London's infrastructure is struggling to cope. Not only are our roads, rail and tube systems in need of a major upgrade (some of which is already underway), but we need new homes, better broadband provision and mobile reception, and more schools and colleges to train the businessmen and women of the future.
According to the mayor’s 2050 Infrastructure Plan, the improvements the capital needs are set to cost £1.3 trillion. Last year, there was already a funding gap of more than £130bn. As government finances continue to be squeezed throughout this Parliament and beyond, it becomes increasingly unlikely that this gap will be filled from the Treasury’s coffers.
Private investors remain concerned about a range of London’s biggest infrastructure projects, but their investment is crucial to the delivery of many of these schemes. According to Treasury sources, 66 per cent of all infrastructure investment in the UK in the next five years will come largely from the private sector, with 14 per cent expected to be public-private in partnership. Just 20 per cent will be provided by the public sector alone.
We have joined with some of the capital’s business leaders and thinkers to look at how private investment can be unlocked and actively channelled to ensure the delivery of these projects.
This is part of a year-long initiative, London Tomorrow – a thought leadership panel researching the biggest issues facing the capital and how to overcome them. The group will meet again tonight to discuss ComRes research we commissioned on private investment in London’s infrastructure.
Attracting investment doesn’t appear to be the problem, according to EY’s 2015 UK Attractiveness Survey. London is the single most important location for foreign direct investment (FDI) in Europe and last year saw the strongest FDI performance in a decade, attracting 381 projects to the capital.
Investors want to put their money into London, but can be spooked by the rocky road to delivery. London City Airport is a case in point. In February, Newham Council passed a resolution to grant planning permission for a £200m expansion of its infrastructure, which would connect it to new markets, including Russia and the Gulf, and potentially generate £1.5bn for the UK economy. This decision was subsequently overturned by the mayor.
Positive developments in Battersea and investments around the Crossrail route, however, show how significant positive investment can be achieved.
Our research found that 45 per cent of London business leaders thought greater clarity around political decision-making on major projects would help to encourage private investment. The costs of the projects (62 per cent); limited appetite from the Treasury to provide funding (47 per cent) and complicated planning restrictions (45 per cent) were also cited by business leaders as major barriers to delivering infrastructure projects.
If we are to unlock the potential of private investment in London, we must overcome these barriers and work positively with private investors to deliver projects, rather than thwart their efforts to help upgrade our city.
Colin Stanbridge is chief executive of the London Chamber of Commerce & Industry. Manish Gupta is partner in EY’s transport and infrastructure practice.