the scenario

Employment change for the East London (2009 to 2030)

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…potential for additional GVA

Creating an additional £13.4bn in GVA by 2030 for East London

London could benefit from an additional £21.4bn in GVA

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Baseline GVA

Scenario GVA



GVA forecasts for East London (2003 to 2030)

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Conclusions

Based in a prime location in a leading international city, East London offers sufficient well-connected space to develop and regenerate

The Olympics can act as a catalytic event for the area and current plans have highlighted the opportunity of building on their legacy by providing investment in retail, leisure and office space

The analysis of the planned, but yet uncommitted developments show, there is considerable potential to improve the East London economy, and with it the future growth of London and the UK

Potential for growth East London LondonEmployment (000s) 130.6 282.0GVA (£2005m) £13,412 £21,458

Providing a long-term commitment is made to regenerating the area by following through on planned investments, the London economy could enjoy an estimated additional £21bn of GVA


Alan Wilson-Oxford Economics

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